The UK money market is pricing in a first UK interest rate hike for August 2012, says Mike Riddell, the manager of the M&G international sovereign bond fund.
Back in January the money market was pricing in three rate hikes of 0.25 per cent in 2011 alone, with the first fully priced in for June.
“Earlier this year the market was almost pricing in five rate hikes, now it’s just one,” says Riddell. “Anyone who’s been betting on a gilt sell-off or rate hikes will be in a world of pain.”
Riddell notes that the pound sterling is now the weakest currency in the world today, while 10-year gilts yields have rallied seven basis points to 3.1 per cent, the lowest yield in seven months.
“The trigger was the minutes from the last Monetary Policy Committee meeting, where the crucial sentences were ’current weakness of demand growth to persist for longer than previously thought’ and ’further asset purchases might become warranted if the downside risks to medium-term inflation materialised’,” he says.
Up to 1.5 million small UK firms could benefit from proposed changes to the accounting rules after EU ministers reached a new agreement earlier this week.
During a meeting in Brussels, business ministers from across the EU agreed that simpler accounting rules were needed to reduce the amount of red tape for small businesses.
It is thought that the proposals, which include simplifying the profit and loss account and balance sheet reporting requirements, could potentially save firms between £150 million and £300 million per year in reduced administrative costs.
Under the agreement a new category of companies called ‘micro-entities’ will be introduced.
To be defined as a ‘micro-entity’ the company must not exceed the limits of two of the following three criteria: a balance sheet total of €250,000, a net turnover of €500,000 and an average number of 10 employees during the financial year in question.
Business Minister Ed Davey welcomed the decision, describing small firms as the ‘backbone of the British economy.’
‘This is a significant step in reducing red tape and a clear signal that we will take action to stop our smallest companies being held back by excessive regulation,’ he said.
‘I believe this shows what can be achieved by a positive and constructive engagement with the European Union – the first ever exemption for micro-entities from an existing EU directive. We now need to build on this breakthrough and I hope that further improvements can be agreed before the proposal becomes law.’
Thousands of people are being forced to pay unexpected hospital bills because of gaping holes in their medical insurance.
Campaigners are worried that policyholders expecting the best treatment are facing:
- Restrictions on which doctors and hospitals they can choose;
- Top-up bills of thousands of pounds;
- Being stuck with the same insurer because pre-existing medical conditions will not be covered elsewhere.
Bupa and Axa PPP have imposed strict limits on the amount many policies will pay out for surgeons and anaesthetists. They have their preferred network of hospitals to keep costs down.
The insurers say this is necessary to prevent doctors from overcharging — but some patients argue that cost limits are stopping them from accessing the best treatment.
Almost six million people have private medical insurance and it can be expensive, especially for older people. A 30-year-old male can expect to pay around £57 a month for comprehensive medical insurance with Bupa, with a £100 excess.
This rises to almost £85 a month for a 50yearold and £116 a month for a 60yearold.
Derek Machin, chairman of the BMA Private Practice Committee, says: ‘Insurers make out they give customers total peace of mind, but in most cases customers will find there are exclusions and treatments they can’t get.’
‘Policies are restrictive, complex and difficult to compare. There needs to be clearer information for customers at the point of sale.’
The Financial Ombudsman Service, which settles disputes between consumers and insurers, upheld 48 pc of the 561 complaints it received about private medical insurance last year.
Many of the cases involved customers being asked to pay additional costs, such as a shortfall for an operation or out patient visits for which they were charged unexpectedly.
Another annoyance for people taking out medical insurance is that pre-existing medical conditions are not covered, which deters people from switching providers. Axa PPP, for example, will generally not cover policyholders for two years (from when they take out the policy) for any condition they have even asked their GP for advice on in the previous five years.
However, these conditions will be covered if the policyholder does not seek further medical treatment for two years after the plan is taken out.
Bupa and Axa PPP say policy holders should contact their insurer before arranging treatment and no one will have to pay a shortfall if treated within their network.
This all goes to prove do not buy a policy without proper independent financial advice
Don’t forget that from 6 April 2011 the HMRC approved amount you can claim for the business use of your own car is 45p per mile (previously 40p per mile).
The 45p rate applies to the first 10,000 business miles claimed in a tax year, after that the rate reduces to 25p per mile.
Employers are not obliged to pay at this rate but any rate paid up to 45p per mile will be effectively tax free to the recipient. Any payments made in excess of 45p would need to be declared as a taxable benefit.
If employers pay, or have paid, less than 45p per mile (40p before 6 April 2011) employees can make a claim. For instance if an employer pays 25p per mile after 6 April 2011, the employees could claim 20p per mile on their tax return as an expense of their employment for which they have not been reimbursed.
The Bank of England bank rate has been held at 0.5 per cent for the 27th month in a row and quantitative easing stays at £200bn.
The last rate change was on March 5, 2009, when it was reduced from 1 per cent to 0.5 per cent.
On the same day, the Bank of England initiated a £75bn QE programme. The most recent change to the size of the programme, on November 5, 2009, was an increase of £25bn, bringing the total to £200bn.
Minutes from the Monetary Policy Committee’s May meeting show a split over a rate increase, with six voting in favour of keeping it the same and three voting for an increase.
Inflation currently stands at 4.5 per cent, well above the Government’s target of 2 per cent, putting pressure on the BoE to raise interest rates.
Former MPC member Andrew Sentance warned the Bank of England earlier this month that it is in danger of losing its credibility with the UK public due to its failure to tackle soaring inflation.
The Bank remains in the thick of it. On the one hand needing to ensure that a sustainable economic recovery is baked in, on the other hand ensuring it does not lose its credibility as an independent rate setter that is capable of maintaining a controlled and low inflation economy.
