Thursday 28 June 2012

Barclays

Barclays: Cameron says bank faces 'serious questions'

Prime minister David Cameron has said that Barclays Bank management has "serious questions" to answer over how it manipulated banking lending rates.
Barclays was fined £290m ($450m) after an investigation into claims that several banks manipulated the Libor rate at which they lend to each other.
The comments came as former Barclays boss Martin Taylor said the bank has engaged in "systematic dishonesty".
Barclays has said its actions "fell well short of standards".
Other banks are still being investigated by UK and US regulators about their role in the affair.
Mr Cameron, speaking during a visit to Todmorden, West Yorkshire, said: "I think the whole management team have got some serious questions to answer. Let them answer those questions first.
"Who was responsible? Who was going to take responsibility? How are they being held accountable?"
The Chancellor of the Exchequer, George Osborne, will make a statement on Barclays in the House of Commons later on Thursday.
Labour party leader, Ed Miliband, said: "This cannot be about a slap on the wrist."
"The people that have done the wrong thing in this case should face the full force of the law... including criminal prosecutions."
Regulators say that Barclays manipulated interest rates at which banks loan to each other to benefit their traders and financial status.
Mr Taylor said that Barclays' deception looks like a deliberate strategy as it had been going on for years.
Tracey McDermott, director of enforcement at the FSA, which imposed fines alongside the US financial regulator, told the BBC: "We have a number of investigations that are ongoing.
"Obviously we need to look at each case on its own particular facts but the initial indications are that Barclays was not the only firm that was involved in this."
The US Department of Justice also said criminal investigations into "other financial institutions and individuals" were ongoing.
Other big names believed to be under investigation include Citigroup, JP Morgan, Deutsche Bank, HSBC and Royal Bank of Scotland.
Lord Myners: This is the most corrosive behaviour I have seen in a major UK financial institution in my career
The scandal is putting pressure on Mr Diamond.
Mr Taylor, who was chief executive of Barclays from 1994 to 1998, said: "It's hard to believe that a policy which seems to be so systematic was not known by people at or very near the top of the bank."
Former City minister Lord Myners told the BBC that the people at the top should take responsibility.
The Liberal Democrat peer, Lord Oakeshott, said that if Mr Diamond had any shame, he would resign.
Barclays has said its actions "fell well short of standards".
In response, chief executive Bob Diamond and three other top executives at the bank are to give up their bonuses this year.
Investigators say that Barclays' traders lied to make the bank look more secure during the financial crisis and, sometimes - working with traders at other banks - to make a profit.
Barclays has admitted that a group of traders lied about what it was costing the bank to borrow.
Now, why does this matter?
It matters because lots and lots of deals involving clients of Barclays used the interest rate into which Barclays was feeding this information, about its own borrowing costs, to determine the profit and loss on their own deals.
It's quite hard to think of behaviour by a bank as shocking as this: not telling the truth about what it is costing you to borrow, that then becomes a benchmark for pricing other deals.
The statement from the US regulator, which levied a big chunk of the fine, talks about how Barclays was working with other banks to try to fix this interest rate.
This of course implies that Barclays is simply the first bank to settle and we will see fines and punishments against some of the other big banks of the world.
Barclays' misconduct relates to the daily setting of the London Interbank Offered Rate (Libor) and the Euro Interbank Offered Rate (Euribor).
These are two of the most important interest rates in the global financial markets and directly influence the value of trillions of dollars of financial deals between banks and other institutions.
They can also affect lending rates to the public, for instance with some mortgage deals.
It is not yet clear whether Barclays staff actually succeeded in manipulating the interest rates to the bank's advantage and therefore whether it had any impact on borrowers.
While the FSA said only that the Barclays employees had attempted to do so, the US Department of Justice said that on some occasions they did affect the Libor and Euribor rates.
Former City minister Lord Myners told the BBC that the people at the top should take responsibility for "a complete cultural failure".
He said the behaviour of Barclays staff was the worst he had seen.
"This is the most corrosive failure of moral behaviour I have seen in a major UK financial institution in my career," he said.
"I think fines and public criticism will not stop these behaviours. These behaviours will not stop until the people perpetrating it or responsible for overseeing them face the prospect of criminal charges and the prospect of going to jail."
The former Liberal Democrat Treasury spokesman, Lord Oakeshott said: "If Bob Diamond had a scintilla of shame he would resign."
"If Barclays' board had an inch of backbone between them they would sack him," he said.
Andrew Tyrie, chairman of the Commons treasury committee, said it would summon Mr Diamond to account for what had happened.
"Banks were clearly acting in concert. I fear it's not going to be the end of the story, that we are going to find that other banks have been involved," he said.
'Accepted culture'
The fine imposed on Barclays is part of an international investigation into the setting of interbank rates between 2005 and 2009.
Each day the British Bankers' Association (BBA) and the European Banking Association publish the the Libor and Euribor rates by taking an average of the estimated rates submitted to them by leading banks.
Tracey McDermott, of the FSA, says the misconduct is some of the most serious the regulator has ever seen
Between 2005 and 2008, the Barclays staff who submitted estimates of their own interbank lending rates were frequently lobbied by its derivatives traders to put in figures which would benefit their trading positions, in order to produce a profit for the bank.
And between 2007 and 2009, during the height of the banking crisis, the staff put in artificially low figures, to avoid the suspicion that Barclays was under financial stress and thus having to borrow at noticeably higher rates than its competitors.
The FSA pointed out that Barclays traders were quite open about their routine attempts to lobby their colleagues who submitted the bank's estimate of its borrowing costs to the BBA.
It was particularly concerned because it appeared to be "accepted culture" among some staff.
"Requests to Barclays' submitters were made verbally and a large amount of email and instant message evidence consisting of derivatives traders' requests also exists," the FSA said.
In one instance, a trader recounted a conversation in which he had "begged" the submitter to put in a lower Libor figure.

