During a speech at the House of Lord’s Economic Affairs Committee, Sir King forecasted a repeat of last year, when the Royal Wedding Bank Holiday hit output.
Sir Mervyn King told the House of Lords: “We do expect quite possibly a fall in output in the second quarter, followed by a rise in the third quarter, as we will lose an extra day's work – it doesn't necessarily follow that we will lose that whole day's output – because of the national bank holiday.
“Last year we saw that pattern again. We would expect that to happen again.”
Along with predicting that the extra Bank Holiday would have an impact on the UK economy, Sir King told the committee that the economy was still not back to normal following the financial crisis; and he warned that it would take some years before the country is back on track, stating the economy "still felt like a crisis.”
The Bank of England governor did offer a glimmer of hope, however, by adding: “We are going through a major period of deleveraging, we still have some way to go in that respect and we still have the problems in the Euro area. It will take a number of years before we are through all this.
“I see no economic reason why we cannot, in the long run, go back to the sort of growth rates we had before.
“Once we come through this crisis we will able to get back to that sort of period again, but it will take some time.”
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( 3 / 136 )During the budget last week, the Chancellor, George Osborne unveiled plans to raise the inheritance tax exemption for nom-doms in a move which has been criticised by Labour.
According to Labour’s analysis of the budget, George Osborne “buried” the proposed increase in inheritance tax exemptions for spouses outside of the UK, in the middle of the Treasury’s explanation of the budget.
Currently a taxpayer domiciled in the UK can transfer their full inheritance tax allowance of £325,000 to their spouse, as long as they are also based within the UK; whilst the figure is reduced to £55,000 for spouses outside of the UK. It is the latter figure which the Chancellor plans to increase.
The shadow cabinet minister who unearthed the change within the budget, Lord Wood of Anfield, said: “This was a budget that raised tax on pensioners and made millions of hard-working families pay more. But buried in the millionaires' budget is a measure which gives non-doms a tax break.
“People will be baffled that in these harsh economic times, the Tories think it is a priority to give more tax advantages to non-dom couples who include some of the wealthiest people in the world.”
Despite the criticisms from Labour, it is believed that the change being introduced by the Treasury is to avoid a legal challenge from the EU.
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( 2.9 / 147 )Leaked documents have shown that football clubs who have gone into administration have failed to pay virtually any of the £40 million they owe the taxman.
The documents show that HMRC have had to write-off much of the debt, as the result of a rule which puts the taxman at the bottom of the pile of creditors; whilst the same documents also show that football clubs and footballers are given priority when it comes to repaying debts.
According to the papers, which have been submitted to the High Court by lawyers acting on behalf of HMRC in a landmark case it has brought against the Football League; football clubs in financial trouble have cost the taxpayer nearly £40 million since 2000.
Within its written submission to the High Court, the HMRC lawyers said: “The Football league have constructed a device under which, on insolvency, football creditors are paid in full whilst ordinary unsecured creditors of the same class receive a very modest dividend.”
A judge is now considering whether to declare the so-called “Golden Rule” – which gives the preferential treatment to football-related debts during administration – unlawful; with the ruling expected shortly.
A spokesperson for HMRC has said: “The rule is unfair. If the HMRC action is successful there will be benefits to all non-football creditors.”
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( 3 / 131 )During his budget speech earlier this week, the Chancellor, George Osborne unveiled plans for a crackdown on a tax loophole used by a string of civil servants to avoid paying income tax on their salaries.
In recent weeks there have been a number of high profile cases involving civil servants using a tax loophole, which sees them taking payment through a company, to cut their tax bill. Now, the Chancellor is set to hold a review of the so-called IR35 rules.
The IR35 rules dictate whether freelancers or contract workers can receive payment for their work as a company and thereby qualifying for corporation tax rather than the much higher rates of income tax and national insurance.
The Treasury believe over 100 civil servants may have used this loophole to reduce their tax bills, and has unveiled recommendations within this week’s budget, which suggest changing the loophole to ensure any office holder or ““controlling persons who are integral to the running of an organisation” is taxed at source by the body for which they work, rather than taking payment as a company.
Under the new proposals, any executive or key employee of an organisation is likely to have to pay income tax on their earnings, even if employed on a contract basis; with the Treasury saying: “This is about putting beyond doubt what the intention of IR35 is.”
Despite announcing the plans this week, a final decision isn’t expected until next year’s financial bill.
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( 3 / 129 )Following the Chancellor’s budget yesterday afternoon, the British Bankers Association has said the UK’s banks will not end up paying higher taxes; due to the government’s planned bank levy hike being offset by the drop in corporation tax.
During the budget speech, George Osborne announced that he was planning to increase the rate of the bank levy from 0.088 percent to 0.105 percent from the start of next year; however he also announced that corporation tax will be cut.
The government is looking to raise £2.5 billion a year from the bank levy, which was introduced last year in a bid to encourage banks to reduce short-term funding in an effort to avoid a repeat of the 2008 / 2009 financial crisis.
Chief Executive of the British Bankers Association, Angela Knight, said following the announcement by the Chancellor: “The government has previously said that it both wants the bank levy to raise a specific amount – two point five billion pounds - and that any reduction in corporation tax will be offset by an increase in the levy.
“The corporation tax cut would reduce the amount raised, so as before the percentage has been raised to correct this. The end result is that the banks pay the same.”
It is the fourth time since the controversial tax was announced that Britain’s banks have had the levy on their balance sheets increased.
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