It is a tough one that, but the recovery has to come first.
HM Revenue & Customs says it has uncovered 500,000 people with money in offshore tax havens who could face severe financial penalties if they have used them to evade tax.
The Revenue is using enforced data-sharing with banks, information from whistleblowers and a new IT system which looks at anomalies between where people live, their financial assets and how much tax they pay to flag up potential tax dodgers.
It says it is confident it will raise billions of pounds in unpaid tax, interest and penalties. An HMRC spokesman says: “We are not out to victimise people but we are determined to ensure we receive what we are owed. This is not just about the very wealthy, we have found chip shop owners, taxi drivers and landladies with offshore accounts.”
Last month, HMRC launched a consultation on plans to blacklist high-risk tax avoidance schemes and force users to tell HMRC that they are in a listed scheme
If you have undeclared money offshore get advice on how to use the amnesty to avoid paying back taxes
The UK property market has hit the bottom and will begin to turn around ahead of Christmas, it is claimed .
But the recovery will be slow rather than a return to boom and bust, according to the Centre for Economics and Business Research.
A separate study published by the Institute for Public Policy Research calls for measures to prevent house price bubbles.
Mortgages should be capped at 90% of property value, it says, with loans limited to 3.5 times household salary.
Reckless lending in the past by banks and building societies, with loans of up to 125% and five times salary, triggered the property surges that have been disastrous for the economy.
CEBR chief executive Douglas McWilliams said: ‘We still believe house prices will fall this year, although there are signs that prices will stabilise over the second half of the year.
‘We think the market is currently close to the bottom for the UK as a whole and there are signs that prices will stabilise over the second half of the year.
‘The main factor driving up prices is the shortage of available housing which has already pushed up rents.
‘Housing completions fell to only 130,000 in 2010, well below the level required to keep pace with demographic change.’
Mr McWilliams suggested London prices rises will remain ahead of the rest of the UK.
‘With the pound forecast to remain low, and London likely to remain internationally attractive, this is likely to continue to boost house prices in the capital, which are forecast to rise about 2% a year faster than for the UK as a whole,’ he said.
‘But the factors that will ultimately drive up house prices again are the loose monetary policy that will accompany the Government’s deficit reduction and the ability of banks to lend again on consumer-friendly terms as their own underlying financial position improves.’
He added: ‘This should not be confused with boom and bust. We are forecasting a gradual four-year recovery at an annual rate of about 4%.’
A new task force to tackle tax dodgers was announced recently by HM Revenue & Customs (HMRC).
The first task force will focus on the restaurant trade, targeting businesses in London over the coming weeks.
The task forces, which bring together various HMRC compliance and enforcement teams, will undertake intensive bursts of compliance activity in specific trade sectors and locations across the UK, where there is evidence of high risk of tax evasion. The restaurant trade in Scotland and the North West will be the next areas targeted.
They come as a result of the Government’s £900m spending review investment to tackle tax evasion, avoidance and fraud from 2011/12, which aims to raise an additional £7bn each year by 2014/15.
Mike Eland, Director General Enforcement and Compliance, said:
“These task forces are a new approach which uses HMRC’s resources to identify and tackle rule-breakers and evaders swiftly and effectively.
Only those who choose to break the rules, or deliberately evade the tax they should be paying, will be targeted. Honest businesses have absolutely nothing to worry about.
But the message is clear – if you deliberately seek to evade tax HMRC can and will track you down, and you’ll face not only a heavy fine, but possibly a criminal prosecution as well.”
HMRC is planning a further nine task forces in 2011/12, with more to follow in 2012/13. Compliance activity through task forces will be 1:1 and target the highest-risk cases in that sector and location, typically focusing on groups of up to around 600 customers in specific locations.
HM Revenue and Customs (HMRC) has discovered half a million UK residents with offshore bank accounts as part of a crackdown on tax avoidance.
According to Treasury minister David Gauke, HMRC is seeking out money ‘hidden’ offshore. He said time was running out for people with offshore accounts to come forward voluntarily and negotiate a tax payment that could be lower than if they waited for HMRC to take action.
Gauke (pictured) said: ‘The options for hiding money offshore to evade UK tax are narrowing all the time and I would strongly urge anyone who is at all concerned that they may not have been paying the right tax on their offshore investments to talk to HMRC.
‘The Government has made £917 million available to HMRC to tackle tax cheats and some of this money is already being very effectively deployed against offshore tax evaders.’
HMRC has run a number of amnesties for those with undisclosed earnings in offshore accounts. The most recent, the Liechtenstein Disclosure Facilities (LDF) began in September 2009 and will run until 31 March 2015. HMRC expects to net £3 billion from the LDF.
If you have an offshore bank account you wish to come clean on it is possible to utilize the LDF to obtain an amnesty depending on the case.
Please contact us in this event
Later this year your solicitor, or property conveyance person, will be required to file new forms with the Stamp Duty Land Tax Office when you buy a property.
The regulations allow old forms to be used, or the new forms, from 1 April 2011 to 3 July 2011. After 4 July 2011 only new forms can be filed.
No cause for alarm thus far. Unfortunately like all these things the devil is in the detail!
The new forms require that each lead purchaser provide the following unique identifier when completing the forms:
Individuals – their National Insurance number, or Companies and Partnerships – their Unique Tax Reference (UTR) or VAT registration number.
Wonder what HMRC will do with this additional information?
No doubt they already have, or will be, setting up tracking processes that link property purchases to the lead purchaser’s tax file.
Big brother is watching – So don’t do something foolish – Tax liabilities can be mitigated with good advice and planning.