"I'm like, dude, you're killing us," he said. His manager replied, "just tell him to... put it low".
In turn, the staff submitting the data would respond to the traders' requests.
"For you…anything," said one. "Done… for you big boy," said another.
And: "I owe you big time... I'm opening a bottle of Bollinger."

CGT

HMRC enquiries into capital gains tax boosts take 43%

HM Revenue and Customs
A CRACKDOWN by the taxman last year yielded a 43% higher capital gains tax yield than the previous year.
HM Revenue & Customs investigations into underpaid capital gains tax brought in £105.2m in 2011, up from £73.6m in 2010.
The investigations formed part of a wider crackdown on buy-to-let investors, with the launch of a taskforce to specifically look into the tax affairs of landlords in north-west England and north Wales.
Roy Maugham, tax partner at UHY Hacker Young, said both the coalition government and the previous Labour government had significantly altered the capital gains tax legislation.
He said: "Some major changes to capital gains tax which have pushed up the cost of this tax to entrepreneurs, other business owners and buy-to-let investors. When you get big increases in tax then this is inevitably accompanied by big increases in tax planning."
He added that the abolition of taper relief in 2008 - which reduced the amount of capital gains tax that was payable on the sale of an asset - would have been a strong motivation for tax avoidance and this was now feeding through to the higher HMRC tax take through investigations.

HMRC enquiries into capital gains tax boosts take 43%

27 Jun 2012
HM Revenue and Customs
A CRACKDOWN by the taxman last year yielded a 43% higher capital gains tax yield than the previous year.
HM Revenue & Customs investigations into underpaid capital gains tax brought in £105.2m in 2011, up from £73.6m in 2010.
The investigations formed part of a wider crackdown on buy-to-let investors, with the launch of a taskforce to specifically look into the tax affairs of landlords in north-west England and north Wales.
Roy Maugham, tax partner at UHY Hacker Young, said both the coalition government and the previous Labour government had significantly altered the capital gains tax legislation.
He said: "Some major changes to capital gains tax which have pushed up the cost of this tax to entrepreneurs, other business owners and buy-to-let investors. When you get big increases in tax then this is inevitably accompanied by big increases in tax planning."
He added that the abolition of taper relief in 2008 - which reduced the amount of capital gains tax that was payable on the sale of an asset - would have been a strong motivation for tax avoidance and this was now feeding through to the higher HMRC tax take through investigations

Tuesday 26 June 2012

RTI

The HMRC message follows below.

Pay As You Earn
Getting your clients ready for changes to Pay As You Earn

Real Time Information
From April 2013 HM Revenue & Customs is introducing a new way of reporting PAYE: Real Time Information – or RTI. RTI will bring PAYE into the 21st century. It will make PAYE easier for employers, pension providers and HMRC to administer and over time, more accurate for individuals. Real Time Information is also essential for the smooth introduction of Universal Credit by the Department for Work and Pensions.

Most employers will be legally required to send PAYE information in real time from April 2013, with all employers submitting PAYE information this way by October 2013.

What do you need to think about now to make sure you and your clients are ready?

Data Quality – The quality of the employee information that we hold and process is crucial to the successful introduction of submitting PAYE information in real time. Mismatched information accounts for over 80% of data quality issues we have, so we recommend you start to prepare by checking the details you and your clients hold for employees, in particular:

·        National Insurance number
·        full names
·        date of birth

For more information on Data Quality see http://www.hmrc.gov.uk/rti/dip/index.htm

Payroll Alignment – This is an important process that ALL employers and pension providers will need to undergo. Alignment will ensure that HMRC, you and your clients all hold a consistent view of the employees in every PAYE scheme before you start to send us PAYE information in real time. To do this, you will have to provide details of all employees who have been on the payroll since the start of the current tax year – even if they have not been paid in the relevant period or have now left the payroll.

It is therefore vital that your own and your clients’ records are up to date. There is more information about payroll alignment at http://www.hmrc.gov.uk/softwaredevelopers/rti/payroll-alignment.pdf

Payroll software – If you use payroll software, it will need to be updated so that it can submit PAYE information in real time. If you use a payroll software provider, please contact them. If you need help picking a payroll software package that is capable of submitting PAYE information in real time, please go to http://www.hmrc.gov.uk/softwaredevelopers/paye/rti-software-forms.htm HMRC’s Basic PAYE Tools product is also available free of charge to employers with 9 or fewer employees.

Granny tax

Maybe the Chancellor was right after all?http://uk.finance.yahoo.com/news/pensioner-incomes-rise-fastest-071610540.html

NHS

http://www.bbc.co.uk/news/health-18584968

Mr Brown's economic legacy...........

Economy

http://www.bbc.co.uk/news/business-18587254

Is King the most negative person in the UK??? Shame he wasn't this negative when Mr Brown was borrowing vast sums to dish out lavish benefits to all and sundry......

Monday 25 June 2012

Residence

HM Treasury has published the summary of responses and launched its outline of a statutory tax residence test for the UK.
The draft legislation for the statutory definition of tax residence is meant to answer all the questions raised by recent cases such as Robert Gaines-Cooper.
The high profile court case raised a number of important issues such as proving when you're resident in the UK for tax purposes.
Francesca Lagerberg, head of tax at Grant Thornton, commented on the news: "The test has been consulted on but is now available for more discussion leading to change in the Finance Bill 2013.
“It is not without its challenges running to over 50 pages of draft legislation, but with consultation it could provide the clarity that many internationally mobile individuals have been seeking."
John Barnett, chairman of the CIOT’s Capital Gains Tax and Investment Income Sub-Committee, also welcomed the news, but added “The rules on tax residence are messy and uncertain and a long way from what we need for a modern tax system. Moving to a statutory test will give businesses and individuals greater certainty in an increasingly mobile world.
“The Treasury are right to have taken their time over this legislation to make sure they get it right. The SRT is too important to rush. Although discussions have taken nearly five years, we see this as a good example of how to make good tax law.”
The government considered the views expressed in response to the consultation of June last year and is now inviting all interested parties to respond fully and work with the government to ensure the legislation meets its objectives.
It intends to introduce the statutory definition of tax residence and reforms to ordinary residence in Finance Bill 2013.
This consultation will only cover the issue of tax residence in the UK for individuals and will not cover the residence of companies.
Click here for the summary of responses and draft legislation.

