Barclaycard has announced that spending on credit and debit cards was up over the 2009 festive period.

Barclay Payment Acceptance, which is one of the largest processors of credit and debit card transactions, said that UK shoppers spent more using their plastic than they did last time. The figures compare 19th December to 31st December, 2009, to the same period in 2008.

And the busiest day turns out to be the 23rd December, when a whopping £497 million was spent using credit and debit cards. Further examination of the data might show of course that this was men doing their last minute shopping.

The next busiest day was 29th December when no doubt attention turned to sale bargains. On this day some £376 million was passed through the tills using plastic.

The total turnover for the period under review was a quite staggering £4 billion, not bad considering the country is still officially in recession. It was a 2.4% increase over 2008 which saw just shy of four billion being spent.

Breaking the data even further, reveals that spending after Christmas was also up from 2008, with £1.68 billion compared to £1.64 billion.

On Christmas Day itself (thought that was a holiday), there were 700,000 transactions totalling £24 million. These appeared to peak at 12.08pm (maybe in readiness for lunch and the Queen’s Speech), with 32 transactions a second. The online retailers accounted for £9.5 million’s worth of trades on the day itself, compared to £8.1 million in 2008 (up 17%).

On boxing day, many of the transactions, which averaged around £73, were driven by the DIY sector.

Head of Sales at Barclaycard Global Payment Acceptance, Marc Pettican, said:
“Our retailers have seen an increase in turnover compared to the same period last year with over £4 billion being spent. We’ve also seen a stronger post-Christmas performance as shoppers take advantage of the sales discounts and consider the effects of the imminent VAT increase.”

Guest Article by Neil Camp

On Wednesday 9 December the Chancellor of the Exchequer the Right Honourable Alistair Darling will once again try and balance the books in his 2009 Pre-Budget Report (PBR) statement.

Observers are more than ever keen to see what the Chancellor has to say, given that, according to Allen & Overy’s UK Tax Partners:
“This year’s report will be made in unique circumstances. There is a large fiscal hole for the UK Exchequer to manage; increased tax revenues will be needed. A general election will take place within the next six months, so some of the possible measures mentioned below may fall by the wayside.”

And the partners at Allen & Overy have highlighted a number of issues they reckon will come to the fore.

First up is that there could be a VAT rise to 20% as a one-step increase from the temporary 15% rate. This in fact represents a significant cost to business associated with VAT rate changes, even though VAT may largely be a "pass through" tax for those businesses.

Second issue is the talk of an end to the generous corporation tax carry forward of losses rules, together with a time limit of such losses.

Third on the table, possibly, is a move to clarify the new dividend exemption has given rise to some uncertainty as to what amounts to a dividend, especially in relation to overseas entities.

Fourth is the issue of trying to address taxpayer behaviour and/or the relationship between HMRC and taxpayers, which might include an update on the proposed Banking Code and the first public indication that Alternative Dispute Resolution may be used to reduce the current HMRC/taxpayer dispute mountain. It could be that the Code is made less onerous, so as to encourage more banks to sign up to it.

The fifth point worthy of recognition is that following the decision in the HSBC case that the 1.5% SDRT season ticket charge is unlawful, there will almost definitely be a further announcement about how the issue of shares into clearing systems and depositaries is to be taxed.

Sixth issue is the now very attractive looking 18% Capital Gains Tax which has been put in the spotlight following the new 50% income tax rate. Although Allen & Overy point out that there here is a danger that the new rate will lead to a reduction of tax on certain profits from 40% to 18% rather an increase from 40% to 50%, which suggests either an increase in the general rate of CGT, or the introduction of a higher CGT rate for "short term" gains.

And finally, the people in the know say that strict anti-avoidance rules – given that the higher rate has increased from 40% to 50% – look very likely indeed. So maybe being paid in bottles of wine, or antiques (as happened the last time the tax rate was high), might not work this time.

Guest Article by Neil Camp 

VAT across Europe is about to be set at new high levels as members of the European Union introduce rises in a way to cope with the financial criss that confronts them all.

