Numerico Chartered Certified Accountants

Big cuts in public spending and significant tax increases are expected to be announced in an emergency budget due on Tuesday.

Chancellor of the Exchequer George Osborne will deliver the Conservative-Liberal Democrats' budget to parliament at 12.30pm.

Osborne confirmed on Sunday that his emergency budget would include a levy on banks.

"What I'm determined to do is to make sure that the measures are tough but they're also fair," Osborne told BBC television.

"What we're clear about is that all parts of society are going to have to make a contribution."

In his letter to the Chancellor, Richard Lambert, director general of the business group, welcomed the Coalition's plans to focus on spending cuts rather than tax increases, but warned that the government should seek to protect spending on capital infrastructure to support growth.

"We believe that the currently-planned sharp cuts in capital expenditure need to be reconsidered, as they risk further undermining the productive capacity of the economy," he wrote.
"Capital spending must, therefore, be returned to 2.25pc of GDP as soon as possible, " he said.

The CBI said it would like to see most of the deficit reduction process achieved through spending cuts rather than tax rises, based on a ratio of 4:1.  The Government should focus on cutting current spending, with changes in the way public services operate to ensure they deliver more with less.  Taxes should be kept to a minimum, and those that pose a threat to economic recovery should be avoided altogether.

"A radical re-engineering of public services is a must if damaging tax rises are to be avoided. Only an effective cost reduction strategy can safeguard future growth".

The CBI said it had "major concerns" about the Government's proposed reforms to capital gains tax (CGT). It said it wants to see a broad definition of business assets – which the Coalition has said will be excluded from a potential rise – to prevent disincentives to investment or start-ups. It also said that any change should be structured to minimise the impact on long-term investments.

Interest rates in the UK have been held again at the record low of 0.5% by the Bank of England for the 15th month in succession. 

The Bank’s Monetary Policy Committee voted not to change the base rate or to alter the £200 billion limit on quantitative easing.

Many analysts are forecasting no change in rates before the end of year as the Bank attempts to boost the UK's economy.

"We fully support the decision to maintain interest rates at 0.5% and the size of the quantitative easing programme at £200bn. Given the dangers still facing the economy, the MPC must persevere with expansionary policies that help businesses to invest and grow," said David Kern, chief economist at the British Chambers of Commerce.

"Any consideration of raising interest rates or reducing the QE stimulus must be delayed until there is concrete evidence that economic growth is secure. The UK's recovery is fragile and businesses are still facing acute pressures."

In his first major speech as Business Secretary, Vince Cable committed the government to taking a tougher line on parts of the banking system that have "not served enterprise in this country as well as they could".

Addressing an audience at the Cass Business School in London, Mr Cable promised to "redouble our efforts to ensure that bank lending agreements from banks that have benefited from taxpayer subsidy are being honoured - especially for SMEs".

He resisted arguments that there was little demand for business loans, pointing the finger of blame at the high cost of much business credit.

Mr Cable said: "If the bar is set too high, of course no one is willing to jump. The current risk aversion by banks in the SME sector will stifle recovery and, if it does, will actually rebound on the banks through bad debt."

He set out three possible routes to improving the present squeeze on lending: separating retail and investment banking, resolving the question of a levy on the banks to reflect the fact the taxpayer is providing insurance, and ensuring that banks' lending agreements are being kept.

In a broad ranging speech, Mr Cable touched on other areas where measures were needed to help business and to re-balance the economy away from too great a reliance on household demand and public sector spending.

As well as overhauling the business regulatory system, the government will look to create new apprenticeship schemes.

He committed himself to making the UK a "place where enterprise and innovation can succeed".

Referring to the problems in the eurozone, Mr Cable conceded that while the "worst of the crisis" was over there was still a risk that difficulties could resurface.

According to independent analysis carried out for the British Retail Consortium (BRC) a rise in VAT together with an increase in National Insurance (already announced by the Goverment) will have a substantial effect on the economy.  “Employment, consumption and GDP would all be hit significantly by tax rises.”   The BRC is also warning that halving the deficit over four years rather than three would provide better support for the recovery. 

An increase in VAT rates will cause an increase in prices and therefore lower demand for goods and services.  This in turn will force companies to cut their costs and therefore employ less people. 

According to the independent analysis carried out for BRC “a 19% VAT rate would cost 99,000 jobs over four years while a 22.5% rate would mean 317,000 fewer jobs over the same period”. 

According to the analysis an increase in Employee’s NI will also cause a reduction in UK jobs: “The UK jobs total will be 109,000 down after four years.”
British Retail Consortium Director General Stephen Robertson said: "For the first time we have clear, independent evidence showing VAT and NI increases will have a deep and long-lasting impact on jobs and growth.
"The budget deficit is serious. It has to be tackled but proposals must be judged against the implications for jobs and growth revealed by this new information.”

HM Revenue and Customs (HMRC) has issued a reminder about the forthcoming switch from paper company tax returns to online filing.

From 1 April 2011 onwards, all companies and organisations will have to file their Company Tax Returns online for any accounting period ending after 31 March 2010.

In preparation for the change from paper to online, HMRC has said that it will not be sending out blank paper return forms (CT600) and guidance notes (CT600 Guide) from 1 July 2010.
Although companies will still be able to download and print the forms from the HMRC website after 1 July, they will need to submit their returns before 1 April 2011 if they wish to use paper forms for any accounting period that ends after 31 March 2010

Employers and employees are reminded that there could be some errors with the new PAYE tax codes that have been issued by HM Revenue and Customs (HMRC).  The codes dictate how much employers and pension firms deduct in income tax for the coming 2010/11 financial year.

Compromise reached to fast-track Finance Bill

by Penny Sukhraj

Pressure from the Tory party and other business lobby groups has forced Labour to drop plans to impose stealth taxes on super-fast broadband, increased taxes on cider, and the scrapping of relief on holiday homes.

The plans, revealed last month in Alistair Darling’s pre-election Budget, have now been abandoned following negotiations to fast-track the Finance Bill through parliament ahead of the general election on May 6.