HM Revenue & Customs (HMRC) is trawling Land Registry data to identify taxpayers who have bought and sold properties but failed to disclose disposals in tax returns, according to research by accountants UHY Hacker [...]]]> Home owners who have failed to declare their capital gains could soon be facing bills running into tens of thousands of Pounds.

HM Revenue & Customs (HMRC) is trawling Land Registry data to identify taxpayers who have bought and sold properties but failed to disclose disposals in tax returns, according to research by accountants UHY Hacker Young.

As a result, accountants have seen a rise in capital gains tax (CGT) inquiries focusing on residential properties, which can involve taxpayers having to pay extra tax bills running into tens of thousands of Pounds.

UHY Hacker Young, said: “CGT inquiries focused on residential properties have become much more common recently and HMRC has clearly stated in inquiry correspondence that it has obtained information on taxpayers from the Land Registry, which is something we’ve not heard before.”

Tax accountants are noticing a trend since the 2009 budget for HMRC officials to re-examine popular tax dodges to recover some of the estimated £40bn lost each year through illegal tax evasion and aggressive, but legal, tax avoidance.

The Association of Chartered Certified Accountants (ACCA), said: “HMRC is definitely becoming more aggressive to find tax evaders and has become more proactive in the past year or so. It is not leaving any stone unturned.”

In some inquiries, HMRC has argued that taxpayers have incorrectly offset some costs spent improving properties against CGT. Taxpayers are allowed to deduct the cost of work on a property from their CGT bill, but such work must be considered “enhancement expenditure” and not maintenance.

The number of second homes in England has risen by 30pc in the past decade, according to the Council of Mortgage Lenders (CML), so how can home owners avoid this timely, and often expensive, mistake?

Rules from HMRC state that if you live in more than one property you must tell your Tax Office which one you want to be treated as your main home, or your principal private residence, (PPR) for CGT purposes. You have to reside in the property to nominate it as your main home.

You have to make the nomination within two years of changing the number of properties you live in, whether the change is an increase or a decrease.

If you do not tell your Tax Office which property you want to call your main home, the question of whether a home that you sell has been your main home and eligible for private residence relief has to be decided on the facts. So it makes sense for you to decide and notify the Tax Office before the two years are up.

You do not have to keep the same house as your main home. Once you have nominated a main home you can tell the Tax Office at any time that a different property should be the one that qualifies for private residence relief but you cannot backdate the change more than two years.

This is known as “flipping”, however, care must be taken and you should consider getting professional advice- unless you are an MP when you are able to rip off taxpayers.

Also, if you buy a house for someone else to live in and own it, but don’t live in it yourself, you will not be eligible for private residence relief when you come to sell the property. You are effectively making an investment in a property, so when it is sold at a profit you will be liable to pay CGT on that gain.

This is because HMRC could claim that taxpayers who regularly carry out this type of activity are in fact engaged in a property development and therefore liable to income tax and National Insurance.

Sales had risen from September to November as first-time buyers took advantage of tax credits.

The decline in December was expected as buyers rushed to complete deals before the original 30 November deadline.

The first-time buyer tax credit has since been [...]]]> Sales of existing US homes fell 16.7% in December, according to the National Association of Realtors (NAR).

Sales had risen from September to November as first-time buyers took advantage of tax credits.

The decline in December was expected as buyers rushed to complete deals before the original 30 November deadline.

The first-time buyer tax credit has since been extended until 30 April, and the NAR said there was likely to be another surge in sales in the spring.

December sales fell to a seasonally-adjusted annual rate of 5.45 million from 6.54 million in November, but are 15% higher than the level seen in December 2008.

The average sale price of a previously-owned home was $178,300 (£110,200) in December, up 1.5% on a year ago.

Total sales in 2009 were almost 5% higher than in 2008 – the first annual gain since 2005.

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Gloomy housing sector data and continued layoffs led to a subdued Wall Street opening as investors played safe with their profits after a succession of session gains.

Investors were also reacting to a warning from [...]]]> US investors opt to take profits on release of disappointing data and as Bernanke warns that America must curb its budget deficit.

Gloomy housing sector data and continued layoffs led to a subdued Wall Street opening as investors played safe with their profits after a succession of session gains.

