Category: Tax

BPR Offers Renewable Investors Timely Solution for IHT Mitigation
Indirect TaxTax

BPR Offers Renewable Investors Timely Solution for IHT Mitigation

While EIS schemes with renewable energy investments will no longer qualify for government-backed incentives from 5th April, investors can still benefit from both the incentive schemes and achieve Inheritance Tax exemption with Business Property Relief (BPR) qualifying assets, according to Intelligent Partnership (IP), the UK’s leading provider of education and insights on alternative investments.

According to a study conducted by IP for its new EIS report*, renewables have been the most popular EIS investment over the last three years, with the majority (58%) of advisers selecting this as their preferred investment sector.
IP’s research also found that, since 1998, 28% of all EIS investment offers have been in energy – 60 products in total. In its analysis of fundraising targets by sector, energy had the largest average across the market of £14.67m – almost £6m higher than the next sector average (technology).

Speaking at IP’s EIS Masterclass in March, **Henny Dovland of TIME Investments said: “Conservative investors have favoured these large-scale, asset-backed investments with well-developed technologies underpinned by government incentives because they are predictable and therefore low risk.

“They no longer qualify under EIS but the subsidies – both Feed-in Tariffs and Renewable Obligation Certificates – haven’t disappeared. For BPR they continue to be great predictable long-term revenue producing assets.”
According to IP, many EIS investors will now have financial planning needs around mitigating the inheritance tax that their estates will be liable for.

Daniel Kiernan, Research Director at Intelligent Partnerships said: “With rising asset prices and the nil rate band frozen, HMRC estimates that 5,000 additional estates will be pulled into the IHT net by 2018. The baby boomer generation are estimated to control 80% of private wealth in the UK and, as they head into their 60s, they are now thinking about how they can pass that wealth onto their beneficiaries.

“Holding assets that qualify for Business Property Relief is one way to reduce the IHT bill, and by virtue of their EIS investments, they will already have held BPR qualifying assets for the two year qualifying period required for IHT exemption. Advisers should bear this in mind. There is a three year window to purchase replacement BPR assets, so as their clients exit Renewable Energy EIS investments, there is an opportunity to reinvest in the sector and still benefit from the incentives via a BPR product. For clients who are reaching the point where IHT is a consideration, it would be a shame to let the qualification lapse and have to restart the clock.”

According to IP, if a renewable energy investment was suitable for a client within an EIS, it will be a suitable investment within a BPR product – and as such it will help clients start to take steps to mitigate their estate’s IHT bill.

Daniel Kiernan continued: “A major benefit is that, unlike other estate planning solutions, if the client requires access to the funds in the future the investment can be liquidated and the funds freed up for other purposes – so clients are not forced to make irreversible decisions or lock money up for overly long periods. An investment into a BPR product could be a way of retaining the qualification for the relief without having to commit funds indefinitely.”

Conservative Tax Cuts Worth Ten Times More to High Earners Than Basic Earners
Corporate TaxTax

Conservative Tax Cuts Worth Ten Times More to High Earners Than Basic Earners

New TUC-commissioned analysis published today (Thursday) of tax policies in the Conservative Party manifesto shows that the party has chosen to prioritise unfunded tax giveaways to the wealthy over support for the low-paid and middle earners.

It shows that the big winners from unfunded tax cut proposals would be higher earners, with the lowest paid getting much smaller gains.

The analysis looked at the average impacts for each decile across the household income spectrum. It found that the poorest decile would get nothing on average, and the second poorest only £2 a year. However, the average gain for the richest decile would be £875 a year.

Furthermore, while the maximum benefit a basic-rate taxpayer can expect from the proposed personal allowance increase is just £222 per year, the maximum benefit for a higher rate taxpayer would be £1,126.

In addition, a taxpayer earning between £50,000 and £100,000 (the level of income at which the personal allowance starts being tapered away) would also benefit from proposals to raise the higher-rate tax threshold, meaning that their after-tax income could rise by over £2,000 per year – around ten times more than the tax gains for a basic earner.

The Conservative manifesto also includes plans for extreme cuts to welfare and public services. The TUC believes that the relatively small tax gains for low earners would therefore be significantly out-weighed by major reductions to in-work support like tax credits and the services that low-paid families rely on most.

The TUC analysis modelled the impact of an alternative approach with identical costs to the Conservative proposals, which targets help to low and middle-earners through improvements to Universal Credit (see notes, and UC option 2 in the analysis). Under this approach, most middle-earners would be at least £500 better off (deciles 3,4 and 5), with some families more than £700 better off.

TUC General Secretary Frances O’Grady said: “We should be targeting help where it’s most needed. But David Cameron’s tax plans will give ten times as much to the rich as to families on regular earnings.

“Families have just suffered the longest decline in living standards since Queen Victoria was on the throne. But before wages have even recovered, the Conservatives are prioritising special treatment for the wealthiest.

“The pledge to help minimum wage workers is a con. Most of them don’t earn enough to pay income tax, but Conservative plans for extreme cuts will hit their tax credits, children’s benefits and local services. All in all, low-paid workers and their families will be left much worse off.

“A better plan to help low-paid workers and their families would be to target support through Universal Credit. This would make low and middle-earner families hundreds of pounds better off, as well as giving a boost to businesses in their local economy.”

(UK) Happy New Tax Year - the Resolutions You Need to Know
Corporate TaxTax

(UK) Happy New Tax Year – the Resolutions You Need to Know

ICAEW advises taxpayers to check which changes could make a difference to their personal finances and to get expert advice if unsure.

Pensions will be an important area for change, and most taxpayers will see an increase in their pay packet as the personal allowance increases.

Key tax changes for 2015/16 for individuals:

The tax-free personal allowance rises from £10,000 to £10,600 on April 6. For those born before 6 April 1938 the so-called age allowance will be £10,660.

The starting rate of income tax on savings will be cut from 10% to 0% for savings income up to £5,000. The change means more people on lower incomes may be able to get their savings income paid without tax deducted.
Married couples and civil partnerships will be eligible for a tax break as the new marriage allowance lets the lower-income partner transfer £1,060 of their personal allowance to their partner – saving up to £212. This isn’t an extra allowance, just the transfer of part of an existing one, and can’t be claimed if either partner pays more than the basic rate of income tax.

The married couple’s allowance – for couples where one or both was born before 6 April 1935 – rises to £8,355. This is not to be confused with the new marriage allowance, and will be a better bet for those eligible, giving up to £835 of tax relief.

The maximum that can be invested in a tax-free ISA increases to £15,240. Junior ISA and Child Trust Fund allowances will be uprated to £4,080.

There are big changes for pensions. From 6 April 2015 those aged 55 or more can take money from their defined-contributions pension pot without having to buy an annuity or put the money into drawdown, and 25% of what they take out will be tax free.

The law will also change so that if an individual dies before the age of 75, they will be able to pass on their pension pot tax-free.

From 1 May families will not have to pay Air Passenger Duty on economy flights for children under 12.

(US) Using Tax Refunds for GAP Waivers Offers Peace of Mind
Corporate TaxTax

(US) Using Tax Refunds for GAP Waivers Offers Peace of Mind

Unfortunately, this exciting moment can be ruined by one simple mistake – failing to purchase a guaranteed asset protection (GAP) waiver.

“Sometimes the unexpected happens. It doesn’t make sense to invest so much in a new vehicle without ensuring that you’re fully protected,” said Tim Meenan, executive director of the Guaranteed Asset Protection Alliance. “Without the reassurance a guaranteed asset protection waiver offers, consumers could get stuck with an unpaid loan for a vehicle they no longer own.”

It’s important for car buyers to know that the moment they drive off the lot with a new car, the value of the vehicle depreciates. If disaster happens in the form of theft or an accident that totals the car, insurance will often only cover the current market value – which can be far less than the value of the unpaid loan. The purchaser will be responsible for paying off the loan, even though he or she may no longer have the car.

GAP waivers cover the difference, offering an additional priceless value: peace of mind. There’s no need for stress when you should be enjoying the tangible benefits of your tax refund!

From a stolen vehicle to a bad accident, there’s no way to predict when something disastrous might occur, so consumers should make the smart choice to protect themselves with GAP protection.

UK Remains One of the Most Competitive Tax Destinations
Corporate TaxTax

UK Remains One of the Most Competitive Tax Destinations

The UK remains one of the most competitive tax destinations according to over 100 of the largest British-based businesses participating in KPMG’s annual survey of tax competitiveness 2014. But Ireland has leapfrogged the UK to take the number one position this year.