from AccountingWeb

P11d

Two dates are ingrained on the mind of anyone who deals with payroll matters. One has now passed for this year (19 May - submission of form P35) and the other is in less than two weeks time (6 July - submission of P11D forms), explains Jennifer Adams.
Some of the questions posed in Any Answers suggest that completing a form P11D is surprisingly not straightforward, with many questioning when one should be submitted. This article attempts to bring together the more ‘non- straightforward’ points and thus hopefully save time searching HMRC’s Guide 480 (Expenses and Benefits) for the answers.
Obligation to submit
A number of recent postings queried the obligation to submit for directors - the answer is to go back to first principles and ITEPA 2003 s 5 which states that “the provisions of ... employment income ... that are expressed to apply to employments apply equally to offices unless otherwise states”. Any office holder (to include non-executive directors) should be subject to PAYE whatever the amount of income received (even £NIL); ESC A37 (Tax treatment of directors fees received by partnerships and other companies) is a separate issue and in any event is invariably rare.
A payroll registration may be required but do P11D’s need to be submitted? The rules governing the tax treatment of benefits in kind (BIK) are to be found under ITEPA 2003 Pt 3, the provisions known collectively as ‘the benefits code’. The code applies in its entirety, any received needing to be declared unless the employment is ‘excluded’. Submission is required where benefits and/or expenses (including those reimbursed) are provided by the company to:
  • All directors and employees earning in excess of £8,500 (in cash payments and /or benefit cash equivalent)
  • full-time working directors earning less than the limit but owning more than 5% of the share capital
Part-time directors earning less than the limit and owning less than the 5% therefore do not come under the rules and there is also no obligation if all benefits and expenses are covered by a dispensation or PAYE settlement agreement (PSA).
petersaxton summarises the position for a full-time director owning more than the 5%:
“If a company doesn't pay wages and doesn't provide taxable benefits and round sum expenses but does reimburse expenses they would have to set up a payroll scheme and either apply for a Dispensation or prepare, submit and distribute P11Ds”.
How to save time and costs
Many comments bemoaned the time cost in preparing P11D’s that will only eventually result in a £NIL tax charge as the director/employee will, in turn, claim the P11D expense figure on their Tax Return but jem suggests a way round this under, as having spoken to HMRC his firm just ticks “the P35 box stating that no P11d’s are due and then submits a P11D if it is subsequently found to be needed”. Euan MacLennan reminds that ‘ticking the box’ is for information purposes  only - penalties being due if the P11D forms are found to be due but are not submitted by 6 July and don’t forget to press the ‘submit button’ when you do send the form!
Dispensations
The majority of Any Answers respondents thought that a dispensation should be sought for all the ‘one man band’ companies on their books as a matter of course not least because it would cover any future HMRC queries but also because they are now ostensibly easier to apply for.
taxhound commented that “You can apply on line for dispensations now (form p11dx) and I have had a quite a lot of success in getting these for quite a few one man limited companies I get the client to fill in a P11dx and then copy there (sic) answers into the online application (which for some reason is not identical but there you go...)
Even if a dispensation is granted be reminded that it does not cover every benefit and/or expense, further, HMRC is supposed to review them regularly to ensure their validity (the HMRC website suggests they do this every five years but has anyone known this to happen?)
The reimbursed expenses really need to be checked every year. The question of who does this chore for checking each company client also produced a number of comments. the consensus of opinion being that it would be a difficult procedure to ask clients to prepare the paperwork (most won’t be bothered) or have the knowledge to “go through the accounts, see whether any P11Ds are needed, prepare, submit and distribute any P11Ds or state they are not needed on the P35 or phone HMRC”.
It is obviously too late to apply for dispensations this year or to take jems route of ticking boxes but possibly applying is something to put on the ‘To Do List’.
The future for P11D’s
The powers that be at HMRC introducing Real Time Information’ (RTI) appear to be aware of the P11D pain as the very last point in the discussion document on ‘Improving the operation of Pay As You Earn (PAYE)’ published on 27 July 2010 confirmed that the new RTI was not intended to include BIK assuming that the procedure would “continue to be returned annually in areas using form P11 d as it is now”. At the Payroll World Spring Update Conference in March Phil Nilson, the employment strategy manger at HMRC’s business customer unit’s employer team responded to a question from the floor by saying that an earlier consultation on including benefit in kind in RTI had resulted in it being “put in the long grass”. This seems to have been confirmed in the follow up document ‘Improving the operation of PAYE: collecting Real Time Information’ published in Sept 2011 where interestingly there was not a word about BIK and P11d’s.
Meanwhile the old system remains and if you still have P11D’s to complete and submit in the short time left before the submission deadline it might be worth taking a few minutes checking out Diana Bruce’s article which lists some common errors made when preparing P11D’s.

From AccountingWeb

Friday 22 June 2012

Equal pay

The Government has confirmed that it is pressing ahead with its plan to impose equal pay audits on employers who lose an equal pay claim and to allow employers to make settlement offers without such offers being used against them in an unfair dismissal claim.

RTI

HMRC has updated its Q&A document on salary sacrifice arrangements in order to add additional information on workplace pension schemes and auto-enrolment.

The Q&A is available from HMRC.

P11d

HMRC is reminding employers to send their 2011-12 forms P11D, P11D(b) and P9D as soon as they are ready by 6 July 2012. If you miss the deadline you may receive a penalty.

