This is a blog of my recent experience with these companies:
I was working from home this morning to get a bit of focus time, and was cold called. Now, my numbers are registered with the telephone preference service (TPS), so I shouldn’t get many cold calls at all. I was intrigued with this one because of the offer of a £1000 cash bonus if I had a pension and was under age 60. Sounds like a freebie to me! And I’m well under 60. It’s also a financial promotion, but I’ll leave that for another day.
So I pressed 5 on my keypad, as I have a pension and I’m under the age of 60.
I then got through to a young lady, we’ll call her Doris, who asked me a few questions about my pension which I was happy to supply. If Doris had asked ‘are you a regulated pensions specialist’ I imagine the call wouldn’t have gone on for very long! She did read out a disclaimer, quickly, which indicated that her firm (I forget the name) didn’t provide financial advice, and Doris then said she would get a case handler to call me back in 10 minutes to discuss my pension further.
10 minutes later another phone call interrupted my well-earned peanut butter sandwich.
This young chap, let’s call him Ben, explained he was from Pension Matters, which wasn’t strictly accurate. Pension Matters is a regulated FSA firm. Pension Matters Associates Ltd, who Ben was calling from, is not. At all.
Ben wanted to get hold of my pension fund details so they could tell me if it had been under-performing or not. Their Independent Financial adviser would advise me on this. Which is strange because they don’t have an IFA working for them and they’re not authorised to deal with pensions. But Ben assured me that I’d get my £1000 cash bonus that Doris had already told me, and with Christmas approaching I’d be foolish not to say no!!!!
The conversation then went a little bit, or very much, like this:
Me: Who pays the £1000 cash bonus”, because there is no such thing as a free lunch, right?
Ben: Yardstick Marketing pay you the £1000.
Me: just for telling me if my pension is underperforming?
Ben: No, you’d have to transfer it
Me: how much would that cost?
Ben: It’s free without obligation.
Me: I get £1000 free and without obligation?
Ben:…………………erm
Me: So Pension Matters are going to pay you enough that you’ll pay me £1000?
Ben: Yes
Me: Which means that they will have to earn enough money from moving my pension to be able to pay you guys at Yardstick Marketing and Doris?
Ben: ………..Yes
Me: So who pays Pension Matters Associates? I think I must do. Does this mean that the £1000 cash bonus was mine in the first place? You’re giving me back money I’ve just given to you??
Ben: No, it would come from your pension.
Me: So that £1000 was in my pension?
Ben: Yes
Me: Ben, I think you’ll find in pension legislation that’s called an unauthorised payment Ben….Ben……….are you there?
So, if you get called by Yardstick Marketing, or Pension Matter Associates, or Doris, then my best advice for you is to avoid them. Unless you’re like me and you enjoy a jolly bit of sport.
The academic year beginning this autumn will see a new regime for student finance introduced in England.
Tuition fees
The biggest change, which only affects students starting their courses this autumn, is the increase in the tuition fee cap. For 2011/12 the ceiling was £3,375, but for 2012/13 it will rise to £9,000. When the proposed increase was first announced, the expectation was that few universities would charge the full £9,000. In practice, it now looks as if most courses will carry the maximum fee.
As is the case today, the fee does not have to be paid up front, but can instead be covered by a tuition fee loan. Theoretically, a wealthy parent or student could pay the fee rather than take the loan and some universities are even offering discounts for a year’s fees paid in advance but; in practice, taking the loan will often be the best option – even if the cash is available.
Maintenance
The financial screws are also being tightened in the area of maintenance provision. As last year, if the student’s family income is not more than £25,000, a full grant (up to £3,250 in 2012/13) is payable. However, above that level the grant is scaled back and by £42,600 of income it will have disappeared. The corresponding figure for 2011/12 was £50,000.
Maintenance loans (reduced by 50% of any maintenance grant) are also available. 65% such a loan is available regardless and the remaining 35% (28% in 2011/12) is means-tested. The 2012/13 means test assumes a ‘parental contribution’ of 20% of all ‘residual income’ above £42,875 in 2011/12. Residual income is, broadly speaking, gross income less pension contributions and allowances for other dependent children. In 2011/12 the same parental contribution percentage applied, but the starting point was £50,778 of residual income.
Loan repayment
The existing scheme generally charges no interest on student loans, but simply revalues them in line with inflation. Loans have to be repaid at the rate of 9% of gross income over £15,000 in 2011/12 (for a student graduating in 2011/12) and over £15,795 in 2012/13 for such a student.
For 2012/13 students, repayments (again at a rate of 9%) apply to income above £21,000. The rate of interest charged is inflation plus 3% during the period of study and once income exceeds £41,000 a year. If income is £21,000 or less, then only the inflation rate is charged, while between £21,000 and £41,000 a sliding scale applies.
Loans are written off after 30 years from the date repayment was due to start, on death or on permanent disablement.
What next?
A student starting university this autumn could well graduate with a debt of £50,000 in summer 2015. The maths suggest that many will eventually see part of their debt written off, which is the reason why paying up-front fees looks unwise.
The world is changing if you want to plan for your children’s (or grandchildren’s) university costs. The loans are potentially much larger and the “interest” is no longer as low. Curiously, the result is that there is now a greater incentive to cover the repayments as they fall due rather than clear the debt, or avoid creating it in the first place.
