Millions more in line for tax rebates

HMRC is grappling with a backlog of Pay As You Earn cases dating back to 2004

About six million people are set to receive tax rebates averaging £400, while another million will learn they have underpaid their tax by about £600.

Her Majesty’s Revenue and Customs (HMRC) said letters would begin going out in the next few months, with those owing money able to pay in stages. It is the second year tax and National Insurance discrepancies have been identified by a new computer system. HMRC said the number of cases would reduce “as the new system beds in”.

Those who will be told they have underpaid tax are expected to owe between £500 and £600 on average.

Interest paid

“In a similar exercise last year, Revenue and Customs were criticised for being insensitive over their treatment of underpayers,” said BBC news correspondent John Andrew. “This time it’s being stressed that they can spread what they owe over time by having their tax code adjusted.”

The rebates, which relate to overpayments in 2007-08 or earlier and will include interest, are due to be settled by December 2012. It is estimated these will cost the government more than £2bn. “Money that is owed going back many years is now going to be automatically paid back as we get the tax system up to scratch,” said an HMRC spokesman. “We are getting cases that were left unreconciled up to date as quickly as possible. Anyone owed money will be paid back with interest without the need to contact us. “The fact is there will always be some cases at the end of every tax year that require an under or overpayment to balance but these cases will reduce as the new system beds in.”

Last year, HMRC identified 4.3 million people due refunds for overpayments and some 1.4 million who owed the taxman after paying too little. The amounts owed averaged just over £1,400, while a further 900,000 underpayments of up to £300 were written off. The House of Commons Public Accounts Committee criticised HMRC’s management of the income tax system. The MPs said up to 22 million people had not been taxed accurately since 2004-05 causing “unacceptable uncertainty and inconvenience”.

Then earlier this year, almost five million taxpayers were informed by HMRC that they had either paid too much – or too little – tax in the last financial year, 2010-11.

HMRC Permanent Secretary Dave Hartnett was widely criticised for a lack of sympathy toward those facing an unexpected bill, after he said tax reconciliation was a routine measure. He later apologised and insisted HMRC did “not underestimate the distress caused to taxpayers”.

Link is http://www.bbc.co.uk/news/uk-15363168

The firm is at the stage where, due to internal growth, additional resources are needed. Bringing in a business partner will allow the firm to grow its client base and, just as importantly, offer a higher level of services to existing clients.

Jon is a qualified Chartered Accountant. He has extensive experience in the field as well as being personable and approachable. He started his career with a small firm of accountants providing financial services to SMEs. Jon then moved to PricewaterhouseCoopers in 1997, where he worked with Mike Flynn. Since then, Jon has worked for two other large accountancy firms – Ernst & Young and BDO – before joining MJF.

Jon can be contacted at the office on 0845 177 5007.

The emails, which claim to be from HMRC, encourage the recipient to click through to a replica of the HMRC website. The website then asks for their credit card or debit card details, enabling the criminals to access their accounts.

Almost 24,000 of these emails were reported to HMRC in August, an increase of 300 per cent compared to the same month last year. As a result, HMRC is currently helping to get around 100 scam websites shut down each month.

Commenting, Joan Wood, director of HMRC online and digital said: “We only ever contact customers who are due a tax refund in writing by post. We currently don’t use telephone calls, emails or external companies in these circumstances. If anyone receives an email claiming to be from HMRC, please send it to phishing@hmrc.gsi.gov.uk before deleting it permanently.

“The increase in reports is partly due to improved awareness of this scam. However, I have no doubt that more of these “phishing” emails are in general circulation than ever before.

“HMRC will do everything possible to ensure those receiving this email know what steps to take to protect their information, and we are working closely with other law enforcement agencies to target the criminals behind this serious crime and see them brought to justice.”

Those were the findings of the Recruitment and Employment Confederation’s latest JobsOutlook survey.

Of the employers polled, two-thirds reported short-term plans to increase their permanent workforce over the next three months, compared with 74 per cent in the previous month.

The picture is even less hopeful when it comes to the longer perspective. Barely a half of respondents (49 per cent) expected to expand their permanent recruitment over the next twelve months. Last month the figure was 66 per cent.

However, employers’ long-term demand for temporary staff has risen, with 83 per cent saying that their use of agency workers will either grow or stay the same during the next 12 months. For the short-term, 79 per cent foresaw either taking on extra agency staff or keeping current levels static.

The overall number of temporary workers in the UK is at an all-time high at 1.6 million, the REC said.