In this year’s results, the UK has built on its 2013 absolute score in terms of the frequency with which respondents cite it as being in their top three most competitive tax regimes but it has slipped to second place overall. Luxembourg, the Netherlands, and Switzerland have all lost ground in the rankings as the table below shows.

Chris Morgan, head of tax policy at KPMG in the UK, said: “This year, respondents’ perception of how attractive Ireland’s tax regime is compared to other countries jumped significantly, with Ireland most frequently cited among the top three most attractive tax regimes overall. Perceptions of the UK’s attractiveness improved slightly versus 2013 but not enough to retain the top spot in the 2014 rankings.

“In contrast, the tax regimes in Luxembourg, Switzerland and the Netherlands are viewed as less attractive in 2014, perhaps due to significant proposed changes in tax regimes (especially in Switzerland), increased regulatory scrutiny on tax issues and concerns about tax rulings and EU State Aid issues (in the EU countries). While Ireland has also come in for criticism from some quarters on its tax policies, it appears that companies accept its very clear cross party commitment to retaining the low rate and believe that Ireland will introduce further measures like an Intellectual Property box regime to maintain its competitiveness.”

For the first time this year, the survey expressly asked about responsibility in business. Respondents agreed that responsible business should act in the interest of the common good and that tax was integral to this. Additionally, a significant proportion of respondents (38 percent) said they had become more transparent on how they report tax in the last 12 months. 44 percent felt they would be more transparent in the future, with this particularly pronounced among the FTSE 100 where just over half said so.

Little appetite for further radical change to system – simplicity and stability are what is wanted

In a similar vein to last year’s results, respondents believe that stability and simplicity determine the attractiveness of a tax system. Respondents were keen to see the corporate tax rate go down to 20 percent as planned by the current government. Respondents felt that this reduction was more important than a cut to business rates and almost a quarter (23 percent) saying they would increase their headcount as a result of this measure. There was relatively little support for tax devolution, with 63 percent saying it should not be decentralised and 27 percent saying it should be decentralised in line with devolution. A similar proportion (66 percent) was opposed to an allowance for corporate equity, which is a deduction based on the amount of share capital in order to level the playing field between equity and debt.

Chris Morgan commented: “According to our survey, stabilising and simplifying the tax system are the two most important measures to prioritise to drive growth over the next year. However, given that simplification would inevitably involve change to the system, there is a natural tension between these factors. The general sentiment seems to be that it makes sense to allow recent changes made to the tax system to ‘bed in’ before introducing any additional measures.”

Support for the OECD’s ‘BEPS’ action plan among respondents but concerns about compliance and UK interests

Looking to the wider tax landscape, a clear majority (76 percent) of respondents were supportive of the general aims of the OECD’s Base Erosion and Profit Shifting (BEPS) action plan. However, 61 percent expressed some concerns around the potential compliance burden of country by country reporting and over half (56 percent) of respondents felt that the UK authorities were unable to influence the overall BEPS agenda.

Chris Morgan commented: “Respondents are clearly supportive of the aims of the BEPS action plan but they do have some concerns. In particular, a significant minority believes that some work-streams could have a negative impact on the UK and more than half expressed concerns about the potential compliance burden of country by country reporting.”

In conclusion, Chris Morgan said: “It’s encouraging that the UK has held its overall score on tax competitiveness this year which suggests respondents remain broadly content with the direction of travel on UK tax policy. Ireland may have leapfrogged into the top spot but the results suggest that has been a result of it taking ‘votes’ from other European competitors rather than the UK. Respondents seem broadly happy with the direction of travel in terms of tax reform and support the OECD’s efforts to reform the international tax system. The sentiment among the senior tax executives we spoke to appears to be one of ‘steady as she goes’ rather than any urgent calls for radical reforms.”

Global Salaries to Continue to Rise in 2015
Human CapitalTax

Global Salaries to Continue to Rise in 2015

A new survey from Aon Hewitt, the global talent, retirement and health solutions business of Aon plc, reveals that most employees around the world received pay increases in 2014 and can expect to receive comparable increases in 2015.

According to Aon Hewitt’s 2014 Global Salary Increase Survey of 12,690 employers in 110 countries, employees in Africa are expected to see the highest rate of increase in 2015 at 8.0%, up from 7.4% in 2014. Conversely, workers in North America can expect to see the lowest salary increases at 3.0%, up from 2.9% in 2014.

“This year, improved GDP projections and lower unemployment rates for most countries meant good news for many employees around the world,” said Yanina Koliren, global compensation surveys and solutions leader at Aon Hewitt. “Employers are competing aggressively for talent, particularly in some regions of the world, and they recognize pay is a key factor in attracting and retaining top employees.”

Key Highlights by Region

• Africa – In 2014, employees in Africa received 7.4% salary increases and can expect to see salary increases of 8.0% in 2015. According to Aon Hewitt, the high rate of increases reflects mainly the impact of inflation, the challenge of finding skilled employees in the region, as well as employers looking for ways to attract and retain top talent.

• Asia Pacific – In 2014, salaries for employees in Asia Pacific rose 5.2%. Specifically, in China, annual salary increases are still quite high (7.9%); however compared with previous years, the speed of salary growth is declining. Overall, employees are expected to see salary increases inch up to 5.8% in 2015, as major countries in the region see the better economic performance of 2014 continuing into 2015. Employee turnover also showed a slight uptick, and companies have adjusted their compensation budgets accordingly.

• Europe – Employees across Europe received salary increases of 3.6% this year and can expect to see similar increases (3.7%) in 2015, though the rate of increase varies by country. For example, Russia and Ukraine salary budget increases are expected to be 8.0% to 8.2% in 2015. In stark contrast, budget increases in Greece are expected to be just 1.9%. Despite the fluctuation, salary budgets in almost every country across Europe are forecasted to rise above inflation in 2015, which may reflect the anticipated strength of a European economic recovery next year and the need for organizations in this region to retain talent.

• Latin America – Companies in Latin America took a conservative approach to salary budgeting this year, and that strategy was reflected in workers’ salary increases. Employees in Latin America received average salary increases of 5.5% in 2014 and can expect to see slightly higher salary increases in 2015 (5.9%). Salaries across the region are slightly above inflation rates, with the exception of Argentina and Venezuela, where high inflation remains an issue. Employers also continue to focus on merit increases, as they try to retain and recognize top talent.

• Middle East (Gulf Countries) – Employees in the Middle East received 4.9% salary increases in 2014. In this region, organizations’ salary budgets are typically aligned with increases in gross domestic product (GDP). With GDP expected to grow in 2015, Aon Hewitt anticipates workers will see salary increases follow (5.1% in 2015).

• North America – Workers in the U.S. and Canada received average salary increases of 2.9% in 2014. In 2015, increases are projected to be 3.0%, which is the largest increase since 2008. In this region, most companies continue to reserve the majority of their compensation budgets towards variable pay programs, or performance-based awards that must be re-earned each year. In 2014, companies allocated 12.7% of their payroll funds toward variable pay.

 

Next Step Taken in Stamping Out International Tax Evasion
Corporate TaxTax

Next Step Taken in Stamping Out International Tax Evasion

Today the UK, alongside 50 other countries and jurisdictions from across the globe, is taking the next step in stamping out tax evasion by signing a new agreement at the Global Forum in Berlin to automatically exchange information.

Under the agreement, unprecedented levels of information, including account balances, interest payments and beneficial ownership, will be shared with the UK from countries across the world in an international clampdown on tax evasion.

This will increase the ability of HMRC to clamp down on tax evaders, providing HMRC with the details of billions of pounds of assets held overseas by UK taxpayers.

Speaking ahead of the signing ceremony in Berlin the Chancellor of the Exchequer, George Osborne, said:

“Today marks a negotiating triumph for Britain, and our close ally Germany, in the fight against tax evasion.”

“It was three years ago when, with my German colleague Wolfgang Schäuble, I launched a campaign for a new international deal to catch people who evade their taxes by hiding their money overseas.”

“I never expected that within such a relatively short period we would succeed in getting 51 countries to sign up to this agreement.”

“Today we strike a blow on behalf of hardworking taxpayers who are cheated when rich people don’t pay their taxes.”

“Today we send a clear message to those who still think they can escape making a fair contribution to our public services and to reducing our deficit: you can hide no more; we are coming to get you.”

The UK has been leading the international fight against tax evasion, including through its G8 Presidency, and has played a crucial role in driving both the development and the early implementation of the new global standard adopted by the OECD in July this year.

The global standard of automatic information exchange to tackle tax evasion was developed by the OECD and agreed in July 2014.

