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A Good ‘Budget’ for Bingo & Boilers (December 2009)
Mr Darling, presenting his last pre-Budget report before the next General Election, confirmed that the economy would shrink by approximately 4.75 per cent this year, and, although the burgeoning deficit demanded attention Mr Darling (according to the independent Institute for Fiscal Studies) has actually increased the Government’s planned spending by £15 billion over two years from 2010. Cuts of more than 10 per cent in departmental spending are expected, however Labour’s priority budget areas of schools, hospital and police are to be protected from any cuts. One popular measure was announced, Bingo players are set to see their duty cut from 22% to 20%.
The Economy is predicted to return to growth. 2010 should see growth of approximately 1.25% with more robust growth forecast for 2011.
Borrowing forecasts have risen from £175 billion to £178 billion.
Here are some of the measures that will affect members: -
VAT is set to return to 17.5% on Jan 1, 2010.
RPI Inflation will rise to 3% before levelling out at 1.5%.
National Insurance contributions are set to rise for business and employees. Workers will see a rise from 12.8% to 13.8%, taking effect from April 2011.
Taxes will rise on company cars. There are three separate tax increases for motorists planned. April 2010 will see a rise in the benefit in kind assessment, from £4056 to £4512. April 2010 will also witness the lowering of company car tax bands. This will push more cars into the higher tax bracket and April 2012 will see carbon emissions and original purchase price allowances change. This will result in an increase of approximately £300 per car.
From 2012, tens of thousands of people will be pushed into the higher rate of income tax for the first time.
Existing higher rate taxpayers will see more of their income taxed at 40%. And with a freeze in the threshold at which 40 per cent income tax is paid, 70,000 more people earning just over £40,000 are set to become higher rate tax payers.
Those earnings more than £130,000 are set to lose pension tax relief.
Unemployment is expected to rise; those under 24 are guaranteed work or training after six months of unemployment.
The Government’s Small Business Scheme, allowing firms to spread tax payments has been extended. The increase in corporation tax has been deferred, which means it will remain at 21%.
Scheme announced to give householders trading in working, ‘G’ rated boiler for newer more efficient models, a £400 ‘incentive’.
The Enterprise Finance Guarantee scheme is set to continue to another 12 months (providing £500 million lending to SMEs).
A new body, Infrastructure UK (IUK) is to be established. IUK will advise Government on priorities for long-term national infrastructure investment.
And from April 2010, people with a home wind turbine or solar panels that can plug their excess power into the national grid, will receive on average £900 a year. It is intended to make this tax free.
New "Cheap" funding for Capital Investment Projects (December 2009)
New "cheap" finance has been made available for capital investment, Barclays have secured £150m of "cheap" European Investment Bank money. This will be available at a cost of 2.5 percentage points less than Barclay's normal interest rate.
The funds cannot be used to fund working capital or for refinancing purposes but with a maximum loan size of £122m the availability of this money is not expected to last long but money may also become available from the Royal Bank of Scotland. (December 2009)
CIS Poll (July 2009)
Through ECAs involvement with HMRCs Construction Industry Scheme Operational Forum (CISOF) formerly CIRIP, we have been informed that HMRC will be conducting a telephone survey using the research company Ipos MORI (MORI Poll)
The purpose is to canvas the opinions of contractors and sub-contractors using the ‘new’ CIS. The telephone survey will not require the disclosure of sensitive or confidential information. Members may receive calls commencing in July.
The Budget - 22 April 2009
Billed as a Budget for ‘Fairness and Opportunity’ a significant number of measures were trailed before the actual Budget.
- The Chancellor forecasts the end of the recession by either late 2009 or early 2010, with the UK economy set to contract this year by 3.5% before returning to 1.25% growth, next year.
- Budget deficit this year to be £175b, with a similar level forecast for next year.
- Measures to be introduced to reduce, by half, the deficit over a four-year period. Public Sector growth to be ‘clawed back’ from 1.1% to 0.7%. Capital Budgets to build new schools, hospitals etc., under severe pressure.
- CPI (the government’s preferred Inflation Indicator) set to be 1% by the end of 2009.
- Inflation target to be retained at 2%.
- A new rate of tax of 50% will be introduced from 2010 on incomes above £150,000. Pension relief at 40% will be withdrawn for people with income above this level.
