FBI 17th May 2009

Page 1


ISSN 1354−2052 02

9 771354 205021


Rt Hon Stephen Timms MP

finance, banking & insurance

Stephen Pound MP

’m grateful for this opportunity to introduce this year’s magazine. I write at a time of serious economic turmoil, the worst conditions we have seen for over 60 years. The last time the economy faced such a crisis was in the 1930’s when the world’s response was too little, too late - this time our reaction must be different. That is why we have had a co-ordinated international response. Finance ministers from the G20 nations – including the UK and India – have agreed a programme of action to speed the recovery. The crisis has impacted countries across every continent. We have acted swiftly internationally and nationally. The Government took action to recapitalise and restore confidence in the banks because by doing so we supported people and businesses. At a time of uncertainty, we were clear we would do everything necessary to get through the global downturn in a way that was fair to all. I therefore welcome the work of Asian businesses here and abroad in helping to restore this confidence. As you have helped us weather this economic storm, you will share in Britain’s economic future. Despite the crisis, we can be confident because of the actions taken. One of the most significant is the VAT cut, which continues to help families and businesses. It has cut monthly average household bills by £20 and has also helped boost retail sales. The Budget in April built upon this support. Businesses with temporary cash flow problems can access an enhanced ‘time to pay’ service, helping over 100,000 firms so far. Our loss carry back scheme was extended to support 140,000 businesses. The spreading of this year’s business rates up-rating will also help. As well as supporting businesses now, we need to plan ahead to make the most of the new opportunities when the upturn comes. That is why we have temporarily increased first year capital allowances for new investment to 40%, a measure that will help 60,000 firms. The £750 million in the Strategic Investment Fund will support advanced industrial projects, with a third of this targeted on low carbon initiatives. And we want to make sure broadband communications can be accessed everywhere. The economy will recover, and our skills, our people and our collective investment make me optimistic about our future. World trade is expected to double in the next 20 years and Britain’s expertise in manufacturing, pharmaceuticals, low carbon industries and financial services, will ensure it plays its full part in that recovery. All these industries continue to benefit from the partnership of Asian people and businesses. So I welcome this edition of Asian Voice exploring today’s challenges and helping us build for tomorrow.


Rt Hon Stephen Timms MP Financial Secretary to the Treasury

Hon. Stephen Pound MP

Asian Voice & Gujarat Samachar - 2009


finance, banking & insurance




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n April 2008 when the 8th edition of the Finance Banking Insurance magazine was published there was a hint of optimism about the state of the UK economy. Reality struck, when in the last three months of that year it was announced that the UK was indeed in recession. Since then the decline has been relentless and the extent of the rot and its ripple effect across industry, spanning world economies, has been laid bare. It seems that we are thrown into the deep end of the vortex of a global meltdown without sight of the proverbial silver lining. The recent outbreak of swine flu has only added to our woes. Increase in air passenger duty and now the looming pandemic can only add to the beleaguered travel industry’s woes. Will the measures announced by Chancellor Allistair Darling in the recent budget mitigate the blows ? Only time will tell because the downward spiral continues unabated. On an optimistic note, history is replete with examples of economic catastrophes and equally so of upswings. That these are but cyclical is well chronicled. At times like these there is the temptation for political parties to indulge in one-upmanship but that is the last thing the situation warrants. They will do well to remember that the human race has a peculiar resilience and an innate ability to weather the worst and emerge stronger as previous disasters have shown.The need of the hour is for politicians of all hues to put heads together and pave the way for recovery. The quicker the better for the toll thus far has been gut wrenching. The Ernst & Young ITEM (Independent Treasury Economic Model) Club has announced that around 900,000 jobs will be lost this year and half a million next. Work Foundation, the employment thinktank, has reported record numbers of those seeking jobseekers allowance, with Birmingham, Leeds, Glasgow, Shefield, Hull and parts of Wales showing alarming trends. The Council of Mortgage Lenders (CML) has warned that the housing market remains historically low with first time buyers having to cough a record deposit of 25% up front. Even during the best of times this can be an astronomical sum.The Bank of England’s radical programme of ‘quantitative easing’ to boost demand has yet to bear fruit. During last week’s Budget Mr. Darling said that the UK economy would contract by 3.5% this year followed by growths of 1.25% in 2010 and 3.5% in 2011. The IMF contradicts the forecast with declines of 4.1% this year and 0.4% in 2010. Contradictions abound. In an economic landscape dotted with fallen giants, the likes of TESCO stand tall; I doff my hat to Sir Terry Leahy and his ilk. The world’s second largest retailer with whopping sales of £1billion a week has shown that customer intelligence and constant innovation is key to staying ahead of the game. One hears

finance, banking & insurance


CB Patel

that the profit making fashion retailer Primark is set to open a further seven stores this year. Consumer confidence boosted by low interest rates and rising stock markets will perhaps set the tills ringing on our high streets sooner than later. On the global front the balance of economic power, once the bastion of the West, continues to tilt eastward. India, Asia’s third largest economy, has no doubt been impacted by world events. But while its growth has slowed down from 9% to 6% who would argue against it’s performance ! In the present scenario growth of any sort is welcome. With visionary leadership the UK can continue to play a lead role on the world stage. In our own small way Asian Voice and Gujarat Samachar have forged ahead, bucking the downturn witnessed in the mainstream press. A combination of consumer insight, innovation and austerity measures without resorting to redundancies has helped maintain our leadership role and a steady bottom-line. Hopefully this FBI magazine will see better times next year. I am grateful to Hon Stephen Pound for speaking at this year’s launch ceremony. A big thank you to Rt Hon Keith Vaz for his invaluable co-operation in organising the launch ceremony at the House of Commons. I also take this opportunity to thank Mr. David Furst, President of the Institute of Chartered Accountants in England and Wales (ICAEW) and chairman of Horwath Clark Whitehill LLP for speaking at the event.

CB Patel Publisher / Editor Asian Voice & Gujarat Samachar

Asian Voice & Gujarat Samachar - 2009


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question has recently been asked of me whether the Eurozone provides a better/safer opportunity to invest than the UK given the demise of the Pound? This is as much a question for politicians to espouse on the merits of solidarity and global market co-operation and has too many permutations to be justifiably covered here in just a few words. I will, however, attempt to unravel some of the facts that we must examine to judge whether this 10th birthday for the Euro might or might not be a happy one‌.. The world economy is still in meltdown mode and the corrective measures will take a while yet, if at all, to succeed fully. The hangover from this period will be severe and long-reaching. The effects and impact on the markets are changing day to day which makes forecasting extremely difficult, not to mention foolhardy ! What do we mean by the Eurozone ? Well, the Euro first came into being in January 1999 with 11 original members and there are now 16 Member States of the European Union who use the Euro as their currency: Austria, Belgium, Cyprus, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Malta, Portugal, Slovakia, Slovenia, Spain, The Netherlands, Bulgaria, Czech Republic, Denmark, Estonia, Latvia, Lithuania, Hungary, Poland, Romania, Sweden and the United Kingdom are EU Member States but do not currently use the single European currency. From the very early days with Wim Duisenburg at the helm of the European Central Bank (ECB ) his total lack of understanding of what impact his rhetoric and random outpourings might have on the newly created currency was obvious. The Euro became the whipping boy of the market as traders and analysts showed that


finance, banking & insurance

what might have been a good idea in theory was fraught with dangers and mistrust. EURUSD plummeted like a stone to 0.8231 and GBPEUR rose to the dizzy heights of 1.7577 but a look at the charts below for the past 5 years shows a remarkable change in fortune against both the Pound and Dollar. The charts clearly Mike Paterson show an upturn for the Euro in the past 5 years but we have seen extreme volatility over the past 2 years or so and this uncertainty is set to continue for a while yet. GBP/EUR April 2004-April 2009

EUR/USD April 2004-April 2009

Asian Voice & Gujarat Samachar - 2009




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finance, banking & insurance