51 countries and jurisdictions, including all G5 countries, are signing the multilateral competent authority agreement under which information will be exchanged at a signing ceremony at the Global Forum in Berlin today.

Together with France, Germany, Italy and Spain the UK launched an initiative for early adoption of the new standard in April 2013. In total 57 countries and jurisdictions – known as the Early Adopters Group – have now committed to a common implementation timetable which will see the first exchange of information in 2017 in respect of accounts open at the end of 2015 and new accounts from 2016.

A further 34 countries have committed to implement the new global standard by 2018.

Most Companies Now Taking Steps to Minimise Excise Tax Exposure
Corporate TaxTax

Most Companies Now Taking Steps to Minimise Excise Tax Exposure

A new pulse survey from Aon Hewitt, the global talent, retirement and health solutions business of Aon plc (NYSE: AON), reveals that a significant number of U.S. employers are taking immediate steps to avoid triggering the excise tax on high cost health plans when it goes into effect in 2018.

Aon Hewitt’s soon-to-be-released survey of 317 U.S. employers found that 40 percent expect the excise tax to affect at least one of their current health plans in 2018 and 14 percent expect it to immediately impact the majority of their current health benefit plans. Surprisingly, a quarter of employers said they still have not yet determined the impact of the tax on their health plans, and more than one-third reported that their executive leadership and finance teams have limited or no knowledge of the implications of the tax for their organizations.

Of those employers that have determined the impact, 62 percent say they are making significant changes to their health plans for 2015:

  • One-third (33 percent) are reducing the richness of their plan designs through higher out-of-pocket costs, including 10 percent that say they will eliminate high-cost, rich design options
  • 31 percent are increasing the use of wellness incentives in their plans
  • 14 percent are evaluating private exchange options for pre- and post-65 retirees, while 7 percent are considering private exchanges for active employees
  • 14 percent are significantly reducing spousal eligibility or subsidies through mandates or surcharges
  • 5 percent are implementing narrow/high performance provider networks

“While the excise tax provision of the Affordable Care Act doesn’t go into effect until 2018, it is accelerating the pace of change for U.S. employers,” noted Jim Winkler, chief innovation officer forAon Hewitt’s Health business. “Over the next few years, employers expect to use both traditional and innovative tactics to make substantive changes to their health plans to minimize their exposure to the tax and put them on a path to lower rates of health care cost increases.”

Looking Ahead
Due to medical costs expected to rise more rapidly than the tax thresholds in the future, 68 percent of the employers Aon Hewitt surveyed expect the excise tax to affect at least one or the majority of their current health plans by 2023. When asked about future actions they are likely to consider in order to minimize their exposure to the tax, the vast majority (79 percent) expect to reduce plan design richness through higher out-of-pocket member share. More than 40 percent of employers say they are likely or highly likely to adopt cost control strategies, such as reference-based pricing and narrow provider networks.

Other strategies employers are likely or highly likely to consider include:

Restructuring coverage tiers to align with tax threshold ratios (37 percent)
Limiting FSA, HSA and/or HRA contributions counted against thresholds (31 percent)
Limiting buy-up options for employees (26 percent)
Moving to a private health exchange (16 percent)
Employer Views on the Excise Tax
Aon Hewitt’s survey revealed that an overwhelming majority of employers—88 percent—favor repeal of the excise tax. However, just 12 percent of employers say they have taken public actions, either directly or through a third-party industry organization—to express opposition to the tax.

That said, just 2 percent of employers said they are likely or highly likely to consider eliminating employer-sponsored health care coverage as a strategy for minimizing their exposure to the tax.

“While employers are continuing to make short and long-term changes to their health plans in anticipation of the excise tax, our data suggests that most would like to see the tax repealed,” notedJ.D. Piro, Aon Hewitt’s health care legal practice leader. “However the presence of the tax is not likely to deter the majority of employers from continuing to sponsor health benefits over the next 10 years.”

Gender Diversity Top Priority for Business Leaders
Human CapitalTax

Gender Diversity Top Priority for Business Leaders

It is a business imperative that even greater strides are taken towards embedding gender diversity in the workplace, according to Confederation of British Industry (CBI) Northern Ireland chair Colin Walsh.

While welcoming the significant progress that the business community has made on the subject over the last two decades, Walsh, speaking at the CBI’s annual lunch in Belfast, said that there are many good reasons for companies to believe that increasing gender diversity in their workforces will be a business boost, as well as being the right thing to do.

In his remarks, Walsh said: “The CBI approaches the subject of gender diversity in the workplace with a clear belief in the needs to sustain and develop the talent pipeline for women.

“Personally, I look forward to the day when from education, to entry into work, through management positions and beyond that we have addressed the remaining issues to make the topic of gender diversity an accepted part of the business culture and that we do not have to talk about it anymore.

“Business needs to once again take ownership of the continuing momentum and progress of the last two decades – something seen very clearly in the number of females in attendance at the Lunch today – and ensure that diversity is and remains a key business issue.”

Turning to the ongoing political challenges in Northern Ireland, the CBI chair said: “In the last twelve months the private sector has created over 16,000 jobs – an encouraging start to our rebalancing of the economy with jobs being created in manufacturing and construction, as well as the services sector.

“The private sector is getting on with it – creating jobs and wealth, investing in their people and innovation, creating new products and services. But we recognise the journey has only begun and much work remains to be done if we are to achieve another of CBI’s objectives: ensuring that growth makes a difference to everyone.”

“This positivity must though be reflected and built on and, for this, it is critical that more cohesive and collegiate approach is taken by the Northern Ireland Executive. There is again a threat of reputational risk as well as ongoing uncertainty.

“It is vital that the Executive Ministers seize the opportunity that the potential of the devolution of corporation tax powers offers, a once in a lifetime opportunity, to make a seismic change that will drive further and higher value inward investment activity and facilitate additional investment by indigenous businesses.”

Commenting, Liz Earle MBE, the founder of the Liz Earle skincare brand and the keynote speaker at the CBI lunch, said: “The diversity agenda is one that I have long championed in my work and it is one that I am delighted to see that the CBI is so supportive of. My message to business today is that when it comes to nurturing and development within your own team, especially female talent that may also have other facets, such as family life or entrepreneurial experience over a formal qualification, don’t judge a book by its cover.

“Having built several highly successful and profitable businesses with predominately female employees I am passionately pro-female when it comes to the workplace. I genuinely believe that the role of more women at the highest levels in our boardrooms will help promote the over-arching objective of the CBI, which is to ensure our businesses can compete and prosper for the benefit of all.”

Tax-free Allowance for Non-UK Residents Could Go
Human CapitalTax

Tax-free Allowance for Non-UK Residents Could Go

According to the Treasury the UK’s higher allowance, coupled with restrictions in place in other countries, means that the amount of tax paid is not proportionate to their earnings in the country.

Presently the UK Personal Allowance is £10,000 and is planned to increase in April 2015. That will mean an allowance, the level of earnings before tax is deducted, of £10,500.

It means that the Treasury is ultimately missing out on an extra £400m each tax year.

Generous Allowance

The proposals outline how the majority of the EU member countries restrict access to such allowances. The same is true in the US, Canada and Australia.

The proposal document goes on to say that few countries have an allowance as generous as the one in the UK.

It states:

“the current UK rules on the Personal Allowance can, in certain cases, mean that there is little correlation between economic activity in the UK and a tax liability in the UK.”

Home Relief

Proposing that changes are introduced to create a more balanced link between the UK’s economic progress and future tax liabilities, the papers continue:

“the division of taxation between countries will often not reflect the way that the income actually arises in those different countries.”

If introduced, it is thought that around 175,000 non-resident landlords here in the UK could be affected, as well as about 250,000 seasonal workers.

However, the Treasury says that the income generated here could still attract tax relief in the individual’s home country to help offset any losses.

Unfilled Vacancies Costing UK Economy £18bn p.a.
Human CapitalTax

Unfilled Vacancies Costing UK Economy £18bn p.a.

New research reveals the scale and economic impact of unfilled vacancies on the UK economy – representing a staggering annual cost of over £18bn.

The economic potential offered by these positions is indicative of continuing improvements in the UK labour market, with falling unemployment and robust job creation. Despite this renewed confidence, the research suggests that many businesses are finding it a challenge to locate and secure the right employees. Inability to find and recruit the right hire for a role has an impact on both the business itself and the wider economy in two major ways. Failing to effectively resource a business slows both production and profits, while unearned wages reduce consumer spending power and contribution to economic growth.

