UK Investment Funds to Land Windfall 
British investment funds could be in line to receive a £16 billion windfall, following a decision by a European Court, which ruled that taxes charged by France on dividends paid by French companies to foreign investors should not be subject to withholding tax.

Currently, under French tax rules, dividends paid to certain funds which are not resident in France are taxed at twenty-five percent; whilst a similar fund based in France is exempt from the levy on its investments within the country.

The tax rule was declared by the European Court of Justice (ECJ) to be discriminatory; and this decision has now paved the way for a possible tax rebate to UK investment funds.

Following the decision of the ECJ, one economist said: “Investment funds that may have paid this withholding tax any time over the past five years should investigate now as to whether they are able to claim rebates. Europe-wide these claims could amount to as much as €20bn, so it is in funds' interests to act now.

“The ultimate beneficiaries of this ruling against discrimination will be UK companies and employees saving for their retirement who will see improved returns on investments in Europe.

“UK pension and investment funds will no longer have to pay more tax on their dividends from investments in French companies than their French equivalents and in a difficult economic climate, funds will welcome any measure which allows them to maximise returns.”

It is believed that along with paving the way for a potential windfall to UK investors, the decision by the ECJ could open up similar judgements against other European countries, such as the Netherlands and Germany, where similar taxes are in place.

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Bank of England to Resist More Quantitative Easing 
The Bank of England are expected later today (May 10th 2012) to call time on the latest round of quantitative easing, following signs that inflation is proving to be “stickier” than expected.

With the second round of the quantitative easing programme complete, the Bank of England now need to consider whether they are to extend it further, or leave the total £325 billion programme unchanged.

Many economists believe the Bank of England will opt for the latter option, following the rise in inflation to three point five percent during March; which has raised hope that the Consumer Price Index (CPI) will reach its target of two percent during 2012.

The British Chambers of Commerce have urged the Monetary Policy Committee (MPC) to keep the quantitative easing programme at its current levels; although they have again called on the government to consider creating a “business bank” to help improve lending to small and medium sized businesses throughout the UK.

Along with business leaders calling for the Bank of England to maintain quantitative easing at its current levels, Adam Posen, a MPC member who has previously been calling for further quantitative easing to be introduced, has also changed tact and called for the bank to keep the programme as it is.

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Pension Deficit Continues to Rise 
It has been revealed that the combined deficit of Britain’s private pension scheme rose to £216.8 billion – an increase of nearly £11 billion – as the funds were hit by the knock-on effects of the Bank of England’s “money printing”.

The figures released from the Pension Protection Fund (PPF) show that the aggregate deficit of the schemes it covers rose; with the Bank of England’s quantitative easing scheme being blamed for rising the cost of paying for pensions.

It has been claimed that the quantitative easing scheme has driven up the cost of government bonds, and because they pay a fixed income, reduced the yield that investors gain by buying them.

This has had an adverse effect on pension schemes, as the cost of paying for pensions is often bench-marked against the return on bonds. Therefore quantitative easing has had the knock-on effect of driving up the estimated stock of assets that pension schemes need now, in order to pay all their pension liabilities in the future.

The PPF have said: “Over the month, scheme assets fell by naught point six percent and over the year there was an increase of four point five percent.

“Total scheme liabilities were £1248.2 billion at the end of April 2012, an increase of naught point four percent over the month, and an increase of twenty-five point four percent over the year.”

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Bank Balances Boosted by Careful Saving 
A study has reported that despite the tough economy, careful savers have managed to increase their balances to the highest levels in nearly two years.

The study, which is based on a consumer savings monitor report – which has been running since 2009 – has revealed that tight control over household budgets by squeezed consumers has seen the average bank balance increase by £284 during the first quarter of 2012; which is said to be a record increase.

The monetary increase reported, equates to an eighteen percent rise in savings during the first three quarters of the year, compared with the previous quarter; which is said to take the average balance of savers to just under £2,000.

A spokesperson for the company behind the study, has said: “Our research told us that ordinary Britons saw restoring savings as their top financial priority for 2012, but in the current climate we thought it would be tough for them to deliver on this.

“Six months of relatively restrained spending may not have helped the economy in terms of GDP growth, but it has allowed Britons to deliver on their determination to restore their savings.”

The latest figures, along with showing that careful savers have managed to increase their finances to the highest levels; also show marks the first time there has been two quarterly rises in savings in a row since 2009.

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HMRC to Yield £6 Million in Fines Per Day 
It has been revealed that as a result of harsher penalties which took effect earlier this week, HMRC is now imposing over £6 million in fines each day on 650,000 taxpayers who have failed to file their tax returns.

Estimates have suggested that 850,000 taxpayers missed the January 31st 2012 deadline, each receiving a fixed penalty of £100; whilst 650,000 tax returns were still outstanding on May 1st 2012, with each of these now incurring an additional fine of £10 per day it is outstanding, which can total a maximum of £900.

In addition to the fines already imposed for missing HMRC’s deadlines, the tax office have also announced they will be imposing extra penalties of £300 or five percent of any tax liability, plus a further £300 or five percent of the outstanding tax if the return still isn’t received after a year.

The total of fines could see HMRC yield over £6 million a day; but Stephen Banyard from HMRC said: “We want the returns and not penalties. So, if you haven’t sent us your 2010/11 return, you need to do so urgently – or call us if you think you shouldn’t have to complete one.”

Although HMRC could potentially yield over £6 million in fines, the organisation have admitted that 12,000 people have been wrongly fined for failing to file their tax return; despite there being no need for them to complete a self assessment return.

HMRC is now writing to those wrongly fined to apologise; and they have also published a statement on the Chartered Institute of Taxation’s website confirming that they will not have to pay any penalties.

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