Investors were also reacting to a warning from Federal Reserve chairman Ben Bernanke that Congress and the Obama administration must start plotting a strategy to curb record-high US budget deficits.

Failing to do so could eventually erode investor confidence and endanger the economy’s prospects for long-term health, he said.

Testifying before the House Budget Committee, Mr Bernanle said: “Even as we take steps to address the recession and threats to financial stability, maintaining the confidence of the financial markets requires that we, as a nation, begin planning now for the restoration of fiscal balance.”

The White House estimates that the government will rack up an unprecedented $1.8 trillion budget deficit this year. That would be more than four times last year’s all-time high.

The Dow Jones industrial average was down 71.76points, or 0.82 per cent, lower at 8,669.11.

A survey by ADP, a payroll business, revealed that the US private sector shed 532,000 jobs in May – better than 545,000 in April but slightly higher than the 525,000 estimated.

The US Mortgage Bankers Association also said mortgage applications fell 16.1 per cent for the week ended May 29.

The CIPS/Markit purchasing managers’ monthly survey on the services sector did little to help the FTSE 100, which continued its downward spiral, slumping by 108.8 points, or 2.43 per cent, by mid-afternoon.

Heavyweight blue chips were to blame for part of the fall as they began to trade ex dividend.

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President Obama said that the move would stop the company being broken up, as it prepared to make the world’s largest industrial bankruptcy filing.

The United Auto [...]]]> The US Government will take a 60 per cent stake in General Motors (GM) as the carmaker files for Chapter 11 bankruptcy protection today, officials of the Obama Administration revealed.

President Obama said that the move would stop the company being broken up, as it prepared to make the world’s largest industrial bankruptcy filing.

The United Auto Workers (UAW) union will take 17.5 per cent in shares and the governments of Canada and Ontario will lend $9.5 billion (£5.9 billion) and get 12 per cent equity and $1.7 billion debt in return.

The US Government will provide an additional $30 billion in financing to get the giant through bankruptcy.

“We intend for this to be a permanent resolution of the GM situation,” an official said early this morning, emphasising that there would be no further taxpayer cash. This is it for GM on a go-forward basis.”

GM will close 11 facilities and idle a further three. The US Government expects GM to be out of bankruptcy in 30 to 60 days.

The UAW will be able to put in one independent director, as will Canada and Ontario, but Obama Administration officials said that they expected a significant clear-out of the existing GM board by the time the company emerged from bankruptcy.

Mr Obama is expected to emphasise today that the Government will take a backseat, “hands-off” role on everything but corporate governance issues.

No government employee will serve on the board or work at the company and the Administration plans to offload its stake “as soon as practicable”.

An official said: “Our goal is to promote strong and viable companies that can quickly be profitable and contribute to economic growth and jobs without goverment involvement.”

The path to a bankruptcy was cleared when 55 per cent of GM’s unsecured creditors agreed at the weekend to accept equity of up to 25 per cent in a restructured group in return for giving up $27.2 billion of debt.

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Yields on 10 year Treasury bonds have risen relentlessly since March when the Fed first announced its plan to buy $300bn (£188bn) of US [...]]]> The US Federal Reserve Board (FED may soon be forced to launch fresh blitz of quantitative, or risk seeing economic recovery snuffed out by the latest surge in long term borrowing costs.

Yields on 10 year Treasury bonds have risen relentlessly since March when the Fed first announced its plan to buy $300bn (£188bn) of US government debt directly, a move that briefly forced rates down to nearly 2.5pc, a level thought to be the Fed’s implicit target.

Yields have jumped to 3.69pc – after spiking as high as 3.74pc on Wednesday – pushing up the standard 30-year mortgage loan to 5.08pc and lifting the borrowing cost for corporations.

The US Mortgage Bankers Association yesterday highlighted the fragility of the US housing market, reporting that 12pc of homeowners are either behind on their payments or facing foreclosure, the highest level since records began.

Almost 6pc of “prime” borrowers are in arrears, showing how far the crisis has moved beyond the sub-prime. Most arrears are caused by job losses. The US unemployment rate has reached 8.1pc, and is even higher under older definitions, running at 15.8pc under Clinton-era metrics.

It is unclear why US bond yields have spiked so violently, with spill-over effects on gilts and bunds. One camp of investors is worried that inflation is rearing its ugly head again: others fear a sovereign debt crisis as over-extended states loses their AAA ratings.

