Will temporary dual homeownership attract CGT?

Q My mother is 64 and still working full time in London. She owns a property with no mortgage, which she bought in 2001. When she retires next year she wants to live on the Kent coast, and recently found somewhere she wants to buy. She wants to purchase this property and then move in upon retiring, when she will sell the London property to clear the additional mortgage on the Kent property and be left with a lump sum she can use to live on as she has very low pension provision.
Would this arrangement leave her vulnerable to paying capital gains tax (CGT) on her current home? Which would be the best mortgage for her? And what is the best way of minimising the tax she pays on this, as it would be illogical for her to pay huge capital gains when she is merely moving home, albeit with a year's gap between move dates. JP
A Your mother shouldn't face a CGT bill when selling the London home, provided she sells it within three years of moving out of it. Assuming the property in London has been her home, and she has lived in it for all the time she has owned it, she will qualify for what HM Revenue & Customs (HMRC) calls private residence relief, which makes the gains on the sale of a home tax free. There could, however, be a CGT bill if she has let the property at any time. More information is available in Help Sheet 283 on the HMRC website.
As far as getting a mortgage goes, your mother would be better off raising the money to buy the house in Kent by taking out a mortgage on her London home. If she took out a mortgage on the house in Kent she would need to have a cash deposit to put towards the purchase. By mortgaging the London home she should be able to raise the full amount she needs to buy the house in Kent, because I am assuming the London property is worth more than the house she wants to buy. If this is the case, the loan-to-value ratio will be quite low, which means your mother should have access to better mortgage deals.
Her age may deter some lenders, but if she makes it clear she plans to pay the mortgage off when she retires she should be able to get a mortgage. As she intends to pay it off rather quickly, she should steer clear of deals which make a charge for early repayment.
Source http://www.guardian.co.uk/

