The admission has prompted at least one credit rating agency to say that missing the public debt reduction target weakens the credibility of the UK’s fiscal framework, which is one of the factors that support the rating.
Meanwhile the Office for Budgetary Responsibility says the UK has a "better than 50 per cent chance of eliminating the structural current deficit in five years’ time.
However, the Chancellor decided to axe the 3p planned fuel duty rise and announced a further £235 in the tax-free personal allowance in a bid to appeal to families, while he is to cut corporation tax to 21 per cent, making the rate in the UK one of the lowest for business in the world and will also increase capital allowances.
At the same time, most working age benefits, such as Jobseekers Allowance and Child Benefit, will go up by 1 per cent, which is less than the rate of inflation, for the next three years.
In other moves, the Chancellor gave the go-ahead for 30 new gas-fired power stations and said that an extra £1bn will be spent on road building projects, including the conversion of the remaining A1 dual carriageway from Leeds to Newcastle into a motorway.
Teachers’ pay in England and Wales will be more closely linked to performance and a consultation will be launched on easing the burden on companies of running final-salary pension schemes, while the basic state pension will rise by 2.5 per cent next year to £110.15 a week. There will also be a further cut in tax relief on large pension pots, from £50,000 to £40,000, saving £1bn per year.
For more information, please contact Glazers, Chartered Accountants London or visit www.glazers.co.uk
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( 3 / 572 )When the Chancellor George Osborne delivers his Autumn Statement later today, he is expected to say that the Government’s austerity measures will be extended for longer, that benefit spending will be cut and that taxes will increase.
The Chancellor will be speaking against a less optimistic backdrop than he forecast in the Budget nine months ago but will say that the Government is confronting rather than the ducking the problems the country faces.
He is also likely to admit that one of his key fiscal targets of having debt as a proportion of GDP falling by 2016, will be missed and has acknowledged that cutting the deficit is taking longer than planned.
The Office for Budget Responsibility (OBR) is expected to cut its forecast for growth alongside the Chancellor’s Statement and this could prompt him to outline measures to boost economic growth, although there is little scope for more schemes in the near future.
Mr Osborne is also expected to give more detail on plans to squeeze spending in most Whitehall departments and use the money to build new schools and transport schemes.
All but four departments will be asked to save an extra 1 per cent next year and a further 2 per cent the following year. The prime minister said yesterday that the £5bn saved would be spent on capital projects to kick-start growth and make the UK "work better".
The Autumn Statement will also outline how £1bn will go towards building 100 new free schools and academies, creating an additional 50,000 new school places.
However, the departments of health, education, international development, HM Revenue and Customs (HMRC) and nuclear decommissioning will be protected from this latest squeeze.
In fact, HMRC will be given an additional £77m to expand its anti-avoidance and evasion activity in a bid to bring in an additional £2bn per year in tax that would have otherwise gone unpaid.
For more information, please contact Glazers, Chartered Accountants London or visit www.glazers.co.uk
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( 3 / 532 )According to a recent report from a telecoms firm, the UK is losing up to £1.6bn a year in VAT on digital services bought by the UK-based customers of suppliers such as Amazon, which are based elsewhere.
This means that between 2008 and 2014, the UK would lose £10bn, which could have funded London 2012, as the Games cost taxpayers £9bn. The news will put even more pressure on Chancellor George Osborne to put a stop to such losses and to take tougher action against multinationals, such as Google and Starbucks, that pay tiny amounts of tax.
Under the EU’s VAT rules, digital supplies to non-business customers, such as ebooks, music downloads and online apps, are classified as services rather than products and the VAT on electronic services is imposed at the rate applying to the country in which a company is headquartered, rather than the rate applied by the country in which it is bought.
For example, digital book giant Amazon is based in Luxembourg and therefore charges its customers 3 per cent VAT for ebooks, compared with the 20 per cent levied in the UK, although the European Commission has recently ordered Luxembourg to increase its VAT rate to 15 per cent.
According to the report, the business to consumer (B2C) digital market in Europe was worth €124bn in 2009 and the UK accounted for over a third of total sales. However, the report goes on to say that we are the least successful at converting B2C sales into tax revenue.