Findings from the report, released by Indeed, the world’s leading job site and global hiring resource, illustrate the growing importance of building a strategic recruitment function to hire quickly and efficiently, and find the right fit for each role.

Indeed SVP Paul D’Arcy commented, “For today’s job seekers, these are positive conditions, however, at around £18 billion per year, the cost of unfilled roles should serve as a wake-up call to UK businesses developing recruitment strategies in a post-recession environment.”

“Each ‘empty desk’ represents an opportunity both for the individual and the business. For the business, finding and recruiting the right individual means better productivity and profits, while for the individual, earning an income and spending a salary contributes to wide economic growth. In today’s economic environment of lowered unemployment and labour participation, it has never been more important to hire the right fit for each role.”

Other key findings from the report:

● Open roles in the real estate sector have the greatest impact on the UK economy, due to high levels of contributed economic value (the goods and services that could be produced if the position were filled)

● Although less ‘productive’, the sheer volume of openings in the wholesale and retail sector means that vacant positions in this sector represent £195m per month

● Empty desks in the UK’s important professional services sector cost the economy an average of £155m per month

● Unfilled vacancies in the health and social work industry account for £130.9m in lost economic potential

● Unfilled vacancies in the finance and insurance sector account for £129.1m in lost economic potential

● Vacancies in the information and communication sector represent £119.9m of lost economic potential

● The proportion of unfilled vacancies in high value added sectors means that empty desks in the UK are of greater economic significance than in the US, Germany and Australia – representing 1.3% of monthly GDP across the UK economy compared to 0.9% in the US

● For industries which can achieve reductions in the time it takes businesses to fill job openings, there are significant economic gains to be made and greater amounts of economic potential can be unlocked by better matching the right people to the right jobs

● For the wider economy, the efficient matching of potential employees to businesses is key to supporting healthy levels of employment and household incomes, while allowing businesses to reach full productivity

Walgreen
Corporate TaxTax

Walgreen

It had been widely expected in the financial services sector that the pharmaceutical big hitter would make the move following its full acquisition of Alliance Boots.

According to sources, though the move from the US would allow Walgreen’s to pay lower tax rates, proposals being considered in Washington suggest it would be problematic.

This week saw the US announce plans to prevent foreign tax centres from being created.

The firm undertook what has been called ‘extensive analysis’. CEO and president of Walgreen’s, Greg Wasson, said that an independent committee subsequently advised that there was no way of reaching a ‘tax inversion’ structure which would satisfy the Internal Revenue Service.

Mr Wasson went on to explain:

“The company also was mindful of the ongoing public reaction to a potential inversion and Walgreen’s unique role as an iconic American consumer retail company with a major portion of its revenues derived from government-funded reimbursement programs,”

However, there is a body of shareholders urging the firm to shift its domicile tax base, with Goldman Sachs among them.

Walgreen’s decision has also ramped up the pressure on other firms in the US considering a move.

Another pharmaceutical firm, Abbvie, is lining up a takeover for Shire, with plans been drawn up to relocate its headquarters to the UK.

TaxPayers' Alliance Launches Campaign against Waste
Corporate TaxTax

TaxPayers’ Alliance Launches Campaign against Waste

The TaxPayers’ Alliance, the independent grassroots campaign for lower taxes, has launched a 29-stop, nine-day War on Waste Roadshow in Westminster, with TaxPayers’ Alliance staff and local activists calling on public sector bosses to strip out waste from a campaign battle bus and a colourful pop-up stand. Among the stops are the constituency offices of the leaders of the three main political parties, the Grey’s Monument in Newcastle, Exchange Square in Manchester and Birmingham Town Hall. The Roadshow will highlight examples of wasteful and inefficient spending across England and Wales, such as:

• The £4,450 Nottingham Council managed to spend on an office Christmas tree
• The two wind turbines, costing some £30,000, which generated just £95 of electricity in their first year
• The £25,000 that the Arts Council of Wales spent to send an artist to South America so that he might put his experiences on a blog
• Sandwell Council spending £24,060 on appearance fees for minor celebrities including Keith Chegwin and Eastenders actor Neil McDermott
• An art gallery with a £72m price tag that closed down because nobody wanted it, asked for it, or visited it

Earlier this year, the TaxPayers’ Alliance showed that some £120bn of taxpayers’ money was wasted last year, a figure almost equal to the deficit.

New calculations by the TaxPayers’ Alliance demonstrate that the public debt burden tops £1.3tn, and is rising by £3,950 a second – the equivalent of putting a family holiday to Disneyland Florida on the country’s credit card. Cutting out waste will be a necessary part of bringing that down.

TaxPayers’ Alliance chief executive Jonathan Isaby said: “Far too much taxpayers’ money is wasted, keeping taxes high and taking precious resources away from essential services. It’s time for a war on waste right across the public sector.

“It would be nothing short of immoral to saddle the next generation with our trillion-pound debt mountain. We need to strip out wasteful and unnecessary spending and start living within our means again.

“For too long taxpayers’ money has been spent with impunity, with little accountability and not enough transparency. The War on Waste hopes to change that and remind those we trust with our money that we’re watching how it is spent very carefully indeed.”

Eurozone Unemployment and Inflation Stuck at Undesirable Levels
Human CapitalTax

Eurozone Unemployment and Inflation Stuck at Undesirable Levels

The unemployment rate across the Eurozone remained unchanged in May from April’s figure of 11.6%, according to data released by Eurostat. This follows data showing that annual consumer price inflation across the currency bloc stood at 0.5% for the second consecutive month.

The preliminary “flash” estimate of inflation released yesterday morning suggested that the largest upward pressure on prices in June arose from inflation in services (including housing, transport, communication and financial services). Offsetting this were falling food, alcohol and tobacco prices that declined by 0.2% in the year to June. June was the ninth consecutive month that inflation has been below 1.0% – referred to by Mario Draghi as “the danger zone”. While the European Central Bank (ECB) doesn’t expect deflation, it is worried about low inflation, which spurred it into cutting the Bank’s refinancing rate by ten basis points from 0.25% to 0.15% and lowering the deposit rate into negative territory.

However, this rate cut might be too little too late as roughly 18.5 million people were unemployed in May within the currency bloc. The prevalence of joblessness across the Eurozone is diverse, with countries such as Austria and Denmark recording a 4.7% and 5.1% unemployment rate for May, respectively, compared to Spain which suffered with 25.1%. More than one in every two Spaniards younger than 25 are unemployed.

Given that the ECB markedly changed monetary policy last month it is unlikely that any further revisions will be made when the Governing Council of the ECB release their rates decision on Thursday this week. However, further worries over the momentum of the economic recovery are represented by the latest Purchasing Managers’ Index (PMI) for the Eurozone, which fell to 51.8 in June. This is the lowest level since November but still above 50, the figure that denotes growth, slowing momentum could spur the ECB into action once again. Cebr believes that further interest rate cuts would have a minimal impact on the Eurozone’s economic outlook. More successful policies should come from the countries within the single currency union, which need to address the underlying problem of a lack of competitiveness.

Summer Staff Parties Can Be Tax Free
Human CapitalTax

Summer Staff Parties Can Be Tax Free

With the World Cup imminent, many work places will be hosting football-themed parties for their staff this summer. And the Institute of Chartered Accountants in England and Wales (ICAEW) is reminding employers that these parties can potentially be tax-free this year. Employers can spend up to £150 per member of staff each year without any tax charge, which is guaranteed to kick off any event in style.

This total not only covers food and drink, but also accommodation and transport home if the employer pays for these. Employees can even bring along their spouse or partner and as long as the cost per head is under the limit, there isn’t any income tax or national insurance to pay. On top of this, the employer will also get tax relief on the total costs, even if the party just lasts for 90 minutes.

The rules apply to any annual party or similar function, which must be open to staff generally or to workers at a particular location. The tax-free limit applies for a tax year, so if the employer puts on a summer party and a Christmas dinner, altogether costing less than £150 a head, both will be tax-free for employees – a match winner.

But one penny over this limit and the full amount spent on the party will become liable to income tax and National Insurance for both staff and employer alike. It is taxed as a benefit – which could prove an own goal.

Anita Monteith of the ICAEW Tax Faculty said: “With the late timings of many of the World Cup matches, many businesses will be hosting events for their staff. Having a summer party is a real morale-booster and rewards the hard work that staff put in over the year as well as demonstrating a sense of unity to support England during the World Cup. It is also a good way for businesses to show appreciation for their employees’ contributions and encourages their commitment and ongoing efforts. With no tax charged, it means there are no penalties from HMRC.”