Further details are available from HMRC.

Residence

The Government has published the summary of responses to the statutory definition of tax residence consultation along with draft legislation. The Government intends to introduce the statutory definition of tax residence and reforms to ordinary residence in Finance Bill 2013. The closing date for comments is 13 September 2012.

The consultation received around 120 responses from a mix of individuals and organisations.

After considering the views put forward, the Government announced at Budget 2012 that the concept of ordinary residence would be abolished for tax purposes and overseas workday relief would be retained and placed on a statutory footing.

In relation to the statutory residence proposals, the main changes and clarifications that the Government will make following the consultation are:

The threshold for automatic non-residence for individuals who have been resident in one or more of the previous three tax years will be raised from 10 to 15 days.
International transportation workers will be excluded from being eligible for Full Time Work Abroad.
The ‘family’ connection factor will be amended so that only time spent with a child in the UK will be relevant.
The definition of accommodation will be simplified and will apply where an individual has accommodation that is available to be used by them for a continuous period of at least 91 days in a tax year and the individual spends at least one night in that place during the tax year.
Day counting: there will be a provision for exceptional circumstances which will allow days of presence to be disregarded where an individual spends a day in the UK for reasons beyond their control.
Split year treatment: the conditions will be amended for individuals who leave the UK to live abroad. In particular, they will be able to spend up to 15 days in the UK in the part of the tax year after their departure.

The Government will consult further on alternative options to amend the definition of full time work abroad. Also, the Government will consult further on whether to increase the qualifying period for full time work in the UK from 9 months to 12 months.

The Government launched a consultation on a statutory tax residence test for individuals at Budget 2011. On 6 December 2011 it was announced that the introduction of the statutory residence test and reforms to ordinary residence would be deferred until 6 April 2013 to give more time for further consultation.

The summary of responses and draft legislation is available from HM Treasury.

IR35 scare

HMRC has written to personal service company contractors warning them that they may face investigation under the IR35 tax rule.

This comes on the back of HMRC having issued new guidance on IR35 in May this year, allowing contractors to voluntarily calculate their risk by completing an online business entity test.

A number of contracting bodies have seen the letters, which ask contractors if they have considered the possibility that their company falls under the legislation.

HMRC is asking those who have deemed themselves not subject to the legislation to provide evidence and to explain how this conclusion was reached.

The letters have so far been thought only to have been sent to those contractors that HMRC has deemed as ‘high risk’.

Limited company contractors have been in the spotlight of late. The results of the recent review of the tax arrangements of public sector appointees revealed that over 2,400 key public sector appointees have been engaged off payroll, in some cases for more than ten years. This was followed by the launch of a consultation on the taxation of controlling persons which aims to ensure that workers who are in controlling positions in a company are meeting their tax obligations.

The consultation proposes that a provision is introduced to ensure that controlling persons have income tax and national insurance deducted at source by the engaging organisation.

The IR35 guide is available from HMRC.

Saturday 16 June 2012

Inflation rewrite

The Office for National Statistics is looking to introduce a new inflation measure – CPIH - which will include housing costs, to replace the Consumer Prices Index (CPI).
In a move set to counter long-standing criticisms that CPI does not include mortgage, rent or other housing costs – currently captured in the Retail Prices Index (RPI) measure – it has embarked on a consultation set to run until the end of August.
Should the plan get the thumbs up from the UK Statistics Authority (UKSA), the ONS look set to start publishing the results of the new formula from next February.
And if CPIH gets the go-ahead, it will be published with the RPI and the CPI, which has been the government's preferred measure of inflation since 2003.
The ONS's advisory committee has plumped for a calculation of how much it would costs a citizen to rent a home privately as an approximated equivalent of the costs an owner occupier would typically incur.
The Bank of England has used CPI in its bid set interest rates since 2003. It was created in 1996 to conform to a standardised measure of inflation to meet European monetary union criteria.
Following the financial crisis, the Bank has consistently missed its own 2% inflation target for the last two years with CPI at 3% and RPI at 3.5%.
More details are available from the ONS website.

Pensions

UK workplace pension schemes have returned some of the worst results for its savers – out of nearly all other countries in the developed world over the last decade - says the Organisation for Economic Cooperation and Development (OECD).
And the result of such dire performance by pension providers means that people’s dreams of a comfortable retirement could be left in tatters, the international think tank has warned.
British pension company returns fell 0.1% every year between 2001 and 2010 while nearly all other developed countries – except Spain and the USA - saw their pension pots swell. Chile’s increased by an average of 5% a year, while Poland returned a healthy 4% and Europe’s economic powerhouse, Germany, 3%.
In its OECD Pensions Outlook 2012 report, it pointed to a growing role for private pensions in closing the gap between pre and post retirement income.
Extending working lives would help, said the OECD, but ‘planned increases in retirement ages are generally insufficient to address expected rises in life expectancy’.
The OECD said that the introduction of auto-enrolment pensions to the UK in October 2012, for all workers not currently covered by private pension plans, should increase the uptake of occupational pension schemes, currently 43.3% of the working age population.
Darren Philp, Policy Director at the National Association of Pension Funds, said: ‘Investment performance has been very poor because of the exceptionally weak worldwide economic environment. UK funds are broadly in line with the global average but that performance is disappointing nonetheless. Final salary pension schemes have generally been moving out of equities in recent years as they attempt to trim their exposure to risk.
‘The UK will struggle to pay for its retirement and the weak returns of recent years make it even more important that we improve these pensions. Strong workplace pensions are a must.’
More details are available from the OECD website.

