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In his Autumn Statement the Chancellor announced a further reduction in the annual tax relief allowance on pensions from £50,000 to £40,000, along with a cut in the lifetime allowance.
Commenting on the announcement, Mark Brownridge, Research and Development Analyst at Mazars Financial Planning said: “While disappointing, the news was widely expected. However, it creates a ‘buy now, whilst stocks last’ opportunity to contribute at the higher level over the next year. Contributions can be maximised by making use of any carry forward of previously unused relief. Remember also that pension tax relief at the 50% level will reduce to 45% from April 2013, an even bigger incentive to act quickly.”
In addition, from 2014-15, the government will further reduce the lifetime allowance for pension contributions from £1.5m to £1.25m. “The government will offer protection to individuals affected to prevent any retrospective tax charges from reducing the lifetime allowance. But what form this protection will take still seems unclear. We could end up with two or three different systems which could create confusion,” explains Brownridge.
The government also underlined its commitment to stamping out tax fraud and evasion. HMRC will be setting up a new centre of excellence, staffed by experts on tax fraud and evasion. This will make a marked difference to HMRC’s ability to clamp down on offshore evasion and a comprehensive evasion strategy will be published in spring 2013.
Also announced was the closing down with immediate effect of four loopholes associated with tax avoidance schemes to protect hundreds of millions of pounds over the next five years. There will also be consultation on the introduction of significant new information disclosure and penalty powers to target the promoters of aggressive tax avoidance schemes.
The introduction of the UK’s first ever General Anti-Abuse Rule (GAAR) is set to provide a significant new deterrent to abusive avoidance schemes and strengthen HMRC’s means of tackling them. Guidance and draft legislation on the GAAR will be published later in December 2012.
Building on existing work, HMRC also plans to conduct a review of offshore employment intermediaries being used to avoid tax and national insurance contributions and will provide an update on this work at the Budget 2013.
Other highlights of the Autumn Statement include:
Employers are underestimating the effect of clean data when it comes to managing successful pension and employee benefit programmes according to a recent seminar hosted by Mazars. Hannah Uttley reports.
In response to a period of unprecedented change in the pension world, Looking Through Employee Benefits, talked through the ways in which companies can manage the issues surrounding workplace pension reform.
Bad data traditionally causes problems with regard to having the right records for the right people, but recent workplace pension reforms causes further implications which many firms may not be aware of. In some cases, the implications can be quite drastic.
“Tax reporting errors, incorrect auto-enrolment management reporting, incorrect and over expensive buy-out quotes as well as wrong investment strategy are major issues, to name but a few, that could result from bad data handling,” says Margaret de Valois, who leads the Global Pensions and Investment Advisory team at Mazars.
A further issue is the transparency of employee communication. In particular, employers don’t appear to be making the most of options available in order to capture data and communicate the worth of benefits to employees, according to Richard Stewart, Director of Employee Benefits at Mazars.
“Total rewards statements can provide transparency in highlighting the total financial value of the employee pay and benefits package, as well as a wider range of pay elements such as bonuses, car values plus other non-financial elements.”
In particular, an effective communication strategy to ensure employees understand the changes to pension reform is essential, says de Valois.
Read our article here on planning a pension pathway.
For more upcoming Mazars events see here.
Unlocking local government pension fund investments to allow councils to pump as much as £22bn into infrastructure to build homes, roads and/or high-speed railway has been broadly welcomed by the CBI.
Local Government Secretary Eric Pickles said these latest proposals would potentially allow councils to double the amount they can legally invest from their pension funds directly into key infrastructure projects in a new and more efficient way, ensuring long-term value for the taxpayer.
Explaining why the CBI supports such proposals, Rhian Kelly, Director for Business Environment, said such a move to unlock pension fund investment was critical to improving the UK’s infrastructure and businesses would be “heartened” that government is listening to the recommendations of the CBI and others, and taking action to lift barriers and attract new sources of funding.
"Local government pension funds are some of the largest in the country and many already have experience of investing in infrastructure and housing. Infrastructure projects should be a natural fit for these funds, which have very long time-horizons and are looking for a healthy investment return. Lifting restrictions should allow them to take a more prominent role in deepening pension funds' involvement in infrastructure financing,” said Kelly.
She added that no one could afford to rest on their laurels. “More must be done to ensure we deliver a pipeline of investable projects and ensure that the real priorities – the projects of national economic significance — are given all possible support."
The Local Government Pension Scheme England and Wales is administered by 89 separate local funds that hold combined investment assets worth £150bn. Pension fund rules make sure investment risks are spread across different types of investments to give taxpayers long-term protection. Fund managers are currently limited in the amount they can invest via partnership arrangements, which includes many types of infrastructure investment. The proposals include an option to increase the current limit of 15% to 30%, giving councils the scope to inject up to £45bn in such arrangements.