What is clear is that the market choked on $100bn of US Treasury debt issued in three auctions this week, and on the knowledge that Washington must raise a further $900bn by September. Governments around the world must fund $6 trillion of deficits this year, exhausting the capital markets.

The US is at the front of the firing line. Beijing is clearly losing its patience with the Fed’s policy of printing paper, seen as a form of stealth default. There is some risk that further moves to step up quantitative easing could cause China to boycott US Treasury auctions. China and Japan together hold 23pc of all US federal debt.

Loans Calculators Blog- loans rates blog for news about interest rates- unsecured and secured loans, mortgages, remortgages and refinancing including home loans, equity release and consolidate debt loans.

Rumours and articles abound this morning concerning Bank of [...]]]> The results of the US banks stress testing is expected tomorrow after the markets in New York close- this is to be followed by a press conference from the Banks involved on Friday at which one would assume, they will argue their opposition to the findings.

Rumours and articles abound this morning concerning Bank of America with estimates that the Bank will be ‘asked’ to get hold of $34 billion of fresh capital following the stress testing. This is about 3 times the original expectation and raises concerns over the total amount that might need to be raised by the other 9 major banks involved.

Equity markets were subdued with a small drop in the DOW recorded. The original stated purpose of the stress tests was to increase confidence in the US banking system, but the market feels like the end result has been almost exactly the opposite.

The markets have already received indications from the ECB president of a rate cut and the possibility of other measures- however with the reserve bank of Australia holding interest rates at 3% could this lead the ECB into a change in sentiment to hold rates?

The Norges Bank meet today and are expected to continue their rate cutting regime with a reduction by 50 basis points down to 1.50% anticipated.

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The market wanted to see more [...]]]> Last month the European Central Bank (ECB) surprised the markets by only cutting interest rates by 25 basis points to 1.25%- a record low but when compared against the UK interest rates of 0.5% and against the US of 0-0.25% then comparatively still high in the current global climate.

The market wanted to see more aggressive action amid rising unemployment and shrinking growth and all eyes will turn to the next ECB rate decision on Thursday. It is expected that another 25 basis point cut to 1% will materialize and the ECB may engage in additional “non conventional” measures- basically some form of Quantitative Easing to help the economy.

The European Union’s economic affairs commissioner recently declared that the European economy was in the “midst of its deepest and most widespread recession in the post-war era” and the euro zone will contract by 4% this year- this is more than twice than forecast in January.

In addition ECB president Jean- Claude Trichet is struggling to keep the ECB’s governing council united with the 22 members split in opinion on how far interest rates should be cut and whether the ECB should buy financial assets from the banks- so much is the wrangling that a vow of silence has been imposed on officials!

The German finance minister Peer Steinbruck has also noted concern that “competitive imbalances have built up within the euro area, increasing the exposure of some member states to the financial turmoil”. There is also a worry of other countries losing their competitiveness within the eurozone- in particular Italy and Greece.

Stateside, the Fed plans to deliver results of stress tests on US banks to executives today that may show about 10 firms need additional capital to weather a deeper recession. An obvious way for banks to fill their capital requirements is via conversion of preference shares to common shares.

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On the upside the FED [...]]]> The Fed stuck to their guns following the March announcement that they will still purchase a total of up to $1.25 trillion of agency mortgage-backed securities and up to $200 billion of agency debt by the end of the year, as well as $300 billion of Treasury securities by autumn.

On the upside the FED noted that the “pace of contraction appears to be somewhat slower” which allies with the surprising surge in US consumer confidence and there was also signs that the market was beginning to repair itself outside of intervention.

Before we get carried away and start talking of an imminent recovery we must remember yesterday’s severe Q1 GDP data from the US which showed a whopping 6.1% contraction against a forecast of a 4.7% drop.

A similar theme in euro zone yesterday as we again saw improved confidence data against a downgrading of German GDP to -6.0% vs. -2.25% originally forecast.

In other news we saw an interest rate cut of 50 basis points in New Zealand to 2.50% after further weak data from their economy. The RBNZ anticipated that the “adverse economic forces generated by the crisis to remain dominant throughout 2009,” with the “timing and extent of recovery” remaining “highly uncertain.” So expect further weakness for the Kiwi dollar…

This morning we saw Nationwide House Prices resume their decline in April after rising unexpectedly in March. However the decline of 0.4% was less than expected and fuels optimism that a bottom is near…or is this another false dawn!