- A £2000 allowance is proposed when any vehicle over ten years old is scrapped and a new vehicle purchased, although it appears that Industry will have to ‘pay’ the first £1000.
- ISAs capital limit has been increased to £10200 (£5100 cash element) from 6th April 2009 for the over 50s, from 6th April 2010 for everyone else.
Of Special Interest to Construction
- There is to be £500m investment to restart stalled housing projects. This figure includes £100m to Local Authorities for energy efficient homes and £50 million for refurbishment of housing for the armed services.
- There are to be talks with the house building sector to “work on the constraints” that are currently affecting them. A £400m funding package is to be provided to unlock stalled housing developments with £100m going to local authorities to help pay for social housing; making £500m in total.
- Part of the £500m package is to partially fund Government’s HomeBuy Direct shared equity scheme.
- To counter liquidity crisis in the mortgage market, £20b is to be provided to guarantee securities backed by mortgages.
- There is to be £525m spent on offshore wind projects, with further money available from the climate budget to spend on carbon capture at solid fuel power stations.
- Government is to introduce a top up scheme to ease availability of Trade Credit Insurance provision. The Scheme will start in May but it will be backdated to 1st April 2009 and will run until 31st December 2009.
- £300m boost for the ailing Building Colleges for the Future programme to get some of the 71 stalled projects moving this year. The projects are to be approved by the Learning and Skills Council and may mean a further 60 plus projects will now get under-way.
- New £750m Investment fund to help emerging technologies and regionally important sectors.
- Landfill tax, levied on Local Authorities, set to rise by £8 per ton per year for next four years from £40 per ton to £70 per ton.
- The Stamp Duty holiday on the sale of houses for less than £175,000 will be extended to 31st December 2009.
- VAT will rise to 17.5% or higher on 1st January 2010.
- VAT threshold set to rise by £1000 to £68,000 on 1st May 2009.
- Statutory redundancy payments will rise from £350 to £380 per week.
- Fuel duty will go up by 2% from September 2009; the expected rise will be 2p per litre.
- Capital allowances for new investment in 2009/2010 will double to 40%.
- Measures to help firms with cash flow problems to schedule their tax debts will continue to be supported.
- Tax avoidance schemes in areas of: Employment income (bogus self –employment issues), Life Insurance Policies; plant and machinery leasing; interest relief on risk capital; to be further targeted. However plant and machinery capital allowances are to be doubled to 40% for a single year in order to prompt large utilities and telecoms companies to spend with their supply chains.
- Loss relief will be extended to 2010 to allow the carry back of current losses to gain tax relief against taxable income in the three previous years.
Discussion on BIS's Appointment of a Chief Construction Officer (formerly BERR)
ECA's Chief Executive David Pollock, recently submitted a response letter to BERR (now BIS) regarding the appointment of a Chief Construction Officer (1183KB pdf), which can be downloaded for your reference.
Capital Working Group / Overdraft Facilities - Government Recapitalisation Schemes
The Chancellor, Alistair Darling, in last year's Pre-Budget Report announced that there would be a series of initiatives intended to help sound businesses secure working capital funds.
Three schemes have now been announced:
1. Working Capital Scheme
A government financed £10bn two-year guarantee fund, that will secure for the banks, 50% of £20bn of short-term bank loans to businesses with annual turnovers of up to £500m. The first £1bn will be secured from the 1st March 2009.
To access these funds businesses should see banks more willing to maintain existing overdraft facilities and extend them further.
Banks currently expressing an interest in joining the scheme are: Barclays, HSBC, Lloyds TSB and RBS, although a number of these are currently receiving government support themselves. Charges will be made to businesses applying for these funds, which will be dependant upon how the banks present the risks to the government. The extent of delay between application and the funding becoming realised is currently unknown.
If popular this scheme may be extended to end March 2011.
2. Enterprise Finance Guarantee
A £1.3bn, one-year fund that will see the government guarantee 75% of risky bank loans to business with turnovers of up to £25m pa. It is an extended and cheaper version of the existing Small Firms Loan Guarantee Scheme. A premium of 1.5 % over commercial rates will be charged. Firms will be able to apply for loans of between £1,000 and £1m, which are repayable over a three-month to ten-year period.
This scheme went live from the 14th January 2009 but the banks say it may take up to a week for all staff to be fully briefed. The scheme will operate until March 2010, and may be applied to both existing and new loans.
