Thursday 31 March 2016

April 2016 Newsletter

Welcome to the April 2016 Newsletter from Easterbrook Eaton Limited

Despite his Budget warning of 'storm clouds on the horizon', Chancellor George Osborne could not have predicted the furore that would follow his 2016 Budget Speech.

In the wake of the Budget on 16 March, the Institute for Fiscal Studies (IFS) issued a warning regarding the Chancellor's ability to balance the books by 2019/20. This news was soon followed by the sudden resignation of Iain Duncan Smith over planned cuts to disability benefits, and the subsequent U-turn by the Chancellor, potentially leaving a £4.4 billion hole in the public finances.

Meanwhile, the Chancellor's plans to introduce a new Lifetime ISA have sparked debate amongst industry experts, with some arguing that the measure could have a dramatic effect on the attractiveness of the pension system to savers.

Chancellor's Budget approved after heated debate

Following a U-turn on his planned cuts to disability benefits, Chancellor George Osborne's Budget was finally approved by MPs during a heated Parliamentary debate on the matter.

Concerns had been raised regarding many of the planned changes to legislation, which resulted in the Chancellor having to defend his Budget amidst calls from Labour for it to be withdrawn. 

In the event, the Budget was accepted after the Government secured a majority of 35, with 310 MPs voting in favour and 275 opting to oppose the plans.

The Chancellor's plans to cut Personal Independence Payments (PIPs) in particular, sparked fierce opposition, with the Secretary of State for Work and Pensions, Iain Duncan Smith, resigning in protest over the issue.

Osborne has now backtracked on these cuts which, if implemented, would have potentially saved the Government some £4.4 billion.

Meanwhile, after the Office for Budget Responsibility's (OBR) downgrading of the UK's economic growth forecasts, the Institute for Fiscal Studies (IFS) warned that the Chancellor only has a 50% chance of meeting his budget surplus target.

In his Budget Speech, George Osborne said that the Government was on course to achieve a £10.4 billion surplus by 2019/20.

However, following the Speech, the IFS claimed that Osborne is 'running out of wriggle room' if he is to reach this target by the end of the decade, adding that, if the Budget forecasts are right, 'we should all be worried'.

The OBR has significantly revised down its economic forecasts for the next five years, with UK economic growth predicted to be just 2% in 2016. At the time of the 2015 Autumn Statement, growth had been forecast to reach 2.4% this year.

The IFS warned that if economic growth deteriorates further, Osborne may be required to raise taxes or cut spending levels in order to reach his target of balancing the books by 2020.

The think-tank also said that the revisions to productivity forecasts would lead to a fall in wages and living standards.

IFS Director, Paul Johnson, commented: 'If there was another downgrade in fiscal forecasts of a similar magnitude and the Chancellor did wish to remain on course to deliver a budget surplus in 2019/20 then this would surely require more real policy change.

'His chances of reaching the surplus are only just the right side of 50/50.'

However, following the Budget, George Osborne insisted that his target will be achievable. He also stated that, in order for the books to balance, the economy must keep growing.

The decision to shelve planned cuts to PIPs means that the Government must now find additional savings to the tune of £4.4 billion. However, further plans are not expected to be announced until around the time of the Autumn Statement.    

Please contact us for advice on how the Budget measures may affect you, or view our summary of the 2016 Budget here.

New Lifetime ISA generates pension industry worry

Chancellor George Osborne's plans to introduce a new Lifetime ISA for the under-40s have created waves amongst pension industry experts.

The measure will enable individuals to save up to £4,000 a year and receive a 25% bonus from the Government for every pound they put in, up to the age of 50.

Both the savings and Government bonus can then be used towards a deposit on a first home, worth up to £450,000.

The new ISA accounts, which are set to be introduced from 6 April 2017, are limited to one per person rather than one per home - so two first-time buyers can both receive a bonus when buying together.

Alternatively, Lifetime ISAs can be used to save for retirement. After their 60th birthday savers can withdraw the savings, tax-free, for use in retirement.

Individuals can withdraw money at any time before their 60th birthday for any purpose, but the Government bonus, together with any interest or growth thereon will be lost. A 5% charge will also be payable.

The Treasury has described the scheme as a 'radical new way for the next generation to save'.

However, pension and insurance industry experts have stated that the new Lifetime ISA could have a dramatic effect on the attractiveness of the pension system to savers and could lead to other retirement options being seen in a less favourable light.

Yvonne Braun, director of long-term savings policy at the Association of British Insurers (ABI), declared: 'This must not be a back door to turning the pensions system on its head.

'A test for the success of the Lifetime ISA is whether it means fewer people will save for retirement, which would not be a good outcome.'

However, those in the investment industry have described the change as an 'exciting development' that could help to cultivate a more widespread savings culture.

