Flash Gordon Sinks Further With Limp Stamp Duty Reform

Amid the meltdown of the British economy we hear Gordon Brown say that the "UK is well-placed to withstand the global downturn". Comforting Gordy, thanks, only the OECD forecast shows that Britain is the only major economy in the world which will face recession in the next six months.

The forecast is the first time a major international forecaster has explicitly said Britain is facing a technical recession, in which the economy contracts for two successive quarters.

Jorgen Elmeskov, the OECD's acting head of economics, said: "Financial market turmoil, housing market downturns and high commodity prices continue to bear down on global growth, while at the same time evolving rapidly.

So what do we have in response from Flash Gordon to save the UK? We have Alastair Darling, that’s what we have.

So, OK he has made a few cock-ups; business tax, capital gains tax etc but surely this time we will see something spectacular to give the UK the shot in the arm it needs?

(Drum roll please)... The suspension of stamp duty on properties under £175,000 for a year!!!

Wow...

Stamp duty is to be suspended on homes worth less than £175,000 as part of a government bid to boost the ailing housing market. Alistair Darling announced that homebuyers will be offered a "holiday" from the tax, though it is unclear who exactly will benefit or for how long.

Forgive me for being sarcastic but isn't this a bit like giving free flights to Baghdad, free mountain tours in Afghanistan or would you like to have a free hotel stay in Mogadishu?

It's welcome, but does the labour government really think that this will help? Lets look at the average price of a house in the UK; £219,262 (according to the BBC) and the average salary in the UK (according to ONS) is approximately £22,000. Do the math on lending figures. Even if there are two people earning the national average wage they are still talking a loan of 5x earnings for an average house and they still would not benefit from this so-called 'relief package'.

In this current climate do you think that lenders will be doing much of this? Me neither. Also, do you think that suspending stamp duty will have new buyers rushing into the market, when most commentators think there is still plenty of downside? Not likely. There are other measures being brought in along with this including £200mn to help those already in homes.

While I applaud measures to help with those already in homes that are to be assisted with mortgage payments or shared equity deals, £200 mn doesn't seem a lot.

"We are looking at about £200 million over the next couple of years for families who are struggling with mortgages, there will also be £100 million to help with mortgage interest payments to keep people in their homes," Hazel Blears, Community Secretary told BBC Breakfast.

A friend (a Labour supporter) asked me recently "What would you do?". "Simple" I said

"Roll back the 1000's of stealth taxes that have been forced on the UK for the last 11 years, cut fuel tax, abolish stamp duty or re-introduce MIRAS (Mortgage Interest Relief At Source), regulate lenders more strictly so that loan procedures are followed, and suspend, for one year, all overseas spending on aid and loans.

Suspend funding of opera and any other thing that rich people can afford to fund anyway.... Basically, batten down the hatches and take a hit on revenue so that the British people can actually get through what is, no doubt, going to be a tough time.

My friend said "That's just ridiculous, can't be done, the rich should pay more in tax... that would sort it out"

And this is why the UK needs a new government, the only answer that Labour supporters have to the incompetency of this regime is to blame, and therefore tax, those who make the most money, oh and Flash Gordon... who, even in the Labour ads is known as "Not flash, just Gordon". I coudn't agree with Labour more... Flash Gordon was one of my childhood heroes...Gordon Brown couldn't be less heroic.

Can The Last Company To Leave, Turn Off The Lights.

Having written an article about the new taxation rules from Alastair Darling and how these would see businesses quitting the UK, we now see more and more companies upping sticks and moving to pastures new.

George Osborne Britains Shadow Chancellor wrote in a letter to Alastair Darling that a decision yesterday by serviced office provider Regus to leave the UK is more evidence of the damage done by the confusion caused over the business tax regime.

Mr Osborne added that the changes, combined with 10 years of a Labour Government, had "left us with some of the highest corporate tax rates in the European Union" and called on the Chancellor to fund a cut in the UK rate by simplifying capital allowances.

But Mr Darling dismissed Mr Osborne's accusations out of hand, telling him he was "wrong".

"Surveys by respected international bodies including the World Bank and the World Economic Forum consistently show that the UK is successful at providing a business friendly environment and a competitive tax system," Mr Darling said in his response.

Regus is the third company this week to announce that it is to move abroad because of business taxes. Asset manager Henderson and engineer Charter are moving to Ireland where the tax regime is more business friendly and Regus - whose chief executive Mark Dixon already lives in the tax haven of Monaco - is moving to Luxembourg.

