2011 April | McBrides

treasury rules out early access to pensions
April 27, 2011 by Shirley1
The Treasury has ruled out plans to give people early access to their company pension, arguing that it would be unlikely to encourage saving.

The proposals, which would have allowed individuals to dip into their company pension during their thirties, were the subject of a four month consultation.

Currently only those aged over 55 can access their savings in a company pension scheme.

However, the Treasury has said the plans should not be considered because there is ‘limited evidence’ that early access would have a positive effect on overall pension contribution levels or significantly help individuals who are facing financial hardship.

Instead, the Treasury supported calls to allow more flexibility over access to pension savings upon retirement and welcomed the planned pension reforms, including automatic enrolment in a new national employment-based scheme from 2012.

‘While early access has some merits, there is insufficient evidence to suggest it would act as an incentive to save more into pensions,’ said the Financial Secretary to the Treasury, Mark Hoban.

‘We will work with industry to develop workplace saving to supplement pension savings.
In addition, we will explore other ways of making pension tax rules simpler and more flexible, for example by making it easier to deal with small pension pots.’

The decision was welcomed by the National Association of Pension Funds (NAPF), which represents 1,200 schemes.

‘Letting people dip into their pensions early would not have increased their retirement income,’ said Darren Philp, NAPF director of policy. ‘Instead it would have risked greater dependency on the state pension, and left pension providers in a bureaucratic tangle.’

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isas ‘failing to encourage savers’, says think-tank
by Shirley1
Individual Savings Accounts (ISAs) should be scrapped in favour of a new ‘Lifetime Bonus Savings Account’, according to a leading think-tank.

In a new report, the Institute for Public Policy Research (IPPR) argues that ISAs have failed to encourage saving amongst low and middle income families.

Latest figures from the IPPR suggest that less than a third of families with a weekly income of under £600 hold an ISA and 44% of families who earn less than £200 a week have no form of savings at all.

It added that the tax relief available through an ISA goes to people who would have saved anyway.

With the Office for Budget Responsibility forecasting a decline in saving, the IPPR proposes shelving ISAs and introducing a ‘Lifetime Bonus Savings Account’, which it claims will boost saving by low-to-middle income earners.

It recommends that the government pay an annual ‘bonus’ into accounts on a sliding scale, dependent on the average balance held in the account over the preceding three years, up to a maximum of £183.33.

Nick Pearce, IPPR director, said: ‘Our research shows that people on low to middle incomes want simple savings accounts with few terms and conditions, little in the way of small print and paying an easily understandable reward.

‘The current tax relief given to higher-income earners could be withdrawn without reducing their propensity to save. Instead, these funds could be used to increase saving by low to middle-income families and boost aggregate saving to improve the UK’s saving ratio at no extra cost to the government.’

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hmrc targets tradespeople in new tax amnesty
by Shirley1
HM Revenue and Customs (HMRC) is writing to around 50,000 tradespeople as part of a new campaign to target tax evaders.

The Plumbers’ Tax Safe Plan, which was announced in March, gives those in the plumbing, heating and associated trades the opportunity to declare any unpaid tax and pay a reduced penalty.

The letter warns that, once the opportunity expires, the tax authorities will begin a fresh clampdown. Investigations after the amnesty could result in 100% penalties and prosecution for wrongdoers.

Those affected have until 31 May to tell HMRC if they would like to take part in the temporary amnesty. It is thought that most participants will face a lower penalty rate of 10% for making a full disclosure, although HMRC may levy fines of up to 20%.

After notifying the tax authority, individuals will have until 31 August to make their disclosure and arrange for payment.

‘Our aim is to make it easy for plumbers to contact us, make a full disclosure of income and face a reduced penalty,’ said Mike Wells, HMRC’s Director of Risk and Intelligence.

‘We are using a variety of intelligence sources to target plumbers who have not declared their full income and I urge tradespeople in this group who think they owe tax on their income to get in touch with HMRC and get their tax affairs in order simply and on the best available terms’.

More information on the campaign can be found on the HMRC website.

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hmrc begins first phase of business records checks
April 20, 2011 by Shirley1
Over 1,000 small and medium-sized enterprises (SMEs) will be targeted in HMRC’s first round of Business Records Checks (BRC).

Following a period of consultation, the taxman is already arranging visits to carry out checks on the records of small businesses. The visits were not due to start until July but HMRC has decided to introduce what it describes as a ‘test and learn’ trial.

In a briefing note, HMRC confirmed that it is testing BRC in a limited way between 4 April and 15 July 2011, which will involve 30 HMRC staff in eight locations (Edinburgh, Irvine, Manchester, Liverpool, Stockport, Sunderland, Sheffield and Portsmouth).

It estimates that around 1,200 businesses will be targeted during this initial phase of the programme.

Under the BRC programme, tax inspectors will have the power to impose fines of up to £3,000 for ‘record-keeping’ failures, although HMRC said it has ‘no intention’ of charging penalties during the testing period.