Tax Policy Change Would Bring Cash Piles Abroad Back Home

By STEVEN M. DAVIDOFF

 Apple has a cash problem. It’s not just that Apple has too much cash, $76 billion as of June 30. It’s rather that the bulk of that pile, estimated at $41 billion, is held abroad.
Apple does not want to bring it back to the United States for several reasons, primarily because of the tax consequences, but also because of its own growing foreign presence. Apple is not alone — this problem is an increasing one in corporate America. And the answer may not be more big, all-cash acquisitions, like Google’s $12.5 billion offer for Motorola Mobility.
In an analyst report in May, JPMorgan Chase estimated that 519 American multinational corporations had $1.375 trillion outside the United States. The problem is particularly acute among technology companies, which historically tend to hoard cash because of the cyclical nature of their business.
A recent Moody’s report noted that Microsoft held $42 billion abroad, or more than 80 percent of its cash. Cisco Systems has $38.8 billion, or almost 90 percent of its cash. Google — at least before Monday’s deal — had nearly $40 billion in cash, with more than 43 percent of it held abroad
Tax policy is driving much of this trend. For multinational corporations, cash earned abroad cannot easily be remitted to the United States. If it is paid back to the United States, it is subject to a dividend tax that can rise to as much as 35 percent. Companies are loath to pay this tax because while they can offset it with taxes paid abroad, the companies still end up paying a relatively high tax rate.
Yet it is not just a tax issue. Many United States companies want to keep cash abroad to focus on high-growth regions for investments and acquisitions.
A recent Standard & Poor’s study found that 50 percent of sales by companies in the S.&P. 500-stock index are outside the United States. Interestingly, the report also found that these companies paid more in foreign taxes than to the United States government. For Apple, 60 percent of its sales are abroad, and like these other companies, its foreign sales are expected to only go higher.
So, for those who expect that a change in tax policy would prompt Apple and other companies to put their cash piles to use in the United States, don’t be so sure. Even if there were no dividend tax, a large portion of this cash would stay abroad as these companies focus on higher growth overseas for investment.
Still, the current tax policy clearly distorts the practices of United States companies. One of the reasons Microsoft acquired Skype was because it was located in Luxembourg. Microsoft could use its foreign cash to make this acquisition without having to first repatriate it to the United States.
More broadly, many American companies return the cash every quarter to the United States, but then send it back abroad by quarter-end to avoid it being counted as a deemed dividend. The current tax laws thus encourage these companies to engage in cash manipulation and keep too much cash abroad.
In 2004, Congress enacted the American Jobs Creation Act, a tax holiday for companies to repatriate cash. The dividend tax was reduced to 5.25 percent from 35 percent. In exchange for this reduction, Congress required that any cash repatriated be invested in the United States. The cash could not be used for dividends or stock repurchases.
Alas, cash is fungible. A study of this tax holiday, entitled “Watch What I Do, Not What I Say: The Unintended Consequences of the Homeland Investment Act,” found that in the year following the act, repatriations increased by $230 billion from the previous year, to $299 billion.
Five companies alone — Pfizer, Merck, Hewlett-Packard, Johnson & Johnson and I.B.M. — repatriated $88 billion, But the repatriation did not result in increased investment. Instead, companies largely repatriated the money and used their current United States holdings to pay out dividends or engage in share repurchases. This was contrary to what Congress had intended.
While the cash was not used for investment, this does not mean it did not have an overall positive effect on the American economy: shareholders went on to spend this cash. The study’s authors acknowledged this, stating that “presumably these shareholders either reinvested these funds or used them for consumption, thereby having indirect effects on firm investment, employment or spending.”
The tax holiday may therefore have stimulated the economy, although a Congressional Research Service report found that the companies that repatriated the most money actually cut jobs from 2004-6.
Still, the act also had a pernicious effect. American companies now accumulate cash and wait to repatriate these holdings, knowing that Congress will probably declare another tax holiday eventually.
Why engage in this game every few years? Congress could permanently modify United States tax policy to set the rate at a lower amount. This would be recognition that Apple and its like are multinational companies and that this problem is not going away. The world is global, and fencing off cash like this for our best companies is unrealistic.
More important, although these companies will still leave some cash abroad, more of it will come back to the United States. If it were invested, that would be terrific but not necessary as it would also end the distortions that drive even more investment abroad.
Google provided a recent example only this week with its Motorola Mobility acquisition. Google has more of its cash in the United States than other comparable technology companies since it is not a retailer like Apple.
Google is also more willing to take on debt in the United States to finance acquisitions, having completed in May a $3 billion debt raise. This was done to provide it more United States cash. Google provides anecdotal evidence that ending this distortion will end the foreign cash bias.
A permanent tax reduction would not only cut taxes but actually raise revenue, allowing for Republicans to vote for it. And it should be a holiday without restrictions — trying to force companies to invest the money rather than pay dividends is a useless exercise that will create only more bureaucracy.
Even if the money were largely spent on buybacks and dividends and a large portion were kept abroad, it would still be reasonable to expect $300 billion to $600 billion to be repatriated. This money would flow into the economy, making the dividend tax cut a stimulus package that Democrats could support.
A 2008 simulated analysis by Decision Economics found that such a reduction would raise about $50 billion a year for the federal government from the tax received and the increased growth, over a five-year period. Economic growth would be increased by up to $62 billion a year.
The Obama administration has previously been negative on such a tax reduction, but it might want to reconsider. This is the rare tax policy move that both Democrats and Republicans should be able to easily support. It is one that would allow Apple and other big American multinationals to spend money more freely, something needed in a troubled economy. It may even push Apple to finally put to use some of its gigantic cash pile.

