ONS Statistics Strengthen Case for Mansion Tax - We Say... 
Statistics have shown that only a very small number of poor British households live in very expensive properties, removing one of the obstacles to a mansion tax. The ONS reported that only 1% of households with incomes in the bottom 40% had property wealth over £500,000.

With Labour and the Liberal Democrats proposing to introduce a mansion tax for properties worth more than £2m after the next election, the figures suggest that few people who live in expensive homes lack the income to pay the tax.

The ONS survey found that only 2% of middle-income earners had property assets worth more than £500,000. The top 20% of households, measured by income, held 44% of total wealth, while 50% of households with top incomes were also in the top 20% of the wealth distribution.

Source: Financial Times

We Say: The principle argument against a Mansion Tax isn't that it would be imposed on people who are asset-rich but cash-poor: it's that it's a poorly-targeted Selective Wealth Tax. It makes no sense, for example, to charge the tax on a man who owns one expensive home but not on a man who has half a dozen homes of lower individual value: or to charge it on the value of a man's house but not his collection of valuable antiques, paintings, classic cars or whatever. The only merit of a Mansion Tax is that it's a simple and cheap way to collect money. But so is mugging.

For more information, please contact London Accountants Berg Kaprow Lewis.

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HMRC Gets its Sums Wrong - We Say... 
Tax officials have been forced to apologise after the NAO found HMRC had incorrectly claimed it was bringing in billions of pounds in extra tax.

The discovery by the spending watchdog led PAC chair Margaret Hodge to question how tax inspectors could expect the public to file their own tax returns correctly when the tax office was making such errors.

The NAO found HMRC had reported that it exceeded its performance targets by £1.9bn in 2011-12 and £2bn in 2012-13. In fact, the tax office had brought in only £100m more.

The error arose because tax officials had set the baseline to measure their performance £1.9bn too low when it began the measurement process in 2010. Mrs Hodge said poor governance at HMRC meant the mistake had not been picked up.

"Put simply: it has not been able to track its performance accurately, which is absolutely crucial to long-term success. If HMRC can't get its own numbers right, how can it ask the same of others?”

The discovery follows what has been HMRC's best year for collecting tax revenues, bringing in £506m, or 6%, more than the year before – and almost £24bn in additional tax through its investigations into avoidance. The taxes which contributed to this increase were income tax and NI, which was 6% higher at £16.2bn, VAT, which rose 7% to £7.2bn, and stamp duties, which rose 35% to £3.4bn.

Source: Financial Times   The Daily Telegraph   The Independent  The Guardian   Daily Mail  

We Say: We'll mention this next time HMRC quibble over a discrepancy of a trivial few million on a tax return. But it's not just on the numbers that HMRC sometimes make mistakes. At a recent Tribunal case where we were confronting HMRC, the first thing they had to do was apologise to the Chairman that their argument was based on ... erm... the wrong legislation.

For more information, please contact London Accountants Berg Kaprow Lewis.

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FCA May Broaden Swap Action - We Say... 
The FCA has told the Treasury Select Committee that it has not ruled out taking further action against banks over the mis-selling of interest-rate swaps to thousands of small businesses.

Nausicaa Delfas, head of the FCA's specialist supervision department, told MPs the FCA would assess whether further measures were required once its voluntary "redress" scheme for victims of the scandal was complete.

The committee was hearing evidence on lending to SMEs which included concerns that high street banks were profiting from distressed companies. Committee chairman, Andrew Tyrie, said: “I have seen some of these cases. Some of them are very bad and something needs to be done.”

Source: The Times

We Say: The FCA have to act, as they are also receiving some criticism. The FCA made a deal with the major banks which saw them escape major fines in return for the voluntary redress system. Whilst many businesses have received fair (and in some cases, even generous) redress over mis-sold swaps, the system was flawed. Deadlines were not initially imposed, and even when they were imposed they have not been met. Many businesses that were clearly mis-sold swaps have been arbitrarily excluded from the review system based on what amounts to luck on the parts of the banks, many of which have been following the letter rather than the spirit of their agreement with the FCA. And many businesses within the review system have still not received any redress. Based on this the FCA is receiving criticism, effectively for letting some of the banks ‘get away’ with not making fair redress for all mis-sold swaps. Businesses are now turning their anger towards the FCA rather than the banks, who are hiding behind their agreement with the FCA.

We’re not sure what will happen but we expect the FCA will take further action, possibly to avoid action being taken or criticism being levelled against the FCA itself. After all it’s better for the FCA to make the banks ‘more liable’ than to become liable themselves.

For more information, please contact London Accountants Berg Kaprow Lewis.

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Tax Relief on Equity Would be Disruptive - We Say... 
A promise from Ed Balls to "redress the systematic bias in favour of debt finance" could cause uncertainty, experts have warned.

The shadow chancellor announced a consultation into introducing a so-called Allowance for Corporate Equity which would give tax relief on equity investments to match the deductibility of interest payments on debt.

An industry insider said: "Business likes stability. For a long time now, debt has been tax deductible and equity has not been – and to introduce a whole new concept could create a lot of economic uncertainty."

However, the CBI welcomed the move saying a broadening of finance options would benefit small businesses.

Source: The Daily Telegraph

We Say: As a general principle, a simple tax system with a low rate of tax is much to be preferred to one with a higher rate of tax relieved by various forms of relief to incentivise whatever currently happens to be in fashion for the government of the day – especially when the inevitable consequence of anyone’s actually claiming the relief seems to be St Margaret Hodge bleating about tax avoidance and “the right amount of tax”. On the specific proposal, treating equity like debt for tax purposes would require the over-turning of some very basic tax principles and the re-writing of acres of tax legislation. So, on the whole, a thumbs-down from here.

For more information, please contact London Accountants Berg Kaprow Lewis.

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Festival of Business 2014 - We Say... 
Rebecca Burn-Callander outlines details of the Telegraph’s fourth Festival of Business which takes place in London on Tuesday, November 11.

Ms Burn-Callander describes the festival as a showcase event for ambitious high-growth firms and a celebration of the vital role these firms play in generating economic growth.

Exporting will be a key theme of the conference as firms face up to the Government's challenge of doubling sales to overseas markets to £1trn by 2020, adds Ms Burn-Callander.

Source: The Daily Telegraph

We Say: There is a measure of irony in being told of an event and its date by someone whose name sounds like "burn calendar".

We're excited to see that the Festival of Business will be taking place at the Brewery, where we had our Winter Party last December. It certainly made a good impression on us – and, we hope, vice versa – so we trust that the Telegraph's event will have similar success in blending business with pleasure.

It's just a shame that the Festival of Business isn't open to many smaller businesses i.e. those whose turnover hasn't reached £5m. It's always worth asking if bigger is better. Which is precisely what we've done in one of our new Team Q&A videos.

For more information, please contact London Accountants Berg Kaprow Lewis.

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