Firms “Must Change Talent Approach”
Human CapitalTax

Firms “Must Change Talent Approach”

When the book The War for Talent was published in 2001, Apple had just released its first iPod, the world population stood at 6.2 billion people and the Dow Jones Industrial Average was below 10,000 points.

Today, more than 350 million iPods have been sold, global population figures are estimated at more than 7 billion and the Dow Jones recently hit a record high of 16,717. Yet despite these changes, a new survey from KPMG shows that businesses have barely moved when it comes to fighting the war for talent. “In 2001, the focus was on attracting and retaining ‘high potential’ and ‘high performing’ employees. It’s an approach that has become deeply engrained for many companies,” said Robert Bolton, co-leader of KPMG’s Global HR Centre of Excellence.

“In 2014, however, 66% of respondents are telling us it’s much more important for organisations to have a holistic approach to talent management that addresses the needs of all employees as well as those in critical roles; roles that are not defined by hierarchy but by position in the value chain.”

The survey results signify a dramatic shift in HR’s approach to business, brought about by four key factors. KPMG’s research identifies these as:

• a broad-based shortage of skilled workers

• the effects of increased globalisation

• competitive pressures resulting from improving economies, and

• the changing career expectations of younger skilled workers.

“These findings should serve as a wake-up call to HR managers who may still be clinging to outdated approaches to talent management,” said Bolton. “Addressing skill shortages throughout the entire organisation, and not just at the most senior levels, should be a top priority in 2014 and will become critical over the next two years.”

Bolton also found little evidence that the practices outlined in The War for Talent are actually contributing to improved business performance. “An analysis of the 106 original adopters of the ‘war for talent’ approach found that 13 years later, only 25% of those organizations can be categorised as market leaders,” said Bolton. “In addition, a third of those companies have ceased to exist altogether.”

According to Bolton, companies can change the status quo to give themselves an edge in the ongoing war for talent. “One thing many leading companies are doing is putting powerful new data analysis capabilities to work to help gauge their performance and fine-tune their people practices over time,” said Bolton. “There’s a real opportunity for companies to create a differentiated approach for the HR function, one that is a demonstrable driver for the business. Those companies that seize this opportunity stand to benefit, while those who take a narrow approach risk losing far more than simply the war for talent.”

KPMG International gathered input from 335 People & Change consultants from 47 countries as part of the survey, which took place between March and April 2014.

Fall in Level of Wage Deals
Human CapitalTax

Fall in Level of Wage Deals

The level of pay awards across the whole economy has fallen in April 2014, according to the latest findings from pay analysts XpertHR.

In the three months to the end of April 2014, the median basic pay award was worth 2%. This is below the April 2014 RPI inflation figure of 2.5%, but above the CPI rate of 1.8%.

However, behind the headline figure there continues to be a clear difference in the fortunes of employees in the public and private sectors. Public-sector employees continue to be caught by the government’s 1% pay policy. Within the latest batch of data are pay awards for around 1.7 million workers covered by the pay review bodies including those working in the NHS, the Prison Service and the Armed Forces.

Meanwhile, in the private sector the median pay award is worth 2.4%, representing a slight fall on the 2.5% figure recorded in the three months to the end of March 2014. Within the private sector, manufacturing and production firms are setting wage awards at a median 2.5%, compared with 2% awards in the services sector.

The most common pay award in the private sector is a 2% increase (representing just over a quarter of all pay deals recorded), followed by an increase of 2.5% (just over one-fifth of pay deals recorded at this level).

Key findings for pay awards in the three months to the end of April 2014 include:

-The whole economy median pay award stands at 2%.

-The middle half of deals fall between 1.5% and 2.5%.

-Pay awards in the private sector are worth 2.4% at the median. Much of the public sector continues to be covered by the average 1% pay award stipulated by the UK government.

-Manufacturing-and-production employers record a higher median pay award (at 2.5%) than the services sector (2%).

XpertHR Pay and Benefits editor Sheila Attwood said:”Following an encouraging start to the year, the pace of pay bargaining seems to have eased. Pay awards in the private sector remain low, at just 2.4% and there is little to suggest a dramatic increase in settlement levels is in the offing.”

London Tops List of Attractive Cities for Business
Human CapitalTax

London Tops List of Attractive Cities for Business

London has for the first time posted the highest score among the 30 cities studied by PwC US in the sixth edition of its Cities of Opportunity report.

London, the only city to finish first in three of the 10 indicators—economic clout, city gateway and technology readiness, a category it ties with Seoul—was followed by New York and Singapore. The study shows that top ranked cities embody the energy, opportunity and hope that draw people to city life. High performing cities also find the right balance between social and economic strengths in a world being quickly shaped by inescapable global trends.
Moving up four spots from the last edition, Singapore takes third place overall and finishes first in two indicators—ease of doing business and transportation and infrastructure. Despite not having a top rank in any indicator, New York continues to show strong consistency across most of the categories. Rounding out the top five cities are Toronto and San Francisco.

As for London, the city outperforms New York by a good margin after finishing second in a virtual tie with New York in 2012. Results show London is developing a strong foundation for the future with top economic strength, openness to the world and technology readiness—all critical building blocks for further growth in a digitally and physically connected world. In addition, London finishes a narrow second to Paris in intellectual capital and innovation and comes in second—virtually tying Sydney—in demographics and liveability, both key areas for future urban prosperity.

“Changing demographics, shifts in economic power and the concepts of urbanization being realized are the forces taking the world in a new direction,” said Bob Moritz, PwC’s US Chairman and Senior Partner. “Cities are increasingly competing for talent and are working hard to capture the promise of growth from the many opportunities in today’s rapidly changing world. As a result, people are looking for more potential for personal opportunity while demanding critical elements to increase quality of life. It’s the top ranking cities in this year’s study that are demonstrating the foresight that is needed to adapt, stay competitive and thrive for a sustainable positive future.”

Cities of Opportunity 6 also highlights the increasing competitiveness of emerging cities across several key indicators. Beijing, which ranked 19th, finishes in the top three in both the city gateway and economic clout categories, while Seoul is top in technology readiness and is the only emerging city to reach the top 10 in the ease of doing business indicator. Seoul and Buenos Aires also break into the top three for transportation and infrastructure, while Johannesburg is in the top three for cost.

Big Business Opens Up on Tax
Corporate TaxTax

Big Business Opens Up on Tax

There has been a step change in the tax disclosures made by the UK’s largest listed companies, a new PwC report published today shows.

Almost half (49) of the FTSE 100 now disclose information on their overall approach to tax, a 50% increase on 32 companies that explained their approach the previous year.

Andrew Packman, tax partner at PwC, said: “It’s evident that companies are sharing more information about their tax affairs. Increased interest in tax and a desire to build trust with customers, employees and investors are undoubtedly encouraging voluntary tax disclosures.

“Whether we will soon see the majority of FTSE firms disclosing similar levels of detail on tax is uncertain. Tax transparency varies from industry to industry and some investors simply don’t demand more information or are mindful of the costs involved. But all businesses should be considering these issues at board level and have an agreed approach to tax transparency. Interest in tax is not going to go away.”

As well as information on tax policy, the report shows that companies are making disclosures about the range of taxes they pay. With corporation tax no longer the largest tax borne by businesses, 24 companies are now reporting details of other taxes borne and collected besides corporation tax, compared with 19 the previous year.

Andrew Packman, tax partner at PwC, said: “Companies are starting to see the benefits of voluntary disclosure of all taxes. It is total taxes that governments are interested in to fund public spending, not corporation tax alone, so it makes sense to provide the full picture.”

The report also highlights that geographical reporting is now on the agenda of the UK’s biggest companies, with a number of mandatory requirements already in place. Some 22 FTSE100 firms (up from 17 the previous year) now provide some breakdown of taxes around the world, either by region or by country. Eight of these firms are extractives companies, who experience particular interest in where they pay tax, and four are banks, who will soon have to communicate detailed figures as part of the CRDIV transparency requirements.

“While we are seeing more firms reporting taxes around the world, it’s important to bear in mind that some companies operate almost entirely within the UK,” said Packman. “A business may choose not to give a global breakdown of taxes because it would be meaningless.”

Tax Risks Accelerating Worldwide
Corporate TaxTax

Tax Risks Accelerating Worldwide

More than four out of five (81%) companies surveyed expect already heightened tax risks to accelerate in the next two years. This is according to a new global report by EY, Bridging the Divide, which also finds companies view the potential lack of coordination by national governments around the Organisation for Economic Cooperation & Development’s (OECD) Base Erosion and Profit Shifting (BEPS) project as a major risk.

