August 2001 - Small Business News

1. IMPORTANT DATES FOR BUSINESS & INDIVIDUALS

a) Minimum Wage - TODAY

The minimum wage is to increase from GBP3.70 to GBP4.10 on the 1 October. A further rise to GBP4.20 "subject to favourable economic conditions" is planned for October 2002 - can't wait! On this subject, the British Chambers of Commerce (BCC) has asked the trade & industry secretary, Patricia Hewitt, to postpone next weeks increase until April next year as the BCC fear job losses will result: I wonder why the BCC thinks that those who need it most should bear the brunt of any economic downturn! Those under 22 years old, considered as non-adults, have a minimum wage of GBP3.50 per hour: this has to be 3 years too much!

Minimum Wage for more information.

b) Stakeholder Pensions - 8 October 2001

By the 8 October you must have a stakeholder pension scheme to offer your employees if: you employ 5 or more employees, you normally employ more than 5 employees for 9 months of the year, more than 5 employees earn GBP72 per week, more than 5 staff are under 75 years old, or your current pension scheme is at least the same or better than available stakeholder schemes.

c) Self Assessment Tax Returns - YESTERDAY!

If you wanted the Inland Revenue to calculate your tax return, you should have had the forms to them by 30 September. If you are doing your own calculations, tax returns and any due payment is due by 31 January 2002. You can still try to take your return to your local tax office, or on-line if you have *already* registered to do so.

Self Assessment for more information.


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2. UK BUSINESS JOINING THE EURO

The more I read about the Euro, the less predictable my knowledge becomes!

What will be the benefits to UK business if we join the single currency? The problem with this question is that *highly* influential people in the UK have vastly different opinions: so, what chance do we mere mortals have! Hopefully, the following will give you an overview of what the Euro is, and what it will mean to UK business...


THE NOTES AND COINS

On January 1 2002, euro banknotes and coins will be introduced in the 12 Euro zone countries. There will be seven banknotes and eight coins. The banknotes and coins being produced total over E664 billion and will equal the weight of 24 Eiffel Towers.

The twelve countries that have signed up to the Euro (Austria, Belgium, Finland, France, Germany, Greece, Holland, Ireland, Italy, Luxembourg and Portugal) will introduce coins and banknotes on January 1 2002. The Euro will consist of eight coins and seven notes. Coinage (100 cents to a Euro) will comprise of 1, 2, 5, 10, 20 and 50 cent coins. Euro notes will be issued in the following amounts - with a Euro worth about GBP0.60 (60 pence): E5 (GBP3), E10 (GBP6), E20 (GBP12), E50 (GBP30), E100 (GBP60), E200 (GBP120), E500 (GBP300).

European law enforcement agencies are concerned about the ease of movement of large sums of Euros that is offered by the E500 note (GBP300) . Money laundering (converting ill-gotten gains into legitimate funds) is reputedly bigger in the UK than in any other European country and with our eventual entry this issue will cause business finance matters to be tightened up, and at some considerable cost.

INTEREST RATES

With the single European currency comes the single European interest rate. This means that interest rates will be set by non-elected individuals (as with our own rates which are set by the Bank of England) and will be at a rate that best serves all single currency members: the issue here is that the rate could be set at a rate that helps the majority (who could be in a semi-recession but penalize a country not suffering from economic upset (say, the UK).


PROS AND CONS

As with many political issues (the Euro is also a major political battle ground *within* parties) the pros and cons for entry are numerous and conflicting.

Some of the PROS mentioned by diverse parties of UK business joining the Euro (not my personal views, I add):

•      A saving of GBP4.5 billion in converting GBP into a foreign currency,
   

• Saving conversion costs will mean competitive pricing with current European traders using the Euro,
   

• Existing exchange rate system can cause unplanned loss of profits if the markets move against the GBP, vice versa the Euro,
   

•  A single and transparent currency will tempt more UK businesses to compete in mainland Europe,
   

• A prosperous combined Europe could think of challenging the USA in existing and new markets, say, China,
   

• A single European market - without trading restrictions - should benefit the UK as we produce quality goods and services,
   

•  A strong GB pound restricts our exports, a stable Euro will encourage exports,
   

•  A weak GB pound means higher prices for imports, a stable Euro will encourage imports,
   

•  Many non-European countries already use the UK as a base, more will follow with investment in a single market,
   

• UK will have more of a say in European trade policy: we will maintain most of our economic control measures (but not the interest rate!
   

  ...and of course, we can all go on holiday and spend with confidence as 2 GB Euros are a straight swap for, say, 2 Spanish Euros.
  
