UK Rich Lose More than The Poor
Posted: 11/08/2010 Filed under: Investment, Moving to London, UK Company Set Up, VAT, VAT Registration | Tags: business concerns, corporation tax, Small Business, VAT Leave a comment »In latest polls, it has come to light that the recession is costing the wealthiest house holds more than that of less ‘well off’ ones. This is something that should please most people as it is a favorite hobby horse of many that conservative governments take money out of the pockets of the poorer members of society. It seems this time they are taking money from everyone’s pockets with rises in VAT and such like.
Which is, of course, as it should be.
The ‘best off’ group, usually headed by someone aged between 55 and 74, with a degree, have took a blow recently losing £25,000 of their total wealth between 2007 and the autumn of 2009.
Whereas the less well off house holds, headed by people under the age of 35 with no qualifications, have felt a smaller blow of just £2,000, during the same period. Of course it does need to be pointed out that it is all relative and the percentage of income earned is probably the relevant figure here.
Clearly the lower earning households felt less of a blow when it came to the recession due to the fact they had less wealth to begin with. It is also being said that the fact that they had stored their assets in more stable places such as banks and building societies (we are talking comparatively here). As opposed to the wealthier households who invest their wealth in places with more uncertain stability such as the stock market.
This study was held by the Institute of Fiscal Studies, or the IFS and commissioned by the Department for Work and Pensions. The study was held to aid research into how households lack of confidence could shake the already fragile economy, not aid its recovery.
There is no doubt, however, that as focused as we may be on pulling the UK up by its bootstraps we must never lose sight of the fact that we are all in it together. Any society that neglects its more vulnerable members risks losing something much more valuable than cash. It risks losing its humanity.
OK I will jump off my soapbox now.
Inflation Up But Interests Stay Down In the UK
Posted: 09/08/2010 Filed under: UK Taxation, Uncategorized, VAT, VAT Registration | Tags: business, business concerns, corporate tax, corporation tax, Small Business, UK tax, VAT Leave a comment »Inflation has been a hot topic in the media these past six months and I believe it can be strongly linked to the VAT rise from 17.5pc to 20pc in January. This may not be rocket science and perhaps it is something we may have to live with but it bears pointing out.
Tensions within the Bank of England Monetary Policy Committee will be “excruciating” for the next 18 months as strong economic data raises the pressure on policy-makers to raise interest rates, according to Peter Spencer, chairman of the Ernst & Young ITEM Club.
Inflation has grown faster than the Bank’s 2pc goal for 41 of the past 50 months and has averaged higher than 3pc for two years, prompting several letters of explanation to the Chancellor from Mervyn King, the Bank’s Governor. ITEM today says that inflation will remain above target until the end of 2011, largely as a result of the planned increase in VAT.
From May until June the GDP, gross domestic product (the measure of the countries overall economic output) growth was 1.1pc, the strongest in four years and far higher than expectations. This has added to pressure on policy-makers to raise rates from their historic low of 0.5pc, Bank policy-maker Andrew Sentance has already called for a rate rise for the past two months.
However, ITEM warns that rates will have to stay on hold until the start of 2014 if the economy is to be given a chance to recover. “The problem is that on the surface the economy looks to be inflating but once you delve deeper, you can see that the situation is very disinflationary,” Mr Spencer said.
So Britain are to hold out on the inflation rise. Staying at 0.5pc will help to build a stronger economy, even though the effects of the VAT rise are said to be felt shortly.
We’ll hang on in there and get through this tough time, coming out stronger and more prepared on the other side. Lower interest rates will help with this process and it will be a great relief to many households and small businesses that they are not set to rise. In my opinion a rise in VAT may turn out to be a small price to pay.
Interest Rates To Rise Or Not To Rise
Posted: 27/07/2010 Filed under: Small Business, UK Immigration, UK Taxation, Uncategorized, VAT | Tags: business concerns, corporation tax, tax refunds, Taxation, UK tax, VAT Leave a comment »Andrew Sentance was on his own in calling for a rise in interest rates from 0.5pc to 0.75pc for a second month running. With VAT up, taxes up and employment down it seems to be one of the few things to stay stagnant.
Mr. Sentance argued that “the inflation outlook had shifted sufficiently to justify beginning to raise interest rates gradually”.
The rate of inflation has remained constantly high this year and despite falling 0.5pc, from 3.7pc to 3.2pc in the past two months, is still way above the banks target of 2pc. However the call was denied again as majority of members believe inflation will fall over time.
The minutes from a Bank of England rate-settlement meeting read “the weight of evidence from both home and abroad continued to indicate that the margin of spare capacity was likely to bear down on inflation and bring it back to the target in the medium once the impact of temporary factors had worn off.”
