One of the challenges of every professional adviser is to try to separate their views from the requirement to give dispassionate and objective advice.
So, in the next few months I will undoubtedly be lecturing and giving advice on how to plan for higher taxes whilst believing that this strategy would be a mistake.
Even before the pandemic, the UK tax burden as a percentage of the economy was the highest that it had been for 40 years. I believe that we are approaching the point where not only will taxes create an additional drag on an already enfeebled economy but also that they will not help in repairing the public finances.
Stamp duties have been raised. The top rate is now 15% and due to go up to 17% next year for non-residents buying UK property. This has resulted in a slowdown in the market which may well have cost the UK Treasury in terms of taxes not raised.
The ordinary worker already faces a marginal tax and national insurance rate of 32%. When you add the compulsory pension contribution this rises to 36%.
Capital taxes have never raised large amounts and I cannot see them making a meaningful contribution toward balancing the books. Raising them could however seriously affect the incentives for entrepreneurs to take risks and for families to take a long-term view of their finances.
We saw with the difficulties created for the NHS when pension tax relief was limited that Consultants were reluctant to take on extra duties because they faced marginal tax rates of above 100%.
Despite all this, there is a strong possibility that taxes will rise and therefore clients need to be advised of the best strategies to deal with what could be a very difficult tax environment. It is a bit like the weather; you may not like the rain but it makes sense to wear a coat and carry an umbrella if the outlook looks stormy.
Primondell will be running a number of seminars in the run up to the anticipated Spring Budget in 2021.
Share schemes can be very valuable to a company, allowing your employees to achieve their financial dreams. We will quickly explain how these work.
Tax changes every year, we can help change your approach to CPD training and keep your staff up to date and interested.
Sometimes employees may receive a windfall, such as a maturing share scheme, bonus or other financial reward. We can help people deal with this and give advice to what would be in their long term financial interest.
There is a respectable argument which says that taxes should not rise as a result of the Covid-19 emergency despite the large increase in government spending and borrowing. This is because if the expenditure is treated as exceptional and once the emergency is over, government spending returns to the level it was before, then there should be no need to increase taxes as the structural long- term deficit has not increased.
The problem with this argument is that the Covid emergency is likely to lead to greater spending in the long term because of the probable increases in health spending required and a reduction in revenue because of the scarring of the economy.
The general assumption of most commentators is that taxes will rise it is merely a question of when; by how much; and on what taxes.
We therefore have a change in the tax strategy which should be deployed by clients. For a number of years, planning has been on the assumption that tax rates were reducing and therefore deferral of income and advancement of expenses would reap both cashflow and permanent tax benefits. This is not the case anymore and therefore in this new environment the strategy needs to change.
Primondell will be doing a number of financial and tax strategy presentations in this tax year. For details email email@example.com
You may have played the game “The Prisoner’s Dilemma” where two people have to decide whether to trust each other or not and see if one person can get a better deal than the other.
A game similar to this has been played ever since the Brexit negotiations started. I suspect that for many years after the Brexit process has finally finished, people will study it as an object lesson on how to conduct negotiations or not as the case may be.
One of the reasons why it was so difficult to obtain Parliamentary approval for any course of action from 2017-19 was that each faction felt it could win on its own terms within the House of Commons. Those who wanted Brexit overturned felt that the easiest way of facilitating that was to oppose all deals. The faction proposing a close Brexit but with a very close alignment e.g. EEA/EFTA which would have meant membership of the Customs Union and or the Single Market felt that they could push Parliament towards this. There was another strand of opinion which supported the May withdrawal agreement and then a further strand of opinion which wanted a much looser arrangement with the EU.
The likelihood is that if the first three factions had agreed a common platform which would have required compromise on their part then, the UK would have been in very close alignment with the EU on issues such as tax, regulation and standards. However, they overplayed their hand and the 2019 General Election result brought to power with a large majority the grouping that wanted a more distant relationship with the EU.
The choice now is between a Canada style agreement or an Australian agreement based on WTO terms. Both of these scenarios are a large distance away from what was envisaged in the aftermath of the referendum by the majority of MPs and commentators.