To access these funds, businesses should approach their high street banks (Barclays, Clydesdale/Yorkshire Bank, HBOS, HSBC, Lloyds TSB, RBS / Natwest and Northern Bank) but some specialist lenders may also be offering terms.
3. Capital for Enterprise Fund
A £75m fund which was first announced in March 2008. It will take stakes in businesses seen as strategically important to the economy that have too much debt to remain financially viable. To access these funds businesses need to register an interest by calling 0845 459 9760.
The fund managers have yet to be appointed, announcements in this respect are expected by the end of January 2009.
Additionally some other new funds could also become available. There are reports of a separate £75m equity-for-debt venture fund being set-up, however no announcement on this is expected for a month.
Businesses that have exhausted other avenues of funding can also apply to their local Regional Development Agency (RDA) for a loan. The RDA’s have access to a regional loan transition fund but this scheme finishes 30th June 2009.
In order to find out which scheme is best suited to an individual business’s need members’ are advised to visit the BIS website (formerly BERR). Alternatively, businesses can call the BIS Business Link helpline on 0845 600 9006.
For the Working Capital Scheme and the Enterprise Finance Guarantee Scheme, businesses need to contact their banks.
Improving payment practices in the construction industry
Draft Construction Contracts Bill
BERR (now BIS) has published a draft Construction Contracts Bill to amend Part 2 of the Housing Grants, Construction and Regeneration Act 1996 (“the Construction Act”). The clauses have been developed in the light of two public consultations in 2005 and 2007 and numerous discussions with industry stakeholders.
SMEs to get free access to public sector contracts
Supply2.gov.uk - the official lower-value (typically below £100,000) contract opportunities portal - was created by the Government to reduce the barriers facing SMEs competing for public sector contracts, enabling small businesses to grow and stay competitive.
By registering on Supplier Route to Government Portal where you can select a free location and benefit from:
- Daily email notification of Government contract opportunities relevant to your business
- Promotion of your company to the public sector market
- Online contract search facility
- Resources to assist you when tendering
- Market intelligence
Until 31 July 2008, new registrants can benefit from access to lower-value opportunities throughout the whole of the UK.
The free trial is part of the Department for Business’ Enterprise Strategy, which outlined new measures to increase the amount of government business that is won by small firms. While the first year's subscription level is free, thereafter a small charge of £95.00 + VAT is payable.
To register and for further information please visit the Supplier Route to Government Portal before 31 July 2008.
SEC Group Focus on Fair Payment
The Specialist Engineering Contractors Group want to bring members' attention to the new guide and charter for the public sector on fair payment. A copy of the SEC Group on Fair Payment Guide (307KB pdf) for your reference.
WEEE Charges
Producers and Distributors of electrical and electronic equipment (EEE) have experienced difficulty in dealing with the administration of the WEEE Regulations and have therefore only recently reached the position where they could inform the industry of the financial implications.
Most producers of EEE have now joined compliance schemes to deal with their obligations for recycling products as required by the WEEE regulations. As anticipated, the Producer’s costs are being passed down to the Distributors (wholesalers, retailers) who in turn are increasing prices to customers.
The new charges will no doubt vary from product to product and also be dependent on individual producers and distributors. Lighting is a significant area and suppliers are informing customers that their charges will fall into two categories:
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The cost of fittings will be increased to include the recycling charge
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Lamps (discharge and fluorescent) will be subject to a separate charge (circa 15p each), which will be shown separately on invoices etc
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These charges are subject to VAT at 15%.
There is no provision in the WEEE Regulations for showing the cost of recycling non-household WEEE separately; therefore there may be inconsistent practices i.e. some showing the charge separately and others including it in the price. Members should take care when pricing tenders and quotations to ensure that they include the additional costs applicable to the WEEE Regulations:
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Suppliers' quotations should be checked to ensure that the recycling cost is included in the price of the equipment supplied
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The charges for recycling lamps should also appear or be stated as included on suppliers' quotations
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When stripped out items of WEEE are are deposited at collection points/recycling centres, there may be further charges for transport and handling.
In respect of household WEEE, producers have the option to show recycling costs separately to their prices for a transitional period only (all categories of WEEE up to 13 February 2011, except large household items 13 February 2013).
Further information on WEEE can be obtained from the Government Guidance Notes – WEEE Regulations, available on the Department for Business Enterprise and Regulatory Reform's website.
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