The average weighted rate was 18.6% in 2006, but the annual TMF EU VAT Tracker predicts that that figure will rise to nearly 20% by 2010. Spain are already believed to have pencilled a 2% rise in their VAT rate with their Premier, José Zapatero, recently speaking of the need for a major increase by the end of 2009. The Spanish financial press think that this means a 2% rise.

Finland is to up their rate by 1% next year and the UK will shortly end their 2.5% VAT reduction.

Standard VAT rates around the 27 European Union are tracked by the annual TMF EU VAT chart and up until 2007, it showed that countries were implementing big VAT increases to subsidise cuts in business taxes. The basis of this strategy was the belief that this was a vital way of securing job-creating inward investment and preventing the leakage of employment to low-cost emerging markets.

Germany was said to be the best exponent of this strategy, which pushed through a 3% rise in 2007. France and Netherlands were said to be following German’s lead, but fears of inflation and then the start of the credit crunch in 2008 put an end to their interventions.

Nonetheless, VAT rises are back on the respective Government agendas because of rocketing deficits emerging over the past year. In order to cope with their debts and pressure from the currency markets, the last six months have seen emergency VAT rises in Ireland, Lithuania, Hungary, Estonia and Latvia. And more countries are expected to follow suit.

Richard Asquith, MD of TMF VAT Services, said:
“It now seems that the earlier fears around inflation and recession have now fallen away as economies stabilise. With record-breaking government deficits in all countries, we may now see a rapid re-acceleration of this policy with an expansion of the VAT burden on consumers. Without doubt, other large European countries will follow suit and push VAT rises back to the top of their tax strategies.”

Guest Article by Neil Camp

It’s quite appropriate that the Bank of England’s new way of trying to save the U.K. economy, quantitative easing, sounds like a brand of laxative.

The economy is literally bunged up and the Bank of England is hoping that an initial £75 billion will help matters, and if not, a further £75 billion will be made available.

So what is quantitative easing? It’s not quite a matter of simply printing new notes, as many critics are trying to suggest. That’s been recently tried in Zimbabwe and doesn’t work, causing rampant inflation. But the big problem for the U.K. is deflation, not inflation.

Quantitative easing is all about flushing vast amounts of money into the system.

Now, a few basics. The Bank of England controls the flow of money into the U.K. economy. It effectively sells money to the country’s financial institutions at a given rate: the interest rate. By repeatedly lowering the interest rate – at the time of writing it’s 0.5% – it has tried, and failed, to get the banks to pass cheap money onto its customers, both personal and business.

So, the main problem is the lack of credit. This is desperately needed by companies to fund their businesses and people to fund their daily lives, and the reduction of interest rates have not relaxed the credit supply log jam.

But quantitative easing is not about giving money away for free at the ATMs. The new money is effectively swapped for assets, both good and bad, which are handed to the Bank of England by the financial institutions in exchange for the bundles of cash.

Now, the great fear is that the banks will gladly hand over assets, a number of them toxic, in return for the cash which they will then use to rebuild their balance sheets. So, what you might find is that having received £75 billion, the banks are solvent again, but their customers are still starved of credit.

Furthermore, quantitative easing doesn’t have a great reputation, with the Japanese having used it to little effect in the 1990s. But, experts put that down to the Japanese using the tactic too late, a case of trying to shut the door long after the horse has bolted. It led to what the Japanese called a lost decade, as it struggled to cope with deflation.

So, the Bank of England has struck quickly, playing what pundits see to be the last card in the pack. If it works, it will stimulate the dying economy. It if doesn’t, it will have wasted billions of money which could have been used elsewhere. And it might cause sudden and rampant inflation from which it will take generations to recover.

But what might turn out to be the biggest criticism is why the Bank of England, and behind them the Government, doesn’t make the money available through a financial institution that will guarantee it goes to the right people.

The Government controls Northern Rock and, in effect, HBOS, so why cannot they be given the money and ordered to distribute it via loans and credit.

Cynics might say that Bank of England is stuffed full of bankers whose primary concern is to help other bankers, despite what the Governor might claim. Others might say that the Government cannot favour one institution over another and that legal claims from those left out of the bonanza might follow.

One thing is for sure though, if it doesn’t work, we may all have to await financial Armageddon.

Guest Article by Neil Camp