The EY survey of 830 tax and finance executives (including 120 chief financial officers) in 25 countries offers the first quantifiable global sample of how companies around the world view the OECD BEPS project.

Nearly one-third (31%) of all companies surveyed predict the BEPS roll-out will be characterized by relatively limited coordinated action and by increased unilateral action by countries. Three-quarters (74%) of the largest companies surveyed (those with annual revenues in excess of US$5 billion) say they believe some countries already see the very existence of the OECD’s BEPS project as a reason to change their enforcement approach before any recommendations have passed into national law. The majority of these largest companies (61%) as a result fear that double taxation will increase in the next three years.

“International companies share the OECD’s concern that coordinated action by national governments is necessary to ensure any BEPS-related recommendations are productive,” says EY’s Global Tax Vice Chair, Dave Holtze. “The OECD can play an invaluable role in preventing what it has called a “global tax chaos” that results in double taxation and increased controversy by pressing for common approaches and consistent standards.”

For all companies responding, China, India, and Brazil (in that order) are the top three emerging market countries identified as having the most significant potential for risk related to tax.

As a result of these increased risks, 78% of the largest companies agree or strongly agree that tax risk and controversy management will become more important in the next two years. Yet three-quarters of these companies feel they have insufficient resources to cover tax function activities, up from 57% in 2011. Forty-three percent of all companies use no technology or rely on local personnel to manage tax audits and incoming data requests from the tax authorities.

Holtze continues: “Today’s global business environment presents a complex assortment of tax risks for multinationals, particularly when operating in markets that may be less familiar. Companies need to get actively engaged on this issue, from ensuring that they have open lines of communication within their own enterprises to making their views known and understood on issues such as BEPS.”

New Tax Plans are Flawed
Corporate TaxTax

New Tax Plans are Flawed, Says PwC

Pricewaterhousecoopers has warned that plans outlined in the Budget for new HMRC powers to settle unpaid demands by taking money from people’s bank accounts could have grave consequences for businesses and individuals if errors in the process occur, and could undermine the principle of independent taxation.

Simon Wilks, tax partner at PwC, said: “It is absolutely right that people should pay tax that is due, but in our view, any benefits from these proposals are far outweighed by the potentially extremely serious consequences for individuals and businesses if errors are made. Under the current plans there will be no compensation for these serious consequences; errors can and do occur.

“While the tax HMRC expects to raise is a relatively small percentage (0.02%) of the tax they collect, it is likely to be a significant amount to anyone affected and in some cases could have severe knock on consequences on people’s borrowing power and credit rating, particularly if it is in error.

“There are practical consequences that haven’t yet been fully thought through. In the case of joint accounts HMRC will assume the money is held equally, so they could end up taking money that doesn’t belong to the taxpayer and therefore undermining the principle of independent taxation. The proposals could allow HMRC to take money in preference to other creditors which will be a cause for concern for all creditors.

“If HMRC goes ahead with these proposals there need to be strong safeguards in place and a thorough examination of the potential benefits weighed against the personal and commercial cost. In practice we believe workable and properly safeguarded new procedures would in the end look like a streamlined version of their current ability to recover tax with the safeguard of a Court, as any other creditor is required to do. We would encourage further consideration of whether these goals can be better achieved by improving the efficiency and throughput of the current procedures.”

Rewrite Global Tax Rules
Corporate TaxTax

Rewrite Global Tax Rules, Says Oxfam

The G20’s plan to tackle corporate tax dodging, devised by the Organisation for Economic Co-operation and Development (OECD), needs a radical shake up so that developing countries can capture their fair share of foreign business activity, says Oxfam.

The report, Business Among Friends, says that today’s international tax rules allow multinational companies to ‘disappear’ their profits including to other countries in order to pay low or no tax. Oxfam warns that many of the world’s poorest economies that are being worst hit are being left out of the OECD’s negotiations to tackle this scandal.

According to new figures from a forthcoming study by tax expert Alex Cobham and economist Petr Janský, if multinationals were taxed in countries where real economic activity takes place, then corporate tax revenues in some developing countries could increase by more than 100%.

Oxfam International Executive Director Winnie Byanyima said: “Corporations are rigging the rules and taking advantage of poor countries, fuelling a vicious cycle of inequality. Developing countries are being locked out of negotiations, creating a risk that any revisions to the rules will only serve the interests of the wealthiest and most powerful.”

Cobham and Janský’s figures, which look at misalignment between US multinational activity and profits, reveal that under more progressive corporate taxation rules the Philippines would see a 75% increase in their multinational corporate tax base, Ecuador a 99% increase, South Africa a 106% increase and India’s tax base would go up by over 180%. Honduras would see their tax base boosted by a massive 400%.

For poorer countries it is impossible to calculate the potential levels of tax income increases, which shows how poor the systems are for data collection and how high the levels of tax secrecy. But it is likely they would also stand to gain by significant margins.

Governments are being pitted in competition against each other to attract foreign investment. This is resulting in many countries being pressured to offer businesses sweet deals, such as tax exemptions or low tax rates. This can leave countries facing huge tax gaps, when they need this money to improve basic services such as healthcare and education. It’s estimated that the “tax gap”—the amount of unpaid tax due by multinationals to developing countries—is about $104 billion a year.

Oxfam believes that non G20 countries must be able to participate in any negotiations to reform the international corporate tax system and lack of capacity cannot be used as an excuse not to include them. Rich countries, like the UK, must support poorer nations to give them the knowledge and capacity to collect the taxes they are owed and governments need to talk seriously about creating a World Tax Authority to ensure fair and equitable tax systems that deliver for the public interests of every country.

Winnie Byanyima said: “If done properly, the OECD Action Plan presents a unique opportunity to overhaul international corporate tax rules to the benefit of all economies. This opportunity is too rare and important to be squandered.”

UK Tax Changes Attract Foreign Business
Corporate TaxTax

UK Tax Changes Attract Foreign Business

Recent changes to the UK tax system aimed at improving its attractiveness to businesses are paying dividends, according to KPMG in the UK. The firm is working with almost 100 businesses that are actively considering locating operations in the UK.

Jane McCormick, Head of Tax and Pensions at KPMG in the UK, said: “The sea change in sentiment towards the UK’s tax system as attractive to business is evidenced by the fact that we are currently talking to almost 100 businesses around the world about locating activities here. It’s only four years ago that UK listed companies were announcing they were quitting the UK. Today, overseas businesses are lining up to come here.”

The 94 businesses KPMG is currently working with cover a wide range of activities but the most common are pharmaceuticals, consumer markets, diversified industrials, manufacturing, automotive, oil & gas, and the financial sector.

The nature of the projects is also diverse. In terms of the types of activity that these businesses are looking at, the two most common are using the UK as a location from which to hold international operations and using the UK as a centre for business operations. In addition, KPMG is working with a number of businesses looking to move their headquarters to the UK, moving to the UK as part of a wider acquisition structure, using the UK as a centralised intellectual property hub or establishing in the UK as the principal hub in its wider supply chain.

“What is particularly striking about the projects we are currently discussing with overseas businesses is the breadth and variety of activities and locations within the UK that they cover,” said McCormick. “London and its financial services centre is well known as an international hub but many of these projects are looking at operations outside the capital in sectors such as manufacturing, consumer goods and diversified industrials. The value of being an attractive destination for business is in the employment and economic activity that is generated and the level of interest that we are seeing suggests that the policy of making the UK more attractive from a tax perspective is working.

“Every project that comes to fruition will generate additional tax revenues in the UK, which is of course a very positive development for the Government and the Treasury.The level of interest in the UK and the seriousness with which it is being considered suggests that the projects we are engaged in will result in real jobs and real economic activity coming to the UK,” she said.

Small Businesses Work Together to Achieve Growth Goals
Human CapitalTax

Small Businesses Work Together to Achieve Growth Goals

More than half of early-stage companies identify sharing resources as vital to SME success, according to a report published by car sharing and car club service Zipcar, in conjunction with StartUp Britain and Ashridge Business School.

Rather than a last resort to cut costs, for the majority of those surveyed, collaboration represents a key element of their business plan, with over a fifth choosing to share office space and 31% sharing their workforce with another company.

“Sharing with other companies enables start-ups to access resources they might not otherwise afford, as well as providing greater flexibility, reducing overheads and improving the bottom line,” said Zipcar UK’s general manager Mark Walker.