Based on the highest estimates, the UK’s combined VAT and corporation tax income from B2C business was generated at a rate of 15 per cent of total sales, while France and Germany secured conversion rates of 19 per cent and 21 per cent respectively and the Benelux countries converted half of their €3bn B2C trade into tax revenue.
For more information, please contact Glazers, Chartered Accountants London or visit www.glazers.co.uk
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( 3 / 620 )Chancellor George Osborne will announce rules later today that will strengthen the ability of HM Revenue & Customs (HMRC) to challenge the tax affairs of multinational companies.
The move will form part of a "£10bn crackdown on tax dodging" due to be announced in full at the Chancellor's Autumn Statement on Wednesday.
Apparently the Chancellor has earmarked funds to help HMRC speed up its scrutiny of multinationals' "transfer pricing" arrangements to ensure they do not shift profits out of the UK to lower tax jurisdictions. These funds, together with extra resources aimed at the wealthy and offshore evasion, amount to £77m for each of the next two years and are expected to bring in an extra £2bn a year.
The Chancellor’s move comes following a report from the Public Accounts Committee (PAC), which describes tax avoidance by companies such as Amazon, Starbucks and Google as "immoral" and criticises them for giving "unconvincing and in some cases evasive" evidence. During the grilling of these executives by the Committee, MPs from all parties were openly incredulous at some of the answers they gave.
Starbucks has already begun talks with HMRC, which could see the firm paying £5m in corporation tax next year after suffering calls for a boycott of their coffee shops in the wake of the amount of tax they paid being made public. Some have described the firm’s decision to do this as a “blatant admission of guilt”
The report from the PAC also questioned whether HMRC has the determination to challenge the practice of these companies as robustly as it might. It says that legislative change is required to ensure that multinationals report their tax practices transparently and advocates prosecutions rather than deals for companies found to be avoiding tax.
Critics of the UK’s tax system have been saying for some time that such changes are required, so the report is being lauded as the wake-up call that the country needs, with some calling for HMRC to recruit better people and tougher leadership in order to tackle tax avoidance in a more aggressive way.
Meanwhile, given the seriousness of the tax gap experienced by the UK, the Chancellor is also expected to confirm a deal with Switzerland which he hopes will raise more than £5bn in previously uncollected taxes from Swiss bank accounts over the next six years.
It is thought that British holders of Swiss bank accounts will be given two weeks to decide whether to pay a lump sum to HMRC or have their account details surrendered by the banks.
For more information, please contact Glazers, Chartered Accountants London or visit www.glazers.co.uk
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( 3 / 510 )This week HM Revenue & Customs (HMRC) produced a video on social media channel YouTube explaining the Patent Box, which is a new tax incentive designed to encourage companies to develop innovative products.
The Patent Box will allow businesses to apply a lower, 10 per cent rate of Corporation Tax to profits from patented inventions and certain other innovations. The tax relief will be phased in over a period of five years, with 60 per cent of the benefit available from 1 April 2013 and the full benefit applying from 2017 onwards.
A company can only benefit from the Patent Box if it is liable to Corporation Tax and makes a profit from exploiting patented inventions and the company must also own or exclusively license-in the patents and must have undertaken qualifying development on them.
The new legislation applies to profits generated from existing and future patents granted by either the UK Intellectual Property Office or the European Patent Office.
According to David Gauke, Exchequer Secretary to the Treasury, the Patent Box has been brought in because the Government wants to create the most competitive tax system in the G20 and to make the UK the best place in Europe to start, finance and develop a business.
He called the Patent Box a key initiative to make the UK tax regime competitive for innovative high-tech companies, as it provides an incentive for them to retain and commercialise existing patents and to develop new, innovative products.
Mr Gauke went on to say that the Government’s aim is for this new tax relief to encourage companies to create high-value jobs in the UK and maintain the UK’s position as a world leader in patented technologies.
HMRC have put the video on YouTube to encourage small firms particularly to look into taking advantage of the relief.
For more information, please contact Glazers, Chartered Accountants London or visit www.glazers.co.uk
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