Update: Essential News – September 2008

Euroshrink
The eurozone saw GDP contract by 0.2% in the second quarter of 2008, the first
contraction for the area since the introduction of the euro, raising fears it is
sliding into recession. France and Italy’s GDP both shrank by 0.3% while
Germany’s contracted by 0.5%. Growing by 0.2%, the UK was one of only a few
European economies not to shrink in the quarter.

Tax time
Investment bank Merrill Lynch could defer paying corporation tax for many years
as it seeks to recoup losses of $29bn (£15m) from collateralised debt
obligations (CDOs). UK law allows deferral until a company posts profits equal
to its losses. Merrill does most of its global CDO business through its London
offices. Merrill declined to comment.

Do or die
Hot on the heels of Bradford & Bingley’s rights issue, which is mostly
unsold and languishing with the underwriters, Alliance & Leicester warned
shareholders it faces “significant risk” of exposure to the economic slowdown if
they reject its planned takeover by Banco Santander. A&L saw 2008 first-half
profits fall to just £2m from £180m in the same period last year.

(Mis)trust
The Pensions Regulator suspended GP Noble as independent trustee of 29 pension
schemes after concerns were raised, according to industry newspaper (and fellow
Incisive Media title) Professional Pensions. Details on the concerns
were not disclosed, but a senior industry figure told Professional
Pensions, “This appears to be a significant intervention by the regulator.”

Bean-counting
Deloitte’s UK senior partner and global chairman John Connolly is the UK’s
highest-paid accountant, having earned £5.7m in 2007, 22% more than in 2006
according to the company’s annual report. If he were an accountancy firm in his
own right, he would be the 71st largest, according to sister title Acco
untancy Age.

Rate hold
The Bank of England held rates at 5% at its August meeting, though minutes of
the meeting showed the decision could have gone towards a cut. “The Bank of
England continues to view the path of least resistance of keeping interest rates
on hold as the most preferable route to take for now,” said Bank of America
economist Matthew Sharratt.

TECHNICAL UPDATE
Pensions
The Association of Corporate Treasurers has criticised Accounting Standards
Board proposals that would result in pension scheme liabilities being valued
using a ‘risk free’ discount rate.
www.treasurers.org

Competition law
Four British Airways executives have been charged with criminal cartel offence
under the Enterprise Act 2002 for price fixing fuel surcharges with Virgin
Atlantic. If convicted, they face up to five years in prison and an unlimited
fine. Three former Dunlop executives were found guilty for cartel activities in
the marine hose industry and sentenced to 30 to 36 months each and disqualified
from being directors for five to seven years, say lawyers CMS Cameron McKenna.

www.law-now.com

VAT
Companies have until the end of March 2009 to reclaim overpaid VAT going back to
1973, warns KPMG. A court case earlier this year ruled that the three-year
backdating cap imposed in 1996 was illegal. Indirect tax partner Stuart Hindle
says time is running out as the process could be very time-consuming.
www.kpmg.co.uk