Many forecasters and analysts are calling for accelerated Euro depreciation this year and whilst we may have seen some level of that already in 2009 ( see charts on previous page ) it is by no means certain that it will continue throughout the coming months. To examine why or why not this may be the case is a similar exercise as to whether we should have confidence to invest in the Eurozone itself. We must consider: Whether the sum of the constituent parts outweighs the current fragility in many member countries both new and old. Will disparate relative growth/recovery levels hamper the Eurozone going forward? The impact of the rapidly deteriorating state of many Eastern European states. Austria, Belgium and the Netherlands have high exposures of lending to central and eastern Europe, an area which is giving the IMF grave concerns Sovereign debt/credit ratings – The recent downgrading of Spain, Ireland, Portugal and Greece highlights the fact that Eurozone can not be accurately evaluated as one equal area The effectiveness of the European Central Bank to manage monetary policy so that its impact is universal throughout member states quite apart from global policy considerations External concerns such as ongoing conflict with the G20, most notably the Brown/Obama blind passion for ever increasing fiscal stimulus aka “ Quantative Easing” The annual rumours of Eurozone break-up that normally come from disgruntled factions in France Germany or Italy sometime during the year So, given the above considerations you can see that there is indeed danger that the Eurozone could run into problems. The current economic crisis is global though and unlikely, in my opinion, to show any real recovery before the end of 2010. The UK has found itself at the sharp end of the fall quite rightly ( for reasons I haven’t got space to go into here but will happily discuss if you wish to contact me ) and this has of course been justifiably reflected in the value of the Pound. For UK exporters of goods and services this presents a great opportunity to sell at vastly reduced prices in real terms to its European customers whilst still retaining profit margins. The real problem with this rose-tinted view though is that the Eurozone economy is also in retreat and relies mainly on exports of its own. The global slowdown has reduced demand across the

board and thus UK exporters are having to work overtime in finding fresh buyers to make the most of this devaluation opportunity. The danger of getting too reliant on Eurozone business is that GBPEUR could improve to levels that would rapidly diminish the current exchange rate advantage compared to even six months ago (1.3000) let alone 2 years ago (1.4800) and therefore reduce our competitiveness. Indeed since the beginning of the year we have already climbed back up from the lows of 1.0196 to peak rapidly at 1.1573, since then settling into a 1.0500-1.1500 range, currently trading at 1.1370 as I type. The currency markets are the most traded ( $3 trillion daily around the globe ) and also the most fickle. Sentiment changes at a whim and justified afterwards. The UK has, and will have, continuing problems of its own quite outside the global economic changes. The Pound has not necessarily found its base. One thing we can conclude though, in all this turmoil, is that whatever merits there may be for looking at investing in the Eurozone with any optimism, we can no longer make any excuses for not being fore-warned of the dangers that may lay ahead. The Euro will have to wait a while yet until the birthday celebrations can be fully justified with any conviction… Mike has been a currency trader for 28 years, the bulk of which was with UBS and Credit Suisse. He now runs his own consultancy to achieve the best rates for customers in both the Corporate and Private sectors. He writes for a number of publications and has appeared numerous times on Bloomberg TV and radio. Mike Paterson - MSP Foreign Exchange Services. For more information Email: mspfx@tiscali.co.uk

Asian Voice & Gujarat Samachar - 2009


Š 2007 KPMG LLP, a UK limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative.

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n 2007/08, £25.2bn was subscribed into Cash ISAs compared to £10.4bn into Stocks and Shares ISAs. UK investors – including those unwilling to commit any new money to the stockmarket at present - could still generate higher income by transferring from Cash ISAs into Stocks and Shares ISAs in order to take advantage of the wider choice of investments available.


Invest for the long term The real benefit of an ISA comes from regular savings over a period of many years – this smoothes out both the highs and lows of market volatility. The benefit of compound interest means that relatively small regular payments can, over a period of years, grow into a very considerable sum: If a married couple invested their joint ISA allowance of £14,400 per year (£7,200 each) for the next 25 years, this could grow to £720,000 in a tax advantaged wrapper (assuming a real rate of growth of 5% p.a.). ISAs can be partly or fully encashed whenever you need them. Or you can take income from them without paying any income tax. Using the example above, investing in corporate bonds currently yielding 6% could provide £43,200 per annum tax-free. Kick the tyres annually It is important to kick the tyres and review your investments held within your ISAs every year. You need to check past performance, the fees being charged and that the asset allocation continues to meet your needs. Remember: “THE ISA IS JUST A TAX EFFICIENT WRAPPER IN WHICH YOU CAN HOLD YOUR INVESTMENTS, IF YOUR ISA IS NOT PERFORMING VERY WELL, DON’T BLAME THE ISA WRAPPER, BLAME THE PERSON WHO PICKED THE INVESTMENT.”

finance, banking & insurance

free lump sum back into a SIPP, it is possible to recycle the income drawn down. Alternatively, the 25% tax-free lump sum and higher rate relief can be put into an ISA (up to the annual ISA subscription limits) or other tax efficient investments. It is also worth bearing in mind that whilst income from ISAs isn’t taxable, this is not the case Shelain Lakhani with pensions. For the savvy investor, the ideal situation is to receive higher rate relief on the way into the pension and then become a basic rate tax payer when you need to take an income from the pension. Corporate Bonds in an ISA Corporate Bonds may be attractive for investors wishing for a higher degree of certainty over the timing and amount of income they will receive from their investments. For example, a bond with a fixed coupon of 6% and with a principal value of £1,000 will pay the holder of the bond £60 a year. This amount is known and does not change for the life of the bond, even if the price of the bond changes.

ISA existing assets whilst underwater Whilst many people are holding shares that have lost a significant amount of value, it can make sense to put these into an ISA to shelter any future recovery in their value from tax. Using ISAs to turbo boost your pension fund If you are over 50 (55 from April 2010) and a higher rate tax payer who is under-funded, consider transferring existing ISAs into a SIPP to give your pension a 114% boost - without any investment risk. Here’s how it works: A 50 year old individual puts £8,000 into his pension. He receives £2,000 tax relief immediately and can claim back £2,000 through his tax return, so a £6,000 net investment results in £10,000 in his pension. If he then takes benefits from his pension he could take 25% of the £10,000, or £2,500 in cash. This means that the net cost to him is £3,500 for £7,500 in his pension. Whilst it is not permitted to recycle the tax-

In order to be ISA qualifying, corporate bonds must have a minimum of 5 years to redemption. Stocks & Shares ISAs are not risk free. Depending on the assets you choose, there is a risk that you could get back less than the amount invested. With corporate bonds, your investment and the income from it may be at risk if the issuer defaults. Shelain Lakhani is a Private Client Broker at Killik & Co Stockbrokers. For more information on Killik & Co’s services please call 0207 337 00 00 or email shelain.lakhani@killik.com. Asian Voice & Gujarat Samachar - 2009



enturing overseas can provide British businesses with a wealth of new opportunities – but Dalip Puri, Head of Multicultural Commercial Banking at HSBC, cautions that preparation is essential. As operating in the UK continues to pose challenges to businesses and the cost of suppliers, services and skills become more expensive, businesses will increasingly look abroad for opportunities this year. Research from HSBC Commercial Banking found that, of businesses expecting to grow over the next 12 months, almost half believe they will need to trade internationally to make that a reality. Venturing overseas can provide British businesses with a wealth of new opportunities and potential for increased profits. As a first step, businesses need to do substantial research into the information and expertise they need to do business outside the UK. From an understanding of currency and payment terms, to awareness of the language and etiquette, preparation is essential.


