MP’s expenses
What can you claim for?
There can be no doubt what the biggest news story of the past few weeks, if not the year, has been – MP’s expenses claims. From moat cleaning to duck houses, Kit-Kats to bath plugs, the variety of items claimed seems to have no bounds. However, there has been one constant to be found – the mantra that “the claims were within the rules...”.
The public reaction to all of the above has been that “there is one rule for MPs and another for the rest of us”, however this need not be the case where the paying of tax is concerned. There are plenty of opportunities for taxpayers to organise their affairs in such a way that they are “within the rules” yet produce a much lower tax liability than HMRC and the Government may like.
Examples include;
Directors and key employees being rewarded by their employer company with no income tax liability being due.
Reduce your income tax liability for the current and/or previous tax year to £0.
Planning to reduce the Inheritance Tax liability on death to £0.
Reducing Stamp Duty Land Tax on property purchases to 0%.
Mitigating both corporate and personal capital gains.
If you would like to stay within the rules yet reduce your tax burden please do not hesitate to contact us on 029 2069 3700.
The Credit Crunch, how did it all begin?
A knock-on effect for credit markets and the wider world economy
As financial institutions globally announce varying degrees of difficulties and losses caused by toxic assets and bad debts held on their balance sheets and with the share prices of some of the UK’s largest banks falling to unprecedented levels, the word ‘subprime’ has become synonymous with these historic events.
The beginning of the subprime mortgage crisis can be traced back to 2001. During this year the US economy was first hit by the dotcom bubble crash, which was then followed by the events that took place on September 11th. In the wake of this, the US Federal Reserve dropped interest rates to 1 per cent, making borrowing cheap as the US housing market began to boom. Many mortgage lenders thought they saw a particularly lucrative market by lending to adverse credit subprime borrowers, because they would be able to charge higher interest rates to their higher-risk customers.
As house prices continued to increase until 2006, refinancing these mortgages through homeowner loans or remortgaging was relatively easy. However, house prices had increased sharply along with interest rates, and by the end of 2006 house prices began to deflate. Soon the US housing bubble popped and house prices slumped, leaving many people in a position where they found it difficult to refinance due to negative equity in their property. People began to default on their mortgages, and this became even more apparent during 2007 and 2008 with many more properties being repossessed as a consequence.
A considerable number of mortgage lenders who lent to subprime borrowers repackaged their debt as mortgage-backed securities (MBS). The cash flow of these had been backed by the principal and monthly interest payments of the mortgages. Because of the boom in the US housing market, many banks and hedge funds saw MBSs as good investment opportunities. However, when the cashflow on them stopped due to borrowers defaulting, the securities lost their value, resulting in huge losses for those that had invested in them. As a result these events have had a knock-on effect on credit markets and the wider world economy, and are the route of the current financial crisis we are experiencing.
Banking bail-out
£500bn underwritten and guaranteed by the Treasury
The Prime Minister, Gordon Brown, announced on 8 October 2008 that he would make available hundreds of billions of pounds to underwrite banking debts that would be underwritten and guaranteed by the Treasury.
This unprecedented action was taken in an attempt to underpin the financial markets, prevent a complete collapse of the system and stave off a deep recession.
Taxpayers could end up becoming liable for this £500bn bail-out and some banks are likely to become partially nationalised as a result. On the same day a number of world banks, including the Bank of England, also cut their interest rates in a coordinated attempt to bring some reassurance to the global financial markets.
The Bank of England’s Monetary Policy Committee (MPC) cut the base rate by 0.50 per cent to 4.5 per cent, the biggest cut for seven years. This was subsequently followed by some of the biggest mortgage lenders reducing their variable and tracker rates. Millions of homeowners should benefit from the 0.50 per cent cut to interest rates, as the Halifax and Bank of Scotland, owned by HBOS, Lloyds TSB and Woolwich, the mortgage arm of Barclays, announced they would all pass on the full rate cut to homeowners on their standard variable rates. The new rates come into force on 1 November 2008.
Under the terms of the emergency rescue announced, the UK government will raise up to £50bn to buy stakes in at least eight banks. Taxpayers will buy specially issued preference shares in these banks, and the government has set a three-year period to recover this money. Banks will also be able to borrow higher levels from the Bank of England for short-term loans, offering credit of £200bn under its special liquidity scheme.
The Chancellor, Alistair Darling, also announced that the 300,000 UK retail Icesave savers with £5bn deposited in the Icelandic internet bank would have their deposits guaranteed even if the deposits were worth more than £50,000. Commenting, Alistair Darling said the implications for the public finances of the ‘essential’ measures were ‘exceptional and mostly temporary and will protect taxpayers by ensuring stability in the economy now.’
This was followed by warnings that more than 100 local councils, police authorities and fire services could lose up to £1bn currently held in Iceland’s bankrupt system. Charities, including children’s hospices, have also warned they could be at risk of losing £25m.