“In the UK lots of companies are large processors with huge turnovers, but they are quite inflexible,” said Charles Baughan, owner of Devonshire sausage firm Westaways, who was surveyed for the report. “SMEs like ours can dodge around the big businesses, adding value and being flexible by exchanging skills with others.”

Fashion business owners Sam Brightmore, of small boutique chain Bottega, and Donna Ida, who runs the denim brand of the same name, are another pair who, the report says, have discovered the advantages of co-operation, having initially made contact through Twitter to share appreciation for each other’s’ collections but have since found there to be significant cost savings in joining forces on international buying trips.

UK “Needs More Women in IT”
Human CapitalTax

UK “Needs More Women in IT”

Increasing the number of women working in IT could generate an extra £2.6 billion a year for the UK economy, according to a new Centre for Economics and Business Research report commissioned by Nominet, the internet company best known for running the .uk internet infrastructure.

Women currently make up less than one fifth of the IT workforce. Based on current trends, the IT gender gap is set to widen slightly over the coming years. The report found that if the gender gap reduced and women filled the skills shortage in IT, the net benefit for the UK economy is estimated to be £2.6 billion each year.

The report found that 76% believe they lack suitably skilled staff in IT. Of these, 58% say this negatively affects productivity levels, estimating on average that productivity levels are 33% lower as a result. And 59% agree that their IT team would benefit from having a more gender-balanced workforce, while only 7% disagree. Improved communication skills (52%), improved staff morale (48%), and bringing new ideas to the organisation (46%) were the most frequently cited benefits.

The report found that low female participation in IT education is a key factor in the workforce gender gap. Only a third of ICT A-level students and less than a tenth of Computer Studies A-Level students are female. The imbalance remains at university, with girls accounting for only 19% of students taking computer science degrees. At present, only 9% of female students taking IT degrees go on to an IT career, compared with 26% of men.

The research also found that 53% agree that women find working in technology jobs less attractive than men do. Of these, 60% of believe that the IT profession is still perceived to be male-dominated, and 33% think IT is not promoted enough as a viable career option for girls in school or college.

Nominet’s Director of HR Gill Crowther said: “The digital economy is driving economic growth in the UK. Given the extent of the IT skills shortage, we can’t afford to only recruit from half the talent pool. It’s alarming to think that, if current trends continue, the IT gender gap will get bigger rather than smaller. We need to attract more women into the technology industry at every level and this starts with encouraging girls at school and university to study IT subjects. The new curriculum coming into force in September offers a fantastic opportunity for girls to become engaged with more technical subjects as the study of computing – and coding – becomes compulsory for all schoolchildren.”

Brewery Aims to Hitch up Global Economy
Human CapitalTax

Brewery Aims to Hitch up Global Economy

Two Tales Brewing, a family-owned brewing company from the Czech Republic that exports beer novelties around the globe, is planning to boost the global economy through a unique charitable marketing campaign.

Targeting the United States—which the company has determined to be the home base of the financial crisis—Two Tales searched for the root of the problem, exploring college dropouts, criminal activity and drug use. Exhaustive research brought the company to the unequivocal conclusion that the common denominator amongst all issues considered is none other than sagging trousers.

Two Tales has therefore pledged that for every six pack sold during the campaign they will donate a belt to an American citizen in need.

“It’s not only a matter of taste, like with our beers,” said Se Padilla, one of Two Tales Brewing’s founders. “This project is of pivotal importance to us. We have the chance to stand up for our beliefs as a company, but we also have the power to work towards the greater good: reviving the global economy.”

The company’s owners are convinced that with Americans’ hands freed from holding up their trousers, they will be free to carry the burden of the economy.

“It’s time for small countries to make history,” explained Jan Martasek, co-founder of Two Tales Brewing. “For the first time ever, a country known for its ice hockey players is now coming to the aid of a nation thirty times its size, with the help of craft beer,” Martasek concludes.

Two Tales Brewing was founded in 2007 by US citizen Se Padilla, professional musician, operator of diverse bars and restaurants and owner of the Prague Beer Museum, and Czech Canadian Jan Martasek, a financial investments manager.

The current Two Tales Brewing product spectrum consists of six different types of craft beers, from lager, ales and flavoured to non-alcoholic, all brewed in Bohemia under the Two Tales brand. The beer specials are available in 0.33 l bottles and kegs. Most exports land in the Nordic countries and in South-east Asia.

Competition Intensifying for Human Capital Management Vendors
Human CapitalTax

Competition Intensifying for Human Capital Management Vendors

In its first half 2014 Technology Value Matrix for Human Capital Management (HCM), Nucleus Research finds leading vendors are increasingly consolidating core Human Resources (HR), talent management and workforce management (WFM) functions onto a single platform.

It also found that, where mid-market vendors are innovating to develop new functionality from the ground up, larger, established vendors are looking to acquisitions and integration of their existing point solutions to build out their platforms.

There is nothing ‘magic’ about the Nucleus Value Matrix, which categorizes vendors according to usability and functionality. This determines which solutions provide the most value to organizations. While large vendors such as IBM, Oracle and SAP have kept pace with each other by acquiring smaller entrants in traditional and non-traditional labor management since last year, flurries of new investments have helped to establish smaller, mid-market vendors as capable challengers. Ceridian, Infor and Ultimate are competitively positioned to potentially overtake Oracle and SAP as HCM leaders while Cornerstone and Sum Total Systems continue to challenge, gaining ground in the leader quadrant.

“Competition is reaching a fever pitch as vendors shift from point solutions to the end-to-end human capital management platforms customers are demanding. And with the establishment squaring off against some well-financed midmarket players, it’s a battle of acquisition versus new innovation, making HCM one of the most exciting and driven areas in enterprise software,” said Zachary Chertok, analyst at Nucleus Research.

The Nucleus Matrix additionally finds vendors are linking HCM with Big Data analytics and business intelligence (BI) focusing their efforts on providing integrated functionality across the core competencies of HCM while integrating HCM into the bigger picture of operational analytics. Many are integrating their data sets across multiple solution offerings to compile analytics into common dashboards that make data more accessible, and that provide new and adaptive insights and visibility for real-time problem solving. Nucleus has recently seen increased interest in new innovations and new strategies exploring cloud capabilities and social collaboration.

Human Capital Centre of Expertise Launched
Human CapitalTax

Human Capital Centre of Expertise Launched

Pronounced “UKC,” the company helps employers avoid the spiraling costs associated with bad hires. It is the brainchild of founder Danny Kellman, who has witnessed first-hand the detrimental effect that hiring the wrong employee, from front line to leadership level, can have on an organisation.

“The effect of hiring the wrong person can resonate throughout a company,” said Kellman, whose experience encompasses 10 years in a variety of HR functions. “It isn’t solely about the cost of training and time invested in bringing that new employee in. It’s about the impact on team morale, employee engagement, and productivity, too.”

HUCACE offers what it considers to be a “first of its kind” one-stop talent acquisition experience utilising the application of science, technology, and emotional intelligence.

Employers can select which stage of the recruitment process they need assistance with, and choose from a range of comprehensive services including:

– Recruitment Process Outsourcing (RPO)

– Job Postings

– Pre-screening questionnaires

– Realistic job preview surveys

– Psychometric assessments

– Job-specific skills tests

– Interview process consultation or creation

– Reference and Background checks

“Our offering is unique as our clients can select a single element, or a bundle of services – whatever meets their specific needs,” Kellman said. “For instance, the psychometric assessments and background checks aim to significantly reduce recruitment costs and dramatically increase ROI by identifying the best candidates for each specific vacancy.”

Kellman is emphatic that candidates, as well as employers, receive the highest quality of service. “We ensure that all applicants are treated with respect and dignity throughout the selection process,” she said.

Allegro Named in '20 Most Promising' List
TaxValue Chain Management

Allegro Named in ’20 Most Promising’ List

Allegro Development Corporation, a leading provider of commodity value chain and risk management (CVCRM) software, has been named by CIO Review Magazine as one of the top 20 Most Promising Risk Management Solution Providers for the Capital Market.

The magazine featured Allegro in its March edition citing its contributions to the commodity value chain, specifically the software’s ability to help clients better monetize their assets, reduce risk and realize greater returns in a shorter span of time.

Allegro’s Chief Executive Officer, Ray Hood said: “The uniqueness of this solution is that it allows customers to select only the components and functionalities they need, while simplifying deployment and enabling companies to quickly expand into new markets.”

Allegro’s flagship product, Allegro 8, has an enterprise-level risk management architecture that allows companies to manage operations and integrate new components as their needs change. The software is used by traders, risk managers, and decision-makers across the globe. The solution uses grid computing to manage numerically intensive processes such as real-time valuation and optimization and enables traders and marketers to view existing positions and to dynamically optimize them based upon real-time connectivity to more than 22 commodity exchanges as well as streaming pricing data.

