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| Latest News | | Merger Between FRC and FSA Considered (posted: 29-7-10) | | | The Government has proposed merging the UKs listing authority, the Financial Services Authority, with the Financial Reporting Council, the body that regulates the accounting profession and financial reporting in the UK.
The proposal comes in a paper published by The Treasury as part of proposals for sweeping reform of financial regulation in the UK.
A consultation paper from the Government said that merging the FRC with the UKs listing authority would have the benefit of bringing the UKLA’s regulation of primary market activity alongside FRC functions relating to company reporting,audit and corporate governance.
The proposals is that the new regulator would under, or supervised by, the Department for Business and come under the responsibility of business secretary Vincent Cable.
Cable has expressed misgivings about the restricted number of big audit firms nad has spoken opening up the audit market to more firms.
The Treasury consultation document said: The Government believes that, within the proposed new regulatory architecture, there is a strong case for a powerful companies regulator established with responsibilities for regulating corporate governance, corporate information and its disclosure, and the stewardship of companies by institutional shareholders.
The Treasury document, A New Approach to Financial Regulation enormous change to financial regulation. It lays the creation of a Financial Policy Committee (FPC) to be housed in the Bank of England that would ensure financial stability in the UK. Reporting to the FPC would be a Prudential Regulatory Authority (PRA) and an independent Consumer Protection and Market Authority (CPMA).
The consultation document said: Perhaps the most obvious failing of the UK system, however, is the fact that no single institution has the responsibility, authority or powers to monitor the system as a whole, identify potentially destabilising trends, and respond to them with concerted action.
However, it is not yet decided whether the merged FSA (listing authority) and FRC should be part of the CPMA, or whether it should sit outside this framework under the department of business.
PwC responded quickly to the consultation paper saying at this stage, the proposals remain very high level. Many questions continue to remain unanswered, including the detailed implementation roadmap. This information will be vital if this new structure is to be a success and so that firms can start planning their own transition projects.
| | | | Government Talks re Pension Tax Welcomed (posted: 29-7-10) | | | Accountants and employee benefits experts have welcomed the Governments efforts to reach a compromise on taxing high earners pensions contributions.
HMRC and the Treasury are jointly handling a consultation on pension tax reliefs after plans floated by the last Government were roundly criticised for being highly complicated and expensive.
Vincent Oratore, president of the CIoT said: The review of the proposed changes to pensions tax relief is especially welcome.
We all understand that pensions tax relief is going to be curtailed, but there has to be a simpler way than the complex and costly system previously legislated for.
Joanne Segars, chief executive of the National Association of Pension Funds said:
Many details still need to be resolved, but we are pleased the government is taking our proposals on board.
| | | | Recession - Is the Worst Over? (posted: 29-7-10) | | | At the height of the downturn nearly two years ago, when the City and London-based media were accused of inflating the situation, the UK200Group of accountants and lawyers with members throughout the regions, carried out its own snapshot checks to assess the severity of the crisis.
Officially, Britain’s economy pulled out of recession at the end of 2009. However, does this mean that the situation facing independent practices and their SME clients improved? Are firms throughout the country less worried about rising costs, less spending power and lack of finance from banks?
SOUTH EAST
This region is renowned for its numerous small and medium-sized businesses but also for many leading firms in sectors such as pharmaceuticals, biotech, healthcare and hi-tech, environmental technology, aerospace and electronics – Britain’s main export sectors. In 2008, the combined effect of the credit crunch and rising inflation caused a progressive squeeze on sales and margins.
“Retailers began to see a dramatic slowdown in revenue,” says Jonathan Russell, partner at Oxfordshire-based Rees Russell and vice president of the UK200Group. “The building industry was being decimated. The Government ploughed a lot of money into the economy but this hasn’t helped small businesses. Firms generally are still worried about the economy. Banks are still not lending.”
SOUTH WEST
Unemployment remains a worry in this area, banks are still reluctant to lend, rising rates are a barrier for start-ups and there is nervousness about what will happen under the new Government. The region is managing an investment of £230 million of European Union funds across all parts of South West England. Plymouth’s position as a global centre of excellence for science, innovation and marine energy research received a major boost with the announcement of a £25 million investment plan.