Banking reform

The Government has published its white paper ‘Banking reform: delivering stability and supporting a sustainable economy’, setting out the Government’s proposals for implementing the recommendations of the Independent Commission on Banking (ICB) (Vickers reforms), to fundamentally reform the structure of banking in the UK. Comments on the white paper are requested by 6 September 2012.
It confirms that retail banking operations will be ring-fenced from riskier operations such as investment banking.
Financial Secretary to the Treasury, Mark Hoban, addressing the House of Commons said:
‘The Government will ring-fence retail deposits from the risks posed by international wholesale and investment banking. A ring-fenced bank will be economically and legally separate from the rest of its group, and run by an independent board.’
However, there have been some concessions made after lobbying by the banks. Ring-fenced banks will be able to offer simple hedging products, subject to the necessary safeguards. Also, smaller banks, with a value of less than £25m, will not be required to set up a ring-fence despite the ICB proposals.
The Government has also chosen not to apply a higher leverage ratio to large ring-fenced banks. The ICB had called for the biggest banks to have a ratio of 4% in an attempt to limit the risks they take. However, the Government does not see a case for increasing beyond the Basel III level, currently proposed at 3 %.
Sir John Vickers, chair of the ICB, speaking to the Guardian said the government should have gone further in adopting his committee's proposals:
‘The white paper proposals are far-reaching, but on some points – such as limits on the leverage of big banks - we believe they should go further. We welcome that the ICB proposals have been accepted in large part, but urge the government to resist pressure to weaken their effectiveness.’
The Government will introduce legislation with the aim of completing all primary and secondary legislation by the end of this Parliament in May 2015. Banks must comply with all of the measures proposed here by 2019, as the ICB recommended.
The ICB was set up on 16 June 2010, at the onset of the banking crisis, to be chaired by Sir John Vickers. The Commission was asked to consider structural and related non-structural reforms to the UK banking sector to promote financial stability and competition. The ICB published its report on 12 September 2011.
The chancellor is expected to discuss the proposed reforms in his annual Mansion House speech on this Thursday evening.

Executive Pay

Business secretary Vince Cable is set to climb down on his bid to slash excessive executive pay.
His softened stance looks set to let chief executives off the hook and spare them the rigours of an annual binding vote on their pay and bonuses, a move he put forward.
The Twickenham MP now plans to allow a vote every three years, to fend off concerns that it would have tied companies up in yet more bureaucracy.
It comes in the wake of a series of shareholder rebellions over and boardroom greed, most recently at insurance giant, Aviva. And in a groundswell of increased investor ire, shareholders at WPP are set to go to war at its AGM over Martin Sorrell’s eye-watering new pay deal on Wednesday.
Labour dubbed the move “greatly disappointing”.
In May, Aviva chief executive Andrew Moss announced his resignation, following a rejection of the insurance group’s remuneration report at a rowdy AGM.
Moss, chief executive since 2007, offered to waive a 5% pay increase, which would have pushed his salary beyond £1m, but this failed to garner him any support from shareholders.
His departure is the latest dramatic event amid the ‘shareholder spring’ as investors have turned on boards indicating their dissatisfaction with excessive executive remuneration packages, despite poor or declining performances of the companies own shares.
In the last fortnight, Astra Zeneca chief executive David Brennan resigned and Sly Bailey of Trinity Mirror also stepped down following concern and discontent among company owners over executive remuneration.
Aviva said it will consider internal and external candidates for the CEO role and expects this to take several months.

New HMRC Toolkits

HMRC has published the updated Business Profits and Capital v Revenue Toolkits to assist agents when completing their clients' 2011-12 returns.
These toolkits provide guidance on areas of error that HMRC frequently see in returns and set out the steps that you can take to reduce those errors. They should help you to:
ensure that returns are completed correctly, minimising errors
focus on the areas of possible error that HMRC consider key
demonstrate reasonable care
The updated guidance is available from HMRC.

