Archive for the ‘home-article’ Category
March 7th, 2008
Minimum wage to rise by 3.8%
Britain’s minimum wage is set to rise by 3.8 per cent from October 2008, in line with the increase in average earnings but below prevailing retail price inflation.
Business leaders had been worried that a rise above inflation would cost jobs in sectors such as hotels, catering and retail.
The increase means that the adult minimum wage will rise from £5.52 to £5.73 an hour.
Since its introduction in April 1999, the UK’s adult minimum wage rate has risen by 59 per cent, more than twice the increase in the retail price index over the same period, and is the third highest out of 20 EU nations.
February 27th, 2008
Asian Non-doms “set for UK exodus”
A new survey has found 42% of South Asian ‘high net worth individuals’ considered non-domicile are now preparing to leave the UK due to the changes to the non-domicile tax regime set to come into effect in April, according to leading business and financial adviser Grant Thornton.
The central feature of the new laws is that non-domiciled individuals (non-doms) who have been UK residents in at least seven of the past nine tax years will have to pay a £30,000 charge per annum to avoid paying tax on a remittance basis on their offshore income. But there are also several, less high profile changes that have created further cause for concern.
The survey, which canvassed the opinions of 50 non-UK domiciled South Asians (ie. India, Pakistan, Sri Lanka and Bangladesh), found that an overwhelming majority of these non-doms (84%) thought the annual fee was not being set at a fair rate, while 78% believed they didn’t have enough time to get their affairs in order in time to comply when the law changes on 6 April. Only 34% of those surveyed said they would pay the new £30,000 fee.
This exodus of a sizeable chunk of the South Asian non-domicile population, which is the largest non-domiciled group in the UK today, has encouraged Grant Thornton’s South Asia Group to actively lobby Government on a policy rethink through a formal submission, in view of the potential economic damage the mass departure of South Asian non-doms could create.
Anuj Chande, Partner and Head of Grant Thornton’s South Asia Group, said it was not just a case of many highly talented individuals leaving; the change in tax status was now discouraging many of the firm’s clients from bringing their skills and entrepreneurial drive to the UK in the first place.
“Historically, individuals from the South Asia Community have come to the UK to set up family businesses, contributing to the UK economy though corporation tax, PAYE and national insurance, and also through the many charity projects supported by the community as a whole.”
On 6 April there are several further changes which are also set to become a significant deterrent for the non-domiciled community. Key changes include gains made by foreign companies in the UK becoming taxable in the hands of non-dom shareholders, non-doms incurring a tax charge on UK gains made by foreign trusts, and finally a capital gains tax charge on foreign trust distributions levied irrespective of where the asset is or whether the benefit is received in the UK.
According to Chande all three will have a huge impact on the fortunes of the non-domicile community, and will need a major rethink should the Government be serious about keeping high net worth individuals in the UK long term.
“In the relentlessly competitive area of attracting talented individuals, the Government must appreciate that in 20 or 30 years it may be Singapore, Dubai or Zurich that will be home to a vast swathe of non-doms that could have been here, continuing to help our economy grow.”
February 15th, 2008
Are you missing out on research funds?
Companies should take action now if they think they could have qualified for research and development awards in the past six years, ahead of a change in the law in April 2008
Thousands of small businesses are missing out on research and development grants worth a total of £125m each year and could find themselves ineligible to backdate claims if they do not take action now.
Business advice consultants Grant Thornton suggests many small companies are simply unaware that they could claim such awards, while law firm Howard Kennedy is warning that from April 2008 companies will only be able to backdate claims by two years rather than the current six.
“Hundreds of millions of pounds in credits and interest on overpaid tax will be lost overnight by UK companies unless steps are taken now to apply for retrospective claims to which they are entitled before the 1st April 2008 deadline,” warns Justin Bryant, a tax partner at Howard Kennedy.
Since their introduction in 2001-02 an estimated £1.76bn has been given away to companies engaging in research or development through either tax breaks or cash claims. Those in the technological development sector are especially likely to benefit from such grants, Grant Thornton suggests.
Yet the percentage of research and development credits as a proportion of gross domestic product has remained relatively static, falling from 1.78% in 1997 to 1.75% in 2005. This compares unfavourably with other European countries such as Sweden (3.9%), Finland (3.4%) and Germany (2.5%), as well as the US (2.6%) and Japan (3.1%).
Hundreds of millions of pounds in credits and interest on overpaid tax will be lost overnight by UK companies unless steps are taken now to apply for retrospective claims
According to Sarika Patel, head of technology at Grant Thornton, many businesses are unaware of what counts as research and development. “Research and development is no longer the sole domain of scientists in lab coats and is potentially a facet of every business,” she said.
“Anything that adds value to a product or process is potentially entitled to tax relief, but in our experience businesses are not actively looking out for this.
“Tax credits apply to a wider range of sectors than some might imagine and can include work undertaken in manufacturing, food processing, consultancy, automotive and even construction,” she added.
Grant Thornton claims examples of businesses that have claimed research and development tax relief where previously some might have thought they did not qualify include a company that developed an electronic document management system and food producers who have developed innovative manufacturing processes.
The company is calling on the government to expand the definition of what qualifies for such credits and to make businesses more aware of how they can benefit. “It is possible that non-technological sectors, such as the financial market, could produce serious benefits for the UK if they were encouraged,” added Patel.
January 25th, 2008
Does our tax system stop enterprise growing?
Nine out of 10 small businesses believe they need an effective voice within HMRC to ensure their progress is not constrained by the bureaucracy of the UK‘s tax regime, research by PwC suggests
The UK’s over-complicated tax system is stifling companies from expanding, research from Pricewaterhouse Coopers (PwC) suggests.The survey of private enterprises revealed that only a quarter (27%) of smaller firms felt the current tax system was supportive of their needs, contrasting with 45% of larger organisations, while nine out of 10 small firms felt they needed an effective voice representing their interests within HMRC.
On average, 35% of business owners saw the UK tax regime as encouraging for enterprise, although this had increased from 21% 12 months ago.
The study also revealed that almost half (49%) of companies want the tax system to be simplified to lighten the compliance and administrative burden on private enterprises, while overall use of tax incentives remains low, at 14% compared to 11% a year ago.
There is still a negative perception of the UK tax system, and its support for enterprise, and that significant improvements are needed. This must be addressed if we are to create a true enterprise economy
“It is promising to see a more positive view coming from UK privately-owned companies,” said Kevin Nicholson, UK head of entrepreneurs and private companies at PwC.
“However, these messages must be balanced against findings that suggest there is still a negative perception of the UK tax system, and its support for enterprise, and that significant improvements are needed. This must be addressed if we are to create a true enterprise economy,” he added.
The survey also revealed that almost three-quarters (69%) of firms saw themselves as ‘mature’, suggesting there is only a limited amount of companies that are actively looking to expand.
“If the tax system is not changing behaviour or positively influencing enterprise - particularly among small business - should investment be focused on simplification instead?” asked Nicholson.
“However, it is important to recognise that this would come at a cost to some. For example, simplifying the system by eliminating some reliefs would reduce the administrative and compliance burden for many small businesses. In contrast, larger businesses could be disadvantaged because the findings suggest they are more likely to use those incentives and reliefs,” he added.
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