Survey finds markets ‘optimistic for economic prospects’

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For the first time since the pandemic struck a year ago UK markets are optimistic about the country’s future economic prospects.

The RSM Financial Conditions Index, based on an aggregated performance indicator of currency, bond and equity markets, has improved from -0.1 below normal stress levels in Q3 2020 to a current positive reading of 0.3.

All this means RSM now believes conditions are right for longer-term growth of the UK economy. Simon Hart, lead international partner at RSM UK, explained: “The extension of business support, including the furlough scheme and the eligibility of 600,000 self employed individuals that previously were not qualified to receive Covid-related support, including those that become self-employed after the 2019-2020 tax year, will prevent some long-term economic scarring in the jobs market caused by the pandemic.

“The introduction of the infrastructure bank, eight UK Freeports and a focus on the green agenda will unlock growth potential in key regions and bolster UK trade and investment.”

RSM chief economist Joe Brusuelas added: “However, spending plans in this week’s Budget reinforces the need for the Bank of England to keep a lid on long-term interest rates. There are unavoidable pandemic expenses ahead; and a need for direct support for businesses and individuals and investment in advanced industries will allow the economy to compete in the global supply chain.”

Women’s progress at work knocked back

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Progress for women in work could be back at 2017 levels by the end of the year as a result of the pandemic, according to analysis conducted for PwC’s Women in Work Index.

For nine years, all countries across the OECD made consistent gains towards women’s economic empowerment. However, due to Covid-19 this trend will now be reversed, with the Index estimated to fall 2.1 points between 2019 and 2021. It will not begin to recover until 2022, where it should gain back 0.8 points, but in order to undo the damage caused by the pandemic to women in work by 2030 progress towards gender equality needs to be twice as fast as its historical rate.

UK overseas territories top list of world’s tax havens

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British overseas territories occupy the top three places in the Tax Justice Network’s top 10 list of the world’s tax havens.

The British Virgin Islands is top of the pile, being labelled the “greatest enabler of corporate tax abuse”. The Cayman Islands is in second place and Bermuda third.

Britain was listed at number 13, and alongside its network of satellite territories was singled out by the TJN for providing the widest scope for international corporations to cut their tax bills.

The United Arab Emirates (UAE) was a new entry into the top 10 after an investigation found it had benefited from $250bn (£180bn) of multinational funds routed through the Netherlands.

A spokesperson for the TJN said tax havens were thriving, with the report’s findings showing the biggest economies in the world were helping companies avoid $245bn in tax.

Its Corporate Tax Haven Index ranks each country based on how intensely its tax and financial systems allow multinational corporations to lower their taxable profits. Grading each country’s tax and legal system with a “haven score” out of 100, the BVI, the Cayman Islands and Bermuda all gained the maximum score.

“A higher rank on the index does not necessarily mean a jurisdiction’s corporate tax laws are more aggressive, but rather that the jurisdiction in practice plays a bigger role globally in enabling the profit shifting that costs countries billions in lost tax every year,” the spokesperson said.

The report said OECD countries were responsible for 39% of the world’s corporate tax abuse risks. Their territories and former colonies – such as the UK’s independent territories and Jersey, Guernsey and the Isle of Man, which are crown dependencies – were responsible for 29%.

The top 10 biggest enablers of global corporate tax abuse

1 British Virgin Islands (British overseas territory)
2 The Cayman Islands (British overseas territory)
3 Bermuda (British overseas territory)
4 Netherlands
5 Switzerland
6 Luxembourg
7 Hong Kong
8 Jersey (British crown dependency)
9 Singapore
10 United Arab Emirates

Move to ban ‘essay mills’

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The government is seeking to ban essay mills amid growing concern that unscrupulous firms are using online influencers on campus to exploit and blackmail students into using their services.

To this end, this week it introduced the Essay Mills (Prohibition) Bill to make such services illegal. The former universities minister, Chris Skidmore, told the House of Commons that there are now over 1,000 companies offering students ‘ready-made’ essays. That is an increase of 50% in three years. It is already a crime to operate such companies in Ireland and Australia, and Skidmore wants the UK to follow suit.

He said: “Each week that passes during the pandemic, the situation is only growing worse. As students have been forced to study remotely from home, away from on-campus welfare and support, taking their studies and exams online, they are increasingly becoming prey to essay mills, whose number has increased dramatically as they seek to take advantage of the desperate situation many students face.”

Skidmore also highlighted how students were being recruited as influencers for essay-writing companies. Some were being paid to distribute flyers on campus advertising such services. Students who have used these services have also been blackmailed to continue using the service.

“If the UK can demonstrate its willing to bring in legislation to end essay mills, we could make this part of a wider international campaign to close this loophole. Most people would assume this kind of service should be illegal in that it actively damages a student’s ability to learn independently and successfully,” Skidmore said.

Time to Zoom out?

There really is such a thing as ‘Zoom fatigue’, say academics at Standford University. For many the rise of video calls has replaced classroom lectures, business meetings, conferences and even telephone calls. This all means spending more time staring into webcams.