Some professional bodies, including the Chartered Institute of Taxation (CIOT), had criticised HMRC for its ‘lack of consultation’ over the early start.

Commenting, the CIOT deputy president, Mr Thomas. said: ‘We need to be sure HMRC staff will not be expecting the smallest businesses to have perfect records written up every day. That is simply not appropriate. What counts as adequate records needs to have regard to the sort of business.’

It is believed that the records of around 200,000 businesses will be checked over the next four years, netting the Treasury an estimated £600m.

We can help keep your business records in good order – please contact us if you would like further information or assistance.

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government urged to remove ‘stumbling blocks’ to investment
by Shirley1
Industry leaders have called on the Government to remove the ‘stumbling blocks’ to investment and make the UK a more attractive place to do business.

In a new report – Making the UK the best place to invest – the Confederation of British Industry (CBI) warns that, without Government action, investment and jobs will be lost to other countries.

It claims that foreign investment in the UK fell significantly during the global recession, from $186.4bn in 2007 to $45.7bn in 2009, thus placing the UK’s investment reputation at risk.

The report identifies key areas for action which the CBI says will help remove the barriers that currently restrict investment in the UK. These include the continued reduction in corporation tax rates and proposals to remove the 50p tax rate ‘as soon as the public finances allow’.

The organisation also called for more apprenticeships and the introduction of a fast-track planning system.

Commenting, CBI director general John Cridland said: ‘We want the UK to be the best place for companies to invest because this is how we will create growth and jobs.

‘But it is worrying how many business leaders are telling us that the UK no longer holds the same attraction it once did, and are questioning whether they need to be here at all.’

‘With competition for international capital so fierce, the Government must play up our strengths and remove the stumbling blocks to investment. Time isn’t on our side and we have less than five years to turn things around’.

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employment tribunal system ‘requires major overhaul’
by Shirley1
The employment tribunal system requires a ‘major overhaul’ if it is to meet the needs of businesses and individuals, a leading business group has said.

According to the Confederation of British Industry (CBI), employment tribunals should offer claimants and companies informal, quick and cost-effective judgements, yet it claims the current system is ‘slow, legalistic and antagonistic’.

In its submission to the Government’s consultation on workplace dispute reforms, the CBI outlines three key steps which it claims will make the tribunal process quicker and fairer while reducing costs.
To help prevent weak claims, the business organisation suggests that individuals pay a ‘proportionate’ fee, refundable on success, to make them think twice before suing an employer.

The CBI also recommends that compromise agreements, where an employer and employee mutually agree to end an employment relationship without using the tribunal system, should be much easier to use.

It added that league tables for employment tribunals would show how different regions and judges perform against set standards, thereby encouraging best practice and greater efficiency.

Commenting, Katja Hall, chief policy director at the CBI, said: ‘We are saddled with a tribunal system that is expensive, stressful and time-consuming for all parties. Surely it’s in everyone’s interests for cases with merit to be heard quickly and settled, while weak claims are swiftly identified and weeded out.’

A Department for Business (BIS) spokesman said: ‘We’ve heard loud and clear the concerns from businesses up and down the country that the system has become too costly, takes too much time and that it is too easy to make unmerited or vexatious claims.’

The Government consultation on employment tribunal reform runs until 20 April.

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late tax return fines to rise sharply
April 13, 2011 by Shirley1
People who submit their tax return after the 31 January deadline will face significantly higher penalties, HMRC has announced.

Previously, returns filed after the deadline would attract a £100 fine. However under the new framework, which first applies to 2010/11 tax returns, taxpayers who file their returns late will be charged £100 on day one and further daily penalties of £10 after three months.

It means that a tax return filed six months late could attract a penalty of at least £1,300.

According to HMRC, the old £100 penalty failed to act as a deterrent. It hopes the new harsher penalty system will therefore encourage people to ‘submit returns as soon as possible’.

‘HMRC spends a lot of time pursuing late returns and getting involved in unnecessary appeals work. We want to focus our resources on more productive work such as catching criminals and collecting tax,’ said a HMRC spokesperson.

The new penalties for filing tax returns late are as follows:
- Day one – Individuals will be charged an initial penalty of £100, even if they have no tax to pay or have already paid all the tax owed
- Over three months late – Individuals will be charged an automatic daily penalty of £10 per day, up to a maximum of £900
- Over six months late – Individuals will be charged further penalties, which are the greater of 5% of tax due or £300
- Over 12 months late – Individuals will be charged yet more penalties, which are the greatest of 5% of tax due or £300. In serious cases people face a higher penalty of up to 100% of the tax due.
The deadline for submitting paper tax returns is 31 October, while those filing online have until 31 January.

