The British Chambers of Commerce (BCC) has warned that the UK economy is set for its ‘weakest year’ of Gross Domestic Product (GDP) growth since 2009.
In its latest economic forecast, the BCC has downgraded its growth expectations for the UK economy.
It now predicts that GDP growth will reach 1.3% – a slight fall when compared to its previous forecast of 1.4%. The BCC also downgraded its GDP forecast for 2019 from 1.5% to 1.4%.
The business group attributed the revised figures to a ‘lacklustre outlook’ for consumer spending, business investment and trade.
It predicts that growth in business investment will slow from 2.4% in 2017 to 0.9% in 2018, and stated that ‘high costs’ associated with doing business in the UK have contributed to the downgrade, alongside ‘ongoing uncertainty’ in regard to the UK’s future relationship with the EU.
‘A decade on from the start of the financial crisis, the UK now faces another extended period of weak growth amidst a backdrop of both domestic and global uncertainty,’ said Dr Adam Marshall, Director General of the BCC.
‘Our forecast should serve as a wake-up call to the government – as it demonstrates that ‘business as usual’ is not an option when it comes to the economy.
‘With firms facing ongoing Brexit uncertainty, increasing global protectionism and instability in some parts of the world that will impact on costs and profits, now is the time for more robust action to support business confidence and investment.’
A report published by banking group Close Brothers has revealed that 71% of UK small and medium-sized enterprises (SMEs) would like the UK’s business rates system to be made ‘simpler and more flexible’.
The report also suggested that 49% of SMEs believe that the government is ‘not doing enough’ to help businesses with business rates relief. Just 36% believe that they receive adequate support from the government in regard to their business rates.
In addition, Close Brothers revealed that 56% of UK small firms have experienced increases in their business rates over the past two years. London, South West England, Yorkshire and Scotland in particular have been adversely affected by rate rises ‘above the UK average’, the report suggested.
Commenting on the matter, Neil Davies, CEO of Close Brothers, stated: ‘Steps are being taken, as demonstrated by an initiative that’s been in place from 1 April 2017 that saw 100% relief, doubled from the usual rate of 50%, for properties with a rateable value of £12,000 or less.
‘That said, the message from SMEs is clear that more needs to be done.’
In the 2017 Autumn Budget, Chancellor Philip Hammond announced that future business rates revaluations will occur more frequently. Revaluations will now take place every three years rather than every five years, beginning after the next revaluation, which is currently due in 2021.
In a letter to Chancellor Philip Hammond, leaders of some of the UK’s most prominent business associations have urged the government to undertake a review of the so-called ‘tax burden’ that faces the finance industry and UK entrepreneurs.
The letter, which has been signed by such groups as UK Finance, the Association of British Insurers (ABI), the Investment Association and TheCityUK, urges the Chancellor to back reforms designed to boost the UK’s competitiveness during the Brexit period.
It also calls for Mr Hammond to prioritise the creation of a new forum, to be made up of the finance sector, industry regulators and the government, and to provide ‘more support’ to financial services businesses located outside of London.
The letter states: ‘There is a clear indication from international investors and firms that they would welcome stability, certainty and streamlining of the UK’s tax system.
‘With regard to the levels of taxation, it is important that the UK remains competitive, and an independent review and analysis of aggregate levels of taxation, coupled with a benchmarking exercise against comparable jurisdictions, would be welcome.
‘This should focus not only on corporates, but also on the tax attractiveness of the UK to entrepreneurs, especially in financial technology.’
A report published by trade association UK Finance has revealed that, by the end of 2017, more payments were made using debit cards, at 13.2 billion payments, than payments made using cash, which totalled 13.1 billion payments.
According to UK Finance’s annual Payment Market Review, the number of debit card payments increased by 14% last year when compared to the previous year, while the use of cash as a form of payment fell by 15% in 2017 when compared to 2016.
However, UK Finance found that cash remains the second most popular choice of payment over direct debits, credit cards, standing orders, BACS and cheques.
Contactless technology, such as cards, online shopping and payments made from smartphones, has helped to drive the increase in card payments, particularly amongst those aged between 24 and 35, UK Finance revealed.
Experts predict that the trend of using contactless technology to make payments will continue over the next decade. In addition, some anticipate that debit card payments will increase to 19.7 billion in 2027.
Commenting on the findings, Stephen Jones, Chief Executive of UK Finance, said: ‘The choice of payment options available in the UK is allowing people to choose to pay the way that best suits them. But we’re far from becoming a cash-free society, and despite the UK transforming to an economy where cash is less important than it once was, it will remain a payment method that continues to be valued and preferred by many.’
Recent figures from HMRC have revealed that the UK ‘tax gap’ equated to 5.7% of total tax liabilities for the 2016/17 tax year.
The term refers to the difference between the amount of tax that is theoretically payable to HMRC, and the amount that is actually received.
According to HMRC’s latest ‘Measuring the Tax Gap’ report, the gap has fallen from 7.3% in 2005/6 to an estimated 5.7% in 2016/17, equating to £33bn in revenue.
The report revealed that income tax, national insurance and capital gains tax made up the largest proportion of the tax gap.
Meanwhile, taxpayer errors and failure to take reasonable care were responsible for £9.2bn of unpaid taxes.
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New plans outlined by the government could require large businesses to justify executives’ salaries.
Under the plans, firms with more than 250 employees will need to disclose and explain pay ratios annually.
Large businesses will be required to justify executives’ pay and explain the gap between their chief executive’s salary and that of an average worker. Directors will also have to demonstrate that they are acting in the best interests of all their employees and shareholders.
Commenting on the plans, Business Secretary Greg Clark said: ‘Most of the UK’s largest companies get their business practices right, but we understand the anger of workers and shareholders when bosses’ pay is out of step with company performance.
‘Requiring large companies to publish their pay gaps will build on that reputation by improving transparency and boosting accountability at the highest levels, while helping build a fairer economy that works for everyone.’
The Confederation of British Industry (CBI) welcomed the proposals. It stated that high pay ‘is only ever justified by outstanding performance’, and that the plans will help to deliver a ‘better dialogue between boards and employees’ in regard to the goals and aspirations of their business.
The Association of Accounting Technicians (AAT) has stated that inheritance tax (IHT) is ‘unnecessarily complicated’ and ‘widely misunderstood’.
Responding to a review of the tax by the Office of Tax Simplification (OTS), the AAT said that several IHT exemptions ‘could be scrapped’.
It argues that certain exemptions, such as gifts on marriage and gifts to political parties, are reliefs that the general public are ‘largely unaware of’, and should therefore be abolished.
However, the AAT did state that the current nil-rate band should ‘stay the same’. Previously, some experts had called for the nil-rate band to rise from its current level of £325,000, but the AAT argues that ‘there are no sound economic reasons’ to increase it.
Commenting on the matter, Phil Hall, Head of Public Affairs and Public Policy at the AAT, said: ‘The simplest means of removing complexity around IHT would be to scrap it and rely solely on capital gains tax (CGT) as they have done in Australia since the 1970s.
‘This would be far simpler, and some might argue, a more meritocratic approach to taxation.’
The AAT’s comments on IHT come following the recent publication of a report by think tank the Resolution Foundation, in which it suggests that IHT should be abolished, and be replaced with a new ‘Lifetime Receipts Tax’.
As your accountants, we can carry out a professional review of your IHT planning needs. Please contact usfor more information.