Fundamental to the success of overseas ventures is having the right financial support and systems in place. A strong banking relationship is key for businesses with any overseas dealing or aspirations. An international bank account, guidance on managing international cashflow, trade services and foreign exchange management (FX) can help businesses keep on top of the demands of international trade. And having a strong banking partner with global reach and experience can be of real benefit. Companies regularly trading overseas should seek guidance on the best solutions for working with

finance, banking & insurance

different currencies. Figures show that only one in 10 businesses trading overseas take advantage of FX options – that’s the ability to agree foreign exchange rates prior to trading to protect transactions against currency fluctuations. There are a range of FX options available to businesses keen not to expose themselves to the volatility of currency rates. Dalip Puri A robust cashflow is another cornerstone of domestic businesses, and is potentially even more important for those trading internationally, where trade cycles can take longer and contracts can be more complex. HSBC recently announced a £1 billion fund for UK SMEs which included financial support through letters of credit and guarantees for overseas trade, to help provide working capital for businesses doing, or planning on doing business internationally during the downturn.

Beyond finance, there are other forms of knowledge and skills that businesses need to negotiate the challenges and unlock potential in overseas commerce. To help businesses address this, UKTI and HSBC have launched a joint partnership to provide training events and trade assistance for businesses wanting to grow their international capability. A series of workshops will take place across the UK for business owners, leaders and finance managers interested in international trade. Ultimately the current economic climate hasn’t dampened the desire for businesses looking to expand overseas. In fact, for many it could be the prime time to seek out potential opportunities in new markets. With detailed research completed, the right advice and the appropriate financial foundations in place, forging trade relationships or expanding operations overseas can give a real impetus to the survival, success and growth of British businesses. Dalip Puri is the Head of Multicultural Commercial Banking at HSBC. For more information please visit www.hsbc.co.uk Asian Voice & Gujarat Samachar - 2009



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TEL: 020 8568 6281

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e are living in quite interesting and challenging times. The global economy has suffered considerably over the last two years and world leaders are now trying to find ways to restore confidence and inject much needed capital into the economy. It is not all doom and gloom. There are interesting opportunities for many people. For example, investors are able to buy into financial stock markets at low levels, the main UK index is at a level last seen nearly 15 years ago. This could provide a good opportunity for some long term investors who have some appetite for risk to enter the market. Those investing regularly through ISA’s and Pensions could also benefit.


The chart provided by Bloomberg illustrates stock markets go through cycles but a long term trend usually results in a recovery at some stage. In saying this, you must accept the risk that the market could fall further and there are no guarantees. The returns on cash deposits are minimal but some other asset classes such as corporate bonds and index-linked gilts that look attractive. There are some leading fund managers and analysts predicting a recovery some time next year.

finance, banking & insurance

to buy an annuity (an income paid for life) with the balance although it may be advisable for some people. It is possible to recycle annuity payments back into a new pension plan, within certain limits. This could build up a further pension pot that can pay you another tax-free lump sum in the future. Anyone looking to retire should also shop Nero Patel around for the best annuity rate as these can vary quite considerably and if you are a smoker or in poor health, you will almost certainly qualify for an enhanced rate.

Almost everyone has some old pension policies that were either taken out with an old employer or privately. There has never been a more important time to have these reviewed. There is a great deal of difference between the best and worst performing funds. The older your pension plan the more the chances are that the policy is expensive in terms of charges and the fund could be underperforming. It would not hurt to review these policies to ensure that they are working as hard as you are. Nero Patel is a Chartered Financial Planner for Killik Chartered Financial Planners. For more information please email nero.patel@killik.com or visit www.killikcfp.com.

Those of you who will be age 50 this year (and those who are over 50 but under 55) should be aware that the Government will be changing the minimum age that your personal pension can be accessed. Under the current rules, anyone age 50 or above can draw their pension whether they retire or not. From April next year, the minimum age will increase to 55 so those who had plans to take a lump sum and or income may need to take action sooner rather than later – otherwise there is up to a five year wait. To remind you, it is possible to take 25% of your pension fund as a tax-free lump sum. You do not have

Asian Voice & Gujarat Samachar - 2009


finance, banking & insurance


inancial spread betting has a legacy dating back to the 1970’s, but it took an overhaul of the way the UK betting industry was taxed in 2000 before this became a truly popular way of trading financial markets. We speak to Kunal Bharadia, a Sales Executive on the Asian Desk at CMC Markets, one of the UK’s leading financial spread betting providers to find out a little more about the history of the product, its innovation and why the product continues to gain in popularity. Bharadia set up the Asian Desk in 2008 to provide a special service with language support in Hindi, Gujarati and Urdu to clients based in India, Pakistan, Middle East and the UK. Historically the preserve of city workers, CMC Markets has since the start of the new millennium, spearheaded an initiative to democratise financial spread betting, educating and offering access to a wide range of users from all walks of life. Bharadia explains that teachers, doctors and IT specialists are amongst the professions of CMC’s clients today, although those who are involved in the financial markets on a day-to-day basis also make up a significant proportion of account holders. The constant media coverage of volatile markets as investors see savings and pension funds decimated


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by the collapse has fuelled interest and although the headline figures may suggest everyone is losing money quite literally hand over fist, Bharadia highlights that of those who are proactive and keen to find a better solution – a way to make potential profits in choppy or even falling markets – are flocking to spread betting. “The flexible nature Kunal Bharadia of this kind of trading means that investors can ‘bet’ on any one of over 3,000 different instruments –household shares, popular currencies, commodities, government bonds and indices including the India 50 (Nifty50) for those who want to participate in the Indian market – and look to profit from the subsequent price movement, whether that is up or down by a process of going long or short. There’s no stamp duty to pay, and as we’ve already mentioned, the current legislation in the UK means that any taxes on the profits from spread betting are paid for

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Spread Betting is a leveraged product and carries a high level of risk to your capital. It is possible to lose more than your initial investment. This product may not be suitable for all investors, therefore ensure you understand the risks involved and seek independent advice if necessary. *Tax laws can change. Terms and Conditions apply see www.cmcmarkets.co.uk/iq for details.

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FBI by the provider rather than the client (tax laws can change). Finally, the tight spreads on offer from CMC Markets mean trades have the potential to become profitable very quickly – call the markets right and the rewards will soon be realised. However you need to keep in mind that the market could move against you.” Bharadia details that the importance of understanding and using risk management tools is instilled in clients from an early stage. “You never know when the market will turn – or just how quickly this will happen – so a stop allows you to get out of a losing position automatically, whilst a limit allows you to realize profits, again without having to watch every last price movement. We offer, free of charge, stops and limits to everyone who trades with us, and we encourage their use on every transaction as it offers something of a safety net.” So, how do you get started? Companies like CMC Markets are keen to provide education to potential investors with robust education programs in place to help. Bharadia adds: “These instruments can look complex to the uninitiated, so a successful trader will need to understand how they work and how to guard against some of the common pitfalls. CMC’s modular training course, Trading IQ, has already won a number of awards including ‘Product of the Year’ by readers of Shares Magazine, and is designed especially to give those new to trading the confidence to place their first trade.” Financial spread betting has clearly come a long way in the last 30 years and it seems likely to continue

finance, banking & insurance

its evolution as the popularity increases. It’s now recognised by the market as a genuine, tax efficient way of investing in a broad range of financial instruments and so long as the demand is there from investors, the product seems set to attract even more interest into the future. Please remember that Spread Betting is a leveraged product and carries a high level of risk to your capital. It is possible to lose more than your initial investment. This product may not be suitable for all investors, therefore ensure you understand the risks involved and seek independent advice if necessary. Visit www.cmcmarkets.co.uk/asiandesk for more details. Kunal Bharadia is a Sales Executive on the Asian Desk at CMC Markets, Visit www.cmcmarkets.co.uk/asiandesk for more details.

Learn more! Free 2 hour seminar to master the basics of trading. 21st May at 6pm at our London office Language support in Gujarati and Hindi – speak to our Asian Desk for details. Visit www.cmcmarkets.co.uk/asiandesk and register now.