Meanwhile, the penalties for paying income tax late are also being changed. An initial penalty of 5% of the unpaid tax will be charged after 30 days, with further penalties levied at six months and a year if it remains unpaid.
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national minimum wage to rise to £6.08 from october
by Shirley1
The main adult rate of the National Minimum Wage (NMW) will rise by 15p – or 2.5% – to reach £6.08 later this year, the Government has announced.

The decision was based on recommendations from the Low Pay Commission and is expected to help more than 890,000 of Britain’s lowest-paid workers.

As well as an increase in the adult wage, the NMW for 18-20 year olds will increase by 6p to £4.98 an hour, while the rate for 16-17 year olds will increase by 4p to £3.68 an hour. The minimum hourly rate for apprentices will go up by 10p to £2.60.

However business groups remain divided over the latest NMW rise, which takes effect from 1 October 2011.

The British Chambers of Commerce warned that it was the ‘wrong increase, at the wrong time’.

‘With over a million unemployed, the priority has to be getting people back into the job market. Youth unemployment is at a record high and we can’t afford to price young people out of work,’ said the BCC’s David Frost. ‘These changes will be a barrier to job creation, and ultimately economic recovery’.

Yet the Confederation of British Industry (CBI) welcomed the change.

‘This moderate increase strikes the right balance during a period of economic uncertainty. It means workers on the minimum wage will not fall behind the rest of the workforce in terms of pay rises,’ said Neil Bentley, CBI deputy director-general.

Under a new scheme, which came into effect on 1 January 2011, employers who deliberately pay their staff less than the NMW may now have their breaches publicised by the Department for Business, Innovation and Skills.

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cameron launches assault on red tape
by Shirley1
Businesses, individuals and community organisations have been given a welcome boost after the Prime Minister David Cameron vowed to ‘rip up’ 21,000 rules and regulations.

Speaking ahead of the launch of the Red Tape Challenge website, David Cameron said the Government planned to reduce the volume of red tape and get rid of ‘ridiculous’ burdens.

The new website will give firms as well as members of the public a chance to have their say on regulations affecting their business or lives.

‘We need to tackle regulation with vigour, both to free businesses to compete and create jobs, and give people greater freedom and personal responsibility,’ said Cameron.

‘Of course we need proper standards, for example in areas like fire safety and food safety. So where regulation is well-designed and proportionate, it should stay.

‘But it is hard to believe that we need government regulations on issues such as ice cream van musical jingles. That’s why I want us to be the first government in modern history to leave office having reduced the overall burden of regulation, rather than increasing it.’

The first five themes of the Red Tape challenge campaign will be:
- Retail (Pilot phase open for four weeks beginning April 7);
- Hospitality, food and drink (open for two weeks beginning May 5);
- Road transportation (open for two weeks beginning May 19);
- Fisheries, Marine enterprises and inland waterways (open for two weeks beginning June 2nd); and
- Manufacturing (open for two weeks beginning June 16).
The campaign will also have six cross cutting themes that affect all businesses: employment law; pensions; company law; equalities; health and safety; and environment legislation.

Once online debate has closed, ministers will have three months to explain why a regulation was still required or it will be scrapped.

The campaign forms part of the Government’s wider strategy to tackle excessive regulation and thus give businesses the freedom to innovate and grow.
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new financial year sees raft of tax and benefit changes
April 6, 2011 by Shirley1
As a raft of changes to the tax and benefits system comes into force, many experts are warning that families and those on middle incomes will feel the pinch.

Dubbed by some as ‘Worse-off Wednesday’, today sees the start of the new 2011/12 tax year and the introduction of a plethora of reforms which could cost British households more than £2 billion this year.

From 6 April the personal income tax allowance – the amount of money you can pay before you start paying tax –increases from £6,475 to £7,475 for those aged under 65.

While the move is expected to take around 800,000 people out of tax altogether, others will be less well-off as the threshold at which people have to start paying the higher rate of tax has been reduced by £2,400 to £35,000.

It means that individuals must now start paying the higher 40% rate of tax when their income exceeds £42,475 (previously £43,875).

In addition, national insurance rates have risen from 11% to 12% for employees and from 8% to 9% for the self-employed.

Meanwhile, changes to the welfare system will leave many families worse off, with child benefit now frozen for the next three years. It will be removed completely for families with a higher rate taxpayer in 2013.

Higher rate relief on employer-supported childcare has also been withdrawn from today, although employees already receiving vouchers or employer-supported childcare will continue to benefit at the higher rates where applicable.

Some analysts have also warned that linking increases in benefits to CPI inflation rather than RPI inflation may reduce social welfare payments by some £1.8bn.

Other changes coming into effect include: a new 5% stamp duty for homes worth more than £1 million; restrictions on tax relief on pension contributions for those on more than £150,000 a year; an increase in the annual ISA limit to £10,680; and a rise in the annual capital gains tax allowance from £10,100 to £10,600.

To discuss how the latest tax changes may affect you, please contact us.

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