BUSINESS NEWS
Salary sacrifice under tax threat
A local financier has accused Whitehall penpushers of attempting to ‘torpedo’ a scheme aimed at providing employees with a range of valuable benefits. Paul Heaven of Blue Sky
Corporate Finance Ltd, said that changes to the ‘salary sacrifice’ scheme meant that it was certain to be strangled by red tape. Salary sacrifice is when an
employee gives up part of their pay in exchange for some kind of non- cash benefit, for example, child care vouchers. Other benefits in kind include cycle to work schemes and face value vouchers (such as book tokens, telephone cards and gift vouchers). As certain of these benefits were
exempt from tax, the scheme has grown in popularity. However, following a recent European Court of Justice ruling, the taxman has decided that salary sacrifice benefits should be subject to VAT, which is, according to Mr Heaven, going to create a huge headache for firms. “This is yet another example of
red tape and bureaucracy getting in the way of a good idea, almost rendering the incentives as non- viable for the vast majority of SME employers,” he said.
Banking reforms fail to reassure Chamber firms
Many businesses in the West Midlands are not convinced that banking reforms will prevent another financial crisis.
A poll conducted by Birmingham Chamber of Commerce Group (BCCG) also found that there is a strong belief that the reforms will lead to reduced bank lending. The survey revealed that 37.5 per
cent of its members were “not very confident” and 12.5 per cent were “not confident at all” that ring-fencing the retail side of banks from their riskier investment operations would prevent another financial crisis. Only 18.8 per cent were “slightly confident” and 6.3 per cent were “very confident”. However, over half of those surveyed (56.3 per cent)
felt that the requirement of banks to have a higher amount of capital in reserve would lead to an inability or unwillingness to lend. A further 31.3 per cent were unsure of the implications for bank lending. A quarter of respondents reported having had difficulty securing a loan from banks. Ross Gurdin, a policy adviser at the BCCG, said: “The
results of this survey highlight the wider impacts of banking reform and it is critical the proposed reforms do not harm the recovery by further undermining business confidence. “It is vital that we do not sacrifice the ability of SMEs
to access finance in our attempts to remove some of the risk from the financial sector.” The financial service sector is hugely important to Birmingham, producing over 30 per cent of its GDP – but more importantly financing the city’s entrepreneurs and small businesses. “We should be looking to SMEs in
order to drive the recovery and rebalance the economy. We should
ensure that the effects of banking reform on SMEs are at the forefront of our mind before we implement any drastic measures,” Ross added.
• Bringing forward major infrastructure projects in the West Midlands, pledged by Deputy Prime Minister Nick Clegg, will be a timely intervention to reduce the region’s unemployment, now standing at 9.1 per cent. Chamber president Christine Braddock said major
investment is the way forward to overcome the 0.6 per cent increase in unemployment figures - the third highest increase across the English regions. She added: “The employment rate decreased by 0.7
per cent to 67.5 per cent and projects such as high speed rail will create 22,000 jobs in the West Midlands and will create further jobs with the anticipated £1.5 billion per annum of new investment.”
12 CHAMBERLINK OCTOBER 2011
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