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.
Small Business to Prosper In The UK
Posted: 08/08/2010 Filed under: Small Business | Tags: business, business concerns, moving to the UK, moving to UK, Non Dom, Small Business, UK tax Leave a comment »I have always been confident that Britain is going to pull itself out of the recession and it is great to see the Bank of England have stepped up to lend a hand to small and large businesses alike.
They have done this by purchasing more corporate bonds in May and June under their qualitative easing programme in order to push cash into the economy, for businesses who have been struggling with the sovereign debt crisis.
Bank holdings of corporate debt rose from £1.36bn to £1.6bn in the three months leading up to June, its quarterly Asset Purchase Facility report showed. The Bank has bought £198bn of gilts from companies under the programme and continues to buy and sell around £2bn of corporate debt.
The Banks facilities have been made use of by Corporate’s in the past quarter as concerns about sovereign debts fed through to fears about companies, pushing the price of bond issuance higher and reducing demand.
“Increased concerns about the fiscal adjustment of some euro-area member states and banks’ exposure to sovereign debt fed through into other risky asset prices, such as corporate bonds,” the Bank said. “The resulting increase in uncertainty and volatility saw conditions in UK corporate debt markets deteriorate marginally during May and early June.”
The cost of raising debt through bond issuance, compared with Government gilts, increased by 0.3 percentage points. “Issuance was lower than in 2009 but broadly in line with historical averages. Market contacts suggested that some firms had delayed issuance as a result of market conditions,” the bank said.
This is all good news for Britain and the both large and small businesses that reside here. In times of austerity it is important, in my opinion, that we highlight the positives and at the moment I must say I do not have to search very far to find them.
Small business may well prosper under this government. Time will tell.
UK Taxation System Gets An Overhaul
Posted: 28/07/2010 Filed under: UK Taxation | Tags: business concerns, corporation tax, non dom tax, Taxation, uk companies, UK tax Leave a comment »There are more talks for the launch of the Office of Tax Systems in today’s news. It always makes me a little nervous when they start talking about changes to the UK tax system. I know how hard some of clients find it when it happens. Lucky we are here to help them.
Anyway back to the subject at hand. The new version will apparently simplify the existing overly complicated version, making it much easier for all Britons, especially small businesses.
Liam Byrne, Shadow Chief Secretary to the Treasury said he welcomed the significance of the government’s plan to simplify the tax system, but he then went onto say “today’s announcement, I’m afraid, sounds rather more like an attempt to grab headlines than real evidence of a push to improve legislation”.
He called on the government to scrap plans to “complicate the tax system by introducing a marriage tax allowance, all for the sake of sending an ineffective £3 a week signal of what his party thinks a family should look like” and what he said was a “more complicated stamp duty system when it comes to energy conservation for housing”.
The TUC union body said it was concerned the OTS could become a “softening-up exercise for tax cuts for the rich”.
But the launch was welcomed by business chiefs.
Richard Baron, of the Institute of Directors, said it was “a brilliant idea” but that it would be judged by its results.
David Frost, director general of the British Chambers of Commerce, said it was “a necessary and long overdue response to the relentless chop and change of tax law”.
I find all of these statements interesting, it is about time the government updated its archaic taxation system. If people understand what they are paying tax for it makes it much easier for them to part with their money. On the other hand the most profound utterance definitely comes from Mr Baron, we will indeed judge it by its results.
If taxation still baffles you or you are concerned about how these changes may affect you please get in touch with us here at St Mathew’s eAccounting and we will be pleased to help you see it all crystal clearly.
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
Income taxation Abolished For Low Earners
Posted: 22/06/2010 Filed under: Moving to London, Non Dom, Small Business, UK Taxation | Tags: corporate tax, corporation tax, Tax, Taxation, UK tax, VAT Leave a comment »I thought I would outline some of the things we are expecting from Mr Osbourne’s budget tomorrow so we can evaluate how close our expectations are. Mainly it is about taxation and spending cuts but which taxation and where is the axe likely to fall?
The first thing that jumps out at me from the predictions is the idea that George will be abolishing income taxation for the UK’s lowest earners. I must admit that this has always made sense to me. It seems a convoluted way to do thing giving people money with one hand i.e. child support and other benefits and then taking it away with the other. By all means if people are struggling to get their heads above the poverty line then let them keep the money they work for.
To go along with his tax exemption for low earners the chancellor is also likely to announce a number of money-raising measures, including an increase in capital gains tax, a levy on bank profits, and rises in alcohol and cigarette duties. There is also likely to be a change in aviation tax.
It is interesting about the aviation tax but a rise in taxation on cigarettes and alcohol is to be expected, have we ever had a budget that did not include this move?
Anyway we have not got much longer to wait. Tomorrow will give us all the answers.
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.
Retail Sales Up In Good News For British Economy
Posted: 08/06/2010 Filed under: Investment, Non Dom, Small Business, Uncategorized | Tags: business concerns, moving to the UK, moving to UK, Taxation, UK tax Leave a comment »Sometimes people fail to see the fact that all facets of the British economy are connected. What is good for the other guy is indeed often good for you. So news that the retail sector is experiencing strong sales at the moment gives all of us something to cheer about. Some of my clients in small business will be directly feeling the benefits other will be reaping the rewards in a less direct fashion but there is no doubt that money moving around in our economy is good news for us all.
It seems we have two major factors to thank for the renewed interest in retail spending, warm weather and football.
“The sunnier second half of May provided a welcome boost to overall sales,” said the BRC’s director general Stephen Robertson.
It is no big suprise that people like to come out and do a bit of retail therapy in the sunny weather, but last year, at the height of recession, people resisted the temptation and stayed home. It is great to see that we have come out the other side and people are no longer frightened of the consequences of spending a little money.
It is not just small purchases people are making, in fact due to a huge interest in the rapidly approaching soccer world cup, many of us are going home with huge shiny TV’s to watch the action on.
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.
Capital Gains Rise Will Close Fat Cat Loophole
Posted: 01/06/2010 Filed under: Small Business, UK Taxation | Tags: business concerns, corporate tax, moving to UK, UK tax Leave a comment »Yesterday I wrote a blog about all the reasons one commentator considers the rise in capital gains tax, from here on referred to as CGT, to be a demented move on the part of our new government. Today as promised the other side to the argument. Please bear in mind that neither of these points of view totally sums up my own.
So after an article from the Scotsman yesterday for the more positive spin on this CGT hike I journeyed over to the The Independent and an article written by Julian Knight. In it he has a right go at the politicians who are attempting to oppose the tax from within the coalition. He says that their claim that the CGT is a tax on ordinary folk is a giggle and their mention of the working classes is deserving of a full blown belly laugh.
Mr Knight maintains that the CGT is a tax that mostly affects the fat cats of our society. His specific claim is that rich people, especially those in the city (that den of over paid and unscrupulous bankers), morph their income into a capital gain and waltz away with an undeserved tax benefit. He believes that a CGT pitched right will hit the exact correct people and close a fat cat loophole.
Fiar enough, it is one point of view.
If you are at all concerned how capital gains or any other tax may affect your business then don’t hesitate to give us a call here at St Matthew’s eAccounting, tax is one of our specialties.