This time however, there was some sympathy with Mr. Sentance as policymakers acknowledged that inflation is “likely to remain above target for some months as the impact of the past increases in indirect taxes and oil prices, and the depreciation of sterling offset downward pressure on inflation from spare capacity”.
The increase in VAT to 20pc is also “likely to add to inflation [as] some companies may anticipate the increase by raising prices in advance”. They fear a rise in “medium-term inflation expectations” becoming entrenched by feeding into pay settlements.
However, the “committee’s central view remained that the substantial margin of spare capacity was likely to persist for some time and would bear down on inflation over the medium term”.
In my humble opinion this view is good, UK tax payers are happy to keep the 0.5pc interest rate, Mr. Sentance needs to stop pushing for this and let the market settle in its own time. It seems there are more than one or two experts who agree with me.
Are We Our Own Worst Enemy? VAT Rises.
Posted: 12/07/2010 Filed under: UK Investment, UK Taxation, VAT, VAT Registration | Tags: business concerns, corporation tax, Tax, UK tax, VAT Leave a comment »It looks as though us Britons are tightening our purse strings again, as we fear another recession backlash. It is said we fear a ‘double dip’ in the economic climate after the recent VAT increase to 20pc.
Being more careful about what we purchase, four in ten have said they wardrobe raided in order to recycle their old garments as opposed to buying new, up to date fashion.
According to the survey conducted by GfK NOP, a third of consumers claimed they had stopped dining out in order to save the pennies and credit cards are being used less for those luxury items we indulge upon.
It isn’t just the consumer-facing companies that seem to be threatened either, people are now changing their lifestyle choices, 6pc surveyed are postponing getting married and an equal amount are putting off having children until the threat has passed.
Ironically, the fear that has been created surrounded the second recession is, in fact, what just may cause the ‘double dip’. Our inclination as a nation to save during these times of ‘economic uncertainy’ could have a devastating effect in the long run.
It is my opinion that consumers should not be so over-cautious when considering the coming of the second recession.
If you are worried about the double dip (AGAIN) and want to discuss any aspect of your business, Please contact us here at St Matthew’s eAccounting. We know business in the uK
CBI: UK Will Still Avoid Double Dip Recession
Posted: 14/06/2010 Filed under: Moving to London, UK Company Set Up, UK Taxation, Uncategorized, VAT | Tags: business, business concerns, corporate tax, corporation tax, recession, recovery, UK tax, VAT Leave a comment »Despite the dire talk coning from a lot of economic pundits and the way the government are talking up the ‘mess’ they have inherited, the CBI says Britain will still avoid a double dip recession. I think people understimate how important this is. Even with tax hikes in VAT and CGT predicted, the avoidance of the double dip specter is a huge plus.
I have a lot of customers who are involved in small business and other industries that rely directly on a healthy economy for their livelihood. I know we all do in some sense but for most of us it is a little more second hand. The news that a double dip is highly unlikely has small business celebrating.
The CBI, one of England’s most respected business organisations, also said that they expected the British economy to continue to grow this year, fuelled by the private sector.
They did have a warning for the new government though. They pointed out quite strongly that any over zealousness in the attempts to cut public spending would slow down the economic recovery. They acknowledge that borrowing needs to be brought under control but huge swathes of cuts was likely to be counterproductive.
I am not sure that the government is in any frame of mind to listen to these warnings.
VAT The Big Issue
Posted: 04/06/2010 Filed under: Small Business, Uncategorized, VAT, VAT Registration | Tags: business concerns, corporate tax, corporation tax, UK tax, VAT Leave a comment »With the UK facing an almost certain rise in VAT in the coming months a few members of our business community are feeling the need to speak out and make their ideas known. This week it was Kingfisher chief executive and owner of B&Q, Ian Cheshire, who was compelled to tell us his thoughts on VAT in the UK. They made for interesting reading.
In essence what he is suggesting is that instead of the predicted rise in VAT, many are tipping it going to 20%, the government fill its coffers by extending the products to which VAT applies.
Mr Cheshire, like most of us acknowledges that tax rises are inevitable and even welcome in the face of our enormous deficit, but he expresses reservations about how the government plans on structuring these rises.
Mr Cheshire said: “Rather than reach for the default switch of increasing the standard rates, we should perhaps look at how the tax burden falls and take this opportunity to think about a slightly smarter form of tax — what we want to encourage and what we want to discourage.”
The example he uses is sugar, though junk food attracts VAT, sugar does not.
This kind of thinking puts him at odds with a lot of social commentators though who point out that as food takes up a bigger percentage of the disposable income of the poor they would suffer the most.
If you are wondering how rises in VAT or any changes in taxation will affect you then please contact us here at St Matthew’s eAccounting to talk it over.