Roger Tweedy, the REC’s director of research, commented: “The fact that employers have reviewed their permanent hiring intentions this month is clearly a reflection of the uncertain economic context. However, overall confidence remains at the same level as this time last year and it is interesting to note that the number of employers planning to maintain or increase their permanent workforce over the coming 12 months still stands at over 90 per cent.”

Mr Tweedy added that, with the economy continuing to stagnate, businesses will understandably remain cautious which is why there has been an increase in the longer-term demand for flexible staff such as temporary and contract workers.

He concluded: “This is a timely reminder of how a flexible workforce to help employers meet peaks and troughs in demand for services and products during uncertain times.”

The BGF was launched in May and is intended to provide Government-backed investments of between £2 million and £10 million in businesses with an annual turnover of between £10 million and £100 million, although that target has now been set at firms turning over between £5 million and £50 million.

It is being run with the support of five major high street banks: HSBC, Barclays, Lloyds, RBS and Standard Chartered.

Quoted in the Daily Telegraph, Stephen Welton, the BGF’s CEO, put the case for an SME bond market as a way of reducing the traditional dependency of many smaller UK firms on bank loans.

Mr Welton said: “Over the last decade or two, the availability of bank debt has masked an unhealthy way of growing companies.

“We want to get the debate away from ‘what’s the highest amount of debt we can get into the business for the lowest cost’ to ‘what is the right way to finance my business for the longer term?’”

Mr Welton suggested that there is too great a reliance on overdrafts because they are cheap.

He added: “It’s like a mortgage. You can borrow now on a tracker that costs next to nothing but the reality is when interest rates go up they’ll do so fairly dramatically – sometimes you’re better off taking longer term fixed rate money. For small businesses that option isn’t there, either because long term fixed rate money isn’t available or because by instinct they go for the cheapest money, not realising they’ll trigger covenants if they underperform.”

A bond market for smaller companies, on the other hand, would be a far better way to finance the debt side of small businesses, Mr Welton argued, leaving firms to free to use overdrafts for their real purpose of handling short-term fluctuations in working capital.

The footfall and vacancies monitor from the British Retail Consortium (BRC) for the three months from May to July revealed that the national town centre vacancy rate in the UK was 11.2 per cent in May.

The survey noted that overall footfall for the period (the number of shoppers visiting) was 1 per cent lower than the same period a year earlier.

Falling shopper numbers in the UK were driven by a 1.9 per cent decline in people visiting out-of-town complexes. The number of people entering shopping centres rose by 0.6%.

Over the last 12 months high streets on average have seen the highest drop in footfall of 2.6 per cent, the BRC said.

Stephen Robertson, the BRC’s director general, commented: “In July, all types of shopping locations saw reduced footfall year-on-year and that was before the effect of this month’s disturbances in England.

“Fewer people are shopping because households are facing high inflation, low wage growth and uncertainty about future job prospects. But that’s slightly offset by hard-up customers spreading their spending over more but less costly shopping trips. For the quarter, the one per cent drop in shopper numbers compared with this time last year is not great but is actually an improvement on the 1.3 per cent fall over the twelve months before that.”

According to think-tank, IPPR a meagre 7 per cent of UK exports are heading towards the BRIC economies of Brazil, Russia, India and China.

The IPPR pointed out that the percentage of British exports to Belgium and Luxembourg is 2.9 per cent, which is nearly double the total that goes to China. Yet the overall GDP of Belgium and Luxembourg is a mere 10 per cent that of China.

In Germany, it’s a different story. German exporters sent goods and services worth £47 billion to China in 2010, an improvement of 44 per cent on the previous year. That figure is twice the value of their British counterparts.

One reason for this that German exports are made up of a greater proportion of goods; the UK concentrates more on selling services abroad.

The US also has a better record of exporting to China.

The IPPR report identified poor business investment in the UK, which occupies last place among the G7 nations for the percentage of GDP that is spent on investment.

There are other problems facing the UK’s export drive, too, the IPPR argued. The quality of the infrastructure lags behind that of many other developed economies.

Productivity is also weaker compared with the US, France and Germany. Blame lies in large part with the lack of skills among the UK workforce. Almost a third of British adults have poor or no qualifications; in Germany only 15 per cent adults are as badly educated, while in the US that proportion drops to 10 per cent.

Tony Dolphin, the IPPR’s associate director, put forward the case for very long-term planning: “Economic success means looking to what needs to be achieved over the next few decades not the next few years. The UK economy has serious structural challenges that require an active industrial policy to tackle them. Only then will the UK survive the Asian century’.

