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Stamp duty loophole investigated

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Stamp duty avoidance schemes that claim to save homebuyers tens of thousands of pounds are under investigation by HM Revenue and Customs (HMRC).

Using concessions granted for Islamic mortgages, some tax websites claim there may be a legal way of avoiding the stamp duty land tax that adds £20,000 to the cost of buying a £500,000 property.

The schemes under investigation use rules intended for shariah mortgages, which must comply with Islamic principles forbidding the paying or receiving of interest. With a shariah mortgage, banks buy a property on behalf of a client, and receive rent rather than interest. At the end of the “lease”, ownership of the property is transferred to the client, but no stamp duty is paid, as the purchase has not been “substantially performed”.

A spokesman for the HMRC said: “We are aware of this scheme and are investigating its use. We are determined to ensure a fair and level playing field in which everyone pays the tax that parliament believes it has legislated for.”

Tax experts warned that any stamp duty loopholes are likely to be closed. “There is the very strong probability that the law will be changed so that their planning idea will be stopped,” said Chas Roy-Chowdhury, head of taxation at the Association of Chartered Certified Accountants.

Lakshmi Narain, tax director of Baker Tilly, said shariah mortgages were not intended to offer any tax advantage.

Published in the Financial Times

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Written by Magda M Ali

February 17, 2010 at 12:00 am

New way to measure value of money

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The traditional approach to private wealth management is ‘misguided’ and retail investors should adopt portfolio optimisation techniques used by institutional investors, according to a new report from a European equity house.

The study from EDHEC-Risk equity management found that while private clients are routinely asked all kinds of questions about their current situations, goals, preferences and constraints, the resulting service and product offering most often boil down to a rather basic classification in terms of risk profiles with no link to the recommendation.

The study suggested that by using asset-liability management (ALM) advisers could ensure private wealth managers are able to offer their clients investment programs and asset allocation advice that improves the probability of meeting their individual objectives.

It said taking an ALM approach to private wealth management generated two main benefits, the first of which was better asset class selection, the second being better risk definition.

Lionel Martellini, scientific director at EDHEC-Risk and one of the co-authors of the study said: “The proximity to clients is often seen as the raison d’être for private wealth management. Yet when it comes to tailoring an investment strategy, investment advice often comes up short because it does not really take into account the private client’s true objectives.

”Obviously, one should not manage money in the same way depending on whether the client is planning to use the money to prepare for retirement, to purchase a real estate property or to pay for the kids’ education. Failing to properly account for what the money is needed for leads to misguided private asset management advice.”

Published in the Financial Times

Written by Magda M Ali

February 16, 2010 at 11:58 pm

Trendspotter: Intricate tables

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Designers concerned with sustainability are refashioning the concept of “less is more” to “more from less”.

Take, for example, the striking 4foldlow table (pictured right) designed by George Rice for Formtank. Like the entire 2d3d group of tables to which it belongs, it has been reverse-designed from a standard-sized sheet of steel in order to optimise yield. Its sophisticated concept traces its roots to the Japanese art of origami. This design approach bears eight tables from one sheet of steel and limits waste to just 3.5 per cent overall, while the intricate forms create the illusion of there being more metal than there actually is.

Meanwhile, a stunning new collection of tables, the Lazerian “Mensa” designs by Liam Hopkins and Richard Sweeney, uses birch plywood components to support glass tops. Thin pieces of plywood are sculpted using a router controlled by a computer. The curvature of the plywood base is reminiscent of a basketball net and the filigree design appears impossibly fine to be able to support the weight of the top. Lazerian will launch the collection at 100% Design in London this month.

Published in the Financial Times

Written by Magda M Ali

January 16, 2010 at 10:56 pm

Second home owners benefit from a falling pound

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The collapse of sterling against the euro will hit people going on holiday to the eurozone but it will benefit those with second homes abroad that need to bring euros back into the UK.

Sterling fell sharply against all major currencies on Friday to hit a five month low against the euro of €1.0946 after Mervyn King the governor of the Bank of England said that a fall in the exchange rate would help to balance the UK economy by giving exports a lift.

“The one thing everyone is agreeing on is that sterling is likely to fall fast and far,” said Peter S Ellis, chief executive officer at Foreign Currency Direct. “While this is bad news for most of the UK, those doing business overseas, or people with second homes looking to convert their Euros back to Pounds can get the best rates around.”

He says that the view that sterling will collapse is “supported by the Bank of England who state in the current quarterly bulletin that the UK has been running in deficit for some time which has only been possible due to foreign investment in the UK. This is now suddenly drying up.”

He added that concerns over the sustainability of the level of public debt, which has increased over 20 per cent in a year, and now stands at £804bn, are weighing heavily on the value of sterling.

“Servicing the national debt now equates to £1 of every £4 spent by Gordon Brown’s government and 57.5 per cent of the country’s annual output,” he said.

The pound was down around 0.8 per cent against the dollar, with a day low of $1.6171. Against the Australian dollar, sterling fell 1.3 per cent, hitting a day low of 1.8503. It also fell against the New Zealand dollar by 1.3 per cent, slumping to a day low of 2.2358.

Duncan Higgins, senior analyst at Caxton FX, said: ”As a chiefly importing nation, Britain’s current account has become accustomed to showing a deficit, which has now been proven to be an unsustainable course for the UK economy.

”Mr King’s comments underline the need to focus more on exports. In order to achieve this, a weak pound is necessary to assure the competitiveness of those exports in the global markets, so clearly Mr King has no desire to see the pound gain value.”

Higgins predicted that the pound would continue to decline steadily over the short term, heading towards parity against the euro by the end of October.