NIC

This Brief outlines HMRC’s position following the Upper Tribunal decision in the case of ITV Services Ltd. HMRC has no plans to undertake concerted compliance activity in the media sector in respect of entertainers and the Regulations as a result of the ITV Services case. It will, however, continue to scrutinise those cases currently the subject of investigation.
National Insurance Contributions (NICs): HMRC’s position following the Upper Tribunal decision in the case of ITV Services Ltd.
This brief confirms Her Majesty’s Revenue & Customs’ (“HMRC”) position following the decision in the case of ITV Services Ltd (“ITV”) at the Upper Tribunal (“UT”). The case concerned the application of the Social Security (Categorisation of Earners) Regulations 1978 (“the Regulations”) to payments made to actors engaged by ITV under specific contract types. The tribunal found against ITV and upheld the decision of the First Tier Tribunal (“FTT”) (see R & C Brief 10/11 issued 2 March 2011) that the actors’ contracts provided for remuneration by way of salary and there was liability for Class 1 National Insurance contributions (“NICs”) under the Regulations on all the remuneration payable under the contract types.
You can read the full text of the UT decision on the Tax Tribunals Service website ITV Services_Ltd_v_HMRC (PDF 82K) (Opens new window).
Readership
Any individuals or businesses engaging entertainers as actors, singers or musicians; or in any similar performing capacity, and the representative bodies for any of these groups are advised to read this brief.
Action required by those engaging entertainers
The decisions of the FTT and UT in the case of ITV have clearly stated the law on the matter. HMRC now expects those in the industry engaging entertainers to comply with the Tribunals’ decisions.
Background
The Regulations relating to entertainers were introduced to provide earnings-related contributory benefit protection to entertainers. At the time the Regulations were introduced it was accepted that a small number of highly-paid celebrity entertainers referred to by the entertainment industry as “Key Talent” or “Marquee Talent”, would be excluded because they did not need earnings-related contributory benefit protection.
HMRC believed that the wording of the Regulations in 1998, as amended in 2003, excluded certain entertainers not paid by way of salary (as defined in the Regulations) and that one such group was those entertainers termed “Key Talent” . However, it has now become clear that many entertainers termed “Key Talent” are engaged contractually under terms which bring them within the ambit of the Regulations.
HMRC also believed that the majority of musicians not engaged directly under employment contracts were excluded from the Regulations because they were not paid by way of salary. The decision of the UT in the ITV case now clarifies that musicians’ contracts which HMRC previously believed to be outside the ambit of the Regulations, and where in some cases it had given a written opinion to that effect, are in fact within the Regulations.
The FTT in its decision of 23 November 2010 found that, except for the ITV “All Rights Contract”, where the contract specifies a fee without any relation to time taken, all other actors’ contracts including bespoke contracts (used extensively for engaging “Key Talent”,) provided for remuneration which included salary. One of the grounds of ITV’s appeal was that the FTT erred in concluding that the contractual payments computed by reference to the time services are to be rendered fell within the definition of salary in the Regulations.
The Upper Tribunal’s decision
The UT rejected the “are to be rendered” argument and all other of ITV’s arguments and decided that entertainers’ contracts are forward looking and the wording of the legislation is consistent with the natural contract-based interpretation of the notion of ‘remuneration’ and in the context of the NICs legislative regime. This means that the Regulations apply to any contract that provides for payment for the individual’s time for some definite or indefinite period (as opposed to being for a specific performance). However, the judge also observed that contracts that include reference to hourly payments such as overtime or overage payments, if and when paid, that will be computed by reference to time, fall within the ambit of the Regulations irrespective of whether such additional payments are actually made to the entertainer.
The effect of the Upper Tribunal’s decision
The UT decision has provoked comments from some observers from the entertainment sector as to the correct interpretation of the penultimate paragraph of Revenue & Customs Brief 10/11. In particular, a query has been raised as regards the category of entertainer to which the following statement was intended to apply:
“HMRC is obliged to apply the law immediately to all Equity contracts that are newly entered into, revised, renewed or extended from the date of this briefing (2/3/11) and from 6 April 2011 in respect of all current Equity contracts that continue beyond the end of the 2010/11 tax year, which are of a type that had previously been accepted by HMRC as falling outside of the regulations.”
That paragraph referred to the liability for Class 1 NICs for all actors on Equity contracts. The second part of that statement made no concession for any specific type of contract, it simply deferred compliance with the FTT decision to the beginning of the new tax year in the limited circumstances where HMRC had previously given a written opinion that a particular contract (or contracts in cases where more than one actor are engaged on precisely the same terms in the same production) fell outside of the Regulations.
It has also been suggested that the following extract from the Employment Status Manual 4147 shows that HMRC previously took the view that those entertainers referred to by the industry as “Key Talent” are excluded from the Regulations:
“The last bullet ensures that Key talent artistes are excluded from the Regulations as they will be contracted to appear in productions for which their remuneration is not directly calculated according to the period of weeks or months they are assigned to the production.”
HMRC is of the view that the above extract in respect of “Key Talent” artistes makes it clear that only those entertainers engaged without specific reference to time are intended to be excluded from the Regulations.
Various HMRC guidance published since 2003 clearly articulates that those “Key Talent” entertainers whose remuneration does not include any element of “salary” – that is the remuneration payable under their contract of engagement does not include any payment computed by reference to the amount of time for which work is performed – are excluded from the Regulations. See particularly Tax Bulletin Issues 65 and 74.
In its published “Guidelines on the Special NIC Rules for Entertainers (PDF 194K)”, HMRC clearly explains that the Regulations are to be applied to the exact terms of a particular entertainer’s contract in order to determine whether the earnings from the contract are to be treated as employed earnings for NICs purposes.
HMRC’s position going forward
“ Actors” and “entertainers” were referred to specifically in Revenue & Customs Brief 10/11. To clarify, liability for Class 1 NICs arises in relation to all types of entertainers (for example,. musicians, singers) engaged under contracts where the remuneration includes an element of salary (as defined in the Regulations).
HMRC has no plans to undertake concerted compliance activity in the media sector in respect of entertainers and the Regulations as a result of the ITV Services case. It will, however, continue to scrutinise those cases currently the subject of investigation and to apply its normal risk based approach to identifying cases which represent a high risk in terms of tax and/or NICs and it reserves the right to investigate such cases.
Where HMRC is undertaking, or undertakes, an investigation into an entertainer or media company, it will apply the law in terms of the Regulations as enunciated by the UT.
Retrospective application of the Upper Tribunal’s decision
The extent to which HMRC will seek to apply the UT decision retrospectively will be determined by a number of different factors.
Written opinion previously given
Where HMRC has previously issued a written opinion that Class 1 NICs are not due in respect of a particular contract because HMRC did not consider that it provided for payment by way of salary, it will not seek from the party to whom that written opinion was given retrospective recovery of the unpaid NICs that were due and payable prior to 6 April 2011 (unless HMRC has expressly advised an engager that NICs should be operated from an earlier date).
Extent of a written opinion
Where HMRC has previously provided a written opinion to an engager that Class 1 NICs are not due in respect of a particular contract, and that engager used an identical (other than for individual personal details) contract to engage other entertainers in the same production, HMRC will not seek arrears of Class 1 NICs due and payable prior to 6 April 2011.
No written opinion previously given
Where HMRC has not given a written opinion, then it reserves the right to seek retrospective recovery of any NICs arrears under its normal risk based approach, and subject to the provisions of the Limitation Act 1980.
ESM 4147 will be updated shortly to reflect the position following the UT decision.
Further information
Under the terms of its “Non-statutory clearance” service to businesses, should an engager have material uncertainty on the tax (or NICs) consequences of a particular contractual engagement, if appropriate, HMRC can provide its view of how the law applies to that contract.
Any such requests should be made by formal ‘Non-statutory clearance’ application to Large Business Customer Relationship Managers, Film & Production or TV Broadcasting Units as appropriate enclosing details of the particular engagement and a copy of the relevant (signed) contract.
Issued: 14th June 2012