Researchers discovered four things that can exhaust us: the need for constant eye contact; the ability to see oneself on the video calls; the need to sit still for long periods of time; and the struggle to interpret or communicate via body language.

Professor Jeremy Bailenson said: “In the real world, if someone was following you around with a mirror constantly – so that while you were talking to people, making decisions, giving feedback, you were seeing yourself in a mirror, that would be crazy. No one would ever consider that.”

His advice is to sometimes opt for an audio-only approach. Turn the camera off and move away from the screen, maybe even walk around while you are talking and listening.

Go to https://tinyurl.com/ku5fym8 for more.

Government confirms new penalty and interest regime

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Reforms to the penalty and interest regimes for VAT and income tax self assessment have been confirmed by the government. The measures will bring significant changes and will first apply to VAT returns from April 2022, before being extended to self assessment returns.

The reforms are part of the Chancellor Rishi Sunak’s Budget package, although he did not mention them in his Budget day speech.

The new penalties for late submission of tax returns and late payment of tax will also see the harmonisation of interest rules across different taxes. The government estimates that the measures will raise £155m a year by 2024/25.

The start dates for the new penalty regime are as follows:

  • VAT – periods starting on or after 1 April 2022.
  • MTD self assessment – accounting periods beginning on or after 6 April 2023.
  • Other self assessment taxpayers – accounting periods beginning on or after 6 April 2024.

Taxpayers will not be charged an automatic financial penalty if they fail to meet a submission obligation. Instead, they will incur a penalty point for each missed submission obligation and a financial penalty will only be levied once the taxpayer reaches a penalty points threshold. The threshold varies depending on frequency of the obligation (monthly, quarterly, annually) and the penalty has been set at £200.

The points system will be applied separately to each tax and it will be possible to appeal against penalty points as they are incurred. The points will expire after a period of full compliance of up to 24 months.

Late-payment penalties come into effect for:

  • VAT – periods starting on or after 1 April 2022.
  • MTD ITSA – accounting periods beginning on or after 6 April 2023.
  • Other ITSA taxpayers – accounting periods beginning on or after 6 April 2024.

Two late-payment penalties may apply. A first penalty of 2% of the unpaid tax is charged on tax unpaid 15 days after the due date, increasing to 4% if the tax remains unpaid 30 days from the due date.

An additional penalty at an annualised penalty rate of 4% will accrue on a daily basis on tax remaining unpaid after 30 days.

The penalties will not be levied if the taxpayer has contacted HMRC to arrange time to pay by the trigger date for the penalty, so long as the taxpayer ultimately agrees the time-to-pay arrangement.

HMRC has confirmed it will take a ‘light-touch approach’ in its first 12 months of operation for both VAT and income tax. A spokesman said: “Where a customer makes reasonable efforts to get in touch with HMRC, we will not charge late-payment penalties on tax paid up to 30 days late in the first year.”

Money launderers using fake job adverts to target ‘Generation Covid’

Young people whose job prospects have been impacted by the pandemic are being targeted online by criminals looking to recruit money mules to launder the profits of their crimes, UK Finance and Cifas is warning.

Its latest research has revealed there were 17,157 cases of suspected ‘money muling’ activity involving 21-30 year olds in 2020, a 5% increase on the previous year.
This age group accounted for 42% of money mule activity in 2020, up from 38% three years ago. It was among the hardest hit by the economic impact of Covid-19, with thousands facing job losses as a result of the pandemic and graduates entering the jobs market at a time of unprecedented uncertainty.

Intelligence suggests criminals are exploiting people’s financial difficulties by using social media platforms, jobs websites and phishing emails to approach them with offers of easy cash. They will use the promise of earning money quickly to convince individuals to provide their bank details, before asking them to transfer the funds received to another account and keep some of the cash for themselves, making them a money mule.

Often, people are unaware that allowing their bank accounts to be used in this way is a crime which will have long-term consequences when they are caught. This could include a criminal record, having their bank account closed and difficulty opening one elsewhere, and trouble obtaining mobile phone contracts or accessing credit in future. Those who become money mules are also often not aware that the cash they are laundering is used by criminals to facilitate serious crimes such as terrorism, drug trafficking and people smuggling.

UK Finance and Cifas are calling for fraud and economic crime to be included in the upcoming Online Safety Bill. This would make online platforms responsible for taking down fraudulent content, including social media posts or job adverts used to recruit people as money mules.

• Cifas is a not-for-profit fraud prevention organisation, managing the largest database of instances of fraudulent conduct in the country. See https://www.cifas.org.uk/

The 2021 Budget Summary

The Budget 2021 Summary – International Association of Bookkeepers - Bookkeeping Qualifications, Bookkeeping Study and exams

Janet

I thought it would be good to set out what the IABs response is to the budget and share our thoughts.

