Treasury Close Tax Avoidance Scheme 
With only three weeks until the tax return deadline, the Treasury have closed a tax avoidance scheme which could have cost £1.5billion in lost tax receipts.

Following a tip-off that artificial trading companies were being set up in tax heavens, the Treasury has opted to close a scheme which could have cost the economy in lost tax receipts.

It’s believed that wealthy individuals were planning to use to use a long standing “past-cessation trade relief” – designed for tradesmen and professionals to offset legitimate costs against their income – to artificially reduce their tax bills.

Exchequer Secretary, David Gauke, said the scheme would have put a “significant” amount of money at risk, adding: “It is unacceptable, at a time when we are trying to bring down the deficit, that there are those who try to avoid paying the tax they owe.”

The current scheme could have legitimately been used by a tradesperson or professional who had ceased trading, but later incurred costs from responding to customer requests where they remained liable.

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HMRC Must Help Small Businesses 
Ministers have called on Her Majesty’s Revenue and Customs (HMRC) to clarify how the introduction of real time information (RTI) for universal credits will affect SMEs.

In a report released today, the Parliament’s public accounts committee says HMRC must clarify how RTI, which is being developed by HMRC to support the introduction of the new universal credit, will affect small businesses and the self-employed who may not use electronic payroll systems.

Chair of the Public Accounts Committee, Margaret Hodge, said: “The sheer complexity of the benefits system places a heavy burden on claimants.

"People claiming multiple benefits, such as housing benefit and child tax credit, deal with different public bodies.
“This can be confusing and potentially discourage legitimate applications. Departments responsible for means testing must work together to get a better understanding of the burdens placed on claimants."

The report also states that HMRC need to develop an effective approach for those claimants and businesses that are likely to be outside RTI in order to try to prevent previous problems which have affected tax credits.

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Investors Pay to Lend Money to the UK 
Yesterday the Treasury sold gifts which will pay returns below the level of inflation for only the second time ever, when the Debt Management Office sold £700 million of inflation-linked bonds which will mature in 2047.

The 35-year gifts were adjusted to exclude inflation and therefore sold with a rate of 0.116pc; meaning investors were accepting a small real-terms loss in exchange for lending their cash to the UK.

Bond yields are partly a sign of the markets’ confidence in a governments ability to repay their debits in future; and the greater the demand for bonds, the lower the interest rate a borrowing government has to pay buyers.

Treasury sources have highlighted that amid fears for the weaker European economies, the UK gift sale is a sign of the markets’ confidence in the Coalition government.

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UK Risks Recession 
The British Chamber of Commerce (BCC) has predicted that UK growth will be flat this year, with one quarter of contraction expected. But it says a recession isn’t inevitable if the government acts.

The BCC surveyed nearly 8,000 members and their findings suggest that the economy has significantly weakened; but stopped short of forecasting an outright recession. They believe that whilst one quarter of negative growth was likely over the next six-months, a recession hinged on the government’s action to help businesses.

John Longworth, the BCC’s director general, said: “Britain's economy is at a critical stage – and now is not the time to shy away from the radical decisions needed to inspire confidence and increased investment for years to come.

“The results of our latest survey are a cause for concern and point towards stagnation in the first quarter of this year. Many of the balances are now at levels last seen in the third quarter of 2009, meaning improvements seen in the last two years have largely been cancelled out.

“Ministers need to move faster on promises made in the Chancellor's Autumn Statement. Measures to improve the flow of credit to businesses, reforms of our complex planning system, and investment in infrastructure projects are all needed now."

The British Chamber of Commerce’s forecast is almost identical to the view of the Bank of England and other economists, with the latest data from the retail, property and manufacturing sectors doing little to dispel this view.

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David Cameron Abandons Plans to Scrap 50p Tax 
Prime Minister, David Cameron, is set to abandon plans to scrap the 50p rate of income tax, amid increasing pressure from business leaders and backbench Tories.

Mr Cameron has come under increasing pressure from business leaders and backbench Tories to scrap the tax, which they feel is unfair on businesses, to help stimulate the economy.

Although David Cameron is sceptical that the tax raises money and believes it should only be temporary; he and Chancellor George Osborne have concluded that it would be politically impossible to abolish the tax, introduced in 2010 by the then Prime Minister, Gordon Brown, as they fear they would be accused of pandering to the wealthy.

Despite the scepticism from the Prime Minister, over the tax, HMRC are currently preparing a report, for the Chancellor, on the proceeds raised from the 50p rate and it is thought the report will show a surge in revenues – totalling hundreds of millions of pounds from the first year – undermining the economic case for scraping the levy.

A senior Government source, has said on the tax: “This is not now something we are moving on any time soon.”

Whilst a second source added: “We are repeatedly emphasising the need for those with the broadest shoulders to do more.

“So we can hardly turn around and start cutting taxes for them first. George Osborne said last year, that it was not the time to scrap the 50p rate and that is even more the case now as the economic situation has deteriorated.”


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