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Update July/August: HMRC’s new chief; troubled times at GM; Darling’s pay realism

Car tax U-turn
More trouble for the government: it only narrowly avoided a Commons defeat over
the controversial plans to increase tax on older, more polluting cars. Six
Labour MPs agreed to back the plan after ministers privately agreed to look into
a compromise in the autumn. Under the plans, any high-polluting cars bought
after 2001 would be subject to substantial tax increases. Road tax on a
five-year-old VW Passat, for example, would rise from £210 now to £430 by 2010.

HMRC gets PE boss
HM Revenue & Customs has a new chief executive, Mike Clasper, who joins from
Terra Firma, the private equity firm, which last year controversially acquired
the EMI Group. Clasper was, from 2001 to 2006, chief executive of BAA, itself
acquired by Spanish industrial group Ferrovial. He will be taking a substantial
pay cut to join HMRC with a salary of just £150,000 for working three days a
week.

Revenue looks back
HMRC is under fire for quietly increasing the time limit for looking at
underpayments, imposing penalties and interest on underpayments in order to meet
new targets. Abbey Tax Protection claims that the HMRC is going further back
than the normal six-year limit by using powers allowing it to go back 20 years
for returns that have been completed negligently. HMRC says this is
“ridiculous”.

What’s good for GM
Merrill Lynch has revealed that US auto giant General Motors is in very real
danger of bankruptcy unless it raises more cash. The investment bank says that
GM needs to source finance of around $15bn in order to solve its liquidity
crisis, its highest estimate yet. On publication of the report, shares in GM
fell 11%.

Darling calls for pay restraint
The government’s fear over rising inflation is climbing the agenda after
Chancellor Alistair Darling repeated his call for public sector pay restraint in
the annual Mansion House speech. Addressing the great and good of the City,
Darling called for realism in pay demands, while insisting the UK would avoid
the worst of any recession. In May, CPI inflation rose from 3.0% to 3.3% while
the RPI rose from 4.2% to 4.3%.

TECHNICAL UPDATE
Auditing
The Financial Reporting Council issued guidance for company directors to help
them when considering whether to agree to limit their auditors’ liability. It
covers matters such as what is allowable under the Companies Act 2006 and some
of the factors to consider when assessing the case for such agreements. The
Institutional Shareholders Committee, which represents several bodies such as
the ABI and the NAPF, said that the specimen clauses in the FRC guidance should
be used where needed, but that companies should justify to shareholders the
benefits of such agreements before putting them to a vote at a general meeting.

www.frc.org.uk

www.institutionalshareholderscommittee.org.uk

The Financial Reporting Review Panel says that it has received notification
of more than 740 company accounts whose audit report has been qualified for
failure to comply with the Companies Act 1985, making clear that all were
“substantial businesses”, though private. The figures were unveiled as the FRRP
disclosed new proposals to ensure that it is notified when accounts are
qualified.
See Corporate governance: Not telling
www.frc.org.uk/frrp

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