New GAAR

The Government has launched a consultation on a new general anti-abuse rule (GAAR) to tackle artificial and abusive tax avoidance schemes. This follows the Budget 2012 announcement that such a rule will be introduced in 2013. The closing date for comments if 14 September 2012.
The Government is introducing the GAAR following an independent review led by Graham Aaronson QC, who concluded that the introduction of a targeted rule would deter artificial tax avoidance schemes and contribute to providing a more level playing field for business.
In line with Graham Aaronson’s recommendations, the proposed GAAR will apply to the main direct taxes and National Insurance. This includes Income Tax, Corporation Tax, Capital Gains Tax and Petroleum Revenue Tax.
As announced at the Budget, it will be expanded to cover Stamp Duty Land Tax (SDLT). The consultation also proposes an extension of the GAAR to Inheritance Tax and makes clear that the Government will consider including further taxes if appropriate.
The consultation confirms that the Government is to establish an advisory panel, members of which will come from both HMRC and business, to give opinions on cases where HMRC proposes to apply the GAAR and to develop, update and approve guidance on its use.
Responses will be taken into account in developing the legislation with a summary of responses published in autumn 2012 after the consultation closes. There will be a further consultation on proposed draft legislation in the autumn with a view to introducing legislation in Finance Bill 2013.
The consultation document is available from HMRC.

Wednesday 13 June 2012

Accountant faces prison

Railway accountant faces years behind bars

A former management accountant has been found guilty of defrauding a struggling railway company and is expected to be sentenced to several years in prison later this month.
Corina Heslop, who denied the charges levelled against her, was found guilty of nine out of 10 offences including eight counts of fraud and one for possessing items for use in fraud. She was cleared of a criminal damage offence.
Following a three-week trial at Durham Crown Court, which centred on a £36,781 fraud accusation, the Bishop Auckland accountant is set to be sentenced on 29 June.
Judge Christopher Prince warned her that she would be facing up to six years in prison. As reported in the Northern Echo, he told her: “The guidelines under which I operate, for an offence of this type, involving nearly £40,000 from an employer, you would be expected to receive a sentence of between four and five years.”
She will also to be sentenced for a previous conviction for fraudulently obtaining £70,000 in housing benefit over an eight-year period, which the judge took into consideration:
“For an offence of that nature the sentence would be of the order of 12 months and so the overall sentence could be between four to six years,” judge Prince said.
Heslop, who doesn't appear to be a member of the main chartered institutes, was accused of carrying out the fraud against her former employer British American Rail Services (BARS) - a train operating company which runs the Weardale Railway in County Durham.
The allegations related to eight cheques paid into her own accounts totalling £36,781 in 2009 when she was the company’s management accountant.
According to local press reports she altered invoices and company records to make it appear the money was paid to creditors for supplies and services. On the discovery of this she then claimed she was reimbursing herself for payments made in cash from her own funds on behalf of the company.
Her husband James Raymond Heslop, who denied criminal damage and possessing items for use in fraud, was cleared of any offences.

Monday 11 June 2012

New Scots tax body

Scotland is to set up its own body to collect new taxes claiming it can do so much cheaper than HMRC.
Finance Secretary, John Swinney, said Revenue Scotland will be established this year and be fully operational by 2015 - the same year the Scottish Government gets new taxation powers to introduce new taxes.
From April 2015 the Scottish Parliament plans to introduce and manage taxes on the purchase or leasing of land and buildings and the disposal of waste to landfill.
In a statement to Parliament, Mr Swinney said the cost for HMRC to administer the existing charges on behalf of the Scottish government up to the end of March 2020 would be around £22.2 million but the new system could the same job for some £16.7 million.
Mr Swinney outlined Scottish government plans to full exploit these powers and introduce two replacement taxes which would be embedded in Scots law, reflect Scottish values and Scottish circumstances.
A Tax Consultation Forum will be set up to draw in “the views of the taxpayer and expert communities”.
He launched the consultation for the Land and Buildings Transaction Tax to replace Stamp Duty Land Tax. Two more consultations are set to follow this year.
HMRC has already said on record that it could “in theory” veto requests to collect new landfill and property taxes if they deviated too significantly from the existing UK system.

Tax fraudster gets 5 years

An IT consultant who failed to declare almost £2m in income has been sentenced to five years in jail for tax fraud.
Stephen Maxwell had claimed he lost income after being involved in the 2009 Cumbria train disaster in which a passenger died. He was dubbed a hero for rescuing fellow passengers from the wreckage of the smash but following an investigation by HMRC officers, it was revealed he had paid no tax for nearly a decade leading up to the rail tragedy.
The 53-year-old Scotsman worked as an IT consultant for a number of City banks between 1999 and 2008. Lucrative fees were paid to a slew of Gibraltar and Isle of Man-registered companies - of which he was a hidden beneficiary. And from 2005 the income was paid to a UK-registered company which never made any tax returns.
Kirkcudbright Sheriff Court heard that Maxwell of Wallock Brae, in Dalbeattie, Dumfries and Galloway, was responsible for a £635,015 loss to the Exchequer over the period 06 April 1999 - 05 April 2008.

Wednesday 6 June 2012

D Day

On this day 68 years ago, the landing of Allied troops on the Normandy beaches saw the beginning of the end of German occupation of Europe.

An opportune time to cast our minds back even further.
On 10 October 1914, a few weeks after the outbreak of the First World War, the industrialist in charge of the German war production, Walter Rathenau, proposed that Germany should not fight the war. Instead, he suggested that German ambitions for European domination could be achieved by forming a European economic system. He believed that such a system would be rapidly followed by a political union and that a combination of the two would achieve far more for Germany than a war.

With Germany at the heart of the struggle to resolve the current eurozone crisis, I wonder how much of Rathenau's vision has come true!

Monday 4 June 2012

Cut and cut hard!

So we are in double dip territory.

