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The charity sector has welcomed the government’s U-turn on placing a cap on charity donations. Paul Gibson, National Charity Specialist at Mazars says the exemption was a victory for common sense, but concerns remain over lack of clarification on community investment tax relief.
“It’s good to see the government has accepted the argument that a gift for public benefit is indeed different from a pension contribution for private benefit. However, as yet there has been no mention of whether this U-turn includes community investment tax relief and we would really like to get some clarification on that,” says Gibson.
In this year’s Budget it was announced the government would cap reliefs, including relief on charity donations, at 25% of total income or £50,000, whichever was greater.
The announcement caused widespread concern as to the impact on an already hard-pressed third sector, which is meant to be key to the government’s Big Society vision. Of particular concern was the likely reduction in substantial donations made by philanthropists who would have seen their tax relief and incentive for giving reduced.
The U-turn was greatly helped by a communication campaign that used social media to great effect, according to Gibson. "I've never seen the charity sector work so well together. It spoke with a single voice and used Twitter effectively to help bring about the government U-turn."
Piracy is the publishing industry’s top concern, according to a digital publishing survey* by Mazars. Twenty per cent of respondents listed piracy as a major concern, the second biggest concern was cost (12%) followed by the challenge of adapting and accepting new business models (9%).
In terms of how to prevent piracy, views were more evenly split. The top choice for stopping piracy was to increase regulation of internet providers and distributors (46%), whereas 31% listed action by government as a preventative measure and 30% of respondents said increased accessibility and lower priced e-books was the best deterrent.
With pressure on prices, publishers are increasingly looking at new revenue streams going forward as a way to both generate and maintain profits. However, only 10% of respondents viewed advertising as a likely development in e-books in the short term. Over 70% believe there will be increased partnerships between publishers and technology companies in the future, which opens up a whole range of potential advancements for e-books themselves.
Over 85% of respondents to the survey were open to innovation in e-books — ranging from video clips in non-fiction titles such as travel guides, through to sound effects to set the atmosphere in consumer fiction titles, as well as multi-functional apps created around children’s picture books. Music and sound effects were the most popular enhancement, with just over half of respondents viewing this as a likely development to e-books in the near future.
Interactivity was also a popular development choice, with 48% of respondents indicating they would like to see more interactivity in e-books, including reader intervention and collaborative story-telling where readers can even help to influence the outcome or ending of the book.
Overall, 47% of respondents to the survey agreed that digital developments continue to represent both an opportunity and a challenge for the publishing sector. “It is recognised that the digital revolution could create huge opportunities for publishers — new audiences, new revenue streams and direct engagement with readers, but only if publishers are willing to change and adapt their business models to embrace this change. It is this adaptation — creating the appetite within the business to make changes, and a willingness to take risks to do new things that represent the real challenges for the sector today,” according to the report authors.
* 182 respondents from the publishing industry including publishers, authors and distributors were surveyed for The Future of the Digital Landscape.
The full survey will appear in Insight Out’s July issue. You can also obtain further information here.
For further insights into digital publishing see our exclusive interview with Tim Hely Hutchinson, CEO of Hachette.
Two agencies have joined forces to assist recession-hit firms save money. The Forum of Private Business (FPB) and Buying Support Agency (BSA) have come up with a buying support service as a way to manage escalating business costs.
The FPB’s latest research revealed that 82% of business owners have seen the cost of raw materials increase over the past year, with the same number saying the rising price of overheads had adversely impacted on their businesses. Nearly three-quarters (74%) confirmed that cost increases have inhibited their growth ambitions, while 45% say their profitability has suffered.
Businesses signing up to the FPB’s buying support service, which includes free access to a buying group and a free purchasing audit, can make a saving of up to 35% on overheads. "At a time of recession and spiralling costs, it is important that small businesses are given all the support they need to control their overheads and cash flow worries. “Group buying is a real solution to the problem,” says the FPB’s CEO, Phil Orford. “In partnership with the Buying Support Agency, the FPB is helping business owners gain considerable time and cost savings — and peace of mind through advice, support and guidance.”
Matt Roper, Founder and Managing Director of the BSA, adds, “We often hear small business owners say that they’ve got great purchasing deals and yet they’ve not had the opportunity to benchmark these prices against other comparable businesses to validate whether this view is accurate.”
Both agencies are convinced that group buying means small businesses can access a level of competitive prices normally only offered to the largest companies due to their lack of buying power. “The BSA is about enabling smaller companies to punch way above their weight and save significant sums of money. And FPB members gain access to our buying group without charge and without obligation,” confirms Roper.
For more information visit www.fpb.org
HSBC has confirmed lending £3.1 billion to UK small and medium enterprises (SMEs) over the first three months of 2012. The bank says that’s an increase close to 7% (over £200m) on the same period in 2011.