Peter Ellis also believes this. “As confidence returns to the rest of the world economy, this position is reversing, investors are once again confident enough to move to riskier currencies. This may see the pound dip against a basket of currencies over coming months.”

Published in the Financial Times

Written by Magda M Ali

January 1, 2010 at 11:50 pm

Sterling lifted on recovery hopes

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Sterling bounced back against the US dollar on Tuesday, to reach a two week high of $1.6523.

The pound was supported by the rising equity and commodities market as well as better-than-forecast monthly manufacturing production figures, which climbed to 0.9 per cent in July by from 0.4 per cent in June.

Duncan Higgins, senior analyst at Caxton FX said: ”After heavy falls over the last two weeks today’s manufacturing data will come as welcome relief for the Bank of England’s Monetary Policy Committee, who are meeting on Thursday.

“If equity markets continue to rally, they may now be able to talk more positively about the UK’s recovery prospects. Caxton FX’s analysts are therefore predicting the pound will regain some value against the dollar in the lead up to Christmas.”

Sterling was not the strongest currency against the US dollar, however, with the euro hitting a one-month high against the greenback, whilst the Australian dollar which hit a one-year peak. The pound also rallied against the euro following the data, as the FTSE 100 climbed 0.7 per cent in early trading.

Published on the Financial Times

Written by Magda M Ali

November 16, 2009 at 11:04 pm

Half of all mortgages now charge a percentage fee

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The number of mortage lenders imposing a percentage fee on their fixed rate products has increased from 43 per cent to 49 per cent, according to new research from MoneyExpert.com.

The research found that for people with large home loans, fees may run into thousands of pounds, particularly as only 4 per cent of products that charge a percentage fee impose a cap of the maximum fee.

The research revealed that percentage fees vary from as much as 2.5 per cent of the mortgage loan to as little as 0.4 per cent. The average percentage fee comes in at 0.89 per cent and on a typical home loan of £150,000 this equates to a fee of £1,335.

“Fees are often linked to loan to value ratios and anyone without a significant amount of equity in their house can expect to pay a hefty fee,” said Pierre Williams, head of research at MoneyExpert.com.

“Borrowers looking for a mortgage focus on rate, but fee has to be a consideration particularly when these can run into thousands of pounds. All too often we forget about the fee by rolling it straight into the loan.”

The research further revealed that, though the number of fixed rate mortgages charging a set fee has decreased as percentage of the market from 57 per cent to 51 per cent. The highest charge on the market has increased significantly, from £1,999 last year to 2,499 today.

The total number of products charging a set fee has increased from 405 to 472 as the market has expanded. The increase consists largely of the introduction of new tiers of fees by the banks. Last year for example there was only one mortgage charging a fee of between £100 and £200 but today this figure has increased to 49. Similarly, a year ago there were 17 products charging between £700 and £800 but today there are 61 products.

Average fees have actually decreased slightly from £860 a year ago to £790, largely due to the introduction of a large number of mortgages charging a small set fee rather than a percentage fee.

Mainstream lenders currently offering fixed rate mortgages with a fee of less than £300 currently include Royal Bank of Scotland and NatWest, on products to existing customers, while regional building societies such as Skipton also offer competitive deals.

“Borrowers need to make a calculation as to whether they opt for a fixed or percentage fee but with the introduction of large numbers of low fee mortgages this year borrowers do have options when it comes to choosing a mortgage,” added Williams.

Published at the Financial Times

Written by Magda M Ali

September 16, 2009 at 11:13 pm

“Palestine don’t you cry…

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We shall never let you die!” An echoing articulation of compassionate ambiance as thousands of British populace protested opposite Downing Street in London on Saturday 26th January, residence of Prime Minister Gordon Brown. The demonstration prompted by the unfolding humanitarian catastrophe in the Gaza Strip due to the 20-month-long siege illustrated a community upholding the inherent human dignity and decorum, calling for Israel’s brutal illegal siege of Gaza to be instantly lifted.

The struggle for liberty for such a long time by a people is both a poignant sight to the human spirit and fatal to the universal hope for freedom. Palestine: suppressed painstakingly and progressively ruined. The human catastrophe deliberately inflicted on Gaza by western policies over the past two years is one of the great crimes of the century so far. How long can this inhuman treatment continue unchallenged by international leaders?

How and why did we get here? Above all: how do we get out of here? In the wise words of Eli Wiesel: “There may be times when we are powerless to prevent injustice, but there must never be a time when we fail to protest.” Without a doubt, it takes more than just a protest to answer and make a difference, but protesting is the very least that we can do.

Palestine Medical Relief Society (PMRS) said: “The distressing urgency of the current crisis should not prevent us from seeing the bigger picture. The Gaza Strip has been under siege since January 2006. Israel’s policy of collective punishment is not new, but it has now reached such extreme levels of inhumanity that it has finally provoked a reaction from the world.”

26th January had been declared a day of international solidarity. Supported by: Palestine Solidarity Campaign, Palestinian Forum in Britain, British Muslim Initiative, 1990 Trust, Friends of Al Aqsa and Stop the War Coalition. It is hoped that other concerned organisations will be joining and/or supporting this campaign the sole aim of which is to prevent a total humanitarian disaster in the densely populated Gaza Strip. Somehow it is no surprise that the coverage of this protest, despite its newsworthiness, did not make it onto the BBC or Sky News. Amongst the protestors were British Muslims, non-Muslims, Arabs, non-Arabs, Christians, all faiths and no faiths.

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Written by Magda M Ali

January 30, 2008 at 1:11 am