They will follow pharmaceutical group Shire and United Business Media who have already relocated to Ireland this year.

Charter, Regus and Henderson all said concerns about possible changes to Britain's tax regime were a key driver of their decisions to leave. "It is fair to say tax is an important consideration for us and we feel like we are doing the right thing," said Mr Dixon yesterday. "I think certainty of tax is crucial in business and what we want is for there to be no surprises. Luxembourg can offer that." Mr Dixon, who hails from Essex and started life as hot dog salesman, also said Luxembourg offers value for money that London, with sky-high property prices, does not. The Regus boss warned the capital must try harder to keep international businesses.

"London has to face up to the fact that the world has become a lot flatter and is much more competitive than it has ever been. As our business model proves, you can be based almost anywhere these days," he said. Regus shares slipped 1¼ to 74½p, valuing the group at £706m.

Philip Yates, chief executive of Henderson, said earlier this week: "There is too much uncertainty about the long-term structure of the tax regime and the fact that so many other companies are looking at a move is a more eloquent testament to that than anything I could ever say."

Mr Osborne urged Mr Darling to reduce the main corporation tax rate from 28pc to 25pc, and bring about a "permanent simplification of the tax system".

The shadow chancellor concluded: "With companies leaving Britain, weakening an already ailing British economy, I urge you to adopt our proposals in order to restore our competitiveness and help prevent any more companies from deciding to leave the UK."

Mr Darling, however, told Mr Osborne the corporation tax rate remains under review, but added changes must be "consistent with transparent and fair tax policy that protects the sustainability of the public finances".

Good news is that Labour are hanging on to power by the skin of their teeth and, barring David Cameron being found with an orange in his mouth, wearing suspenders and visting 5 hookers dressed like Nazis, he should be in power shortly and we can say au revoir to this disasterous experiment with conservative-socialism.

The Old Grey Whistle Tax

You have to love the Internet. Gone are the days where articles can be written and it's only Mr Giles Farquarson-Smyth who can make a comment in a long-winded letter to the Times.

Simple and straight to the point are the rules of today's commentators. My favourite of the day was from Mr Fredrick Davies commenting on an article about Labour's tax hikes.

"I sometimes wonder what those idiots in the Inland Revenue are thinking; I mean, come on, you cannot be THAT stupid and be able to hold a job, can you?"

Marvelous.

What was this precision perfect insult about? Labour's complete cock up of the capital gains tax rules, an old favourite of ours.

You remember this farce. Darling decides to make poster boys of private equity millionaires ripping off tax payers by having carried interest in their funds which has them taxed at only 10%. Darling says he is having none of that and creates a flat rate of 18%.

Realising he has now just almost doubled the tax for hard working people who have been running a business for years, he brings in the 'Entrepreneurs Relief' which is a one time £1mn taxed at 10%.

Fair enough, but in practice this is now causing the golf courses of Britain to be deserted of the grey haired retirees who have built their businesses, paid their dues and moved on to well deserved golfing and gardening.

These once great business owners had happily settled into retirement, leaving the running of their enterprises to the next generation. But they had retained their shares as an investment, for old time's sake.

Enter Darling's capital gains Entrepreneur's Relief - and all hell breaks loose.

The more pessimistic predictions suggest that our grey heroes will leave the 19th hole a little worse for wear, preparing themselves to go back to their companies and ask to be reinstated.

The reason being is that the new tax relief comes with some strict rules (no surprise there then), including one that requires the entrepreneur to own at least 5 per cent of the shares and be either an office holder (i.e. a director) or an employee of the business if they want to claim the relief when the shares are finally sold.

Basically leaving the oldies holding a fat tax demand if they sell their shares without complying with these rules. Having already taken a hit by the retrospective loss of indexation (which inflation-proofed gains before 1997), they are unlikely to be in the mood to help the Chancellor out any further.

All this against the backdrop of falling stock market, falling houses prices and a potential recession. Is there any wonder that Gordon Brown has the lowest approval numbers in history?

The only 'Entrepreneur Relief' on the horizon is the impending crushing of the Labour Party in the next general election. I just hope the next mob take a good look at the indirect taxation scams that have been thrust upon the people of Britain and sweep them aside.

I fear, however, that David Cameron is Tony Blair in a different party, rather than Maggie Thatcher in a suit.

Private Equity CGT Doubles Under the UK Tax Reich

Private equity and advisory firms have expressed their 'disappointment' at the latest tax bonanza announced by the new Chancellor of the Tax Reich, Herr Darling, after he announced that business taper relief on capital gains will be abolished and replaced with a flat capital gains tax rate of 18 per cent from April 2008.