“For example, Britain needs a state investment bank, like they have in Germany and Scandinavian countries, or even a major state-led investment fund, like in France. Other policies that should be considered are an expansion of the export credit guarantee scheme, greater efforts to identify and provide companies with the skills that will be needed to compete and a change to enterprise zones policy to strategically focus on innovation.”

The VAT rate of 20 per cent, good corporation tax receipts and the tax levy on banks saw Government income hit a surplus of £2 billion in July. A small rise in National Insurance contributions also helped.

In the first four months of the current financial year, net government borrowing was a little over £32 billion. This represents a £3 billion decline in borrowing compared with a year ago.

Ross Walker of Royal Bank of Scotland added: “At face value it’s a better than expected outturn. It’s quite an important figures as July is a key month for corporation tax receipts. It’s the first big inflow for 2011. The issue is that with expectations for growth deteriorating sharply, the risk of a hit to tax receipts have increased. But at least as things deteriorate, we’re starting from a strong point.”

There wasn’t, however, unanimity amongst analysts about the ability of the Government to meet its budget deficit reduction targets.

Samuel Tombs of Capital Economics said: “July’s public finance figures suggest that the trend in borrowing has improved a bit, but not enough to leave the government on track to hit the fiscal forecasts for the year as a whole.”

The fund was launched in May and was intended to provide Government-backed investments of between £2 million and £10 million in businesses with an annual turnover of between £10 million and £100 million.

It is being run with the support of five major high street banks: HSBC, Barclays, Lloyds, RBS and Standard Chartered.

However, the Business Growth Fund’s chief executive, Stephen Welton announced in a press interview with the Daily Telegraph that the monies may now be targeted at firms with a turnover of between £5 million and £50 million per year.

Mr Welton said: “The investment case drives us, not turnover. If we rigidly applied a £10 million cut-off in Scotland and Wales, you’d exclude many, many businesses. I think the core market where there’s a lot of demand is between £5 million and £50 million.”

He also suggested that the size of the business may not be the only important criterion. Ambition and innovation will play a part too.

Mr Welton continued:  “A company turning over £10 million is of a size where it’s suitable to take on a partner but it might not be a very interesting company. A company turning over less that has grown quickly and has a good management team, we will look at.”

Mr Welton added that a firm with sales of £5 million but growing at 40 per cent would be “interesting”.

It wasn’t all good news for SMEs though. Much smaller firms, perhaps with sales of just £1 million, would be “highly unlikely” to gain the backing of the fund.

The first beneficiaries of the Business Growth Fund are to be made public in September.

The Office for National Statistics (ONS) has announced that high street sales volumes increased by just 0.2 per cent in July.

This compares with the 0.8 per cent rise in June.

There was a dip in the sales of household items (down 4.1 per cent on the year), clothes and shoes, the ONS said, although food sales showed a 0.7 per cent increase.

Analysts had been expecting a 0.3 per cent improvement in retail sales.

It is clear that consumers, hit by the rate of inflation, subdued pay settlements and job losses, still have little ability to spend.

Stephen Robertson, the director general of the British Retail Consortium, said: “Customers’ ability to spend is being squeezed by rising costs, particularly utilities and low wage rises.

“Food sales continue to outperform non-food with inflation helping to drive top-line growth. But it’s taking a record number of promotions to tempt customers into stores.”

With global economic fears mounting, the BRC argued that policymakers both in Europe and the US must act quickly to implement a coordinated and credible strategy to reduce public sector deficits while supporting growth.

David Kern, the chief economist at the British Chambers of Commerce, acknowledged that the figures were much as anticipated but insisted that the weakness in consumer spending did not necessarily point to a looming second recession.

Mr Kern said: “The July retail sales figures were broadly as expected, pointing to continued weakness in light of low levels of consumer spending. While disappointing, it is not surprising given the huge squeeze on disposable incomes as a result of higher food and energy costs and the government’s austerity measures. These figures and other economic indicators suggest growth in the third quarter of this year is likely to remain sluggish, although fears of a new recession seem exaggerated. 

“While the economy faces serious challenges over the coming months, some of the pessimism we are seeing is unjustified. Many forecasts made earlier in the year were too optimistic and we now know that the economic situation is more difficult.”

Mr Kern continued that the Government is right to persevere with its deficit-cutting programme. He also said that, given the pressures facing businesses and consumers, it is important for the Bank of England’s rate-setting Monetary Policy Committer to keep the cost of borrowing low until at least the middle of 2012.