MIDLANDS
Carmakers are turning the corner and the industry appears to be coming out of intensive care. However,Midlands industry generally is still struggling, says Matin Smith, senior partner at Dains, the largest independent firm of chartered accountants located and operating in the West Midlands. “We are still busy with insolvency work. Some of our biggest engineering and motor industry-related clients are suffering.
“Banks are still very tight, squeezing existing customers, inflicting higher charges and not lending much. We dont expect overall improvement for another twelve months. People are wary, companies are cutting work hours or offering sabbaticals to avoid losing skilled workers.”
YORKSHIRE
North Yorkshire has suffered less with tourism being a major contributor. “More people like going on short trips,” says David Ingall, a former president of the UK200Group and senior partner at JWPCreers, with offices in Selby and York. “This is an area of low cost housing, so people are not on the edge with mortgages and spending is less tight. I don’t think recovery is in sight for several years although I find the London media are still over-egging the problems. Businesses here are pumping along. The employment situation is mainly hitting school and university leavers, although I hear corporate finance advisers in Leeds have had to cut back staff.”
NORTH EAST
Business in the region is still very patchy, says Mark Sharpley, partner at Smailes Goldie in Hull. Employment is slightly down and would be more serious but for an explosion of public sector recruitment. Banks are still very hesitant on lending except to large businesses with a good track record. The good news is that Nissan chose Sunderland to be the third base for its Leaf model.
Investment from Government grants and loans from the European Investment Bank should safeguard the jobs of 2,250 of its 4,000 strong Sunderland workforce.
NORTH WEST
Small businesses are holding on albeit with reduced profits; some accountancy firms have made more layoffs although those which had laid staff off are now struggling to cope with their workload and are recruiting again. Larger companies don’t seem to have relaxed their recruitment freezes so it is hard for skilled people who have lost their jobs to find alternative employment.
“I view this as an opportunity lost,” says Anne-Marie Naylor, senior partner at Harts in Macclesfield. “Now could be the time to enhance the skills base of businesses. Unemployment looks very likely to increase. Finance is available for the right project but banks are looking for security and very high margins. Bank support for increased facilities has been good but short-term. Any acquisitions are strategic by larger businesses with a war chest. The construction industry is suffering from a triple whammy – a bumpy residential property market, empty commercial developments and public sector financial restraint.”
WALES
Businesses in Wales were badly affected by the downturn with consumer spending being severely hit and building projects have been stalled, with a multiple effect on associated businesses and professional firms. Two years after the crisis erupted, finance is still a major problem. “Banks are just not lending,” says David Challenger, partner at Cardiff-based Watts Gregory. “Many businesses have cash flow problems, but banks will not allow overdrafts. Some of our clients have scaled down or are on short time. In the region generally more projects have been mothballed or put on hold, which affects us too.”
SCOTLAND
The slowdown hit Scotland two years ago and is now showing signs of a recovery. Competitive exchange rates have been good for exports and for tourism. However, the bad news is that, as with other regions, funding is still very difficult. According to Gordon Chalmes, director at Glasgow-based Wylie & Bisset. “There’s little point putting companies into insolvency because few are able to buy up assets or to buy up any businesses. Sadly, personal insolvencies are growing.”
NORTHERN IRELAND
The slowdown is continuing to affect investment and personal spending. The stalling property market hurt estate agents, solicitors and builders and now affects retailers of furniture and furnishings, hardware and DIY, says Bill Miscampbell, partner at W.J. Miscampbell, in County Antrim. “Banks heavily exposed to property earlier are still very tight on lending. This year is going to be harder than 2009.”
| | | | HMRC Contracts Out Debt Collection (posted: 29-7-10) | | | HMRC is farming out part of its debt collection operations to four companies in moves to rake in an extra £140 million of tax debt.
HMRC has signed contracts with Commercial Collection Services Ltd, Credit Solutions Ltd, Fairfax Solicitors Ltd, iQor Recovery Services Ltd to boost HMRC’s debt collection capacity and help the pursuit of lower value debts.