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ITV stands for United Indians Television – an Internet Television media entertainment business, providing Indian focused programming and content online, on mobile and on air as part of a wider social network reuniting the one billion plus people of India with the thirty million Diaspora Indians spread all over the world. Video streamed through ten individual channels will form the centre of the UITV content offer, mixed with a high level of technical functionality encouraging users to comment on and upload and share their own content with other users on the platform. The initial content for the platform will be aggregated from rights owners, with a view to producing bespoke programming and encouraging users to produce their own content. UITV has commissioned the build of a technical platform which provides ten video channels combined with a suite of Web 2.0 social networking tools allowing users to interact with the content. The platform will be generate revenue through advertising, sponsorship and e- commerce revenues.


UITV consists of ten independent and different channels. The channels are as follows 1. Social Networking Channel 2. World News Channel 3. Sport Channel 4. Entertainment Channel (Bollywood, Hollywood, Soaps) 5. Music Channel 6. Business Channel 7. Commerce and Shopping Channel 8. Travel and Tourism Channel 9. Lifestyle Channel 10. Culture and Arts Channel Each channel will contain both International programs and those of specific interest to people of Indian origin. UiTV is a free full screen Internet Television network for our global viewers. UiTV’s vision is to reunite Non Resident Indians (NRI) and People of Indian Origin (PIO) with the people of India, by creating a globally accessible media entertainment platform which casts an electronic net over the existing communities and societies worldwide. For the past two years UITV has with the support of three different marketing companies approaching different social, cultural, business and the younger audience about their views concerning our content and other relevant social networking matters. Our marketing research has indicated to us that there is a huge market for our content and also that the people are eager to join and register with us for free. So far we have already identified over quarter of a million users

finance, banking & insurance

worldwide and these people are waiting to register. Our marketing research has also given us a clear picture of what our worldwide audience wants. UITV has taken into account all their suggestions and firm comments which we have adopted. It is through their eyes that the ten channels have been built. UITV strongly believes that this is the Mr Vedan Choolun proper way to approach a global audience. UITV has also appointed many marketing associates around the world to keep us posted about what our audience’s needs and desires as far as programmes are concerned. UITV has also approached and signed Memorandum of Understanding’s (MOU) with different advertising companies worldwide and have identified different companies for sponsorships. UITV marketing research has contacted many manufacturers, wholesalers, retailers and sellers of goods and financial services. These companies will be given a platform on our Commerce and Shopping channel. The content will be a mix of the latest catch up and archive programming, including dramas, soaps, sitcoms, documentaries, Bollywood films, Hollywood films, Indian and Western Music and relevant Western content. UITV strongly believes through our extensive marketing research done worldwide that there will be an audience for our different types of content among the millions of broadband users worldwide. UITV will not just be a modern high technology video stream; but it will provide the best of both the internet and TV worlds which will include social features and interactivity. In other words, we have created a TV platform for Indians to communicate with each other through the visual medium from different corners of the world. UITV will be the first quality Internet TV ever to launch a multi channel broadband Internet TV for such a huge global audience. Even though this audience/ market is large and growing the real reason why it is so special to launch it now is the timing. India and Diaspora Indians are ready to support each other in order to create a better world for all of us. UITV main goal is to connect our Diaspora Indians with India. The management of UiTV are now looking for capital to fund it’s marketing, production activities and completion of it’s platform. William Albert Securities Ltd are managing the fund raising efforts and are conducting a round of private placement currently. Asian Voice & Gujarat Samachar - 2009


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ecord low bank interest rates – if only they had done that a lot sooner and a lot more often. But they haven’t. So what are people doing in terms of investment to survive the credit crunch?


With the stock markets still at a 10-12 year low, more people than ever (proven by the record profits of some spreadbetting companies such as Worldspreads) are trading short-term rather than taking a buy and hold approach. These people are trading on spreadbets and making trades for a duration from a few hours to only a few days – for fear the markets are unforcastable in the present markets. Good idea? 5/10 – the problem is most people don’t have the skill. If you start small and learn then it’s a better idea.

Speaking to numerous stock brokers, investors are increasingly bargain hunting on the stock market. They are looking for companies which look undervalued, generating profits. Others are using index trackers – taking the view for instance that even if the Sensex hits its high of 18 months ago in the next 5 years that would still mean about a 12-15% per annum return on your investments – better than the bank. Good idea? 7/10 in the present market as long as you get the undervalued companies else pick a FTSE 100 or Dow or Sensex index tracker from websites like www.ishares.net.

More cautious investors will speak to stockbrokers about buying corporate bonds – basically lending money to say BP and receiving a rate of interest. Portfolios can be created yielding about 5% annually. Of course the risk is the company goes bust! But a the risk is lower with corporate giants of course. Good idea? 6/10: Speak to a good broker with experience in this area – tell them to show you a typical portfolio they would create for you.

finance, banking & insurance

Also increasing popular are investors looking to put money directly into new businesses. Indeed so popular is this that I am taking UK angel investors to India to see Indian companies who are pitching to the UK angels. This is an extract of an interview on exactly that subject: (good idea? 5/10 – if you join an angel Alpesh Patel network who does vetting like www.envestors.co.uk) Could you elaborate on various Investment Models preferred by Angel Investors? What are core investment attributes? How do you evaluate the proposals? What are the steps involved in the process of investment? We are looking for Indian companies which have already got some seed funding from friends, family or fools (the 3 ‘f’s), who have a protected intellectual property based product, with sales, the ability to scale and looking to raise realistic amounts of money which is not simply for marketing but which would really catalyse the company forward – accelerate it. At UKIBAN we have a simple 1 page form which we invite companies to fill in which is a standardized form all our angels wish to see and that allows us to do the initial screening. The step beyond that is then to move things forward with filling in any gaps of information and undertaking more due diligence to ensure the company is telling the truth about its product, the customers it has and so on. Entrepreneurs, with untested business models or innovative ideas, seek financial back up in the form of capital or the early stage finance from Angel investors. What is the most preferred investment structure by the Angel investor and the investee? For those companies from India, looking to go global via the UK, but still having an India operation as their competitive edge, we look to establish a separate UK company with the relevant UK tax breaks for the UK angels. What is the investment horizon for Angel investor after the second round of funding when companies mostly expand their equity base? What exit options would be available for an Angel investor? What are the exit strategies that are generally preferred? The usual exits – IPOs tend to bring the highest multiples, but that market is dead at the moment. An exit in five years – but usually ends up being seven. Trade sales too are common of course but the key is to

Asian Voice & Gujarat Samachar - 2009


finance, banking & insurance


ensure the company behaves in terms of its documentation as if one day someone is going to do detailed due diligence on the company. Does any Angel Investor participate actively in the management of investee/portfolio company? Are they offered any seat on the board? What equity stake is generally offered to the investor? Most angels do not want to be passive. If they put $500,000 into a company, they want to do it knowing that with one phone call they can get a big order for the company and so recoup their investment. Given the angel is looking for an IRR of 30% minimum pa, then the stake they take is such that they estimate the value of the company at exit based on earnings at that point and a market cap based on a multiple of those earnings would mean their stake at that point would leave them with such a return – after all dilution. So for example, if I am investing $1m, and in 5 years expect with the company earning $10m at that point and a valuation on a multiple at that time of 3, so

a valuation of $30m, and I want my $1m to have become $3m, then I would need to ensure in 5 years I owned 10% of the company. Which would also be 10% of the company today if no other investors came in, but since they will, I would need to calculate that today I may need 30% of the company or more because it will be diluted to a mere 10% in five years. Alpesh Patel, Co-Chairman UK India Business Angel Network, Board Member UK India Business Council, Board Member TiE-UK (The Indus Entrepreneurs),




