Student Loan Interest Rates Have Doubled
Apology by HMRC for Loss of Publics Contact Details
The Cost of Entertaining This Christmas
Our Christmas Charity Appeal: Under The Tree

News

Student Loan Interest Rates Have Doubled

For all of you with children, siblings, family or friends studying at University, this may be of great interest to you. Without much fanfare, The Student Loans Company announced in September that the interest on student borrowings has doubled, from 2.4% to 4.8%, in order to stay in line with inflation.

Each year in March, the SLC reviews the interest level in relation to the current inflation rate and sets the new interest rate accordingly. It happened this year that inflation had risen to a sixteen year high of 4.8%, which is now being reflected in the new rate.

If this trend continues into next March then the rate will be adjusted accordingly, but in the meantime students and graduates have to contend with knowing their student debt is growing at a rapid rate.

For example, a graduate with 16,000 pounds of debt with the Student Loans Company was seeing their loan rise by 384 pounds per year on the previous rate of 2.4%, but the new rate will mean annual interest of 768 pounds.

A spokesperson for the Student Loans Company told financial website thisismoney.co.uk: "This rate is unusually high. I don't think anyone would expect it to be 4.8% again and we expect it to reduce next year." Additionally, there is Government policy in place to keep inflation low and the bank of England has already acted to try and bring it back down.


Repayments are calculated on the basis of what a borrower earns, not on what they owe. This means that while the total amount owed will increase faster with the new rates, actual payments will be unaffected, although it could take longer to pay back the loan. However, graduates, many of whom may be in their 50s when they complete their repayments, see this as an "education tax" in disguise.

Graduate Dave Collins Lafferty protested; "I feel this has been carried out stealthily with little news coverage and no information given by the Student Loans Company to date". "A bank could never double its interest rates without informing its customers well in advance, but currently very few of the people this will affect are aware of the rise," he continues.

Collectively, students and graduates owe SLC more than 19 billion pounds, so the 2.4% interest rise will cost them nearly 500 million pounds more in the next year alone.


Apology by HMRC for Loss of Publics' Contact Details

HMRC have written to all child benefit recipients to apologise and say that a copy of the lost database containing the personal details, including bank account numbers, of every family that claims child benefit, are probably still in a Government office somewhere, but they can't be sure! This does not remove the very real risk that every individual named on those discs, including the partners of the claimants and their children could be the target for identity or bank fraud, now or at any time in the future.

You need to be constantly vigilant about odd bills arriving for items you haven't ordered, or confirmation of loans you haven't applied for. If your post suddenly goes missing this can be a sign that someone has applied to redirect your post for criminal aims.

As a matter of routine you should never dispose of bank or credit card statements in your normal household rubbish. In any case you need to keep all the documents used to complete your tax return for at least one year after the tax return filing date. So bank statements covering the year to 5 April 2007 must be kept until at least 31 January 2009.
All business records, including receipts, need to be preserved for at least six years after the end of the year they refer to. When you do decide to have a clear out shred all your statements, including utility bills, before you throw them away.

Never give personal details over the phone or to personal callers, even if they claim to be from your bank, water board or power company. If the transaction is important call them back on a telephone number you already know. It also goes without saying you should never open emails which are supposedly from your bank asking you to confirm security details. There is a particularly nasty scam doing the rounds at the moment in the form of an email apparently from Paypal confirming payment into your account. Be suspicious of all unexpected emails and never click on links embedded an email from someone you don't know.

The Cost of Entertaining This Christmas
You may be about to have your firm's Christmas party and hand out seasonal gifts for staff and customers, but remember there are strict rules about what is deductible for tax and reclaimable for VAT.

The cost of entertaining customers or potential customers is not tax deductible for income tax or corporation tax. Your accounting records need to distinguish between the cost of hospitality such as the provision of food or drink, and significant gifts to customers, from other marketing expenditure. The amount classified as non-deductible entertaining is added back to the profits to calculate the tax due.

Samples of the products or services your business normally sells are permitted to be given away, as long as you are not in the food or restaurant business. Small promotional gifts of any item are also acceptable if they cost less than 50 pounds each and carry a clear advertisement for the business, although food, drink, tobacco and gift tokens of any value do not fall into this exemption. Small gifts worth more than 50 pounds in total should not be made to the same person in one year.

You can't reclaim VAT on the costs of entertaining customers or potential customers. Where your staff is required to attend an event to act as hosts for potential customers, all of the VAT cost is blocked. A VAT registered business can reclaim the VAT on small gifts that cost up to 50 pounds each, including gifts comprising of tobacco and alcohol.

Entertaining staff is tax deductible if it is not incidental to customer entertaining. The VAT on staff entertaining can be reclaimed, but a portion of the cost may need to be disallowed where customers also attend the event.

Staff entertainment can be tax free for the employees if it is in the form of an annual event or number of events to which all the staff are invited. However, you should try to limit the annual cost to 150 pounds per head, counting all those who actually attend the event. If the costs exceed 150 pounds per head (including VAT) your employees will be taxed on the total cost per head (not the excess above 150 pounds) as a benefit in kind. You as the employer can pay this tax on behalf of your employees through a payroll settlement agreement (PSA), but this does involve a degree of grossing-up, which can be expensive.

 
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Our Christmas Charity Appeal: Under The Tree

Over the past few weeks, we have been urging our clients and contacts to get involved with our Christmas Appeal collecting Christmas gifts and monetary donations for the charity When You Wish Upon A Star.