Following a successful pilot, HMRC announced in the Emergency Budget that it was planning to use Debt Collection Agencies.
Safeguards have been put in place to ensure the companies operate under industry and HMRC standards.
Nick Lodge, HMRC Director, Debt Management and Banking, said:
“We do understand that some businesses and individuals are not in a position to pay what they owe and we have put procedures in place to help those who are genuinely struggling.
But those who simply refuse to pay have to be pursued, and our partnership with DCAs ensures they will be.”
Before the debt is referred to a DCA, HMRC will write to the debtor giving one final opportunity to pay or reach an agreement, HMRC added.
| | | | Banks to be Hit by Another Tax (posted: 29-7-10) | | | Vince Cable has warned the banking sector it could be hit by another tax on profits or existing widening loans if vital lending to UK businesses fails to pick up.
In the Financing a Private Sector Recovery, green paper, Mr Cable set out a range of finance options for different sized businesses but the business secretary has also warned the banking industry would need to do its part after the help it had received from the government.
Representatives of the insolvency profession are broadly in support of the plan if viable businesses gain access to much-needed funds.
R3’s vice-president Frances Coulson said: Our feeling on the ground backs this up, with 70% of the UK’s insolvency practitioners surveyed saying they had come across a business they believed to have a viable future unable to obtain finance from a bank or other lender.
We would support measures to ease lending to any business with a viable future, which of course is the key eligibility criteria in itself - the balance with responsible lending cannot be overridden.
| | | | Tax Relief on Holiday Lettings Could be Tightened (posted: 29-7-10) | | | Owners of furnished holiday lettings could lose the tax relief available on their properties unless they are made available to let for longer.
Government plans would extend the amount of time that homes need to be let out and available to let for their owner to continue to qualify for currently available relief.
Currently, homes have to be let out for 70 days a year and available to let for at least 140 days to receive entrepreneurial relief on Capital Gains Tax at 10% and rollover relief on the tax. Treasury plans would see the qualifying period raised so that homes have to be let out for 105 days a year and available to let for 210 days, according to the Times.
| | | | Time To Pay Panel Revealed (posted: 29-7-10) | | | HMRC has revealed the 13 firms approved to ascertain whether businesses will be able to pay back their deferred tax bill.
Firms have been approved by HMRC to provide Independent Business Reviews (IBR) for large companies seeking time-to-pay (TTP) arrangements.
The former Government announced in its March 2010 budget that all businesses seeking a TTP of £1 million or more would need to pay an insolvency practitioner for a review.
The review would seek to adjudge the ability of the company to eventually pay back any tax deferred by HMRC.
Following a consultation, which took place in January this year, HMRC approved a panel of firms to conduct those reviews.
The panel list consists of: Baker Tilly, BDO, Begbies Traynor, Deloitte, Ernst & Young, Grant Thornton, KPMG, Mazars, Moore Stephens, PKF, PwC, RSM Tenon, Smith & Williamson.
A statement from HMRC said the outsourced process was subject to regular six month reviews and inclusion was not permanent but non-selection of a firm would not rule them out in future.
The next review is due to take place in Autumn this year.
| | | | Money in Grave Uncovered (posted: 26-7-10) | | | A businessman who planned to leave £140,000 in his aunt’s grave for 20 years in order to avoid tax has been caught out after HMRC were granted permission to open the grave up.
Tax inspectors were tipped off and obtained permission from the priest to recover their £50,000 share. The unnamed man was going to leave the money in the grave up to the time limit for tax investigations, reported The Sun.
Dave Hartnett, permanent secretary for tax, said: “Tax evasion isn’t a victimless crime. But we’re getting better at catching cheats. It’s not worth the risk.”
It was disclosed in April that HMRC has paid informers £437,000 in return for tip-offs since 2007 and prosecutes around 200 people a year for tax evasion.
Investigators announced a crackdown on middle-class professionals earlier this year, with doctors already under greater scrutiny.
| | | | Victory for Marks & Spencer (posted: 26-7-10) | | | In the latest bout of a ten-year sparring contest in the courts, Marks & Spencer has won a points victory over HMRC.
