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Tax Refunds to Come Early

It has been revealed that up to 3.5 million taxpayers could be in line for a tax refund, from as early as next week, as HMRC begin reconciling employer and employee PAYE year-end.

The process of reconciling employer and employee tax accounts happens each year and results in millions of people receiving notifications of refunds or the need to pay more tax if they have been on the wrong tax code previously; with HMRC estimating that 3.5 million could be in line for a tax refund, whilst a further 1.6 million will be advised they have underpaid tax throughout the year.

It has expected that those who are due a rebate will get an average windfall of £379, while the typical shortfall for those who have not paid enough is £537, PAYE adjustments for the tax year 2011/2012.

Stephen Banyard, acting director general for personal tax, said: “We are pleased that we are able to start this process more quickly than in previous years, giving money back to those we owe and delivering certainty to those with something to pay.

“We are improving the PAYE system further through the introduction of Real Time Information (RTI), which will make it easier for employers and pension providers to administer as they will tell HMRC about PAYE payments at the time they are made – as opposed to only at the end of the year – reducing the need for corrective actions at a later stage.”

The letters advising taxpayers that they are either due a tax rebate or are required to pay additional tax are to be sent out from May 17^th 2012, with the last being sent in October 2012; and HMRC have said that anyone who receives a letter doesn’t need to do anything, as any tax owed will be taken throughout the year via an alteration in the tax code.

Think-Tank Call for Purse Strings to be Loosened

The leading think-tank, the Organisation for Economic Co-Operation and Development (OECD) have suggested that the government should consider borrowing more to pay for vital infrastructure projects, in a bid to stimulate the UK’s economy. Continue reading →

Treasury Demand Monthly Spending Reports

Chief Secretary to the Treasury, Danny Alexander, is set to outline changes in a speech later today, which will see Whitehall’s spending subjected to greater scrutiny by the Treasury. Continue reading →

UK Economy to Stall

An independent forecasting group has claimed that although the UK has avoided a double-dip recession, the economy is set to stall for the next twelve months. Continue reading →

Conflicting Predictions For UK Economy

Depending on what you read and who wrote it, the UK economy will either contract in Q1, taking the country back into recession, or enjoy a small amount of growth.

The Organisation for Economic Co-operation and Development (OECD) is saying that there will be an annualised contraction of 0.4 per cent for GDP, suggesting a 0.1 per cent contraction compared with the previous quarter.

However, figures from the Office for National Statistics (ONS), out last week, show that the UK service sector, which accounts for around 75 per cent of the UK economy, grew 0.2 per cent in January alone.

Governor of the Bank of England, Sir Mervyn King, foresees a ‘zig-zag’ pattern, predicting that the economy will continue to fluctuate between positive and negative growth throughout the year, as it has been since the middle of 2010.

And according to the CBI, “growth will restart in 2012, but high levels of uncertainty around the economic outlook, mainly driven by the situation in the euro area, mean growth will remain subdued, particularly in the first half of this year.”

Analysts are divided on the matter. Howard Archer at IHS Global Insight said: “While services output was hardly spectacular in January, it was a solid enough performance after a decent gain in December and supports hopes that the economy has returned to growth in the first quarter.”

But David Blanchflower writing in The Independent today believes the OECD, saying: “A big day on the economic calendar will be 25 April when the first estimate of GDP growth for Q1 2012 is released. I also expect the number to be negative.”

Speaking of the OECD’s prediction, Chancellor George Osborne said: “This is a forecast… Our own forecast from our own independent body, which we published last week, says we are going to avoid a recession.”

Football Administration Costs HMRC

Leaked documents have shown that football clubs who have gone into administration have failed to pay virtually any of the £40 million they owe the taxman.

The documents show that HMRC have had to write-off much of the debt, as the result of a rule which puts the taxman at the bottom of the pile of creditors; whilst the same documents also show that football clubs and footballers are given priority when it comes to repaying debts.

According to the papers, which have been submitted to the High Court by lawyers acting on behalf of HMRC in a landmark case it has brought against the Football League; football clubs in financial trouble have cost the taxpayer nearly £40 million since 2000.

Within its written submission to the High Court, the HMRC lawyers said: “The Football league have constructed a device under which, on insolvency, football creditors are paid in full whilst ordinary unsecured creditors of the same class receive a very modest dividend.”

A judge is now considering whether to declare the so-called “Golden Rule” – which gives the preferential treatment to football-related debts during administration – unlawful; with the ruling expected shortly.

A spokesperson for HMRC has said: “The rule is unfair. If the HMRC action is successful there will be benefits to all non-football creditors.”

Budget to Focus on Business Tax Avoidance

Businesses are expected to face a permanent tax crackdown on abusive tax schemes, under schemes set to be unveiled by the Chancellor, George Osborne, in Wednesday’s budget.