Families lose vital support as Home Start charity cuts back services

A ‘lifesaving’ and ‘invaluable’ charity which supports hundreds of city families through tough emotional circumstances is being forced to make huge cuts to its services.
Home Start Milton Keynes is having to close three of its four support groups, in Grange Farm, Bletchley and Heelands, next month. One in Newport Pagnell already closed in March.
In the last financial year, the charity provided emotional and practical support to 179 families, including 402 children, across the city. Since April this year, 122 families, including 255 youngsters, have already sought help.
But the closure of the three groups means the charity will have to turn away 45 vulnerable families it would have been able to support for longer than nine months.
The groups, as well as a home visit service, offer support, advice and a listening ear to families struggling to cope with issues such as sick children and other situations which make parents feel in need of support.
Steph Ellis, senior coordinator for Milton Keynes, said: “It costs just £8,000 to keep one group open for one year, which is not a lot really, and this would mean 15 families will get nine months plus of support.
“The families have issues such as post-natal depression and isolation. We have quite a few sick parents with things like cancer, and we help some very, very sick children. We also have a lot of mothers who have left it quite late to have children, which is a total lifestyle change.”
The fourth group, Hedgerows in Netherfield, will remain open, but is only guaranteed for another six months.
Staff hours at Home Start will also be reduced, with one worker losing 12 hours and the equivalent of another 20-hour post being cut.
The charity discovered in January this year its Government Sure Start funding would be stopped on April 1.
Since then it has spent a lot of time exploring alternative options and has submitted 12 funding applications in the past six months, but has so far failed to find any extra cash.
Hayley Roberson, who has taken her son to Hedgerows since he was three months old, made an emotional plea for more money to be found to support the charity.
She said: “I don’t think people realise how good they are. Home Start needs this funding, otherwise a lot of families are going to be sad and lonely. I want people to understand what they do and that they really need this funding.”
The scheme’s chairman John Nicolson said the charity has received comments from parents expressing their gratitude and calling the groups a ‘lifesaver’ and ‘invaluable’.
He added: “We very much regret that we have no alternative but to restructure the scheme.”
Source http://www.mk-news.co.uk/

Why CCTV has failed to deter criminals

Is anobody watching? CCTV's greatest value appears to be to those who make money out of selling CCTV. Photograph: Felix Clay

I've lost track of the number of people who've asked me to comment on David Cameron's insane plan to cripple Britain's internet in times of civil unrest by blocking Twitter and other services. In case you're wondering where I come down on it, well, let's say that it's not just a bad plan, it's also an ineffective one.
It's only been a week, after all, since Cameron's government concluded that the Digital Economy Act's web censorship plan wouldn't be implemented because downloaders would have no trouble getting around the blocks it would throw up. If people who want to download movies can evade Britain's censorwall, then so can people who want to organise riots. Duh.
But for me, the use of BlackBerrys in organising riots (if "organise" is the correct verb here) is just a sideshow. Though as a Canadian, I'm fascinated to see that our national technology success story, the businesslike BlackBerry, has now enduringly entered pop culture's lexicon as the tool of choice for disaffected and violent youth.
The real story for me is about surveillance, and not the mere use of CCTV footage to apprehend rioters after the fact. It's about the total failure of CCTV to deter people from committing crimes in the first place.
After all, that's how we were sold on CCTV – not mere forensics after the fact, but deterrence. And although study after study has concluded that CCTVs don't deter most crime (a famous San Francisco study showed that, at best, street crime shifted a few metres down the pavement when the CCTV went up), we've been told for years that we must all submit to being photographed all the time because it would keep the people around us from beating us, robbing us, burning our buildings and burglarising our homes.
A year before the Vancouver Winter Olympics, a reporter from a one of the local papers called me to ask whether I thought an aggressive plan to use CCTVs in the Gastown neighbourhood would help pacify the notorious high-crime heroin district. I said that the deterrence theory of CCTV relied on the idea that the deterred were making smart choices about their futures and would avoid crime if the consequences might catch up with them.
Then I recounted my last trip through Gastown, where the pavements were thronged with groaning and unconscious emaciated addicts, filthy and covered in weeping sores, and asked if those people could be reasonably characterised as "making smart choices about their future." I explained how my hire car had been broken into by a thief who'd left four perfect fingerprints on the passenger window, not caring whether the crime was associated with her or his biometrics forever.
Funnily enough, I was in Vancouver during the riots, which took place quite close to my home in London. I went through Gastown, which is utterly transformed into a pleasant shopping and university district. Simon Fraser University very carefully and cleverly slotted a new campus into the middle of Gastown, and hired only local people to work in it.
It was the very model of giving people a chance and a stake in their neighbourhood. And while there are still some sad and disfigured junkies here and there, you'd never know that Gastown was recently notorious as the most drug-blighted neighbourhood in the city that is the major port of ingress for heroin into the Americas.
I won't pretend to understand the forces that led my neighbours to take to the street and smash and burn and hurt each other. I don't think I know what "pure and simple criminality" is – presumably, it's some imperceptible pollen that drifts through society and alights on people, which is awfully convenient for government because "pure and simple" criminality has no cause and therefore no one to blame and nothing that can be done to prevent it.
But I do understand one thing: the deterrence theory of surveillance had no nexus with the motivations of the rioters. The theory of street crime as a rational act is bankrupt. Evidence-led CCTV deployment shows us where CCTV does work, and that's in situations where crimes are planned, not pulled off in the heat of the moment.
Parking garages, banks and jewelry stores, yes. And CCTVs make perfect sense as part of burglar alarms that switch on when the glass breaks (or buffer continuously, but only save the few seconds before a break-in). But the idea that we can all be made to behave if only we are watched closely enough all the time is bunkum. We behave ourselves because of our social contract, the collection of written and unwritten rules that bind us together by instilling us with internal surveillance in the form of conscience and aspiration. CCTVs everywhere are an invitation to walk away from the contract and our duty to one another, to become the lawlessness the CCTV is meant to prevent.
After the London riots, one thing is certain: anyone promoting CCTVs for deterrence is most likely selling something, probably CCTVs.
Source http://www.guardian.co.uk