M&S has been trying to claw back group relief since 1998 on its UK tax bill for losses suffered by its former German and Belgian subsidiaries.
Judges said the retail giant was entitled to claim group relief for losses made in 2000, 2001 and 2002 but rejected other claims.
Others challenging HMRC on the same front have been warned by advisers that a win for them is by no means guaranteed despite M &S’s success.
The main issue hangs on whether there is “no possibility” that the losses a company makes in a foreign subsidiary are unable to be offset in the country they were generated.
“Other companies which have lodged UK group relief claims for the losses of European Economic Area resident subsidiaries need to double check that the ‘no possibilities’ test was met at the time the claims were made and, if necessary, make new ones when the test is met,” said Rosemary Blundell, director of national tax at Mazars.
Law firm Norton Rose has said there could be “hundreds of millions of pounds” at stake in possible claims.
“Although only M&S’s claim is currently being heard by the tribunal, many companies have lodged protective claims for their European subsidiaries’ losses,” the firm said in a briefing paper on the eve of the decision.
In the context of the global credit crunch, which has seen UK-based multinationals suffer major losses, the ruling also has significant implications for those who attempt to smooth out the effects of the financial crisis in future years.
Challenges may stay behind closed doors. The claims are filed as part of a company’s Corporation Tax Return and do not come into the public domain unless court action is taken.
The M&S case has proved so contentious it has been dragged through the UK’s court system, all the way to the European Court of Justice and back again, with HMRC and the retail giant trading claim and counterclaim.
Since then, the UK courts have been left with the highly complex task of considering when the “no possibilities” test is applied, how the losses available for relief should be computed and the administrative process of making claims.
“Companies should also check that the way in which the losses have been calculated is consistent with the Upper Tribunal’s ruling,” Blundell added.
An HMRC spokesman said: “HMRC is currently studying the detail of this judgment carefully before deciding any further course of action.”
| | | | Tax Advisers in Agreement with National Audit Office (posted: 26-7-10) | | | Advisers have flagged up their own personal experiences of problems at HMRC, after the National Audit Office criticised its backlog of unresolved cases.
Tax specialists cited problems with the construction industry tax scheme, variable quality of advice and a lack of joined up thinking.
One client of mine is owed over £60,000 in Construction Industry Scheme (CIS) tax. The client is chasing and so are we but nothing appears to be happening. They are being asked to do lots of extra work but funding it will be a problem without this cash, said Nick Forsyth, a partner at Lambert Chapman.
Banks take a lot of stick for failing to deliver. HMRC is also a banker to many small businesses so it has a responsibility to collect effectively from those who owe and repay those whose deposit accounts they manage.”
Ellacotts tax partner Alan Boby said that once a case fell into the backlog, he thought it would take much longer to deal with than a case that could be resolved relatively quickly.
More up-to-date cases are given priority, said Boby.
Furthermore, there is clear evidence that particular tax offices are struggling with resources (for example those dealing with non-residents) and so anything out of the ‘main fairway’ is much more likely to sit in the ‘long grass’.
David Challenger, partner, Watts Gregory, said: “HMRC is struggling generally and the system is not ‘joined up’, with debts being chased by one department without reference to system notes causing aggravation between us and clients who have been advised on what should happen.
An HMRC spokesman said in response: The introduction of a new computer system will go a long way to making the amounts of tax deducted at source more accurate. But we have a lot of work to do to deliver the quality of service to which we are committed.
Just like every government department we are going to have to do more with less, and yesterdays [Wednesdays] report will help us to focus on those areas of our business that need to improve.
Most tax refunds are made within in a couple of weeks, some may be slightly delayed for additional security checks but this is to protect all taxpayers by ensuring we only make refunds to those who are due them.
We dont consider its unreasonable to expect people to pay their tax in full and on time in order to fund the UKs vital public services.
Where an individual or business thinks it will have difficulty paying its tax, the most important thing is to contact HMRC straight away - things never get better by being left or when HMRC notices to pay are ignored. The sooner people contact us the sooner we can begin working with them to find a solution.
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