The consultation process announced by Eric Pickles applies to England and Wales only and runs until 18 December.
A ground breaking seminar to discuss alternative sources of funding available to a range of sectors was recently facilitated by chartered accountants, Mazars. Securing Alternative Sources of Funding in the Education, Health, Charity and Housing Sectors, was presented alongside the Social Stock Exchange and co-founders Pradeep Jethi and Mark Campanale.
Paul Gibson, Mazars National Charity Specialist, and Leigh Wormald, Banking Partner and Head of Real Estate in the UK at Mazars, welcomed the delegates to the first round table discussion which had been initiated to bring together sector representatives and potential investors to tackle some of the obstacles to securing funding and identifying sound investment opportunities.
Gibson said the event allowed for the exploration of a variety of financing concepts and models developed by various parties and it was Mazars’ aim to help those seeking funding in three distinct ways. First, to gain a better understanding of what investors are looking for. Second, to understand what needs to be done in order to meet expectations; and third, to determine whether these expectations are realistic and can be met.
A further ambition of the event, said Gibson, was to help interested parties learn more about the investment potential in these sectors by understanding what the key barriers to entry are; identify specific areas where greater insight is needed to guide investment decision, and identify the sectors that present viable investment opportunities.
Representatives from government, law firms, think tanks, interested sectors and investors aired their concerns and experiences in seeking funding. This was the first such event programmed by Mazars. Next year five more seminars are planned which will be sector specific as follows:
For further information email Paul.Gibson@mazars.co.uk.
Uncertainty, confusion and contradictory statements coming from the coalition government over wind farms are a serious set back for business, disastrous for the environment and will ultimately cause the UK to fall behind the rest of Europe in its provision of renewable energy warns Luca Concone, CEO of the Real Asset Energy Fund.
Recent government actions regarding renewable energies have received negative reportage in the media as another coalition rift is exposed and the sector is left cut adrift on policy direction. The latest set back for wind farms came when the Energy Minister pledged to stop turbines “peppering” the countryside. While Conservative minister John Hayes announced he would do all he could to “protect our green and pleasant land,” his boss, the Liberal Democrat Energy Secretary, Ed Davey, responded immediately confirming there was to be no review of wind energy policy and no cap on turbines.
Concone confirmed that wind farm capacity currently accounts for less than 6% of the UK’s energy needs per day. “On a global scale that means the UK, a G7 country, produces barely 3% of the world’s wind energy capacity. The UK is now behind Germany, France, Italy and Spain in wind power capacity production.”
A further government decision baffling the renewable energy sector is the increase in reliance on fossil fuel energy. Concone warns this will have three key negative effects — damage the environment, increase health risks, render the UK dependent on foreign countries. “The prime argument that some coalition members are citing for not building wind-farms is that they are an “eyesore” on the countryside. This is subjective and arguably marginal when considering the importance of future energy supplies. Now we have to invest in renewable energy or the UK will find itself failing to meet EU quotas and be left with a substantial energy debt.”
See here for the latest Mazars report on renewable energy.
The eurozone recession is set to continue throughout next year and set to grow only marginally in 2014. This gloomy forecast from the think tank, Centre for Economics and Business Research (Cebr), offers some slight relief for British business as it believes, while UK growth is likely to be held back by the weakness of its continental trading partners, GDP growth for the next two years looks set to be faster in each year than in any of the major European economies.
Senior economist Tim Ohlenburg, explains, "Even assuming that the problems of the euro do not cause an economic melt-down before the German elections next year, we are looking at a very weak economic outlook in Europe for the next two years.”
CEO Douglas McWilliams adds, "The economic situation in some parts of Europe is moving from bad to catastrophic. There is a danger that the economic problems will spill over into social breakdown in many areas of Europe as unemployment soars and governments run out of money."
Looking at the global picture, Cebr’s latest quarterly review predicts sluggish growth at best for the world economy for the next four years. But warns that the outlook may well be worse than presently anticipated as the risk of disruption through Middle East political disputes or through a collapse in the eurozone would, in the short-term, worsen prospects considerably.
Overall, Cebr has revised downwards its forecast growth for the world economy over 2012 and 2013. Cebr explains that provided there are no unusual disruptions to supply in the Middle East, the price of oil is forecast to drop by about $5 per barrel on average in 2013 and primary commodity prices by 8% because of the weak world economy and its impact on demand.
The emerging markets will remain the fastest growing economies. Cebr forecasts that the eight main sub-Saharan African economies are forecast to grow by 4.6% in 2013 and 5.1% in 2014; the Middle East by 3.3% in 2013 and 4.2% in 2014 and the ASEAN economies are forecast to grow by 4.5% in 2013 and 4.9% in 2014.
