Head of HMRC Apologises For Poor Performance 
Chairman of Her Majesty’s Revenue & Customs (HMRC) Mike Clasper, apologized to taxpayers last week after the Treasury Select Committee uncovered a raft of problems with the service in 2010.

The apology came following the release of the ‘Administration and Effectiveness of HM Revenue & Customs’ report, which concluded that there was a “serious risk” that if communicating with HMRC became too time-consuming, difficult or expensive, “respect for the tax system and, with it, voluntary compliance, may be undermined”

MPs slammed HMRC’s performance and found a list of problems including bad management and demoralized staff. MPs also attacked HMRC for scrapping printed tax advice leaflets and putting all the information on-line.

Other problems highlighted in the report included unacceptable waiting times for replies to letters, over 50 per cent of telephone calls going unanswered and callers regularly being given incorrect information by inexperienced call centre staff.

The report said that “HMRC's delivery of services to the general public has fallen to unacceptable levels in several areas. There is considerable dissatisfaction among the public and tax professionals with the service provided by the department.”

The Committee also noted that the “flawed implementation” of the PAYE system had done “significant damage' to the public perception of HMRC and the general tax system.”

Amongst recommendations made to HMRC to improve its service are improving its telephone system, looking into an alternative to 0845 numbers and offering alternatives to on-line communication.

Mr Clasper admitted that HMRC had not been good enough in 2010 but added: “In 2011 we've been working very, very hard to improve things. We're handling the calls immediately much more frequently than we did in 2010 and as far as individual customers are concerned you know the post levels have dropped in half. That's not where we want to be but it's a lot better than where we were in 2010.”

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Changes To PAYE Will Affect SMEs 
The current PAYE system, which relies on employers submitting their tax return annually is being changed from April next year but according to a recent survey, many small and medium-sized businesses (SMEs) have no idea that the changes or coming or of how they will impact on them.

Research from business software provider Sage UK has revealed that a majority of small and medium sized enterprises are not prepared for the impending changes to the system, called PAYE Real Time Information (RTI).

RTI aims to collect the information about tax codes and deductions automatically each time an employer runs their payroll. This information would then be submitted electronically to HMRC when the employees are paid. The employers would still calculate the tax codes and deductions but as it is Real Time Information it should lead to fewer errors at HMRC, as the information would be submitted at the same time the employees are paid.

All businesses will be affected by the changes, yet Sage’s UK Omnibus, which surveyed 1,100 small businesses, found that 76 per cent of them admitted to having no knowledge of the alterations.

HMRC will be piloting the Real Time Information system in April 2012 with the hope that all companies will be migrated over by the end of 2013. Employers will still be responsible for tax deductions and calculations but instead of submitting this data once a year they will be required to do so at the same time as their payroll, be that weekly, fortnightly or monthly.

Employers will need to ensure that their payroll systems are able to support RTI and upgrade them accordingly. But whilst these changes will initially require employers to outlay extra time and money, the RTI initiative should be a benefit in the longer term, in that their end of year processes will be significantly reduced and more accurate.

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Banks Need More Competition 
According to the Federation of Small Businesses (FSB) the banking sector needs more competition rather than lending targets if it is to give small firms a better deal.

Figures show that the number of banks in the UK has fallen by 20 per cent in the last 10 years and the financial crisis could mean that there will be an even bigger reduction in the choice of banking services for small firms.

The FSB believes that the Independent Commission on Banking’s (ICB) proposal to separate the investment and retail divisions of banks will help small businesses get a fairer deal.

In February, the country’s five largest banks promised to lend £190bn to companies this year, including at least £76bn to small and medium-sized firms, under the Project Merlin agreement.

However, lending to businesses with a turnover of less than £25m is down by 4 per cent year-on-year, according to the Bank of England’s quarterly Trends in Lending report, published last week.

The FSB is urging that promoting competition in the banking sector should now be emphasised over Merlin targets.

National Chairman of the FSB, John Walker said: “The lack of competition in the sector is the most important thing that the ICB should focus on in its full report in September. The lack of competition gives small businesses less choice, and it also means that the cost of finance is more expensive.”

In a bid to promote competition, the FSB is calling on the ICB to recommend, amongst other things, that any moves to force the state-owned banks to sell off more branches than the EU Commission recommends should be used to help new entrants.

"Allowing new or even specialised banks to buy branches from the state-owned banks would boost competition on the high street; helping to drive down costs and gives the smallest of businesses a fairer deal,” Mr Walker added.

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Britain’s Future Could Be ‘Young Enterprise’ 
Following the publication yesterday of figures showing that the UK economy is in danger of ‘flatlining’, a campaign has been started, headed by Young Enterprise, calling for employability and entrepreneurship education to be placed on the curriculum in UK schools.

Eighty companies including Dyson, Citi Group and Sage have backed the “Young Enterprise Charter” campaign, saying that the Government’s emphasis on core academic skills will not improve young people’s future employability.

In an article in the Telegraph, Young Enterprise’s Chairman, Ian Smith warned against the “alarmingly narrow focus on academic skills and exams” but also rounded on employers, saying that they can be too quick to “blame their own failures on the attitude of the British worker and, particularly, young people.”

According to Mr Smith young people need to be taught the skills employers look for, such as “teamwork, presentation, reliability, honesty, integrity and punctuality.”

And to employers, the Young enterprise message is equally clear. In his blog Mr Smith writes:

“... attitude is infectious. If you want to change it, don’t just sit in meetings moaning, get yourself and your employees out amongst young people as business mentors, Get involved ... to begin to inspire the next generation.”

Other entrepreneurs, such as Sir James Dyson, have warned that there is not enough emphasis on practical skills. He said:

“Britain has 37,000 engineering vacancies but produces just 22,000 engineering graduates each year. Young people should be encouraged into practical subjects like design and technology, which is at risk of being taken off the national curriculum. If we want a generation of problem-solvers this is a mistake.”

Education Secretary Michael Gove has already said that he wants the education system to move away from an “obsession” with tests and targets and will no doubt view with interest the “Young Enterprise Charter”, which will be presented to the Government in October.

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UK Economy May Have Contracted 
Some analysts are predicting that the UK economy may have contracted during the first half this year, as figures to be published today may well reveal.

The Office for National Statistics (ONS) will almost certainly show a sluggish growth of 0.3 per cent at best for the second quarter, with some analysts forecasting as low as 0.2 per cent.

The first GDP reading for the second quarter will only provide information about growth in key sectors of the economy, without giving details about consumer, government or export demand. And a low figure will certainly bring calls for the Government to change its deficit policy.

However, Chancellor George Osborne has said that it is important for the government to stick to its economic plan "in a world of very great uncertainty".

"We have brought stability to the British economy, we have brought interest rates down and we are creating private sector jobs. That is all evidence that our economic plan is working and on track," he told a press conference.

Various factors are being blamed for the feeble growth, including the extra Bank Holiday in April and the effects of the Japanese earthquake and tsunami.

Despite the growth or lack of it, many economists are keen for the Government to stick to its deficit reduction plans in an attempt to maintain the UK’s AAA rating.

Ross Walker, UK economist at Royal Bank of Scotland said "What would be more damaging would be if we were to see slippage on spending cuts."

And Danny Gabay at Fathom Consulting added: "The biggest risk to our rating is if the Government caves in. It has set out a plan for short-term pain that leads to long-term growth. That has got to be right."

In support of these arguments the IMF said last month that the UK's high inflation and low growth had been unexpected but were largely temporary and that no changes to policy were yet needed.

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