The BBC was recently told by HMRC whistleblowers that the Revenue has been instructed not to chase a lot of underpayment cases that are over two years old and which could be open to a legal challenge; a claim that has been strongly denied by an HMRC spokesman.

According to the whistleblowers, staff have been told to prioritise cases where HMRC owes money to taxpayers, especially pensioners or other vulnerable groups, and any cases that could be fraudulent.

The Revenue currently has a backlog of around 7.5 million cases of under or over payment of PAYE. £3bn of these cases are the result of overpayments whilst £1.5bn are underpayments.

Whilst the HMRC spokesperson confirmed that the department would be prioritising the processing of refunds, he also made it clear that no decision had yet been reached concerning underpayments. Staff are currently reviewing the underpayment situation and any instances that are found will be put aside to await a future decision.

Like other government departments, the Revenue is subject to government spending cuts and expect to shed 5,000 staff by 2011 in addition to the 20,000 they have lost in the past 4 years.

In related news, the LITRG has expressed concerns over HMRC’s proposal to claim fixed costs from defaulters when a case is successfully pursued through the courts. The Group has no objection to these costs if a debtor has refused to pay but in some cases the debtor is suffering genuine financial hardship and is unable to pay. The body is therefore calling on the taxman to exercise discretion when it comes to claiming these costs.

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Within 5 years, unemployment levels will reach 10% in over half the regions in the UK predicts the CEBR.

The biggest drop in economic output will be in the North West, but other areas such as the North East, Yorkshire, Wales and the West Midlands will also fare badly.

A director for a Manchester based IT recruitment firm noted that there has been an upturn over the last 6 months but uncertainty remains as to the effect of the public sector spending cuts.

Paul Clutton, a director at Professional Recruitment Wales has an even more pessimistic view of the future saying he believes that Welsh unemployment will exceed 10% as the public sector accounts for between 60 to 70% of all recruitment activity.

On a slightly better note, the UK saw a 1.2% increase in GDP over the last quarter. The ONS originally reported a figure of 1.1% in July but this has since been revised. The increase is the fastest quarterly rise recorded for over nine years. The manufacturing and production sectors recorded stability in the last quarter with production output rising by 1% for the second consecutive three months and manufacturing rising by 1.4% in Q1 and 1.6% in Q2.

The September Economic Forecast from the BCC now predicts GDP growth of 1.7% for this year and 2.2% in 2011. However, the Chamber still expects unemployment to increase, peaking at 2.65 million in 2012.

On a more positive note, at least as far as the economy is concerned, the BCC expects the fiscal deficit to reduce faster than originally planned but with a sharp slowdown in growth as the VAT increase is implemented. The business group expects GDP to average less than 2% per annum for the next four to five years.

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The chief economist at the Bank of Scotland has predicted that the Scottish economic recovery is going to slow down in Q3.

The Scottish economy has been on a bumpy road since emerging from the recession at the end of last year. Although the private sector has been growing for the past 13 months, economic growth actually stalled in the first quarter of this year.

Scottish manufacturers’ sentiment dropped 20 points to zero between quarters one and two according to the CBI index and the Consumer Confidence Index, compiled by Gfk NOP, registered -22 last month.

Those looking for new employment will be heartened by the news that the Bank of Scotland’s Report on Jobs showed an increased demand for permanent workers for the 8th consecutive month.

Growth in the leisure, tourism and travel sectors continues to outstrip growth in business and financial services. And the manufacturing industry is receiving more orders and they are rising faster than inventories, so manufacturers will need to increase the supply of finished goods if they are to keep up with demand.

However, it is thought that the recovery will slow down in the autumn months as widespread concerns continue over government spending cuts.

However, good news for the Scottish jobs market comes with the news that Hewlett Packard is to create 700 new IT jobs at its plant in Erskine, something which could benefit umbrella company IT contractors. The technology giant is setting up a service hub in Renfrewshire, partially aided by a government grant of £7 million.

Alex Salmond, the First Minister, is delighted at the news saying it is testament to the skilled workforce in Scotland that HP has decided to invest in the region and it also points to conditions improving in the IT sector.

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The Investment Management Association has said that the government must not be detracted from the need to reform the UK taxation system just because spending cuts are being implemented.

The IMA, which speaks on behalf of the UK’s £3 trillion fund management sector, called for the tax system to be changed in order to encourage more business investment for limited companies.

Some members and contractors are also calling for the government to introduce tax-free zones for equity investors in a bid to move away from an economy that relies solely on debt finance.

The IMA chairman, Dougie Ferrans, suggested that MPs might start overlooking tax reform if they focus too much on austerity measures. He said that as well as spending cuts the country also needs to come up with a long-term viable savings and investment regime.

He added that there needs to be a change in culture and incentives for investors if our manufacturing economy is going to be rebuilt on a meaningful scale. It will also be important to rebalance the economy by building up other sectors but Ferrans is concerned that the financial services sector will be diminished following the credit crisis.

He said that asset management is becoming increasingly global and London can no longer assume it has the right to monopolise that business. He went on to say that there needed to be a convincing case for asset managers to be UK based. Asia is our biggest threat. Companies will try and raise finance in markets where there is less regulatory complexity, he added.

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Since the coalition came into power, umbrella company civil engineers have been enjoying an unexpected upswing in work.

However, this is not likely to last and experts at CECA have warned that workloads will fall once public sector spending cuts start to bite.

The water, electricity and communications sectors have provided more private work but spending on public sector projects, such as road works, remains depressed.

Although most contractors (51%) still have less work than they did this time last year, more than 25% say that their workload is rising. 45% of CECA members predict that workloads will decline over the next year, whilst a mere 14% expect to see them increase.

The CECA thinks the coalition should have taken more steps to create confidence in our infrastructure sector. The Comprehensive Spending Review in October will help to clarify public spending but while we wait the country is in a state of uncertainty which is denting the confidence of contractors. Projects such as Crossrail and the Managed Motorways programme hang in the balance and contractors are still awaiting the National Policy Statement for Transport.

The Head of Industry Affairs at the CECA, Alasdair Reisner, said that the coalition should be commended on the speed of its progress during its first 100 days. However, opportunities are still being missed. There is still no guarantee that Crossrail will go ahead and we have no idea how much funding the government will provide for the upkeep of our roads.

At the beginning of the week it was announced that second quarter growth in the construction industry was 8.6%.

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George Osborne is due to give his emergency budget on June 22nd and it seems everybody wants to give him advice! Any measure introduced could affect umbrella companies.

The CBI is urging the chancellor not to introduce damaging tax rises. John Cridland, the CBI’s deputy director general pointed out that although we must bring the fiscal deficit under control quickly, it should not be done in such a way as to jeopardise economic growth.

He called on the government to radically re-engineer public services as a means of avoiding tax rises.

The CBI also wants Osborne to bring the top tax rate back down to 40% (it currently stands at 50%) and ensure that investors, including freelancers, are not hurt by changes to CGT.

The unions condemned these ideas and the TUC General Secretary. Brendan Barber, voiced his amazement that the CBI had also suggested that the public sector should bear the brunt of the cuts rather than corporate taxpayers.

He went on to point out that it was the poor who would suffer as they are more likely to use public services.

The CIoT, has also been making their voice heard in the run up to the budget. They are calling on Osborne to review the way that the UK’s tax laws are made.

No doubt we will hear suggestions from many more organisations in the next 8 days. But will they fall on deaf ears? Only time will tell.

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