99p Downloads Hit by VAT Change
Indirect TaxTax

99p Downloads Hit by VAT Change

 

Changes to how VAT is taxed may mean digital stores like iTunes and Google will no longer be able to offer 99p music downloads.

New legislation, announced as part of the recent budget, requires online retailers to put VAT on media downloads based on a customer’s location.

Both Apple and Amazon have, until now been able to place lower VAT on downloads, due to their headquarters being based in Luxembourg. However the new scheme would instead be based on the location of the consumer, meaning buyers in the UK would pay 20% as opposed to Luxembourg’s 15%.

It is still not clear whether any increases would be passed onto consumers or taken on by publishers, however the end of the 99p download could have a huge impact on digital sales, which now account for over half of total sales figures in the UK.

The move comes as the Government attempts to get tougher on multinationals and forms part of ‘international efforts to develop tough, new global tax rules’, which forecasters suggest could generate an extra £300m in tax revenues during the first year.

A 2012 report revealed that the UK was losing out on more than £1.5bn in VAT every year on digital services, including music and video downloads.

40p Tax Rate
Corporate TaxTax

40p Tax Rate

The Chancellor’s likely move not to give relief on the 40p tax rate in his Budget tomorrow has been branded as ‘short termist’ and slammed as a ‘disincentive to aspiration,’ by the boss of one of the world’s largest independent financial advisory organisations.

The comments from Nigel Green, deVere Group’s founder and chief executive, come a day before George Osborne’s penultimate budget before the next general election, in which he is expected to reduce the threshold for the 40p tax, thereby dragging more middle-class workers into the higher band.

Mr Green comments: “Increasing the tax burden on more and more middle class workers by pulling them into the top band will result in a significantly higher proportion of the population with a reduced ability to save for their futures.

“With many of today’s working population likely to spend 25 to 30 years in retirement, creating additional barriers to saving adequately for older age – which is what this measure does – is extremely short termist.

“There needs to be rewards, such as greater pension tax reliefs, not disincentives, for prudently putting money aside into pensions.

He continues: “Clearly, should the majority of the population be financially independent in older age this means not only will they and their families be able to enjoy the retirement they desire with a higher disposable income, which will boost the economy, but they are likely to be less dependent on the State.

“With a steadily ageing population, should the middle classes not be able to financially support themselves, the State’s already burgeoning welfare bill will skyrocket due to increasing medical and care costs.”

As a further indictment on the 40p rate, Mr Green, deVere Group’s chief executive, adds: “It clearly serves as a disincentive to striving middle class workers from wanting to earn more, a disincentive to working harder, a disincentive to securing a promotion – in short, it serves as a disincentive to aspiration. Naturally, this is all to the detriment of the British economy, both now and for the longer-term.”

The Patent Box: Unfair Competition?
Corporate TaxTax

The Patent Box: Unfair Competition?

Businesses are under immense pressure to produce innovative new products to keep up with the competition.

The UK’s Patent Box tax incentive was developed as a spur to industry to develop and patent new products and encourage innovation. But now this generous tax regime, introduced in April 2013 has come under fire from other EU countries, notably Germany, who feel that it represents harmful competition in the race to attract foreign corporate investment.

The Patent Box was introduced into UK tax legislation in April 2013. It allows profits arising from qualifying patents to be taxed at a reduced rate of corporation tax. If the Patent Box continues, by 2017 the rate of corporation tax applied to Patent Box profits will be 10%, a significant discount compared to the anticipated rate for other taxable profits.

The rate is currently 15.2% compared to the main rate of corporation tax of 23%. It will fall to 13.3% on 6 April 2014 and gradually taper down to 10% from 1 April 2017, when the main rate of corporation tax is expected to be 20%.

Too much of a good thing?

The challenge to the Patent Box comes as part of a general clampdown on tax regimes that are perceived to facilitate profit shifting rather than genuine economic development. The EU’s Code of Conduct Group has fielded complaints from several member states (including Germany) that the Patent Box is too generous and represents harmful tax competition.

The EU’s Code of Conduct Group was not able to reach a majority decision about this and the matter was referred up to The Economic and Financial Affairs Council (ECOFIN). ECOFIN met in December but was unable to conclude whether the UK’s Patent Box regime is a ‘harmful’ tax incentive. It recommended a review of existing preferential intellectual property regimes by the European Commission, which is expected to be concluded by mid-2014.

The review will look at economic substance and compliance with OECD principles of each regime. It is likely to differentiate between measures that encourage genuine economic activity and those that merely facilitate profit shifting. The review is expected to take place under the Greek presidency of the EU and be concluded by mid-2014.

The ‘active management’ test

The review of the Patent Box will concentrate on whether the ‘active management’ test, which does not require research and development (R&D) to be performed in the UK, is ‘harmful’ tax competition.

‘Broadly ‘active management’ means input into the decision-making processes relating to the development and exploitation of intellectual property rights.

This would include activities such as deciding on whether to maintain protection in particular jurisdictions; granting licences; researching alternative applications for the innovation or licensing others to do so.

Where the rights are being exploited by incorporating the item into products, activities such as deciding on which products go to market, what features these products will have and how and where they will be sold would also count as ‘active management’.

The UK Government robustly defends its view that in today’s global business environment it is not realistic to demand that R&D has to be performed in the UK and if there was a requirement to carry out the R&D in the UK, this would be in breach of European Union law.

The European Commission’s concerns about the ‘active management’ test are ill founded.

The UK tax legislation has been carefully drafted so that passive owners of qualifying patents cannot benefit from the reduced rate of corporation tax. Groups that carry out research and development outside of the UK not only have to adhere to the ‘active management’ conditions but also to strict ‘development’ conditions before Patent Box benefits can apply. The furore caused by the Patent Box in Europe highlights the issues facing multinational businesses operating in different, often competing tax regimes, where one country’s ‘generous tax incentive’ is seen by another as ‘unfair competition.’

In any event, the EU Code of Conduct is not legally binding, so the UK Government potentially resist any adverse findings that come out of the review, which could be a gift in the current political environment.

So for now, it is business as usual, with the expectation that the Patent Box incentives will continue to be available in its current form.

Companies should be looking to make the most of a tax regime that other EU members think too generous.

Stephen Alleway Joins Questro International
TaxTransfer Pricing

Stephen Alleway Joins Questro International

Questro International, a new transfer pricing advisory firm has announced the opening of their first office in Zurich and the recruitment of Stephen Alleway as their new head of Transfer Pricing in Switzerland.

Questro International was founded in October 2013 by experienced and internationally operating transfer pricing professionals. Stephen joins the firm after 15 years of Big 4 transfer pricing experience at both PricewaterhouseCoppers (PwC) and Deloitte covering the UK, Australia, and Switzerland.

Stephen was most recently the founder of Deloitte’s transfer pricing group in Switzerland and assumed a variety of transfer pricing leadership roles during his time as a Partner with the firm.

Stephen has more than 15 years of tax experience in the field of transfer pricing. He has acquired broad experience in leading large global projects for Swiss and foreign headquartered multinationals.

Stephen has been named as a leading transfer pricing adviser in various publications since 2007 and has been listed in recent Euromoney/Legal Media Expert guides. He was cited in the 2012 publication of World Tax, the International Tax Review’s directory of leading tax advisory firms around the world, as an adviser recommended for his transfer pricing work by contemporaries in the Swiss market. He is a contributor to publications on transfer pricing and speaks widely on the subject in Switzerland and Internationally.

Before joining Questro, Stephen was recruited in 2006 by Deloitte AG in Switzerland to establish and build up a transfer pricing group in Switzerland. Under his leadership, he established a well regarded team of professionals and helped raise Deloitte’s profile locally. This was recognised in the market with various client wins and awards, including International Tax Review’s Transfer Pricing Firm of the Year Award in May 2008.

Stephen is an experienced practitioner, having led client assignments in many countries around the world and across all industry sectors. He holds a Bachelor of Social Science Degree (1st Class with Honors) from The University of Birmingham.

Stephen comments: “I am delighted to be joining a group of senior professionals in launching a new and truly innovative transfer pricing advisory firm. Transfer pricing has never been higher as an issue on the global tax agenda. For me, it makes perfect sense that our first office should open in Switzerland, which finds itself at the heart of so many client’s TP structures and is under great international scrutiny within the current G20 debate about tax base erosion and profit shifting”