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ost of the innovative ideas in business are simple solutions to longstanding problems. Mobile Centric Applied Technologies Ltd. (‘MCAT’) was incorporated by its founder, Mr Rune E. Spaberg, with this principle in mind. In 2004 Rune E. Spaberg was at the back of a queue in a shop, anxious, like those in front of him, to secure their chance of winning a jackpot rollover in the nation’s lottery. As the minutes passed he received a text message on his mobile. Taking out the phone from his pocket, he saw a message from his partner asking him to purchase a lottery ticket for her. The message ended in the 6 numbers that she had chosen for her ticket. He duly filled out an additional ticket with her desired numbers and resumed his place in the queue. “I thought to myself, ‘it was easy enough for her to buy her ticket – just send me an SMS and sit back and relax. No queuing for her!’ It then occurred to me how many more tickets would have been sold that day if everyone could have bought their tickets by SMS. No more waiting in line, no more frustration at how slow the queue was processed.” Recalls Mr Spaberg. Mr Spaberg’s insight was to allow players of his games to purchase tickets simply by sending an SMS text message to a central number. Because an SMS can be sent from anywhere, instantly, a player could be sitting in front of the television at home and buy a ticket in response to a TV advertisement for the lottery. An instant response to a targeted advertisement – literally, the lottery operator’s dream ticket! Most innovations in technology require lengthy development and implementation cycles and those that require new technologies suffer from teething problems until the technology is sufficiently robust and understood to be reliable. The beauty of MCAT’s system is that it utilises existing technology and so is already reliable. “Our system uses no new components and is thus extremely reliable. Our innovation was to bring existing technologies together – SMS and a weekly TV show that entertains the audience and players as the game progresses – and utilise them to make our players’ lives easier and hence to increase customer satisfaction. At the same time the lottery operator


finance, banking & insurance

increases their ticket sales. It is a win – win situation. Everyone is happier.” MCAT’s customers are the lottery operators and betting operations that already have experience in the field. By obtaining a national operating license from governments and being backed up a solution package that eases the implemenRune E. Spaberg tation phase, these companies greatly reduce their risk of entering a competitive market. “Business customers appreciate our product because it comes as a pre-packaged solution to getting to market and staying ahead of the competition. The implementation and testing phases are greatly reduced, speeding up time-to-market and reducing business risk. We even obtain the operating license that allows them to operate in their own country.” Explains Spaberg. “By not becoming overly involved in every project, we can expand rapidly in many countries in a region, allowing us to move quickly to fill a gap in the market and stay ahead of the game. When we move into a new region we tailor our games to suit that region’s tastes and size. The trick is to design a game that matches the odds of winning the first prize to projected sales. By doing this our designers help ensure that ticket sales volumes for the operator are maintained because the size of the first prize is the main driving force that retains interest in the game and keeps ticket sales high. The live TV entertainment show also acts its own promoter and sales are maintained throughout the week by carefully placed adverts. The affect of adverts are felt on sales almost instantly because players can buy the product as soon as they see it.” Win – Win! The directors of MCAT are currently raising capital to fund the expansion plans. William Albert Securities Ltd is one of the broking houses appointed for private placement of the company’s shares. Asian Voice & Gujarat Samachar - 2009


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as 2008 not a great year for your portfolio? Did you watch helpless as your stocks tumbled or were you one of the wise ones who jumped off the cart before the wheels came off? Are you wondering if equities still have a place in your portfolio or are you sitting on cash and scouting for a bargain? If you answered yes to any of these questions, then here’s one more – have you considered corporate bonds? First, you need to know what a corporate bond is. It is basically an “I owe you” sold by a company promising to pay back your original investment at a certain date in the future plus regular semi-annual interest payments called coupons in the meantime. Why hold a corporate bond? For the yield of course! A UK government bond is 100% guaranteed to pay your money back which is not the case for a corporate bond. By owning a corporate bond, you are taking on bankruptcy risk which could wipe you out, but because you are brave enough to do so, you are compensated with a higher yield, as 7-8% right now. Now that’s sounds quite attractive! In fact, the spread – that is the difference in yield between a corporate bond and its corresponding government bond – has spiked in 2008. Just to put that in perspective, spreads were near their narrowest (below 2%) as recently as the first half of 2007. Why the sudden and steep turnaround? Corporate bonds suffered through 2008 in the face of the declining global economic outlook and financial turmoil. Risk appetite for these bonds declined as investors sold positions, looking for safer investments. We may now be at a turning point. Corporate bonds have decreased too much in value and now present a cheap buying opportunity. With every day that passes, economic data from around of the world only adds woe to the grim economic outlook for 2009. As governments engage in unprecedented monetary measures to stimulate the economy, downside risks to global growth remain severe. Under these conditions, corporations may not have stellar earnings and the dividends you receive from shares may be paltry at best. So while shareholders may be left with a dwindling return, bond holders get priority over shareholders and are still entitled to a semi-annual coupon. Thus you as


finance, banking & insurance

a corporate bond holder enjoy higher yields and greater protection. Furthermore, governments are taking extraordinary efforts to help shore up corporate balance sheets to get credit markets working again. One such measure is quantitative easing which includes the government buying of corporate bonds. The Bank of Aparna Jagajeevanram England has the potential to buy up to £50 billion of corporate bonds. The impact of the intervention will be to underpin the price of these bonds. Of course, being veteran investors, you will know that there is no such thing as a free lunch. The compelling value of corporate bonds is balanced by higher risks. You should be prepared for a sharp acceleration in corporate bankruptcies which could adversely impact you. However a well diversified portfolio and the higher yields should protect you from the risks that you take. Finally, for private investors, the safest way to invest in corporate bonds is via a bond fund which invests across many bonds thus diversifying the risk. Corporate bonds are uniquely placed right now to provide attractive returns. Amongst the diversified holdings of the portfolios at Seven Investment Management is the Invesco Sterling Bond Fund which invests in a range of corporate bonds, balanced to some extent by safety of government bonds and cash, and yields 10.9%. We also diversify our holdings through cheaper alternatives - Exchange Traded Funds (ETFs) such as the iShares £ Corporate Bond which yields 9.4% and tracks the iBoxx Sterling Corporate Bond Index. Whether you are a cautious or an adventurous investor, corporate bonds should be a part of your investment strategy and you may well find them to be your portfolio’s saviour in 2009! Aparna Jagajeevanram is a Research Analyst at Seven Investment Management. For more visit www.7im.co.uk Asian Voice & Gujarat Samachar - 2009


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t is fair to say that investors may have become a little disenchanted with equities. In the ten years to December 2008, the total real return from UK equities was negative for the first time since 1982. This fact is not without precedent and as we shall see, it may, in itself, be a reason to invest. In investment, the best returns are often achieved by investing against the tide. History shows that extended periods of poor performance have almost always led to ensuing periods of above-average performance. Analysis of historical stock market returns (via the Barclays Equity Gilt Study) shows that previous ‘lost decades’ (10-year periods of negative aggregate performance), have been followed by a decade of positive performance, with average annual returns of 10.8% per annum. (Based on FTSE All Share Index 10 year average annualised returns in inflation adjusted terms, with dividends reinvested. Annual performance of the FTSE All Share Index for the last 5 calendar years is included below for context.)


Performamce over the last 5 years FTSE100 FTSE All Share

Mar 2004 2005 +14.6% +15.0%

Mar 2005 2006 +20.5% +22.8%

Mar2006 2007 +10.1% +11.6%

Mar 2007 2008 -1.3% -2.7%

Mar 2008 2009 -31.8% -33.0%

Source: Morningstar to 01/03/2009, performance calculated bid-to-bid, net of basic UK tax rate, with income reinvested, initial change excluded.