  Some of the CONS mentioned by diverse parties of UK business joining the Euro (not my personal views, I add again):

  
  
   

•  The UK economy is in good shape compared to most of Europe, and the USA. The UK would be at the mercy of the Euros performance in those countries within the Euro (presently, this is not good),
   

•  The UK is already a big player on the international scene: G7, UN Security Council, NATO A single interest  rate will not allow us to respond to our own economic fluctuations (at present, spend too much, the rate goes up),
   

• With our monetary control gone, many commentators say output will fall as our confidence for long-term planning wanes,
   

• A single currency may be the final push towards tax harmonisation with
  Europe: some say taxes could rise by a fifth,
   

• The cost to the UK of implementing the Euro could be an enormous GBP36
  billion* - the annual education budget is GBP40 billion,
   

• It is claimed that our trade with Europe has increased without us joining the Euro and single market, so, why join,
   

• As only a fifth of our GDP (gross domestic product) is exported, why change the system for all UK businesses,
   

•  The UK economic landscape mirrors the USA more than it does Europe,
  
  ...and of course, we can all go on holiday and not have confidence in our exchange skills.
  
  
  GOVERNMENT POSITION
  
  The UK Governments Intentions
  
  Our present government sees the UK joining the single currency if "economic conditions are right".
  
  These are:
  
  1. Whether there can be sustainable convergence between Britain and
  the economies of a single currency.
  
  2. Whether there is sufficient flexibility to cope with economic
  change.
  
  3. The effect on investment.
  
  4. The impact on our financial services industry.
  
  5. Whether it is good for employment.
  
  In this speech the chancellor also answered the question of the time 'is the UK to join the single currency in January 1999?', his comments, "British membership of a single currency in 1999 could not meet the tests (above) and therefore is not in the country's economic interests. There is no proper convergence between the British and the other European economies now. To try to join now would be to accept a monetary policy which would suit other European economies but not our own. We will therefore be notifying our European partners, in accordance with the Maastricht Treaty, that we will not seek membership of the single currency on 1 January 1999." THE FIVE ECONOMIC TESTS by Gordon Brown, from 1997, can be seen in full at Treasury.gov.uk
  
  
  RESOURCES
  
  A quick test to assess how the single Euro currency will affect your business is at: Euro.gov.uk
  Case examples including manufacturing, retail, service, consultancy, wholesale, engineering, construction and transport. Industry by region is also included. Euro.gov.uk
  
  
  3. NEW BUSINESS TRAVEL PAGE
  
  We have a new section called 'BUSINESS TRAVEL'. This page will give you the information and links you need to plan your journey. We have also included some great links for car users - from cheap tyres to personalized plates, plus the following:
  
  LINKS
  
  Flight prices
  If you think travel prices are too high, why not choose your own. Priceline
  
  Travel Insurance
  For instant on-line travel Insurance quotes try Go Sure, whose policies are underwritten by the Royal & Sun Alliance.
  
  On the Rails
  For the latest on rail travel, National Rail will keep you updated.
  
  Tax for Business Travel
  How much can I claim? How much should I pay? HMRC
  
  BOOKS
  
  Goff's Business Travellers' Guide: 2000 GBP6.36 689,000 sales to date.
  The complete travel-kit for anybody in the UK who is on business away from home.
  
  INFORMATION
  
  How much tax relief can I get for my business travel?
  
  If you have to travel on business you can get tax relief for the full costs of your business journey.
  
  Examples
  The examples below show how the rules work in some typical situations. The figures used are purely illustrative.
  
  Example 1
  Bill normally works at his employer's regional office in Swindon. Occasionally he has to attend a management meeting at the head office in London. Bill's employer pays a travel allowance sufficient to cover the cost of a standard class rail ticket for the journey. The employer has a dispensation covering this payment.
  
  Bill buys a first class ticket. He can claim the difference between the allowance he received for the standard class ticket (covered by his employer's dispensation) and the cost of the first class ticket.
  
  Example 2
  Chris usually works at his employer's main office in London, travelling each day in his car from his home in Oxford. One day he has to work at a branch office in Birmingham instead. He travels directly to and from his home. The cost of the return journey is GBP43. Chris is entitled to tax relief for the full cost of his business journey, GBP43.
  
  Example 3
  Frances works at different sites and has no permanent workplace. She travels in her own 1,600cc car to and from the sites where she is working. Over the whole of the tax year she travels 8,000 miles on business to and from the different sites. She is entitled to tax relief for the cost of this travel.
  
  Frances's employer pays her 50p a mile for her business travel. This is more than the Inland Revenue authorised mileage rates for a 1,501 - 2,000cc car. For the particular tax year the authorised rates are 45p for each of the first 4,000 business miles and 25p for each mile over 4,000. Frances gets a tax return.
  
  Frances's employer does not operate a Fixed Profit Car Scheme. So her P11D shows the full mileage allowances of GBP4,000 she has been paid =50p x 8,000 miles) for the tax year.