VAT reduction of 2.5 percentage points

[JohnD]

because big Gordy had raided the pension funds and played havoc with eventual monies due on retirement.

The loss of dividend tax credit on pension funds is extremely trivial and is a very unconvincing argument.

Let me work you through an example:

Suppose you have a pension fund worth £100,000. It is invested 60% in equities (shares) with the rest in fixed interest, property REITs, corporate bonds, gilts, cash deposits, whatever. In a typical year it grows by 8% plus inflation. In a good year it grows by 20%. In a bad year it goes down by 20%. That's ups and downs of £8,000 or £20,000. Your fund manager fleeces you by 1.5% in expenses and charges. That's another £1500. If you've been trapped in a with profits fund he can take whatever he likes, maybe £5,00 or £10,000. To invest £100,000 in a pension fund costs between about £80,000 and £48,000 out of your pocket depending on the amount of tax and NI you pay. Thats £20,000 or £52,000 you've gained. the more prosperous you are, and the more you can afford to contribute, the more you get back in rebates.

The All-share has a yield of 3%. Your pension fund "loses" 10% tax on that. So £100,000 x 60% (shares) x 3% (yield) x 10% (tax) is £180

Do you really think that £180 over a year makes a big difference, compared to the size of all the other ups and downs? No, it's just an excuse to whinge because nobody likes paying taxes.

 

[Shytalkz]

I don't begin to follow the not-so-subtle nuances of pension funds and bow to your greater knowledge on things pension-related, but the percieved wisdom of the man on the street has been that his pot has been raided, hence he turned to other investments to supplement that; hence the BTL explosion and the increase in house prices.

 

[JamesA]

The pensions thing was used as a final straw excuse by my company to end the final salary scheme so it did have far greater effects in some cases.

I imagine businesses that deal with the VAT-paying public might just keep their current prices and pocket the 2.5%

 

[Shytalkz]

I'm not: I'm sitting on invoices to joe public clients this week, so that they can go out with a reduced VAT amount.

It's not entirely altruistic, I would just hate to be lumped in with those who do take the opportunity to increase the net take.

 

[JohnD]

I don't begin to follow the not-so-subtle nuances of pension funds and bow to your greater knowledge on things pension-related, but the percieved wisdom of the man on the street has been that his pot has been raided, hence he turned to other investments to supplement that; hence the BTL explosion and the increase in house prices.

So the falsehoods of the Daily Wail are to blame

 

[2scoops0406]

JohnD's example is very simplistic, and wrong, in that pensions are accrued over 40 years, therefore, the removal of tax relief on dividends is much much more significant.

 

[Trazor]

£100 billion a drop in the ocean, JohnD.

Just read the last paragraph, of this independent report, it's the governments response...........

http://www.telegraph.co.uk/news/ukn...nsions-costs-Britain-andpound100-billion.html

 

[Softus]

Some people can't see beyond the ends of their own noses.

The drop in VAT is a device to boost retail spending, and isn't supposed to directly "help" small businesses.

If you're so short-sighted that you've invested money in bulk stationary that has "17.5%" printed on it, then now is a good time to learn your lesson.

 

[Thermo]

i still fail to see how it will achieve that. many retailers will not pass on the saving. i certainly dont think poundland are going to change!

 

[hairyben]

i still fail to see how it will achieve that. many retailers will not pass on the saving. i certainly dont think poundland are going to change!

I'm on a flat rate VAT scheme.

(Which means, instead of doing long and complicated VAT books, I charge 17.5 and pay the VATman 8.5% of the gross turnover, but don't claim any VAT back, on the basis that in my game labour/materials&costs averages around 50:50.)

Great so far. But does my 8.5% rate now drop? Cos I've quoted a load of work for businesses VAT-exclusive and stand to lose out in the pocket otherwise.

It probably seemed a really great idea to a certain prick sat in whitehall without half a clue of just whats involved in making the world go round..

 

[Softus]

Two words:-

Big.

Picture.

 

[Shytalkz]

Hairy, apparently HMCR are looking to adjust the flat rate payments.

 

[Shytalkz]

...bulk stationary that has "17.5%" printed on it...

Or stationery, even, but then again, things do seem to be grinding to a halt....

 

[Softus]

Oh, b*llocks. Well spotted.

 

[confidentincompetent]

Oh, b*llocks. Well spotted.

Seems VAT is going to be 18.5% in 2010/11. That will really help business
Wonder how many more gems will out from this tax cut statement.
make note to check up definition of ' tax cut' .