It is widely believed that tax avoidance is set to be at the heart of the budget, with the Chancellor telling the Andrew Marr Show, yesterday, that the it would be “a budget for working people”, at the same time as pledging to “come down like a tonne of bricks” on those who used tax avoidance schemes.

Treasury sources have also fuelled speculation that tax avoidance will be the main element of the budget, by suggesting the government is set to adopt the GAAR, following a recent report by Graham Aaronson QC, despite businesses traditionally being wary of the General Anti-Abuse Rule (GAAR), due to it complicating tax planning, as under a GAAR companies have to disclose their tax arrangement in advance and schemes can be shut.

Mr Aaronson has attempted to address such concerns by businesses, by recommending an “anti-abuse” rule rather than an “anti-avoidance”, which would limit the scope of its application.

Mr Aaronson said: “A general anti-abuse rule narrowly targeted to deter such schemes, while not affecting responsible tax planning, should lead to a fairer, more principled and ultimately simpler tax system.”

The clampdown on tax avoidance is also expected to be used as a way to justify a reduction in the top rate tax, from fifty-pence to forty-five pence.

Clegg Goes Soft on Tycoon Tax

The deputy Prime Minister, Nick Clegg, ahs been forced to go back down on proposals for a tycoon tax, less than forty-eight hours after announcing his proposals.

Speaking at the Liberal Democrats Spring conference on Saturday, Nick Clegg proposed the tycoon tax on millionaires, with the aim of introducing a minimum tax rate to ensure high earners didn’t pay less than twenty percent of their incomes tax.

Clegg told the conference: “There are hundreds of people earning millions per year who are barely paying 20 per cent tax – forget 40 per cent, forget 50 per cent, forget 30 per cent.

“I think it’s time that we look at what I call a tycoon tax.”

However, no sooner had Clegg announced his proposals than the Treasury announced they were surprised by the deputy Prime Minister’s mention of a minimum tax rate, with sources close to the Chancellor saying a minimum tax rate wasn’t being considered.

One Treasury source added: “There are people out there making use of various reliefs and loopholes who don’t pay much tax at all.

“There is a commitment across government to close those loopholes.”

During his keynote speech at the conference on Sunday, Nick Clegg appeared to have softened his stance on the tycoon tax, telling the conference: “We will call time on the tycoon tax dodgers and make sure everyone pays a fair level of tax.”

UK Forecast Cut

Business lobby group, the British Chamber of Commerce, has warned that growth this year will be slower than previously forecast; but added that the UK will avoid a double-dip recession.

In its quarterly forecast, the British Chamber of Commerce has predicted that the UK economy will grow by 0.6% rather than the 0.8% it had previously forecast, warning that the UK’s economy still faced serious challenges with debt levels that are too high and unemployment set to rise to almost three million by the start of next year.

John Longworth, the Director General of the British Chamber of Commerce has urged the Chancellor, George Osborne, to “pull out the stops” in the budget to help drive growth, saying: “Our economic forecast underlines the need for the Government to deliver a Budget that will bring confidence to businesses.

“Businesses up and down the country are doing their utmost to find new markets and grow their firms, despite the difficult economic challenges they face. Only the private sector will drive recovery and help deliver public services, like education, healthcare and pensions.

“A sustainable recovery depends on creating the right conditions to empower businesses to drive growth. Companies need the best possible environment to generate wealth and create jobs.

“The Government must stick to plan A, but also stimulate growth within the economy. There is room within the current spending envelope for measures that will encourage firms to export, invest and grow.”

The quarterly forecast, from the British Chamber of Commerce, has also warned that growth is likely to be lower than expected in the second quarter of 2012 due to the extra bank holiday in June for the Queen’s Diamond Jubilee; whilst in July and August there could be unusually high growth figures due to the Olympics.

It added that growth from exports and business investment will prevent the UK from falling back into a recession this year, with prospects set to improve further in 2012, when the British Chamber of Commerce predict the economy will expand by 1.8%.

Chancellor: UK Has Run Out of Money

The Chancellor, George Osborne, has admitted that the government has run out of money and cannot afford debt-fuelled tax cuts or extra spending.

Speaking ahead of next months Budget, the Chancellor has issued the stark warning that there was little the Coalition government could do to stimulate the economy and that Britain’s only hope rests with the private sector creating growth.

Mr Osborne told reporters: “The British Government has run out of money because all the money was spent in the good years.

“The money and the investment and the jobs need to come from the private sector.”

Despite coming under increasing pressure to ease his tough austerity measures, amid fears the country is set for another recession, Mr Osborne, has also added that he’d stand firm on his pledge to balance the book’s by refusing to borrow money, saying: “Any tax cut would have to be paid for. In other words there would have to be a tax rise somewhere else or a spending reduction.

“In other words what we are not going to do in this Budget is borrow more money to either increase spending or cut taxes.”

The tough words by George Osborne were also echoed by Liberal Democrat Jeremy Browne, the foreign minister, who has warned that the country faces an “accelerated decline” without measures to tackle its debt and increase competitiveness.