A girl, a rope and happy parents

BANGALORE: Her life rests on a one-inch thick coir rope. Five-year-old Sukhbhai makes her way conscientiously across the line pulled between two poles impermanently drilled into the ground by her young parents. Her father, Prakash plays on a double-sided drum and her mother Nissa uses a ladle to clobber on an aluminium-plate-turned-percussion-instrument.

One miss and the swift drop could easily break a few bones. But Sukhbhai has never fallen, so says her father. She is no doubt, sure-footed, but the onlookers who gather around her gasp in bewilderment as they see the young girl take to the rope as smoothly as a cat.

This family of three hails from a little hamlet off Raipur in Chhattisgarh, and often, they head to Bangalore in an attempt to make money through their tightrope walking stint. “We have come to Bangalore at least three times before. We have also gone to Mumbai, Pune and Hyderabad. This is how we make money,” says Prakash.

Wherever they go, they stay for about a month, until they believe they have enough money that will last them till their next trip. “In Bangalore, we make about `400 a day,” says Prakash. But they sleep in the bus stand in Yelahanka so that they can save money to take back home with them.

Prakash’s family members have all been tightrope walkers. “My parents and grandparents were also doing this. They taught me this skill. My wife was also taught by them,” he explains. According to Prakash, who has been doing this from a tender age, it’s upto him to keep up the tradition. “I don’t know any other means to make money. Everyone in my family has been doing this. Now I want to pass it on to my daughter, I’m glad I could teach my daughter this skill. She is good now. She can even walk using a cycle rim on the rope,” says a proud father.

Source http://ibnlive.in.com/

On mortgage rates, Obama wants proposal for how government can keep big role

By Zachary A. Goldfarb,

President Obama has directed a small team of advisers to develop a proposal that would keep the government playing a major role in the nation’s mortgage market, extending a federal loan subsidy for most home buyers, according to people familiar with the matter.
The decision follows the advice of his senior economic and housing advisers, who favor maintaining the government’s role as an insurer of mortgages for most borrowers. The approach could even preserve Fannie Mae and Freddie Mac, the mortgage finance giants owned by the government, although under different names and with significant new constraints, said people knowledgeable about the discussions.