It is a reduction from the previous top rate of 25 per cent but the move abolished the previous 10 per cent reduced rate for investments held more than two years.

The Chancellor's 'initiative' was prompted by a surge of political testosterone on both sides of the Atlantic over the ability of private equity firm partners to have carried interest profits from their funds taxed at favourable rates of capital gains tax rather than as income, at a rate of up to 40 per cent.

Herr Darling announced to Parliament in his Pre-Budget Report: 'I can tell ze house ze changes I propose to capital gains tax, taken togezer with ze tax loopholes zat I am closing, will ensure zat zose working in private equity pay a fairer share.' Clicking his heels he then went on to start on non-domicile taxation, but that I shall save for another day.

Simon Walker, chief executive designate of the the British Private Equity & Venture Capital Association (the 'British Resistance'), says: 'The BVCA notes that the chancellor has placed emphasis on innovation, enterprise and the need to maintain the UK's competitive position.

'However, we are concerned that the elimination of taper relief means all capital gains, including carried interest, will now be taxed at a single rate, no matter how long they have been held.

'This move will hit not just private equity but thousands of venture capitalists, family businesses and small and medium-sized companies. A rate of 18 per cent means capital gains tax is higher in Britain than France (16 per cent), Italy (12.5 per cent) or the US (15 per cent), let alone countries like Switzerland which have no CGT.

'The British private equity industry - which accounts for 60 per cent of the European market - is core to maintaining London as the world's financial capital. We regret the rise in the effective rate our investors will pay, but hope the industry will now be recognised for the contribution it makes to pension funds and the wider economy. Above all, private equity and venture capital need certainty and stability.'

Anneli Collins, head of private equity tax for KPMG in the UK, says: 'PE bosses will indeed now pay the same tax rate as their cleaners. But entrepreneurs who have built up businesses over their lifetimes and were perhaps looking forward to selling up to fund retirement will find that unless they can do it before next April, they will pay eight per cent more tax than they were expecting to.

'True, the changes mean a single rate will be in force, but the playing field has not been levelled at all. UK private equity will be taxed at 18 per cent, while non-UK domiciled private equity will be subject to a flat tax of £30,000 per year - and then only after seven years.'

It is obvious that there will now be a stampede of business sales before April 6th next year as business owners seek to avoid the tax, for those suffering the problems of the credit crunch this will just exacerbate the situation.

According to Grant Thornton corporate tax partner Stephen Quest, the increase in capital gains tax represents in effect an 80 per cent rise from what is currently paid. It may act as a major disincentive for private equity executives to take the risks they were currently taking, and is likely to impact negatively the industry's recruitment and retention rates.

In a cock up of Biblical proportions Herr Darling may have given the industry the kick up the backside it needs to leave the UK. The next 12 months are already set to be extremely difficult for buy-out firms, who reported their most negative forward-looking expectations ever in a survey carried out by Grant Thornton Corporate Finance last week, with 63 per cent of private equity executives predicting a downturn in deal values.

Reassessing business models will be the order of the day for private equity firms and it is plain that the competitiveness of the UK will diminish when this comes in. I believe that Herr Chancellor just made a massive error and may go back on this tax hike.

The Chancellor obviously sat down with his, equally as dim, lieutenants and decided that rich private equity Barons were taking the proverbial out of the tax man and so came up with a half baked scheme that now encompasses people who have worked all their lives to create a business and nearly doubled their tax rate.

Gordon Brown has never been one of my favourite politicians as I believe he is a 'Pinko Commy' willing to suck the life out of the UK through stealth taxes. In his time in the cabinet he has made over 85 tax hikes which has equated to £2.3 Billion per week more in tax in the UK than in 1997.

This latest Brown inspired - Darling delivered cock up is by far the most badly timed, ill thought out political vomit to come out of the Tax Reich that I can remember.

Grant Thornton said 'This is the most negative forecast we have ever seen from the private equity sector and a huge drop in confidence from just three months ago. With the capital gains tax increase announced today, it seems the light at the end of the tunnel is an oncoming train.'

In conclusion, there is one thing I would like to highlight from the above post that you really should pay attention to ".....countries like Switzerland which have no CGT."

Will the last person to leave the City turn the lights out please and I will meet you at Geneva airport.

If you would like to get a taste of the community in Switzerland, there are tons of expat site...I like the look of a new one that has started...check it out here.....