The announcement comes after the Chancellor abandoned his plans to implement a radical reform of the tax relief system for pension contributions.

ESSENTIAL TAX DATES FOR APRIL
5 April
Last day of 2015/16 tax year.
Deadline for 2015/16 ISA investments.  
Last day to make disposals using the 2015/16 CGT exemption.        

14 April
Due date for income tax for the CT61 period to 31 March 2016.

19/22 April
Quarter 4 2015/16 PAYE remittance due.

30 April
Normal annual adjustment for VAT partial exemption calculations (monthly returns).

QUOTE OF THE MONTH
'A great many savers will have no idea that, from April, they may for the first time have to check whether they need to report or pay tax on interest they have received, rather than have their bank deduct the tax they owe.'

Chairman of the House of Lords' Economic Affairs Committee, Lord Hollick, commenting on HMRC's 'inadequate' communication strategy that has rendered taxpayers 'unaware' of key changes to the taxation of savings and dividends.

WEBSITE OF THE MONTH
uk.reuters.com/business

All the latest business news and announcements.

ON OUR WEBSITE
Updated 2016/17 tax rates
For the latest tax rates and allowances, view the Tax Information section of our website.

Useful information for individuals
Our informative guides include useful tips and strategies to help minimise your tax bill and maximise your wealth. Visit the Your Money section of our website today.

SNP says that Scotland would not adopt new 40p threshold rate
Scottish First Minister and SNP leader Nicola Sturgeon has said that Scotland will not adopt the UK Government’s plans to increase the starting point at which workers pay the 40p tax rate, if her party wins the Holyrood election on 5 May.
Click here for the full story

Prime Minister announces National Minimum Wage increases
Prime Minister David Cameron has announced increases in the National Minimum Wage rates from October 2016.
Click here for the full story

MPs reject proposed changes to Sunday trading laws
Government plans to radically overhaul Sunday trading laws have been abandoned after they were rejected by MPs during a House of Commons vote on the matter.
Click here for the full story

Taxpayers 'unaware' of key tax changes, House of Lords committee reveals
Many taxpayers are oblivious to the 'important' and 'complex' changes to the taxation of savings and dividends, a House of Lords report has suggested.
Click here for the full story

Women have 'half' the occupational pension savings of men, reports TUC
A report commissioned by the Trades Union Congress has found that women have barely half the occupational pension savings of men.
Click here for the full story

Tuesday 1 March 2016

March 2016 Newsletter

Welcome to the March 2016 Newsletter from Easterbrook Eaton Limited

With Chancellor George Osborne's 2016 Budget Speech just around the corner, predictions and demands from business groups are growing. The Confederation of British Industry (CBI) has urged the Government to put business rates reform at the forefront of its Business Tax Roadmap in the forthcoming Budget, while the annual Green Budget from the Institute for Fiscal Studies suggests that the Chancellor's budget surplus target could require him to raise taxes or make significant additional spending cuts.

Meanwhile, Sunday trading powers are set to be devolved to local councils in England and Wales, despite opposition from business groups, in a move announced by the Business Secretary Sajid Javid. Under the plans, authorities will be given the power to 'zone' any relaxation, and retailers will be permitted to extend Sunday trading hours if they choose to do so.

Business group calls for business rates reform to be 'top priority' at 2016 Budget

The Confederation of British Industry (CBI) has urged the Government to reform the current business rates system, amid concerns that it is 'outdated' and 'undermines' both retailers and manufacturers.  

In a new briefing released ahead of the Chancellor's Budget, the CBI warns that the existing model is unable to cater for any changes in the UK's economic circumstances. The lobby group also claims that the existing business rates system is increasing taxes for UK firms.

According to the CBI, over the last seven years the rate of tax revenue growth from business rates has risen by 28%, far exceeding other types of tax and growing at a quicker rate than the Government's overall tax take.

With the Government due to report back on its business rates review in March, the CBI has set out its recommendations for a 'simpler, fairer and more competitive' system.

It argues that business rates could be made simpler by removing firms with a 'rateable' property value of less than £12,000 from the system completely, while carrying out more regular valuations would help to make the system fairer.

In addition, the CBI suggests that moving from RPI to CPI indexation for annual increases will result in 'a more stable business rates multiplier'.

Commenting on the organisation's proposal, CBI Economics Director, Rain Newton-Smith, stated: 'The current business rates system is from another era and proving an ever-increasing problem for firms, hitting our high streets and manufacturers across the country. And devolving business rates does not tackle the significant problems that this distortive tax is causing for businesses.

'The Government cannot put business rates reform off forever and we want to see urgent action taken at the Budget. Business wants to see the smallest firms completely removed from the system, more frequent valuations and ensure the system is tied to the Consumer Price Index to make it fairer and more competitive.' 