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Stock markets were little changed as US consumer prices posted their first annual decline since 1955. Trader John Cetera of Hamilton Executions on the floor

Hopes of a [...]]]> The fledgling recovery in the US housing market appears to have stalled, reducing the chance of President Barack Obama’s “glimmers of hope” turning into green shoots any time soon.

Stock markets were little changed as US consumer prices posted their first annual decline since 1955. Trader John Cetera of Hamilton Executions on the floor

Hopes of a recovery were also damped down as the US registered its first year-on-year fall in inflation for more than half a century in March, due to falls in energy prices.

Recovery of the housing market is central to the recovery of the US economy, and the latest data puts paid to comments this week by President Obama that he saw “glimmers of hope” in the economy. His views were largely based on earlier housing surveys.

The number of US citizens losing their homes leapt by 44pc last month, as banks pursued delinquent borrowers after federal mortgage lenders Fannie Mae and Freddie Mac lifted temporary bans on foreclosures. A survey by Foreclosures.com found that 175,199 homes were repossessed by lenders in March.

In spite of major banks promising to work with troubled mortgage holders to keep them in their homes, almost 370,000 families have lost their homes so far this year.

Mortgage applications also fell last week for the first time in more than a month, suggesting that even with borrowing costs at record lows, potential house buyers are staying out of the market.

The bearish outlook was compounded by the Federal Reserve’s Beige Book, which provides an assessment of regional economic activity. It said the US economy continued to weaken in March – albeit at a slower rate – and found that the housing market remains “depressed overall”.

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Sterling has tracked higher again following a UK bullish article that appeared in the Telegraph in which the Lombard economist predicts that the [...]]]> Despite yesterday’s trading volumes being severely depleted resulting from the Bank Holiday across much of Europe and the UK; there was plenty of activity – both in the equity and the currency markets.

Sterling has tracked higher again following a UK bullish article that appeared in the Telegraph in which the Lombard economist predicts that the UK Housing crisis will end by Christmas. This will make today’s release of the March RICS housing market survey even more eagerly awaited with expectations of a slightly firmer figure from February’s -78.3% (the lowest figure in more than 30-years).

Survey data suggests that growth in enquiries and viewings have become more buoyant resulting in a modest uptick in sales although financing constraints combined with fears of unemployment continue to hold back any significant recovery in activity.

The US has a heavier calendar however with retail sales for March the highlight for today. The hope is for a continuation of the firmer than expected January and February figures but with the decline of the US auto-makers still headline news, the outcome could be close to a flat overall number.

This sets the scene for a strong opening on Wall Street where we are scheduled to get results from 3 major US corporate, Intel Corp, Infosys-Tech and Johnson & Johnson.

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From the US we had several very interesting pieces of news – both good and not so good, but Wall Street ended focusing on the positive and the [...]]]> The G20 Conference in London stole the Press Inches but it was the yesterday’s economic and trading data plus financial announcements that provided the market with more interest.

From the US we had several very interesting pieces of news – both good and not so good, but Wall Street ended focusing on the positive and the DJIA closed on an up note, +2.01% higher.

On the positive, we had auto sales better than anticipated, probably supported by heavy discounting but good news nonetheless with numbers at both GM and Chrysler less negative than had been feared. We also had some positive news on the economic data front including a strong bounce in the ISM survey, although the ADP jobs number did come in marginally worse than had been predicted yesterday.

An indication of how slow the recovery of the US economy is going to be is the massive stock building of petroleum products as reported in yesterday Oil Inventory Data Release. The number is running at 4 times the 5-year average and indicates that OPECs best efforts to stabilise their market are not working.

More important for markets was an announcement from the US that the Fed would be buying Treasuries today and that the Treasury would not be issuing. This should leave longer term yields lower as QE begins to leave its mark but effects on currencies are more difficult to call.

With the ECB meeting scheduled for later today, this might very well leave Sterling as the Buyer’s choice (for today anyway) but the European Central Bank have been known to scupper the best laid plans before…..

