News round up… December
W/C 20th December
Shrinking profits prompt shrinking products
Confectionary companies are reducing the size of their products before January’s hike in VAT. Cadbury and Nestlé are two of the companies that will be cutting the size of some of their biggest brands, while simultaneously increasing the price. Brands affected include Maltesers, Mars Bars, Toblerone, Dairy Milk, all of which will be downsizing from February 2011. David Jago, of consumer analyst Mintel, said, ‘At first companies were reducing pack sizes but keeping prices the same but now both things are happening at the same time and people are starting to notice.’
HRMC scraps tax breaks for caravans and boats
More than 300,000 caravan owners will be paying up to £100 more towards running their home after HM Revenue & Customs withdrew tax breaks. The long-running concessions, which include VAT and utilities charges, have been found incompatible with EU law. VAT will now be charged on each caravan’s share of water and sewerage charges and a one-off connection on utilities will garner £40 in tax. Simon Elliott from Bridge Leisure Parks said, ‘It’s something the industry and the holiday market could do without.’ Similar concessions for boat owners have also been scrapped in a move that HMRC estimate will raise £3m in tax.
Twitter permitted in court
The Lord Chief Justice for England and Wales has permitted the use of Twitter in court. The move came after journalists asked to post ‘tweets’ in court during the bail hearing of WikiLeaks founder Julian Assange. The Lord Justice Judge's ruling said, ‘The use of an unobtrusive, hand-held, virtually silent piece of modern equipment for the purposes of simultaneous reporting of proceedings to the outside world as they unfold in court is unlikely to interfere with the proper administration of justice.’ The interim guidance is effective immediately, with a full consultation being prepared for the new year.
W/C 13th December
New Year VAT rise prompts £9bn shopping spree
Shoppers are expected to spend £9bn, an average of £650 each, before the VAT rises to 20% on 4th January. According to research by Santander, people living in the South East are expected to spend the most at £840 each, while those in the North West are estimated to spend on average £357 each. Electronic items were highest on the list of pre-increase purchases, while clothes and alcohol came second and third respectively. The standard level of 17.5% was re-established on 1st January 2010 after the government dropped the rate to 15% in November 2008 to encourage spending.
Taxi tax relief abolished
The Office of Tax Simplification has announced the government will abolish tax relief on the cost of late-night taxis for employees who work late. Current rules stipulate that employees avoid paying income tax and national insurance on infrequent taxi journeys taken by employers working after 9pm. However, the OTS claims this discriminates against shift workers, who aren't applicable for the relief since late-night taxis fall within their ‘usual working hours’. The proposals have been criticised for sidelining safety. Roy Maugham of accountants UHY Hacker Young, said, ‘Many employers will be angry that the personal safety of their employees seems to have been completely sidelined in the decision-making in order to allow the Treasury to rake in a bit more tax.’
W/C 6th December
Higher-strength beers sees higher-rate tax
Tax on high-strength beers will increase in 2011, while levy on weaker beers will reduce, in attempt to curb ‘problem drinking’. Duty on beer with an alcohol content of 7.5% or more will be subject to the higher duty from autumn 2001, while low alcohol beer with strength of 2.8% or less will be reduced. It is hoped this will influence the behaviour of drinkers, with problems associated with super-strength lager, as identified by health and homelessness groups. Health Secretary, Andrew Lansley said, ‘It's a scandal that life expectancy among homeless people is in the low 40s… We need a new approach to public health, one that directly involves the many influences on our choices.’
Ireland facing ‘traumatic and worrying time’
Ireland’s finance minister, Brian Lenihan, has warned that people face a ‘traumatic and worrying time’ during his budget presentation. The tough plans outlined spending cuts of €4.5billion (£3.8bn) and tax rises of €1.5bn (£1.3bn). The scale of Income Tax will expand to include low-income workers within the tax net and Ireland’s 450,000 unemployed will be enrolled on internships and training positions. Lenihan said, ‘The scale of this adjustment is demanding but it demonstrates the seriousness of our intent.’ Voting on the budget began this week, and will be fully enacted in spring when Prime Minister Brian Cowen has vowed to resign.