There is a lot of debate as to whether "the cuts" (and bear in mind that total government expenditure is still rising relentlessly) have been too soon and too much. Listen to Ed Balls and this is his mantra.

In history, we have only ever been in double dip territory - in the early 1930s and the early 1970s.

In 1932-34, the government cut spending hard and yet from then to 1937, real GDP grew by over 20%.

Post 1976, with savage cuts in Government spending, we had sustained growth in the 1980s and 1990s.

There is no historical precedent for the Government to borrow more and increase spending, and so those who advance it as a solution to stimulate growth are speaking more from hope than experience.

Saturday 2 June 2012

Tax freedom day - much later this year

Employees can finally start earning for themselves rather than working for the Government today (Tuesday 29 May) - two days later than 2011, according to low tax campaigners.
The Adam Smith Institute said Tuesday marked this year’s Tax Freedom Day - the point in the calendar when Britons stop grafting for the Treasury and begin to earn for themselves.
Institute director, Eamonn Butler, said: ‘Tax Freedom Day, which the Adam Smith Institute has been calculating for 25 years, is the plainest way to show what the tax burden really is.
"That is why the Treasury hates it. They of course want to conceal how much tax we pay, which is why they are so keen on stealth taxes."
The institute – factors in levies such as VAT, income tax, excise duties, national insurance, council tax, air passenger taxes, fuel and vehicle taxes in its calculations.
Butler said the double-dip recession, high personal taxes and 20% VAT rate had led to the date being put back 48 hours compared with last year.
He added: ‘The stark truth is that this burden costs us all 149 days of hard labour every year.
‘That's not how long a rich person has to work - it is the time the average person must labour for the tax collectors.
‘In the Middle Ages a serf only had to work four months of the year for the feudal landlord, whereas in modern Britain people have to toil five months for Osborne’s tax gatherers.’
The UK’s Tax Freedom Day falls way after Australia’s on 4 April and the USA’s, on 17 April 17.

Late payroll returns

Employers who missed the 19 May deadline for submitting their 2011-12 annual return face even higher penalties if they don’t act now.
That’s the stark message from HMRC, which is writing to employers across the country this week, warning them that penalties for missing the May deadline for Employer Annual Returns (EAR) will rocket if a late return is received after 19 June.
HMRC says that because EARs contain important information on employees’ tax and national insurance deductions during the tax year, any delays in returning them can create additional work for employers, employees and the taxman.
Even when an employer has no return to make, they need to tell HMRC as failure to do so can lead to a penalty.
Penalties are charged at a rate of £100 per 50 employees per month, or part month, that a return is late.
Help and advice on filing a return is available from HMRC via its Employers Helpline on 08457 143 143 or online

HMRC might not collect new Scottish Tax

A senior HMRC official has told the Scottish Parliament’s finance committee that it is not compelled to implement any radical new taxes imposed by a Scottish Government through changes to devolution laws.
The position emerged after Sarah Walker, deputy director and head of HMRC’s devolution team, said it could, in theory, veto requests to collect new landfill and property taxes if they were significantly different from the UK system.
She made the claim as part of an inquiry into the new Scotland Act, which devolves new financial powers to Edinburgh.
She said: ‘The way the Act is set up, the Scottish Government have a choice whether to ask us to operate the devolved taxes, and we have freedom whether we agree or not.
‘So it is completely open whether they want us to do it and equally whether we feel we can do it, fitting in with our existing business.
‘It will depend very much on whether it's a look-a-like tax, whether it looks very much like an existing UK tax, which would mean we could operate it alongside an existing system using the resources we already have. Clearly if they asked us to do that, that would be relatively easy for us to do.
‘If they want to have something that has a different framework or different rates, then we would have to look at the details of what they want it to do and decide whether it made sense for us to try and adapt our systems to operate that, or whether we would need to say that is so different that actually there is no point in trying to operate it.’
Her comments followed a question from SNP MSP committee member Mark McDonald, on how simple it would be for HMRC to progress new Scottish plans.
A revenue spokesman said: ‘HMRC is working closely with the Scottish Government to help them as they design their new devolved stamp duty and landfill taxes. The design of the new taxes will influence the decision on who would be best placed to operate them on behalf of the Scottish Government. That is entirely a decision for the Scottish Government.’

New HMRC task forces

HMRC expects to claw back £23m from cabbies, market sellers and other tax-dodging self-employed traders as it rolls out another batch of niche taskforces.
London’s indoor and outdoor markets, taxi firms in Yorkshire and East Midlands, East Anglian, London, Yorkshire and North East property rentals as well as tax-dodging restaurant owners in the Midlands will from this week each have a designated task force targeted in its direction.
Speaking at the launch David Gauke, the Exchequer secretary, said: ‘HMRC is on target to collect more than £50m as a result of the taskforces launched in 2011/12.
‘We have made it clear that we will not tolerate tax evasion – everyone needs to pay the taxes they owe in full. We are determined to crack down on the minority who choose to break the rules. It is not fair that at a time when most hard-working people are paying the right tax, others are trying to get out of paying what they should.’
Commenting on the news Gary Ashford, CIOT representative on the Compliance Reform Forum, said: ‘Anyone who has been evading tax (whether income tax, PAYE or other taxes) in any part of the country should consider coming forward before they are found out. Voluntary disclosure usually leads to lower penalties, a reduced chance of prosecution and a reduced risk of being “named” under the publication of details of deliberate defaulters scheme.’
Ashford added: ‘The targeting of property rental income overlaps with other HMRC campaigns, for example the offshore campaign, as many property investors may well be UK residents holding offshore accounts, or non-doms, mistakenly not appreciating that UK source income is still taxable. Those affected should take advice from a tax adviser to make the most of the different disclosure facilities available.’
The latest batch of taskforces follows campaigns against as varied traders as plumbers, music teachers and take-away providers.
(Accountancy Live, 1 June 2012)