There’s actually quite a lot of optimism in the economy especially with recovery expected to be back to pre-covid levels by mid next year, which is a lot sooner than expected. Growth over the next quarter and into the next year is predicted to be at about 7%.  Which is huge but in the context of the recession caused by lockdown it still leaves us a long way behind were we where.

The government has given us a roadmap out of lockdown so businesses can start planning, over the next few months – even though these might change, there is still a real sense that optimism.

Unemployment is not going to be as bad as people thought so the prediction that there would be 12% unemployment at its peak has not materialled. It is currently at about 6.5% which translates to nearly 2m people who won’t be unemployed. Sarah what’re your thoughts?

Sarah

I think the chancellor has had to walk a fine line between repayment of borrowing versus getting businesses back on their feet and I think has done a relatively good job.

Overall I’d say it’s spending now, tax later budget.

I also think he has sheltered many small businesses from the inevitable tax increases so I would also say it’s a pro-small business budget.

Furlough Scheme has been a highly successful and I’m glad to see its been extended past June when we are anticipating business to be back to usual trading. The scheme is still being heavily relied on but I think it has largely done what it set out to do especially if we refer to the figures Janet quoted.

Although it’s not fully funded as before and we will see the tapering as we did last year, with 10% contribution by employers in July and 20% thereafter. I think this is a good way to wean businesses off the scheme.

SEISS

There is now a 4th and 5th grant and crucially this now includes the newly self-employed, so this is now available to people with a 19/20 tax return whereas before these people did not qualify because they didn’t have an 18/19 one.

So a further 600,000 self-employed people will now be included.

There is a bit of an issue with the length of time between the grants with Grant 5 probably available around September time.

But overall I think this is a really positive response by government with 30 billion pounds made available to 2.7 million people. This has kept so many people going and will continue to do so way past June.

Janet

There were significance leaks before the budget and one area which was spoken about was the new set of cash grants

Restart Grant

A new restart grant will start in April. These will be available in England and will be worth up to £6,000 per premises for non-essential retail businesses and up to £18,000 per premises for hospitality, accommodation, leisure, personal care and gym businesses.

Similar to the one-off cash grants which were allocated in Lockdown 1.

Recovery Loan Scheme

A new Recovery Loan Scheme will launch on 6th April and will be open to all businesses, including those who have already received support under the existing coronavirus guaranteed loan schemes. It will provide lenders with a guarantee of 80% on eligible loans between £25,000 and £10 million.

Sarah

In addition, there is also discretionary grants which are being made available from local authorities for those business that might not qualify.

The government is continuing support for the UK’s tourism and hospitality sector and will extend the temporary reduced rate of 5% VAT for goods and services supplied by the tourism and hospitality sector until 30‌‌‌th ‌September 2021. Then from 1st October to 31st March 2022 a 12.5% rate will apply until returning to 20%.

Alcohol and fuel duty will also be frozen. This is the second year in a row that alcohol duty has been frozen, whilst fuel duty has been frozen for over a decade. We both have electric cars anyway!

Janet

Business Rates was a big area of concern, there isn’t the 100% business rates holiday that was hoped for the whole of the next FY but we did get 100% for 1stApril until 30th June. Then its 2/3rd off all the way though to April next year.

Corporation tax

This has gone up but UK still has one of the lowest rates of CT in the world meaning that it can still stay competitive on the global stage, and there is still time to prepare the changes.

Sarah

The rate of Corporation Tax will increase from April 2023 to 25% on profits over £250,000. The rate for small profits under £50,000 will remain at 19%

You can now also bring forward losses from the previous 3yrs which also helps even the divide between those that have done well and those that have struggled during the lockdown.

Stamp Duty Land Tax (SDLT)

To keep the housing market buoyant  – The current stamp duty holiday (in England and NI) will be extended until the end of June. The £500,000 nil rate band had been due to end on 31st March but will now continue until the end of June. Then from the 1st July to 30th September the nil rate band will be reduced to £250,000, before returning to the usual £125,000.

Mortgages

In addition to this a new mortgage scheme to help buyers with a low deposit will be launched. It will start from April and many major lenders say they will offer the 5% rates.

Janet

If we look at personal taxes – The income tax Personal Allowance will rise as planned to £12,570 from 5th April and will remain at this level until April 2026. The income tax at the higher rate threshold will rise as planned to £50,270 from 5th April and will remain at this level until April 2026. This is another example of postponing taxes.

The NMW is due to increase to £8.91 from 6th April but note that the age bandings have been reduced.

The Universal Credit uplift of £20 per week will continue for a further six months. In addition, working tax credit claimants will get equivalent support for a further six months.

Sarah

Lot of money being talked about but really positive and a lot of support for small businesses while they go through this continued period of disruption. What I liked was that there was continued support as we come out the other side. For example, the Kickstart scheme. This has been given an additional boost with the apprenticeship bonus doubled to £3000 for every new apprentice hired between 1st April and 30th September 2021.

Janet

Yes, there’s defiantly money being made available to help to get things moving after lockdown as well as the short term covid responses. It wasn’t the radical budget we were expecting but it seems to have been received well from the business community.

 

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