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

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