A decision to preserve a major government role would mark a big milestone in the effort to craft a new housing policy from the wreckage of the mortgage meltdown and could mean a larger part for Fannie and Freddie than administration officials had signaled.
In a statement, the White House said it is premature to say that senior officials have agreed on any of the three main options outlined earlier this year in an administration white paper on reforming the housing finance system.
“It is simply false that there has been a decision to move forward with any particular option,” said Matt Vogel, a White House spokesman. “All three options remain under active consideration and we are deepening our analysis around how each would potentially be implemented.  No recommendation has been made to the president by his economic advisers.”
The proposal is likely to draw criticism from many Republicans, who blame the financial crisis on policies they say overly encouraged the housing market. And many economists, including some who have worked in the White House under Obama, consider the federal role harmful to the free market.
But if this approach became law, it probably would keep in place the kind of popular home loans that have been around for decades — 30-year fixed-rate mortgages with relatively low interest rates.
Officials have not determined whether to advance a final proposal before the 2012 presidential election. Officials from the White House, the Treasury Department and the Department of Housing and Urban Development are working out the details.
The government could maintain a substantial role in various ways. These include restructuring Fannie and Freddie as public utilities overseen by a government regulator. The government would no longer guarantee their financial health, as in the past, but would continue to backstop the mortgage-backed securities they issue using loans made by private banks.
Or the two companies could be shut down and replaced with several successors that, likewise, would have their mortgage-backed securities guaranteed by the government in exchange for a fee. A federal guarantee, by reducing the risk to investors, can make it cheaper for firms to raise money for making home loans, in turn reducing mortgage rates.
For years, Fannie and Freddie — shareholder-owned companies chartered by Congress to support the housing market — owned or insured trillions of dollars in home loans. When the housing market crashed, the government seized the firms, and it has spent more than $150 billion propping them up.

Obama to automakers: ‘You can’t just make money on SUVs and trucks’

By Andrew Restuccia
The country’s automakers should ditch their focus on SUVs and trucks in favor of smaller, more fuel-efficient vehicles, President Obama said Monday.

“You can’t just make money on SUVs and trucks,” Obama said during a town hall forum in Cannon Falls, Minn. “There is a place for SUVs and trucks, but as gas prices keep on going up, you have got to understand the market. People are going to try to save money.”

Obama has positioned the revival and reshaping of the auto industry as a major part of his administration’s push to improve the economy and create jobs.“When I came into office they were talking about the liquidation of GM and Chrysler, and a lot of folks said you can’t help them, and it’s a waste of the government’s money to try and help them,” Obama said Monday. “But what I said was, we can’t afford to lose up to a million jobs in this country, particularly in the Midwest.”

Obama was speaking at the start of a three-day bus tour of the Midwest. He will visit Decorah, Iowa, later in the day.

The president said his administration “turned around” the U.S. auto industry and is calling on automakers to change the way they do business.“They are gaining market share for the first time in years, but what we said was, ‘If we are going to help you, then you have also got to change your ways,’ ” he said.

The White House unveiled first-ever fuel efficiency rules for heavy-duty trucks last week. The standards come after the administration ratcheted up fuel economy standards for cars and light-duty trucks.

The administration negotiated the standards in a series of high-stakes closed-door meetings with industry. In the end, the White House won the endorsement of major automakers and truck companies.

Obama has touted the new standards as “the single most important step we’ve ever taken as a nation to reduce our dependence on foreign oil.”

Later Monday, Obama touted the administration’s efforts to boost electric vehicles and advanced battery technology.

“That is the kind of approach that we have to take: Using the private sector, understanding that ultimately the private sector is going to be creating jobs, but also understanding that government can be an effective partner in that process, and nowhere is that more true than in rural America.”