Today, the main event will be the ECB meeting and the conference that follows. It is almost unanimous that rates will be cut by 50 basis points but the jury is still out as to what the press conference will contain.

The favoured view is that the ECB will give details of a Corporate Bond buying programme which would get its QE measures on the way. As mentioned above though, the ECB rarely miss the chance to disappoint and therefore a less market-friendly outcome is still a distinct possibility. The unknown is not a favoured position for market players hence the current Euro weakness on the exchange markets.

From the UK, other than anything from G20, the interest will surround the DMO’s (attempted) auction of £2.25 billion of 30-year gilts. This, remember, is outside of the BoE Reverse Auction buying range as was the 40-year auction that the DMO failed to fully get away last week.

Will they have learnt from the previous failed attempt? We will be told later…. Earlier this morning, the Nationwide revealed that house prices in March rose by 0.90% month-on-month versus a 1.90% fall in February, this, the first rise in the index since October 2007.

Loan Calculator suggest an aberration rather than a turning point.

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The funds will be used to buy government debt and to liquidate Fannie Mae and Freddie Mac.

The Fed kept interest rates on hold at 0-0.25 % as expected, however the sheer scale of the plans surprised the markets. $300 billion will [...]]]> The Federal Reserve shocked the market with a $1.15 trillion boost for the US economy.

The funds will be used to buy government debt and to liquidate Fannie Mae and Freddie Mac.

The Fed kept interest rates on hold at 0-0.25 % as expected, however the sheer scale of the plans surprised the markets. $300 billion will be made available for longer term treasury securities and $850 billion for the ailing Fannie Mae and Freddie Mac.

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The main interest was the pledge to double the amount of resources of the IMF, this essentially comforted the markets and encouraged risk appetite.

For the week ahead, the main highlight will be the US interest rate decision on Wednesday [...]]]> There was actually very little focus at the G20 on the forex markets and recent volatility.

The main interest was the pledge to double the amount of resources of the IMF, this essentially comforted the markets and encouraged risk appetite.

For the week ahead, the main highlight will be the US interest rate decision on Wednesday evening. The FOMC will not shift interest rates any further but in the light of recent initiatives from the UK and Switzerland, they could discuss other measures to help the economy.

The Rightmove Housing survey released overnight also came in slightly positive with a 0.9% month on month gain. With the Swiss and possibly other economies looking to adopt Quantitative Easing it may be perceived that the UK is ahead of the game.

Still early days and recent news that 10 jobseekers are applying for every vacancy signifies a mountain to climb before the UK economy recovers.

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Investors responded to fears that the world’s largest economy is sinking further into recession and speculation that the US Government may be forced to buy stakes in ailing banks, despite assurances from Washington that lenders would not be nationalised.

Japan’s Nikkei Index [...]]]> Asian stocks fell heavily this morning following last night’s sharp decline in American shares.

Investors responded to fears that the world’s largest economy is sinking further into recession and speculation that the US Government may be forced to buy stakes in ailing banks, despite assurances from Washington that lenders would not be nationalised.

Japan’s Nikkei Index fell by 1.5 per cent to a four-month low, narrowly avoiding a slide to below 7,000 for the first time in 26 years, closing at 7,268.56. In Hong Kong, the Hang Seng lost 461.46 points, or 3.5 per cent, to end the day at 12,713.64. Last night, the Dow Jones industrial average fell to an 11-year low, losing 250.89 points to 7,114.78.

Japanese shares remained in the red for the day despite hints from Kaoru Yosano, the newly appointed Finance Minister, that the Government may be working on more measures to support the domestic share market. “The side-effects of falling stock prices are worse than expected,” said Mr Yosano. “We are witnessing many negative wealth effects with impaired assets held by banks and insurance firms.”

Concern is growing that the Japanese banks, despite their stable capital position relative to peers in the US, will rein-in their spending even more fiercely, triggering bankruptcies throughout the small and medium-sized industrial heartlands of Japan.

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What we did see was more negativity in the equity markets as the Dow fell to the 2002 lows below 7300 amid fears that the US [...]]]> Last week although the currency markets were choppy, we did not see a significant break out of the current ranges for the main protagonists- GBP/USD, EUR/USD and GBP/EUR.