Please remember that past performance is not a guide to the future and the value of an investment can go down as well as up. It is worth emphasising the extremely cheap levels that stock markets are now trading at in terms of valuations. The price earnings (PE) ratio is the most commonly used barometer of a company’s share value; it compares the share price with the earnings of the company on a per share basis. The UK stock market was recently trading at a price earnings ratio of just under 7 times company earnings; you have to go back to the oil shocks of the mid-1970s and the recession of the early 1980s to find occasions when share valuations were this cheap. On both occasions, the market went on to more than double in the three years following its valuation trough. One of the main reasons why shares have performed poorly over the past ten years is that they were relatively expensive towards the end of the dotcom

finance, banking & insurance

bubble in 2000 when investors were paying around 30 times annual company earnings per share. And although, stock markets rose between 2003 and 2007, they did so less quickly than company profits. As a result, company valuation multiples have actually fallen steadily for nearly a decade. History suggests that when valuations Sanjeev Shah reach these extreme lows, it is a good time for long-term investors to enter the stock market. Although it may go against the grain psychologically, buying equities at these low-points increases the odds of achieving above-average returns.

The interest in tracker funds in recent years can partly be attributed to a low volatility market environment. While there was little to differentiate between stocks, owning the index was a reasonable way of building equity exposure. In today’s environment of heightened volatility, that is no longer the case. Tracker funds cannot shelter investors from the worst performing shares

in the market. As a manager of an active equity fund, I have the ability to avoid the fundamentally weak or overvalued stocks and invest only in the most attractive names. As markets have fallen back, shares have Performance before and after the PE trough Trough PE 1 yearbefore 6 monthsafter 1 yearafter 3 yearsafter often been sold indiscriminately. Some share prices have deserved to fall since their business 1970s oil shocks 3.0x -50% +115% +151% +272% 1980s recession 6.0x +3% +32% +38% +111% plans have been weakened by the credit crunch. 6.8x -32% ? ? ? Credit Crunch Other companies have not deserved such treat2008-9* ment. Never has it been more important to identi*The trough PE for the present Credit Crunch was reached in February 2009. Source: Datastream, 01.04.09. Data refers to the UK-DS Market Index from 01.01.65 to 01.04.09. fy the winners and the losers. This is where I

Asian Voice & Gujarat Samachar - 2009


finance, banking & insurance


believe an active management approach based on fundamental analysis has the potential to add significant value in the years ahead. I have managed the Fidelity Special Situations Fund since January 2008, having been at Fidelity for 13 years, working alongside Anthony Bolton, whose name became synonymous with the great track record of the fund. I continue to manage the fund on very similar contrarian principles, aiming to invest in opportunities before the rest of the market. To this end, I go to great lengths to find the unrecognised value or growth potential in companies using the full resources available to me from Fidelity’s extensive research platform. Good fundamental analysis does not merely involve getting to know the company in which I am investing. I believe it is important to also find out about a company’s competitors, suppliers and customers to understand how it creates value. This enables me to build conviction in my contrarian views and avoid following the herd. While the current volatility is disconcerting for investors, I am finding a growing number of attractive opportunities, particularly in small and mid cap stocks. It is important to bear in mind that the stock market will recover long before economic news becomes more positive. Sanjeev Shah, Portfolio Manager – Fidelity Special Situations Fund at Fidelity Ltd. For more information visit www.fidelity.co.uk


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o two patients are the same. Having worked with thousands of patients over the past 15 years, Dr Aleem Mirza knows this better than most other Doctors, which is why we do things differently. More employers are realising just how important it is to have a healthier workforce. Not just to help improve productivity and profit, but in respect of the vital contribution their physical and mental performance has on the overall success of each and every business. Yes, providing your employees with prompt access to medical diagnosis and treatment will help them return to work sooner after sickness absence, but is that enough on its own? For many of our corporate clients, the answer is no. At Symbiosis healthcare PLC, we are different, and we’d like to demonstrate why we’re the right choice for you and your business. As you’d expect, we can offer you and your employee expert healthcare provision as standard. What makes us stand out, though, isn’t just the wealth of experience, the specialist touches, friendly and professional staff. The difference is in our approach and what we can offer you and your organisation as a whole to mainatain their well being.


Symbiosis Healthcare Plc is as passionate in delivering a caring, consistent and efficient service as the doctors who treat our patients. So you can look forward to receiving full, expert guidance and access to a wealth of information and support. We can also communicate the benefits to your employees and keep them up to date with any new medicines, treatment regimes and preventative screening and surveillance that are available. Whichever treatments and package you or your employees require, Symbiosis Healthcare and its partners will ensure that they are easy to obtainable, supported by expert advice and offer real value for money at every stage. We continuously re-invest in improving and enhancing our healthcare provision. Symbiosis healthcare PLC is in the process of establishing networks of quality primary care clinics, Laser eye centres and aesthetic medicine centres for skin and dental care. We can also provide on-site ergonomic assessments and manual handling training courses aimed at prevention of musculoskeletal problems such as back pain, neck stiffness and repetitive strain injury (RSI)

The Government’s current health, work and wellbeing strategy places responsibility on employers and individ-

finance, banking & insurance

uals to improve the health of the working-age population. There are many ways in which Symbiosis healthcare can help businesses with this. For example, Symbiosis healthcare is working on a proactive online service, which will be available to all employees through their company scheme at no extra cost. It will offer access to a series of interactive health Dr Aleem Mirza assessments, lifestyle advice and health tips. By focusing on areas that impact on performance of all individuals i.e. sleep, nutrition, stress and fitness. This approach could help improve employee health and productivity and reduce stress. SYMBIOSIS HEALTHCARE PLC is poised to become a significant leader in the rapidly growing and lucrative primary healthcare market in the UAE. Worldwide, as the global recession hits the major economies, local governments are still committing to encourage investment in the healthcare sector and support the services and improve standards of healthcare across the board. Symbiosis Healthcare management has significant knowledge and expertise in all aspects of this business and will achieve this through organic growth and acquisition of strategic healthcare providers in the UK and UAE. Discussions are underway with leading private primary care clinics, an e-prescribing online pharmacy service, provider of Laser eye treatment and Dentistry to capture the growing aesthetic medicine market as well as primary care. 'The use of the latest technologies, multidisciplinary team approach, integrated network with highly dedicated staff will be the key in providing quality and controlling cost as well as adding value'. ' We intend to create a model for others to emulate' Our key partner Medicentres International FZ LLC in Dubai will play a significant role in the roll-out of integrated primary care clinics in the UAE. Medicentres International Client quotes in Dubai UAE: Very dedicated team of doctors with excellent communication skills' A breath of fresh air and reassuring to see Uk qualified doctors in the UAE' Symbiosis Healthcare Plc are currently conducting a funding round through private placement and aim to list shortly. William Albert Securities Ltd are the mandated corporate advisers for the issue. Asian Voice & Gujarat Samachar - 2009


finance, banking & insurance


uring the 1970s and early 1980s many Asian families moved to the UK from India, Africa and other parts of the world often to escape political turmoil and to build a new life. Many such families arrived with very little having been forced to abandon their businesses and their homes. However, these modern day pioneers brought to the UK skill, talent and entrepreneurial spirit. Perhaps it was the injustice of their plight that drove many in the pursuit of further success and recognition. For others the motivational driver may have been aspirational, having never had wealth, status or position. Hard work, endeavour and business acumen will have contributed in no small measure to creating modern day “Slumdog Millionaires”. There is no doubt that Indian and Asian businessmen have contributed beyond measure to the economic prosperity and the rich culture of this country. Of course many businesses that rose during the 70s and 80s have now passed to second and, in some cases, third generaSean Wakeman tion family members. During the course of time businesses sprung from humble beginnings consisting maybe of one shop, one restaurant or one hotel will have grown into larger enterprises driven by the youthful vigour and ambition of their owners. Businesses will have evolved into compliant and well run establishments using robust business systems for measuring income and expenditure. Poor recordkeeping, shortcuts in procedures and irregular practices as a result of lack of time or cash flow concerns in those early days will generally have been put right by the successor, if not the original genera-



