In recent months the High Street retail industry has been lobbying for a more equitable tax system. In particular they want to see online traders charged a sales tax.

High Street retailers argue that online sellers can afford to drop their prices as they have much lower costs; for example they do not have to pay rates on retail premises. This allows the online businesses to make more profit, and capture a larger share of the market. A sales tax would help to level the playing field, increasing the prices charged by online sellers.

Alex Baldock, who recently became the boss of Shop Direct, the UK’s largest home delivery retailer, disagrees. He says:

“I don’t think [an online sales tax] is a good idea. If you tax businesses it should do three things: it should promote growth, promote jobs and be fair. An online sales tax fails on all three counts.” He added, “Whatever the reason is [for considering an online sales tax], it is misguided. I feel for people who pay rates, but it’s a business choice.”

No doubt the debate will continue. High Street retailers will likely continue their lobbying as long as they experience a steady leach of business to the online sector.
 

HMRC have created yet another taskforce to seek out businesses owners who are believed to be paying less tax than they should. The new team will be concentrating on holiday businesses in certain areas of the UK.

Initially, the tax investigation teams will be active in: Blackpool; the Lake District; North Wales; Devon and Cornwall. No doubt if their investigations reveal serious irregularities in the holiday industry, they will consider widening their net to other areas of the UK.

Hospitality traders in the affected areas should take steps now to get their house in order. It is likely that HMRC will want to see that businesses are compliant across a range of taxes. Including:

• PAYE – payroll
• VAT
• Business record keeping

Certain trades, for example restaurants, should ensure that they understand and are compliant with regards to tips and gratuities paid to staff or collected from customers on the bill – are they taxable or tax free receipts? How are they treated for VAT purposes?

Hotels and boarding houses will not only need to present a decent set of books to the tax man, but also reconcile these financial records with other records – for example does the income declared for room letting reconcile with the number of room bookings?

As HMRC is setting up teams to cover specific industries it is likely they will know what to look for. Be ready…

The following statement was published on the UK Parliaments website 2 July 2013.

Please note that the tax gap referred to in Margaret Hodge’s remarks is the difference between tax due and tax collected.

A statement from The Rt Hon Margaret Hodge MP, Chair of the Committee of Public Accounts:

These accounts give us a mixed picture. One of the most startling figures is the tax gap for VAT, which HMRC estimates at £9.6 billion. That is a huge amount of money – 10% of the VAT that should be collected and a third of the overall tax gap. Yet despite some progress, HMRC still does not comprehensively check all VAT returns and its response to the emerging threat from online trading has been far too slow.

I welcome the progress HMRC is making in tackling fraud and error in the tax credit system, but with £2 billion in overpayments last year it still has a long way to go.  And the personal tax credit debt balance is going up, not down. It now stands at £4.8bn, over £1bn greater than the target HMRC hopes to meet by the end of March 2015.

HMRC met its target to operate a normal PAYE service by March 2013, following previous problems. But it had to forego £953.3 million of tax in the process and there remain questions about its capacity to handle in year changes to taxpayer records. I also have concerns about HMRC’s real time information system (RTI), which has been rolled out before being fully tested. HMRC has chosen not to add in contingency for significant extra costs or measures to deal with major technical failure. This is worrying as the current cost of RTI is already expected to be £115.5m more than originally planned. HMRC is leaving itself exposed, which could be a real concern for DWP as Universal Credit relies on RTI.

HMRC is responsible for collecting all the tax due. It must do more to crack down on tax avoidance. And it needs to put taxpayers – the customer – at the heart of its services.

The appointment of Mark Carney as the new governor of the Bank of England has received guarded approval from the financial press this week who hope that he will take a more active role in stimulating the UK economy.

The Bank of England interest rate setting committee is meeting Thursday this week and is expected to reject any further boost to quantitative easing beyond its current level of £375bn.

The BoE's figures show that RBS and Lloyds have reduced the amount of money they lend to households and businesses, while Barclays has threatened to cut back following demands from the main City regulator that it must bolster its reserves. The Co-op, which recently abandoned its planned take-over of 600 Lloyds-TSB branches, is in trouble after discovering a large shortfall in its capital reserves.

The funding for lending scheme designed to cut the cost of borrowing has pushed down the cost of mortgages since it was launched last year, but unfortunately has made little difference to the level business lending.

A leading think-tank has called on Mark Carney to bypass the main banks with a direct intervention into the housing industry to support the building of 60,000 homes. The New Economics Foundation has said that instead of using quantitative easing to buy government bonds, the BoE should buy assets that will directly support the economy, which would mean purchasing bonds to support home building and energy efficiency, infrastructure projects and small business lending.

It will be interesting to see if the new broom sweeps clean and wakes up the Old Lady of Threadneedle Street, or, continues to brush these innovative ideas under the carpet!

 British cosmologist and astrophysicist Martin Rees has been charged with identifying a modern day Longitude Prize – this was set by the British Government in 1714 and promised £20,000 to the person who mastered the challenge of calculating longitude at sea. At the recent G8 conference Cameron is quoted as saying:

“What the world needs most of all right now is growth, and that growth in my view is going to come from small businesses and start-up businesses, more than from the big existing traditional businesses, so the whole agenda of innovation and entrepreneurship is absolutely vital,”

He added:

“There are so many problems in our world that need that amazing solutions – whether it is a cure for dementia, solving the problem of diabetes, having a flight from Britain to New York that's carbon-free… Let's challenge the public and challenge the scientist for which is the great problem we want to crack. I think it's an exciting idea and another example of Britain leading in innovation.”

The competition is open to everyone from individual citizens to academics and businesses. Any ideas?