This latest announcement follows HSBC’s earlier commitment to make at least £12 billion in total available to SMEs during 2012 — again, an amount that will exceed last year’s lending.
HSBC’s Deputy Head of Commercial Banking Europe and Head of Commercial Banking UK, Jacques-Emmanuel Blanchet, confirms the bank’s commitment to supporting strong, viable UK businesses of all sizes and across all sectors. “We are on track to lend even more to UK SMEs in 2012 than we did in 2011 and are ahead of schedule to lend £4 billion to businesses who expand their activity internationally through the International SME Fund."
The International SME Fund provides specific support for UK businesses, with a turnover of up to £25m who currently trade or aspire to trade internationally. This £4 billion fund was established after findings from HSBC's ‘Global Connections' trade forecast predicted that over the next 15 years, the UK is set to increase its international business activity by around 60%.
Blanchet explains, "Trading internationally is critical not only for British companies who want to remain competitive in the future, but it is also critical to the UK economy. As such, in the first three months of 2012, we have increased by over 50% our dedicated salesforce through the recruitment of additional international commercial managers to ensure that we are able to provide the high level support needed by businesses which are growing through international trade."
The National Employment Savings Trust (NEST), confirms that over half (54%) of the UK’s largest employers (5000+) have confirmed their providers for automatic enrolment.
A further 34% say they have a “good idea” of the provision they will be putting in place, while 11% say they are still at the early stages of implementation.
Surveying medium-sized employers (1000 to 4999), NEST’s research shows that nearly half (48%) have confirmed their providers, 35% have a “good idea” of the provision that will be put in place, and 16% confirm they are still in the early stages of provision.
The majority of all employers, regardless of size, confirm that when choosing a pension provider they consider ease of day-to-day administration and clear communications to be factors that are “very important” or “of utmost importance”.
When it comes to expectation of support from the pensions industry in the process of automatic enrolment over half (55%) with more than 1000 workers expect to receive a lot of help from their chosen pension providers. The survey shows that as employer size decreases, companies are more likely to expect the most support from advisers.
NEST found that awareness of it to be almost universal among the largest employers (97%). Approximately one fifth of large employers in the private and not-for-profit sectors confirm they are “quite likely” or “very likely” to use NEST for some groups of workers, with around 16% of employers saying they are still undecided. However, the majority of these large employers said they would use NEST alongside another scheme. CEO Tim Jones, says, “Large employers who say they are likely to use NEST report that it is likely to be used alongside existing provision. That's one of the roles NEST is intending to play — complementing existing schemes. We are already working closely alongside many of the existing private pension providers and expect that to continue.”
See our Big Interview with Tim Jones, CEO of NEST here.
Less than 5% of all small businesses are playing the biggest role in boosting the UK economy and account for two-thirds of all private sector employment. This latest report from Santander Corporate Banking reveals that these fast growth, or growth champion businesses are having a significantly higher economic impact than the rest of the UK’s small and medium enterprise (SME) population.
Santander points out that growth champions have proved to be “exceptionally resilient during the recent recession creating almost 173,000 jobs at a time when similarly sized non-growth champions shed more than 400,000.”
Santander’s Breakthrough Growth Champions Report examined patterns among businesses with turnovers between £500,000 and £10,000,000. It shows that growth champions are found across a wide range of industry sectors. The highest concentrations were found in sectors such as social work (14.7%), complementary medicine, such as homeopathy and physiotherapy, (11.4%) and architectural and engineering activities (7.7%).
Growth champions were found to be equally spread across the country. The north-west recorded the highest concentration with 5.3%; Yorkshire, Scotland and the north-east all recorded 5.2%; and the south-west and Thames Valley followed with 5.1%.
There were a number of common characteristics identifying a growth champion business. These include strong teamwork and relationships; youthful leadership; high levels of ambition; directors with a history of entrepreneurial success; and a proactive approach to cash and credit management. While success and failure depends on a number of external factors, Santander says that comparing these characteristics among other existing businesses can indicate possible “future stars” — businesses with a higher probability of achieving significant and sustained growth in net worth, sales and employment.
John Williams who heads up the Breakthrough programme says: "Banks have a responsibility to support businesses to accelerate growth at all stages of their lifecycle. Using the common characteristics exhibited by growth champions, we can identify the fast-growth businesses of the future and provide the support they need to help them fulfil their potential."
For more information visit www.santanderbreakthrough.co.uk
While the jury is still out as to what an unplanned euro break up will cost — some predict it will set us all back by US$1 trillion — Douglas McWilliams, CEO of the Centre for Economics and Business Research (CEBR), says that the most important fault line in the eurozone is the lack of competitiveness of some of the weaker economies.
“Because they did not restrain their excess inflation when they joined the euro, they have become highly uncompetitive. All this is happening at a time when western economies are struggling anyway to keep up with the emerging economies in the East.”