Asian Voice & Gujarat Samachar - 2009

tion. Significantly from a UK tax perspective, the migration means that hundreds of thousands of individuals of Indian or Asian descent who are currently living in the UK may be regarded as UK tax resident but not UK tax domiciled. In brief, this applies where individuals ultimately retain an intention to return one day to their or Anand Unalkat their parents’ country of origin. On account of their tax status, many individuals will have followed tax advice and opened offshore bank accounts to mitigate their UK tax liabilities by not remitting overseas income to the UK. More sophisticated (and often wealthier) tax individuals may also have created offshore tax structures, incorporating trusts or Liechtenstein Anstalts (a cross between a trust and a company). Again, over time these tax structures may have lost their tax effectiveness or been otherwise compromised. Offshore tax planning may have become redundant or even inappropriate. It is crucial therefore for UK resident non-domiciled individuals regularly to review their UK tax positions to ensure the robustness of previous tax advice. Finally, voluntary and spontaneous disclosure to H M Revenue & Customs (“HMRC”) remains the only advisable option for those individuals who have deliberately chosen to evade taxes by systematically diverting income (sometimes to an offshore bank account). With the help of a tax investigation specialist, immunity from criminal prosecution may be negotiated and the best possible financial outcome achieved. Following the success of the first Offshore Disclosure Facility operated by HMRC in 2007 (which raised in excess of £400m), as a result of information obtained about offshore account holders from five major banks, a second (and final) chance (“the New Disclosure Opportunity”) is being launched this autumn. This is as a direct result of HMRC taking action against a further 30 banks to obtain customer and offshore bank account information. The last amnesty was accompanied by a “carrot” of a 10% fixed penalty of all unpaid taxes (the maximum statutory penalty is 100% of unpaid taxes). It is not yet known what the incentive in terms of a penalty loading in respect of unpaid taxes will amount to but this is likely to be more than the 10% offered for the original

FBI amnesty but almost certainly no more than 30%. The New Disclosure Opportunity will be available until March 2010 although registration to be included in the scheme is likely to be much earlier (perhaps as early as 1 September 2009). If there are individuals who have not paid the correct amount of taxes either due to tax inexperience or tax evasion motives, this is the perfect (and possibly final) opportunity to come forward and make a voluntary disclosure. The introduction of a new penalty regime by HMRC from 1 April 2009 means in future there will be significantly higher monetary penalties linked directly to the behaviour of the proprietor, partner or company director which has led to the underpayment of tax. Under the new penalty regime, where there has been a failure to take reasonable care in one’s tax affairs, a voluntary disclosure will result in a penalty from 0% to 30% of the unpaid taxes, whereas a disclosure on challenge by an Inspector of Taxes will give rise to a penalty in the bracket 15% to 30%. Where there has been a deliberate understatement of tax, a voluntary disclosure of liabilities will yield a penalty in the range 20% to 70% of the unpaid taxes, where as a prompted disclosure will yield a penalty in the range 35% to 70%. Finally, an underpayment resulting from a deliberate understatement with concealment (which might include using an offshore bank account or offshore tax structure), the penalty for a voluntary disclosure will fall in the range 30% to 100% and a forced dis-

finance, banking & insurance

closure will fall in the brackets of 50% to 100%. The prospect therefore of a civil monetary penalty in the range of 10% to 30% as suggested above for any offence is from a financial prospective extremely attractive. In fact, there will never be a better opportunity to put right previous misdemeanours or serious irregularities. This second chance should therefore be seized with both hands! For further information or to arrange a free initial consultation, please telephone Sean Wakeman, Partner (020 7842 7285) or Anand Unalkat, Tax Investigations Consultant (020 7842 7143) at Horwath Clark Whitehill LLP. Sean Wakeman has in excess of 20 years experience on both sides of the fence having been an Inspector with the former Special Compliance Office, H M Revenue & Customs. He has now been advising clients and defending their affairs for 14 years.

Problems with the taxman? We’ll save you. Contact: Sean Wakeman or Anand Unalkat Horwath Clark Whitehill LLP, London T: 020 7842 7285 or 020 7842 7143 E: investigations@horwath.co.uk

Asian Voice & Gujarat Samachar - 2009


finance, banking & insurance


he current economic environment is fraught with uncertainty but at the same time filled with opportunities. The liquidity crisis and government intervention has led banks to tighten lending which apart from real estate market has impacted the Small and Medium Enterprise (SME) industry significantly. The SME industry constitutes over 90% of the UK market and is unattended. First Trade Global Holdings (“FTGH”) aims to fulfil the need for structured financial solution and capital raising for the Small and Medium Enterprise. FTGH aims to achieve this through acquiring and managing brokerage houses, wealth management and corporate finance houses in key financial centres around the globe. FTGH aims to build a distribution network which has a global footprint. Different markets have different cycles, FTGH’s local presence would allow it to captalise on them. Through an international network FTGH aspires to capture the surplus in liquidity in one market to compensate for the crunch in the other. FTGH aims to have the capability to raise finance even under the toughest market environment. Apart from distribution FTGH aims to build strong structuring capability. Negotiations are underway with specialist corporate finance and structured product groups globally. The companies within FTGH” deal with both the institutional and retail segments in the market place. On the institutional business side the firms in the group provide a balanced group of traditional merchant banking activities aimed at the level of the global Small Medium Enterprise market place. On the retail side, the firms in the FTGH group are involved in wealth management, investment advice, and, providing broking services. FTGH works very closely with Independent Financial Advisors in the retail sector. In order to achieve it’s goal while minimising risk FTGH has adopting a diversified business model. The company plans to avail membership of all or most of the stock and/or other exchanges around the world. The company has already established links with broking houses in the following countries:


Asia (including the Indian sub-continent), Germany, Tanzania, UAE. Further plans include membership of additional exchanges located in. Frankfurt, Brussels, Amsterdam, Rome, Moscow, Warsaw, Oslo, Geneva, Toronto, Dubai Abu Dhabi, Qatar, India.


Asian Voice & Gujarat Samachar - 2009

The directors of First Trade Global holdings have a wealth of experience in the financial services sector. The group CEO Mr Samrat Bhandari has been in the financial services sector for over a decade and has studied at Harvard Business School. FTG’s Corporate Finance head Mr Atul Sharma is a Chartered Accountant and member of the ICAEW Mr Samrat Bhandari Corporate Finance Faculty. He has been at Oxford and worked in top accountancy firms (PwC, Deloitte, KPMG). Atul has enjoyed an exceptional career in the financial services sector for over 25 years. Atul is also, currently a director of Leicester City Football Club. FTG’S Head of operation Mr Norbert Przibilla, has over 40 years’ experience in the financial services industry. He has worked for some of the world’s largest institutions, including UBS and Daiwa Securities. The directors of FTG are very excited about their prospects in the coming months. The current economic climate has led to many buy out opportunities in the sector. A considerable number of financial services companies are being sold at ‘sizeable discount’. FTG is looking to take full advantage of the abnormality in the market and fuel it’s acquisition led aggressive growth strategy through ‘opportunistic purchases’. FTGH is looking to list soon. William Albert Securities Ltd, a London based stock broking house are managing the issue and have experienced great interest in the company.


finance, banking & insurance

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finance, banking & insurance


new tax régime came in on 1 April 2009 that is the biggest change ever to hit relations between taxpayers and HM Revenue & Customs. Thought has to be given now about how to survive in the new environment. Simply carrying on as before is not an option. In the context of mainstream direct tax liabilities of businesses, there has been a massive extension of HMRC’s powers. The new legislation provides for statutorily authorised fishing expeditions. That means that when HMRC start an investigation they will know that there’s something in it for them, so everyone needs to take steps now to raise their game to protect themselves.


