Despite the Bank’s Financial Policy Committee (FPC) saying earlier this week that it was relaxed about the possibility of a property boom because it is keeping an eye on the market, Chancellor George Osborne has said that he has asked the FPC to work with him and advise on whether the key parameters of the scheme remain appropriate.
From January the Help to Buy initiative will provide mortgage guarantees on properties worth up to £600,000 but the FPC will make annual reviews and could recommend that the cap is reduced, although in initial plans it had only been due to assess the scheme after three years. The Committee could also make loans more expensive by recommending that the Treasury raises the fees paid by lenders for the guarantees.
The Help to Buy scheme was originally launched to help buyers of new properties and a second, potentially much bigger phase is due to begin in January, which will assist buyers who might otherwise be unable to afford a deposit on a home. Up to £12bn of government guarantees could spur as much as £130bn of new mortgages.
Since the second stage of the plan was announced in March, the housing market has shown signs of recovery, especially in London, where prices have jumped by about 10 percent from 12 months ago.
However, critics of the scheme have said it risks fuelling an unsustainable rise in house prices, with Business Minister Vince Cable in particular expressing his concerns about the programme.
For more information, please contact Glazers, Chartered Accountants London or visit www.glazers.co.uk
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( 3 / 558 )The Bank of England’s Financial Policy Committee (FPC) has said that it is watching the UK’s rising housing market “closely” for signs of any overheating, in a bid to avoid another housing bubble.
The FPC said that the recovery in the housing sector seemed to have "gained momentum" with average prices up 5 per cent in August from a year earlier and added that it was "vigilant to potential emerging vulnerabilities".
However, despite the rise, housing activity and loan-to-value ratios on mortgage lending are still below historic averages and debt servicing costs are low, while the ratio of house prices to earnings are at the same rate as a decade ago.
In addition, the Committee said, if risks to the stability of the financial system were to emerge from the housing market, both it and the financial regulators had a range of tools available to address those risks. These include guidance on underwriting standards, capital requirements and recommendations to the regulators on tightening of affordability tests.
While the Committee and the Bank’s Governor Mark Carney seem relaxed about a potential property bubble, some commentators fear the disruption one could cause but the Committee has to walk a fine line between encouraging the market and quelling people’s dears of future trouble.
However, others say that the growing unaffordability of housing should act as a natural check on the rise of house prices and there is no suggestion that the banks would return to pre-crisis lending conditions, meaning that the FPC may not have to intervene.
Meanwhile, the Financial Conduct Authority will now assess the "potential amplification" through the financial system of interest rate changes, or perceptions of interest rate changes that may be caused by Bank policies on reducing the stimulus currently being pumped into markets to keep interest rates low.
For more information, please contact Glazers, Chartered Accountants London or visit www.glazers.co.uk
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( 3.1 / 571 )Small firms have been left counting the cost after new figures revealed that HM Revenue & Customs (HMRC) raked in £565m from small and medium-sized enterprises (SMEs) last year from compliance investigations.
The taxman’s haul was up from £434m in 2011-12 and was part of the department’s target, set by the 2010 Spending Review, of clawing back an extra £7bn a year in tax.
Since 2010, 40 specialist taskforces have been deployed by the department, often aimed at small traders, who are seen as easier targets than larger firms, as they are more likely to make mistakes when filling in tax returns and are less likely to have the time or weaponry to fight back.
Moreover, while the tax news of multinationals, such as Starbucks or Vodafone, make the daily news, the taxman targeting small firms is hardly the stuff of headlines. However, it is important for SMEs to be aware of the risks they face if their tax affairs are not in order, because they are increasingly in the taxman’s sights, as the increase in revenue from these investigations proves.
Additional research has suggested that SMEs are facing threats from another quarter.
Apparently one in 20 small firms has no insurance cover in place, leaving them vulnerable to liability claims, hefty fines and prosecution.
The research found that 350,000 small firms that employ staff have no Employment Liability insurance in place, which is illegal, and if found out, the business could be fined up to £2,500 a day by the Health and Safety Executive.
Apart from being against the law, such firms are leaving themselves open to compensation claims from disgruntled employees, damage to commercial property and other external threats, all of which could ruin a small business if it not insured.
For more information, please contact Glazers, Chartered Accountants London or visit www.glazers.co.uk
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( 3 / 535 )Labour Leader Ed Miliband’s keynote speech today (September 24) at the party conference in Brighton will offer an £800m tax break to small and medium-sized enterprises (SMEs) if Labour wins the general election in 2015.
According to pre-speech notes, a Labour Government’s first act would be to reverse the raising of rates for small business, due in the April of election year, and to freeze the levy until 2016. However, the move would apply automatically only to businesses in England.
Mr Miliband calculates that the break, which would be worth an average £450 over two years to 1.5 million businesses, including shops, pubs and hi-tech start-ups, and up to £2,000 for some firms. According to the pre-speech notes, the revising of the business rates could be paid for by scrapping the current Government’s planned 2015 cut in corporation tax from 21 per cent to 20 per cent.
The Labour leader claims that this move would save the Treasury £340m in 2015/16 and £785m in 2016/17 and will say that this "effective tax rise" would also affect 80,000 large firms.
Mr Miliband will push the case for an economy based on higher skills and wages and the "dynamism" of small business. He will say that he wants growth in the UK to benefit “hard working families” and small business owners, not just the “privileged few”.
Meanwhile, Shadow Chancellor Ed Balls signalled yesterday (September 23rd) that he will reintroduce a 10p tax rate for low-earners, which will be paid for by a so-called "mansion tax" on properties worth more than £2m. According to Mr Balls, the move would provide a tax cut for 25 million people on low and middle incomes.
For more information, please contact Glazers, Chartered Accountants London or visit www.glazers.co.uk
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( 3 / 486 )New research has revealed that around half of all small and medium-sized enterprises (SMEs) are planning on giving their employees a raise over the next year or have already done so during the last 12 months.
The Federation of Small Businesses (FSB) said that some of the increases could be as high as 10 per cent, as confidence is evidently returning to small businesses after a period of wage restraint.
The figures are based on a survey of FSB members between 31 July and 12 August 2013 and the responses showed that fewer than a quarter of small firms have any staff on the minimum wage, a 4 per cent improvement on 2012.
The research echoed the results of the FSB’s Small Business Index, also published last week, which found that 15 per cent of small firms have increased their staff numbers in the third quarter of 2013, which is the highest figure reported since the Index began in 2010.
However, the findings also suggest that those in traditionally low paid sectors such as retail or hospitality are still struggling. An FSB spokesman explained that, even with the beginnings of an economic recovery, small businesses in some sectors still face rising business rates and utility bills.
This means that not all firms are in a position to raise salaries, which should be noted by policymakers when it comes to legislating on pay. Given that the vast majority of unemployed people who enter the workforce do so by starting a business or working for an SME.
For more information, please contact Glazers, Chartered Accountants in London or visit www.glazers.co.uk
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