In order for the euro to survive, McWilliams says it would require not only writing off debts and refinancing banks but also for the Germans to subsidise the weaker economies for a minimum of 10 years, and possibly more likely 20 years, as they revive their competitiveness through increased productivity and restraining their labour costs. “Realistically this won't happen. Even if the Germans were to agree continuing subsidies, the weaker countries — which are essentially failed states — cannot put the political will together to reform their economies.”
McWilliams predicts that the end of the euro in its current form is a certainty, but a radically transformed currency with the name euro may survive. “The economic consequences depend on the timing and the way in which the euro splits. There is no doubt that when the euro breaks up it will be costly. Some countries will lose around 10% of annual GDP. But this will happen anyway — the choice is between a period of austerity followed by the impact of the end of the euro and then some eventual recovery for facing the trauma of the end of the euro early and then starting to get the recovery underway.”
For more information visit www.cebr.com
Companies may soon be in line for more generous tax deductions for losses sustained by European Economic Area (EEA) resident groups trading in the UK. The Advocate General appointed to provide an opinion on claims for consortium relief by Philips Electronics (UK) has recommended that the claim rejected by HMRC should proceed.
In the case of Philips Electronics (UK) Ltd a Dutch company was used as the vehicle for a UK based joint venture (JV) between two electronics companies, Philips of the Netherlands and LG of South Korea. The JV lost money and so Philips Electronics (UK) Ltd claimed consortium relief for Philips’ share of the JV’s UK trading losses.
HMRC rejected the consortium relief claims on the basis that UK legislation did not permit such claims to be made, nor does UK legislation permit group relief claims in respect of losses sustained by the UK permanent establishment (PE) of any non-UK subsidiary.
In 2009, Philips took its claim to the First Tier Tribunal which ruled that denial of the relief breached EU freedoms. HMRC appealed to the Upper Tribunal who, due to lack of EU clarity, asked the Court of Justice of the European Union (CJEU) for a ruling. The Advocate General (AG) appointed to provide an opinion for the CJEU has recently recommended that the Court should uphold Philips’ claims for consortium relief.
If the CJEU agrees with the AG’s opinion, the Philips Electronics case has potentially wider implications for sister company group relief claims lodged following the earlier Marks & Spencer case as HMRC’s arguments for resisting these claims will be undermined, according to Rosemary Blundell, National Tax Director at Mazars. In 2005 M&S succeeded in its claim for non-UK trading losses sustained by EU-based subsidiaries.
“Lots of UK companies with EEA resident loss makers have made group relief claims on the back of the M&S case. However, HMRC have resisted these claims if they are not on all fours with M&S. The European Court will be hearing the Philips Electronics case shortly and the Advocate General has provided her legal opinion. If the CJEU follows this opinion, and they generally do, then that will open the doors to many more M&S style claims. This will be a big issue.”
Assuming the CJEU follows the AG’s opinion, claims for consortium and group relief may be successful in future in respect of losses sustained by UK PEs of companies resident in any other member state of the EU. As this will be a ruling of what the law should have been, if Philips wins any other companies will be potentially entitled to make retrospective claims.
Protective claims should be made in respect of losses sustained by the UK PE of any EEA resident member of a group or consortium. This should be done at the earliest opportunity in view of the time limits for group and consortium relief claims.
For further information see here
A new initiative to help new and small businesses establish and grow quickly has been launched at the House of Commons by Business Secretary Vince Cable.
The All Party Parliamentary Small Business Group (APPSBG) published its report highlighting the barriers to entrepreneurship and suggesting ways in which they can be pulled down with this four-point action plan.
The APPSBG also called for the New Enterprise Allowance (NEA) to be extended in order to encourage more budding entrepreneurs to use the scheme. Current rules allow jobless entrepreneurs to apply for funding of £1,274 plus access to a guaranteed loan of up to £1,000 — but only after they have been claiming Jobseeker’s Allowance (JSA) for six months. The APPSBG wants the NEA to be made available from day one of signing onto JSA and for funds to be available for a full year to provide £3,692 plus the guarantee of a loan of up to £2,000. The association believes this would encourage more to set up in business, in turn helping to boost the economy and stem high unemployment. Current figures show that setting up a business is costing 14% of entrepreneurs between £2,500 and £5,000.
Brian Binley MP, Chair of the APPSBG, says, "What this report shows is the importance of nurturing business and developing the culture to enable it to thrive. Not only must we create the conditions to help ensure that the education and financial systems are available to supply potential entrepreneurs, but society embraces the enterprise culture whose full potential is yet to be explored in these difficult times."
In addition, a new loan scheme has been launched by Prime Minister David Cameron for young people aged between 18-24. The start-up funds are expected to average around the £2,500 mark and must be repaid within five years. Interest charged will be at the RPI level plus 3%. The government hopes the new scheme will lead to 30,000 more start-up enterprises.
Also see Mazars' commitment to social entrepreneurship through Your Big Year here