In the 2015 Autumn Statement, the Chancellor revealed plans to allow local government to keep the rates they collect from business, and to give councils the power to cut business rates to boost growth. Osborne also outlined proposals to give elected city-wide mayors the power to levy a business rates premium for local infrastructure projects, provided they have the support of the local business community.

Furthermore, in its Budget 2016 submission the CBI revealed that new measures such as the National Living Wage and the Apprenticeship Levy could potentially result in a £9 billion-a-year burden for businesses by the year 2020. The group is calling on the Chancellor not to further increase the 'cumulative burden' and to support investment and innovation by increasing the scope of capital allowances and broadening access to research and development.

The Chancellor will present the 2016 Budget on Wednesday 16 March. Coverage of the key announcements will be available on our website, so please visit regularly.

Sunday trading powers to be granted to local councils

The Government is set to devolve Sunday trading laws to local councils in England and Wales, it has emerged. The move, announced by Business Secretary Sajid Javid, is expected to benefit high streets and city centres.

The Department for Business, Innovation and Skills revealed that authorities will have the power to 'zone' any relaxation, effectively aiding struggling high streets by permitting them to stay open for longer.

Under the current laws, large shops are only permitted to trade for up to six hours between 10am and 6pm, while small shops are unrestricted.

Sunday trading is already devolved in Scotland, where retailers do not face such limits.

The new powers are set to be brought forward within the Enterprise Bill, which is currently being finalised by the Government. These amendments are expected to be introduced to enable any changes to Sunday trading to be made this Autumn.   

Additionally, the plans include extra freedoms for shop workers: those working in England, Scotland and Wales will be given more flexibility to 'opt out' of working on Sundays if they so choose.

However, unions and some Government backbenchers remain opposed to the proposals.

John Hannett, General Secretary of shop workers' union Usdaw, stated: 'What the Government is proposing is undesirable and unworkable. Their claims to be offering additional protection for shop workers amounts to nothing more than has existed for the last 20 years.'

Conservative backbencher David Burrowes also criticised the proposals, saying: 'The Government should still listen to the significant opposition to this unnecessary and unwanted plan. Otherwise, I look forward to leading an unholy cross-party alliance in defeating a measure which is anti-family, anti-small business and anti-workers.'

Although online shopping has increased considerably in popularity, Sunday trading laws have not been changed in over 20 years, significantly reducing retailers' ability to compete with their online rivals.

The Government has emphasised the fact that local councils will be able to weigh up the economic needs of their area, taking into consideration the impact it could have within the community.

The Business Secretary stated: 'These new powers are about giving local areas the choice to extend Sunday trading hours to meet the needs of their local businesses and communities. It is local people who will make the decision.

'Extending Sunday trading hours has the potential to help businesses and high streets across the UK better compete as our shopping habits change'.

ESSENTIAL TAX DATES FOR MARCH

1 March
New advisory fuel rates for users of company cars effective from today.
Last day to pay any balance of 2014/15 tax and Class 4 NICs to avoid an automatic 5% late payment penalty.

31 March
End of Corporation Tax financial year.
End of CT61 quarterly period.    
Filing date for Company Tax Return Form CT600 for period ended 31 March 2015.

QUOTE OF THE MONTH

'Untidy family members and hungry pets are very unlikely to be accepted as a legitimate excuse for completing your tax return late.'

Ruth Owen, HMRC Director General for personal tax, commenting on the Revenue's list of worst late tax return excuses.

WEBSITE OF THE MONTH

www.smallbiztrends.com

News and features for small business owners

ON OUR WEBSITE

Key tax advice for you and your business
For effective tax planning advice for both you and your business, visit the Tax Strategies section of our website.

Useful information for individuals
Our informative guides provide useful tips and strategies on minimising your tax bill, as well as managing your wealth. Visit the Your Money section of our website today.

New report suggests the self-employed require 'more support'
Self-employed individuals should receive more help and support in the running of their business, a new Government-commissioned report has suggested.
Click here for the full story

New fraud taskforce launched by Home Secretary 
Home Secretary Theresa May has announced a new joint taskforce designed to combat fraud in the UK.
Click here for the full story

UK could face tax rises as a result of Chancellor's 'inflexible' budget target, warns IFS
Chancellor George Osborne’s budget targets could require him to raise taxes or make additional spending cuts, according to the Institute for Fiscal Studies.
Click here for the full story

Help to Buy ISAs taken out 'every 30 seconds' in UK
A quarter of a million homebuyers have opened a Help to Buy ISA since their introduction in December of last year. 
Click here for the full story

'Leftovers' from apprenticeship levy to be given to small firms
Small businesses will receive remnants left over from the apprenticeship levy once larger firms have made use of the funds, Skills Minister Nick Boles has confirmed.
Click here for the full story