UK residents with Swiss bank accounts have just a few weeks to comply with the new tax agreement between the two countries which comes into force on 1 January 2013. The landmark taxation arrangements established between the UK and Switzerland means any UK resident has to provide full details to HMRC of their account/s, or pay over a proportion of the money in the account including future withholding tax.
The withholding tax deals with the tax on income and gains. HMRC confirms that rates currently range from 27% on capital gains up to a maximum of 48% for interest or other non-dividend income. Where the payment option is chosen, any past liability to specified taxes will be dealt with by paying a one-off charge of up to 41% of the total value of the account.
The agreement between the two countries was negotiated back in 2011 and signed last October by the UK’s Exchequer Secretary, David Gauke, and Eveline Widmer-Schlumpf, the Swiss Finance Minister. At the time, Gauke warned those UK residents with undeclared Swiss bank accounts, “The days when hiding money in Switzerland in order to evade tax are over. Burying your head in the sand is no longer an option. The only realistic strategy is to talk to HMRC, as quickly as possible.”
Jennie Granger is HMRC Director-General, Enforcement and Compliance at HMRC and she said, “Swiss banks or accountants are writing to people affected by the agreement. Some may be asking customers to close their accounts. If this happens, UK residents must ensure that any outstanding tax liabilities are paid. Anyone in these circumstances is strongly advised to contact HMRC as soon as possible.”
A fact sheet from HMRC explains how Swiss bank account holders can bring their tax affairs up to date and comply with the new arrangement. Also in the fact sheet is a guide for those wanting to make a direct voluntary disclosure to the tax authorities.
To find out more about what options you can take. See our article here.
The waste industry is the latest sector showing signs of ‘economic’ fatigue, which is not being helped by variations in commodity prices. A drop off in M&A activity and reports of ‘record lows’ in construction output have also taken their toll on the sector, according to Mazars.
Mazars cites a number of companies which have gone into administration, including Yorkshire-based Sterecycle, which went under following the cancellation of a council contract. And, further south in Kent, Keith Cornell Waste Paper also went into administration in the last quarter of this year.
The unsettled climate means that a number of waste management companies are now reviewing their cost base, says Adrian Alexander, a Partner at Mazars in the South East.
He is seeing companies selling off prized assets such as ‘waste transfer stations’, which would previously have been unthinkable given the cost of achieving the required licences and planning permissions required to operate these sites.
“Previously a waste industry that appeared immune to the normal economic cycle, able to pass on costs such as landfill tax increases to its customers, temporarily at least seems to be feeling the impact of the economic problems suffered by other areas of the economy.”
On a more positive note, Mazars reports there have been some waste companies acquired from administration include Harpers Environmental Services, Plastic Sorting and Chilton Waste Services.
The UK’s new immigration rules which come into force on 13 December will affect several different classes of immigrants as these changes are wide-ranging and affect all tiers — from one to five — including entrepreneurs, investors, skilled workers, students and temporary workers, explains chartered accountancy Mazars.
Entrepreneurs and investors must now abide by the new controls put in place ensuring they genuinely have access to the funds they claim they do including the requirements to maintain a specified level of investment. Further changes to the rules aim to clarify the points-based system for this class of immigrant in that points will not be awarded for investments against which applicants have taken out loans, or investments that are held offshore.
Mazars confirms that the UK Border Agency (UKBA) will run a list of financial institutions whose verification will not be accepted for the purposes of applications due to the lack of credibility and warns that the government has stated its intention to carry out a more thorough review of the UK Tier 1 Investor programme. “It is anticipated that the government will appoint the Migration Advisory Committee (MAC) to launch a consultation and carry out an analysis of the current qualifying investment thresholds, the impact of the existing scheme on the UK economy and ways in which further benefit could be derived for the UK economy. We are expecting the UK government to formally announce the consultation in early 2013,” says Mazars’ Immigration Team.
Further changes include the Tier 2 maximum leave period being extended from five to nine years for senior level staff earning £150,000 a year or above. This category will continue to deny a migrant the right to settle. The UKBA will allow flexibility in determining a date when the ‘cooling-off’ period kicks in if migrant workers leave the UK prior to their leave expiry date. As such, the ‘cooling-off’ period will start from the earliest date that the migrant can demonstrate that they left the UK.
Mazars invites those with thoughts on how the Tier 1 Investor programme could be improved to work better for applicants, UK residents and the economy as a whole, as well as those who’ve been affected by the family migration changes to contact its Immigration Team. Mazars says it will include all concerns received along with its own representation about these changes to the UK Border Agency and other parties concerned.