Will VAT Rise Cause Job Losses?
Posted: 28/05/2010 Filed under: Uncategorized, VAT, VAT Registration | Tags: business, business concerns, Tax, Taxation, UK tax, VAT Leave a comment »As usual it depends on who you listen to as to whether or not you believe that a rise in vat in the UK will cause a fall in employment.
The British Retail Consortium has come out this week and claimed that the rise in Vat that is expected in the next budget will cause massive job losses from the retail sector. Their figures are dire and fairly scary. They say theat the predicted new VAT rate of 20 per cent would cost 163,000 workers their jobs and mean a consumer spending clamp down that would cost £3.6 billion over the next four years. That does sound grim.
As usual though ( and you cannot blame them) they are only seeing things from their point of view. They are urging the government to make cuts in the public sector instead of raising tax and they are doing so without a hint of irony. Despite the fact that public sector cuts would be sure to still result in large numbers of jobs being lost; just not in the area they are concerned about.
It seems that many experts think the BRC may be skewing a figures a little bit in order to make their case. I think that is natural. But I despite their scare tactics I think I am still leaning slightly towards the VAT rise being a good thing. But I am not yet completely convinced,
Interesting times ahead.
UK To Tax Spending Instead Of Income
Posted: 25/05/2010 Filed under: UK Taxation, Uncategorized, VAT | Tags: corporate tax, corporation tax, Taxation, UK tax, VAT Leave a comment »Today’s blog was inspired by a commentary piece I read in the The Times last week regarding taxation in the UK. The article focused on the way that we view taxation in this country and what that has meant for the way we implement it.
Basically the UK traditionally taxes income. It is such a deeply ingrained thing that when I mentioned it to my friends I was met with puzzled glance and the question, “what else would you tax”. The answer, clearly, is spending. In other words tax the expenditure rather than the income.
Of course we do have VAT these days which does target spending but still a lot of our taxation efforts still focus on taking money from people at the source of their earning. Big deal you say? Well the point of the Times commentator was that income is far more volatile than spending and so therefore, less reliable. If we want to be sure about the amount that will reach our coffers we need to turn the focus to taxing spending.
How do we do that? A rise in VAT, of course. It is beginning to look very much as if this rise is only a matter of when and how much.
Election 2010: What Was That All About?
Posted: 09/05/2010 Filed under: UK election, UK Immigration, Uncategorized, VAT | Tags: business, business concerns, UK election, UK tax, VAT Leave a comment »Wow, I like most of the country was completely speechless by close of play on Friday night. What on earth just happened? The actual result of the UK election, even though we are two days out from it is still unsure. It is not often that has happened in recent times in the UK and it makes it tricky to talk in any meaningful way about what the result will be for issues close to our heart such as The UK economy and immigration into the UK. VAT and its predicted increases are still a complete mystery.
So are there any general conclusions we can draw from where we are now?
It is true to say that the confusion is not good for the UK economy, things are likely to worsen if some decision is not made soon. That is not something that can be allowed to happen. It seems to me that both the Lib Dems and the Labour party lost ground so do we take the chance of having a Labour government propped by the Lib Dems? It could be construed as losers backing up losers.
I am not partisan in these thing at all, I am a totally swinging voter but I cannot help thinking that if Tory did not actually win the election they lost it least.
In the meantime we will all wait with bated breath for the powers that be to make a decision. Let’s hope they get on with it quickly, as far as the international financial market is concerned either party in government is better than no government at all.
VAT is The Gorilla in the Room in Election
Posted: 04/05/2010 Filed under: UK election, UK Investment, UK Taxation, Uncategorized, VAT, VAT Registration | Tags: business concerns, corporate tax, Taxation, uk companies, UK tax, VAT Leave a comment »Sorry to be like everybody else and keep banging on about the election but if you are interested in the financial structure of the UK it is pretty hard to ignore at the moment. On the bright side it is nearly over and we can start talking about something else very shortly, but for now… There was an interesting article in the guardian this week regarding VAT and its place in the election.
The article was quoting the holy grail of think tanks the Institute for Fiscal Studies. In very diplomatic and polite terms the IFS made a statement this week that basically said that the parties were telling us fibs or at the very least putting a gloss on the truth. According to them we are facing four years of austerity and tax cuts under either party. Each will raise taxes and make cuts to pull Britain out of the deficit mire just the ration will change.
The Tories will have a ratio of 4 to in favour of cuts over taxes, Labour will do it at a ratio of 2 to 1 and the Lib Dems will fall somewhere in between. And no matter which party you elect Vat will rise.
Personally, and it may sound odd, I am not terribly concerned about any of this. Let’s do what is necessary to get our economy back on track.