The acceptance by the Johnson government that “friction” at the borders is a necessary price to regain sovereignty over issues such as tax and regulations as well as trade policies means that the break on the 1st January 2021 will have wider consequences for business than had previously been envisaged.
Primondell is running a number of seminars on the consequences of the end of the transition period.
For further details please contact Jeremy Mindell at firstname.lastname@example.org
During an overdue clear out during lockdown, I came across an old wedding list from 28 years ago issued by a department store. The secateurs were priced at £29.95 last week I saw secateurs at a DIY store for £6.25.
The story of the world economy in the last three years, particularly manufacturing can be encapsulated by the fact that an item now could be priced at just over one fifth from 28 years ago. This is before even taking into account inflation.
The contrast between the 1992 secateurs; Wilkinson Sword and made in the UK, which have stood the test of time and still work today; and the cheap imported secateurs tells its own story. The movement of manufacturing out of the West to cheaper locations has resulted in a windfall for those whose jobs have not been adversely affected. A large amount of the rise in living standards in the last three decades is down to the fact that goods are offered cheaper. There are, of course, losers in this process such as those who have seen their jobs disappear both in manufacturing and in labour intensive repair work. What is the point of repairing something expensively if it can be replaced cheaply?
The process of globalisation has enriched most of the world economy and the economists have been right that most of the manufacturing jobs in the West have been replaced by service jobs. This means that until Covid-19 employment rates were at record high.
For a number of reasons globalisation is in retreat, economic, social and political. Covid-19 did not create this retreat but may have accelerated it.
This talk takes an in depth look at globalisation; why it is in retreat and who will be the winners and losers of that change in policy.
The date of The Budget has not yet been set but the speculation regarding its contents have already started.
This was always going to be the year of 2 Budgets as the previous Budget was postponed from Autumn 2019 until March 2020 because of BREXIT. In keeping with the new Autumn Budget timetable, the 2020 main Budget is due in November or December. The measures in that Budget will generally be enacted with effect from the 2021/22 tax year.
Given that the budget deficit for this year may be in the order of £300 Billion, many commentators believe that this will be a major tax raising budget.
I am not so sure. The economy needs stimulation rather than suppression. It also may not be clear by the time of the proposed budget whether tax rises are appropriate or not.
At present, The Treasury is doing its normal tactic of floating 10 tax raising ideas so that it can gauge the public and political reaction to them. Some of these ideas will never see the inside of a Budget Red Box.
Primondell will be doing a series of articles on the Autumn Budget 2020; looking at it from the economic, political and taxation perspectives. We will also be looking to host a number of seminars on the Budget, once the date has been announced.
Working from home has gone through three phases in terms of tax.
The pre-covid phase where tax deductions were difficult to secure as a result of a strict application of the wholly, exclusively and necessarily in the performance of duties rule.
Since the lockdown, HMRC significantly relaxed the rules on the ability of employers to pay working from home expenses including the provision of equipment. As the Government wanted everyone to work from home, this was not surprising.
The big challenge will come when the Government stops advising employees to work from home. Will the tax rules changes?
One should not ignore the human resource issues, the employment issues and the tax as employers get used to a new normal.
Jeremy Mindell offers a course which looks at both the HR and Tax issues that arise.
In the last economic emergency which followed the financial crash in 2008/09. Alistair Darling temporarily reduced VAT by 2.5% on all goods and services. This blew at least £12 billion in the accounts and did not do much good.
Rishi Sunak’s changes are by comparison targeted. The reduction in VAT in hospitality to 5% is at least targeted at the areas which have been most badly affected by Covid (except for airlines). Moreover, the reduced rate of VAT actually puts the UK in line with many other countries which levy a reduced rate of VAT on hospitality.
Even the 50% off measure for eating out is only from Monday to Wednesday which is traditionally a slow time for hospitality. Again, if it restarts or encourages the habit of people going out it would probably be worth the cost to the Treasury and it is only one month.
Finally, the stamp duty changes would appear to be in line with what was Government thinking before the crisis and may presage a wider reform of stamp duty where high rates have created a diminishing return for the Treasury.