VAT and the Channel Islands

Attempts to stop the introduction of more stringent VAT rules on low value goods sent from the Channel Islands have been averted.

The Chancellor had announced last November the removal of the Low Value Consignment Relief (LVCR), which had allowed goods shipped from the Channel Islands worth less than £15 to ship VAT free.

Its abolition, from 1st April, was challenged by the Jersey and Guernsey governments, which said the move was discriminatory and illegal.

However, Law Lord Mr Justice Manning said the Treasury was within its rights to end the relief.

"This is a victory for common sense in what has become something of a case of David v Goliath," said Forum of Private Business senior policy adviser, Phil McCabe.  "But the judiciary has today reaffirmed what George Osborne said in November, that LVCR  is tax abuse and avoidance, plain and simple, and has to stop."

"Unfortunately it is too late for countless small firms which went to the wall, unable to compete with giants such as Amazon and Tesco, who have been able to unfairly use this loophole to avoid paying billions in tax and undercut their small rivals by significant margins."

"Had the government's decision been overturned there would have been serious consequences for high streets across the UK."

The real question is now whether the big companies will put up their prices by 20% or whether they will absorb the cost in the short term.

Welcome to the Great New Year NIC Giveaway

The take up of the National Insurance Holiday scheme that formed a key part of Chancellor George Osborne's first Budget is still way below the Treasury's initial estimates, the government has confirmed.

Exchequer secretary to the Treasury David Gauke released figures about the scheme to Parliament recently.  Just over 10,000 companies have taken up the scheme since June 2010.  The government had hoped for a take-up of 132,000 a year when it was announced by Osborne.

The holiday exempts qualifying new businesses in eligible regions from up to £5,000 of employer national insurance contributions for each of the first ten employees hired in the first 12 months of business.

It has received criticism because it is only available in certain regions.

Professionals have call for the scheme to be rolled out across the country.  HM Revenue & Customs say that they have sent around 140,000 personalised letters to all businesses that have registered for a PAYE scheme since June 2010 at a cost of around £90,000 in October.

The Exempted areas are:
Greater London (all)
The Eastern Region comprising:
The counties of Bedford, Cambridgeshire, Central Bedfordshire, Essex, Hertfordshire, Norfolk and Suffolk.
Luton, Peterborough, Southend-on-Sea and Thurrock.
The South East Region comprising:
The counties of Buckinghamshire, East Sussex, Hampshire, the Isle of Wight, Kent, Oxfordshire, Surrey and West Sussex.
Bracknell Forest, Brighton and Hove, Medway, Milton Keynes, Portsmouth, Reading, Slough, Southampton, West Berkshire, Windsor and Maidenhead and Wokingham.

Autumn Statement - What's up?

GEORGE OSBORNE has announced plans to expand the government's Enterprise Finance Guarantee (EFG) scheme in a bid to get credit flowing to Britain's smaller businesses – Let’s hope the banks understand what this is meant to be and not just another excuse to ratchet up security on existing lending.

He also said that capital allowances of 100% will be rolled out in areas of Liverpool, Sheffield, the Black Country, Humber Valley, North East and maybe Blythe- Is the latter because he is unsure of his geography and needs to double check on Google?

But the good news is that business rates will be held over until April 2013

2011 Budget Highlights

The facts below are extracts from the Budget Speech delivered by Chancellor George Osborne. No responsibility can be accepted for anyone taking or refraining from taking actions based upon the notes below. The Budget will be ratified later in the year through the Finance Act.

The Chancellor promised not to rattle through growth figures - he said average quarterly growth will be higher than forecast - but the annual forecast will be revised down to 1.7%.

Going through the new forecasts from the Office for Budget Responsibility, he said growth is predicted to be 1.7% for 2011, 2.5% next year, 2.9% in 2013, 2.9% in 2014 and 2.8% in 2015.

Mr Osborne said inflation is expected to be between 4% and 5% this year - dropping to 2.5% next year and 2% in two years' time.

Borrowing is expected to fall to £122bn next year, the Chancellor reported, and will continue to fall until it reaches £29bn in 2015/6.

Mr Osborne says the government will consult on merging National Insurance and Income Tax. The goal, he says, is to simplify them - not to increase taxes. It will make the tax system "fit for the modern age", he said, but it will take years to implement.

Corporation Tax is to be cut by 2% - more than the 1% previously announced. It will be the lowest in the G7.

Income Tax relief on the Enterprise Investment Scheme will increase from 20% to 30% in April 2011. The clear aim seeming to be reinforcing the UK as a centre for entrepreneurial investment.

The top 50% tax rate was regarded as a "temporary measure" but it is to remain for the time being. "We are all in this together." said Mr Osborne.

The "non-domiciled" charge is being increased to £50,000 for those who have been in the country 12 years - raising more than £200m.

Profits from the bank levy will fund a new £250m shared equity scheme for first-time buyers - which will help 10,000 families get onto the housing ladder for the first time.

To support the construction industry further and reinforce the culture of enterprise, there will be 21 "enterprise zones".

The small business rate relief holiday is being extended by one year to October 2012, at a cost of £370m, the Chancellor said.

To assist the young unemployed, 40,000 extra apprenticeships will be funded by Government.

Tax avoidance has been addressed whereby three forms of stamp duty land tax avoidance will be shut down.

There'll be help for families "who do pay their taxes but who struggle with the daily cost of living", Mr Osborne said - outlining measures such as the council tax freeze and more child tax credit for lower income families and a "pay lift" for public servants on less than £21,000.

In an attempt to help charities who have suffered lower donations during the last two years, it was announced that if people leave 10% of their Estate to charities then the rate of Inheritance Tax will be reduced by 10%.

The Chancellor confirms a rise in the personal tax allowance, which had been widely discussed. A two year staged rise will take the personal allowance first to £7475 and then to £8105 for 2012/13.

Finally, the Chancellor turned to Fuel Duties - it had been due to go up by 1p a litre above inflation next week, but Mr Osborne said a government has to "listen and respond" when oil prices rise. While revenues go up when the oil price rises, other tax intake falls, he says. He dismissed a proposal to cut the VAT rise on fuel - which went down well with his colleagues. He said a "fair fuel stabiliser" will be introduced from Thursday, which will raise an extra £2bn. The money will be used to delay the duty rise until next year.

A more detailed summary along with tax rates will be available shortly through our website www.walkerthompson.co.uk.