June saw the media launch a full frontal attack on aggressive tax avoidance schemes in the wake of a series of ‘revelations’ in The Times.
Even David Cameron joined in, describing the comedian Jimmy Carr’s involvement in a complex Jersey-based scheme as ‘morally wrong’.
Tax avoidance and tax evasion
Although politicians (and sometimes HMRC) tend to speak of tax avoidance and tax evasion in the same breath, there is a significant distinction between the two:
Tax avoidance involves arranging your financial matters within the terms of existing legislation to reduce or eliminate tax liabilities. The law now requires details of nearly all complex tax avoidance schemes to be reported to HMRC. Similarly, anyone who uses such a scheme must give details on their tax return (usually just an eight digit reference number given to the scheme by HMRC). Designing and using tax avoidance schemes is not illegal.
Tax evasion will normally involve hiding wealth and/or information from HMRC. The classic example used to be putting money into an offshore bank account and not declaring the interest earned. Tax evasion is illegal and, as Lester Piggott the famous jockey showed, can result in time spent behind bars.
The thickness of that prison wall
To quote Denis Healey, a Labour Chancellor of the 1970s, ‘The difference between tax avoidance and tax evasion is the thickness of a prison wall’. That wall can sometimes appear surprisingly thin.
The schemes which grabbed the headlines this summer were at the ‘aggressive’ end of the tax avoidance spectrum, often pushing the interpretation of the law to its limits. However, the Courts and Tax Tribunals are themselves increasingly adopting a more robust approach to the aggressors. A tax avoidance scheme can be legal, but still fail, leaving the would-be avoider with no tax-saving, interest on overdue tax and legal/advisory costs.
Past, present and future
A fair slice of the press coverage tended to concentrate on celebrity more than fact, which meant some valuable detail was missing:
The K2 scheme used by Jimmy Carr relied in part on interest–free loans and an employer-financed retirement benefits scheme (EFRBS).
The latter were the subject of anti-avoidance legislation announced in December 2010 and legislated for in last year’s Finance Act.
As far as the loans are concerned, HMRC will always want to be satisfied that they are genuine, repayable loans.
The Eclipse 35 film scheme, which had several high profile football managers among its users, was found not to qualify for tax relief by the First-tier Tribunal in April 2012. However, the investments were made six years earlier, shortly before revised legislation was introduced to restrict tax relief for film investment, other than by film production companies.
At much the same time as all the tax avoidance publicity, the government launched a formal consultation on a General Anti-Abuse Rule (GAAR), targeted at closing down aggressive avoidance schemes. The legislation for this will be in next year’s Finance Act.
What is acceptable?
The attention given these low-profile, highly complex schemes, has once again raised the issue of when acceptable tax planning becomes aggressive tax avoidance.
The boundary between the two has undoubtedly moved, with the current round of austerity reducing the acceptable area.
It is hard to imagine today any judge echoing the 1929 comment of Lord Clyde that ‘No man in this country is under the smallest obligation, moral or other, so to arrange his legal relations to his business or to his property as to enable the Inland Revenue to put the largest possible shovel into his stores.’
Summary
There is no suggestion that normal tax planning, such as arranging ISAs or contributing to a pension, has suddenly become unacceptable avoidance.
If you think you are paying too much tax, do not let all the recent publicity prevent you from seeing what can be done to reduce your payments to the Exchequer. In many instances there is scope to reduce the Chancellor’s slice by tried and tested (and non-contentious) means.
Employer’s staging dates have been extended to February 2018.
The staging dates from March 2014 to May 2015 will only apply to employers with 50 to 249 people in their PAYE scheme as at 1 April 2012.
Where an employer has less than 50 employees in his PAYE scheme as at 1 April 2012 the revised staging dates are set out below:
40 to 49 employees – 1 August 2015
30 to 39 employees – 1 October 2015
Less than 30 (First PAYE income paid before 1 April 2012) Between 1 June 2015 and 1 April 2017
Where an employer sets up a new PAYE scheme between 1 April 2012 and 30 September 2017 the employer will be assigned a staging date between 1 March 2017 and 1 February 2018.
Where an employer sets up a new PAYE scheme on or after 1 October 2017 the employer will have an immediate staging date where the employer is paying PAYE income in respect of any worker.
Where an employer did not have a PAYE scheme, their staging date will be 1 April 2017, while new employers set up after 1 April 2017 without a PAYE scheme, will have an immediate staging date where they pay qualifying earnings to a worker.
Transitional phasing in period for money purchase contributions
The regulations also now confirm the one year delay in the phasing in of the minimum employer and minimum aggregate contributions for automatic enrolment, where the qualifying scheme is a money purchase scheme. The revised phasing in periods will be as follows:
Minimum Employer Contribution
First transitional period (years 1 – 5 from 1/10/12) 1%
Second transitional period (year 6 from 1/10/2017) 2%
Fully in force (year 7 onwards from 1/10/2018) 3%
Minimum Total Contribution
First transitional period (years 1 – 5 from 1/10/12) 2%
Second transitional period (year 6 from 1/10/2017) 5%
Fully in force (year 7 onwards from 1/10/2018) 8%
The transitional period for defined benefit and hybrid schemes will also be extended to finish on 30 September 2017.
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I wouldn’t be surprised if your accountant had recommended Sage Payroll to you.
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I’d like to share with you the software we use, and have been using for some time now.
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