What we did see was more negativity in the equity markets as the Dow fell to the 2002 lows below 7300 amid fears that the US government will raise their stake in Citigroup and Bank of America- a step closer to nationalization which has raised concern for investors.

On the back of this the USD is showing the strain and we have seen a move higher on GBP/USD and EUR/USD reversing the dollar strength we saw last week.

Looking to the week ahead the main data to look out for will focus on releases from Europe and the US. Tomorrow we have the German IFO survey and Wednesday we see GDP data from Germany- the IFO survey will give an early indicator of current business expectations and sentiment and Wednesdays GDP will give a statistical measure of German economic activity and health. It is expected that the GDP will show a further contraction of the previous -0.5%.

It will be interesting to compare the German GDP to that of UK GDP released later in the morning on Wednesday- again we expect to see a further contraction from the previous -0.6%.

In the US GDP data released on Friday and tomorrow Ben Bernanke the fed governor will testify on the current state of the US economy and the US dollar. Also of note is Obama’s summit on the US deficit.

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It has a fancy title within it, the Financial Stability Plan and the Public-Private Investment Fund (ie Bad Bank) but little else besides.

The ideas are similar to those proffered by the widely lampooned ex Treasury Secretary Paulson and the methods to be [...]]]> Geithner unveilled absolutely nothing new with regards to the Obama Administration’s financial rescue package.

It has a fancy title within it, the Financial Stability Plan and the Public-Private Investment Fund (ie Bad Bank) but little else besides.

The ideas are similar to those proffered by the widely lampooned ex Treasury Secretary Paulson and the methods to be used to achieve the objectives as absent as ever. It is hard to see how or why private sector funds would rush to buy an ocean of toxic assets that are still difficult or impossible to value without there being some form of Government guarantee as to their minimum worth.

So the US Banking fiasco remains well up the muddy creek with only the promise of a paddle somewhere down the line. Equity markets hated Geithner’s pronouncements and there was a rush by currency markets into risk averse mediums, primarily the US Dollar and gold.

Yesterday’s Government funding operations went reasonably well with a warm reception for the UK Gilt auction and strong demand for the US Treasury’s 3-year note sale.

The latter went some way to assuage worries about overseas appetite for US Government securities, with federal borrowing expected to surge. Following the Dutch offering yesterday we get a further offering of the 10-year bund out of Germany today.

This bond is the same one that was badly received by the market in January so this round’s reception will be awaited with interest.

Elsewhere, the Riksbank in Sweden reduced their official interest rates by a full 1% down to 1% citing a continuing depreciation of the Swedish economy and prospects considerably worse than they had predicted last December.

This cut was greater than had been expected by both cash and futures markets and has caused the Krona to weaken sharply against the Euro. Not that the Euro is immune to the prospects of lower rates following comments from ECB member, Gonzales-Paramo who, following on from the winding up of the Ecofin meeting stated that 2% not lowest rate for the currency. He added that he sees a further inflation fall in the short term.

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Attention therefore was firmly fixed on any mention of more innovative easing initiatives and also the mood of the accompanying statement. [...]]]> With a target Fed Funds Rate ( the rate at which The US major Banks are able to borrow overnight Dollars) already at a 0 – 0.25% level, further cuts are nigh on impossible.

Attention therefore was firmly fixed on any mention of more innovative easing initiatives and also the mood of the accompanying statement. The Fed did not specifically announce a programme of longer term asset buying as part of a shift towards quantitative easing but just confirmed that the current low levels of interest rates were going to be with us for some time to come.

Their prognosis for the economy therefore remains every downbeat with little sign yet of any move towards recovery.

Market opinion therefore is that the previously discussed plan to create an entity to buy a lot of the toxic assets held by US Banks will gather momentum and as long as the Price Is Right, this should free up additional cash for those Banks to lend on to the Corporate Sector.

Still a lot of work to be done here.

One piece of good news out overnight was that the $ 800 billion stimulus package cleared the first hurdle (Congress) on its tortuous route to becoming a real injection. The dark cloud was that not one Republican member voted in favour.

It looks as though Obama is going to have a real battle if he is determined to have these measures approved across the political spectrum. The Dollar and Wall Street however both took heart with the currency making strong gains across the board.

Today sees the auction of $ 30 billion of 5-year notes – a massive amount but it will be vital for the rest of the programme that the sale goes well.

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