What can HMRC inspect? HMRC can carry out an inspection of business premises (which includes vehicles and parts of homes used for business purposes), business assets and business documents. That could include private bank accounts into which transfers from business accounts for, say, drawings or salaries are made. There is an urgent need to make sure that transactions into and out of private bank accounts are properly identified and annotated because HMRC will treat unexplained deposits as taxable without evidence to the contrary. What about verbal information? The best advice is undoubtedly to save all conversation until an adviser is present. Will taxpayers be obliged to answer questions? HMRC’s Richard Davey has said that “it is not intended that this amounts to a right to demand an oral reply to a question”, and that “a person refusing to answer questions will not incur penalties for obstruc-


Asian Voice & Gujarat Samachar - 2009

tion”. That is good news for all taxpayers and businesses – so make sure that you don’t give verbal replies that will come back to haunt you later. Even if only the current year’s records are examined, though, there is still significant risk. because weaknesses in current year records will be extrapolated backwards to justify assessments for earAndrew Gotch lier years. What all this means is that the advent of the new inspection régime requires that taxpayers and advisers must collaborate in planning transactions and planning the records that underpin them in order to produce the tax result that the parties want. All too often accountants only get to know about their clients’ transactions well after they have taken place when the time comes for accounts preparation. That is too late. Taxpayers have to understand that tax and accountancy professionals are just as much an essential part of the transaction planning process as solicitors and bankers are.

Under the new compliance régime the focus is intensely on business records. Everyone needs to accept right away just how important defendable and accurate records are under the new compliance régime and that HMRC will be expecting high standards. Detailed advice on appropriate standards of ordinary business record-keeping is an essential part of the service advisers should be offering their clients – a failure to do so will mean that taxpayers are far more vulnerable to inspections than they should be. When can HMRC inspect? HMRC have the power to enter and inspect if “the inspection is reasonably required for the purpose of checking that person’s tax position”. Unfortunately there is no right of appeal against a decision to inspect and no opportunity to check the reasonableness of the decision to inspect. What’s more, HMRC have said that all compliance checks will be selected for a reason. Taxpayers are thus well advised to treat every notification of an inspection as meaning that something has been identified that makes HMRC think there is a problem. Inspections should never be treated as low-


finance, banking & insurance

risk matters of routine. The second point to be aware of is just what is meant by a person’s ‘tax position’. This covers anything relating to payments between HMRC and taxpayers in either direction and covers the past, the present and the future. It would be hard to think of anything broader.

The vital point to bear in mind is that the new statutory minimum penalties are higher if disclosure of the inaccuracy is prompted. ‘Prompted’ means that a disclosure is made at a time when a person has reason to believe that HMRC has discovered – or is about to discover – the inaccuracy. That means that any disclosure made after HMRC announce an intention to undertake an inspection will be prompted. The result would be minimum penalties of 15% for a careless inaccuracy, 35% for a deliberate inaccuracy with no concealment, and 50% for a deliberate inaccuracy with concealment. Remember – those are minimum penalties, achievable only where there is perfect disclosure and cooperation in relation to the default. Given human nature, the likely analysis is that the real penalty will be higher. Thus for a careless inaccuracy the best taxpayers can hope for is 15%, and in practice it is likely to be 20% or more. For ‘ordinary’ tax investigations that are the cannon-fodder of everyday

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enquiry work for HMRC – the corner newsagent or general store, the taxi driver, the garage owner, the subby – 35% is the lowest possible penalty and the reality is likely to be 40% or more of the potential lost revenue. If an adviser is given the opportunity to preview what HMRC will be likely to see during the investigation then the chance of identifying potential problems – and thus saving money on penalties – will be optimised. So – get your tax adviser involved now to review records to identify potential weaknesses and disclosures. And when HMRC announce that a compliance check is coming don’t delay – get your tax adviser involved immediately to help you hang on to as much of your money as you can! Andrew Gotch BA MA CTA (Fellow) is a tax adviser for John Cumming Ross Limited and can be contacted on 020 864 6689 or post@jcp.uk.com.



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finance, banking & insurance

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Partners: Joseph H L Weston, Melvin C Kay, Kiran D Patel, Jill L Springbett Asian Voice & Gujarat Samachar - 2009


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ast year was not kind to property with the economic slowdown cutting off tenant demand at the same time as the banking crisis made life almost impossible for investors and developers. Investment yields had moved out for all grades of investment with the only sellers being those under pressure from their banks were forced to cut prices to attract the few cash rich buyers still active and prime properties suffered more than most. All that seems to be changing and for more and more investors there is a light at the end of the tunnel – the world seems to be settling down and facing up to a long and slow recovery but the view is increasingly held that the shocks of the last eighteen months have come to an end. The Budget made it quite clear that we could expect some hard times ahead as banks, commerce and nations all struggle to rebuild. Taxation will inevitably increase in coming months and years as efforts are made to balance the books but the property market can look forward to relative stability through this period with the prospect of a progressive if slow recovery in tenant demand and increasingly accessible finance from the banks. In these difficult times it is essential for property owners to monitor asset performance since a sympathetic approach to tenants’ cash flow problems, whilst commendable in its place, may actually allow them to slip into arrears from which they might never be able to recover. There is no substitute in such times for good independent professional advice. Property owners can find themselves too close to the situation having established relationships with their tenants and maybe a nostalgic view of the property which together can obscure a balanced judgement of its future potential and value. This may be the time to sell and reinvest. Recent falls in interest rates have of course impacted heavily on savers and investors with greatly reduced returns now being offered and the demand for residential and commercial property is increasing as new buyers are entering the market looking for an alternative way to invest their money that will provide a more appropriate level of return than available on bank deposits. Of particular interest are properties showing steady returns with good covenants on long leases but there is also increasing demand for vacant and part let properties offering opportunities for regearing, refurbishment and redevelopment by hands-on purchasers with sufficient cash. Auctions have always been at the forefront of the market offering transactional transparency, a barometer on market movement and giving buyers and sellers alike the certainty of fixed timescales reducing the risk of escalating and abortive costs.



Asian Voice & Gujarat Samachar - 2009

Standing: Brijesh Patel - Commercial Management Surveyor (L) Tim Lewis MRICS - Auction Manager (R) Simon Hanton FRICS Head of Valuations (Center)

The auctions fared no better than other areas of late with many buyers taking a holiday during the second half of last year while those that did show themselves were looking for bargains and many lots failed to make their reserve with success rates down to just 3040% towards to end of the year. The upturn in the auction market over the first few months of the year has been remarkable, despite the banks’ caution, with most now looking to limit their contribution to an LTV of 50-60%. Many vendors are becoming more realistic on pricing and those buyers with cash reserves or good lines of credit are now able to start picking up some bargains. No-one can be sure that the property slide has reached the bottom but there are clear signs suggesting that it’s very close and that the time is right to buy. This is reflected in recent trends and Willmotts typifies the sector, raising £11.2m on UK investments and vacant properties in the February sale with a success rate of 84%. Average sales were around 29% above the guide price. Willmotts Chartered Surveyors is a multi disciplinary firm of chartered surveyors, estate agents and property managers as well as one of the country’s oldest established auction houses. It now holds seven auctions a year, in association with A&R, offering residential and commercial properties of all types and values in London, the Home Counties and further afield. Simon Hanton F.R.I.C.S is a director at Willmotts Chartered Surveyors. For more information email s.hanton@willmotts.com or visit www.willmotts.com

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finance, banking & insurance


Business owners are well versed in having to make critical strategic decisions about their companies at various stages of its lifecycle. But with the UK in the midst of a recession, directors and business owners are having to make vital strategic decisions in an uncertain economy which is changing at an unprecedented pace. Nina Amin, Partner at KPMG looks at why forecasting has become a priority for businesses looking to weather the recession. esearch commissioned by KPMG shows 89 percent of business directors are reacting to the current uncertain times by changing their approach to strategic planning and forecasting has pushed it’s way to the top of the agenda for most companies. Management information, which was previously collated and used by the finance team, is no longer necessarily flexible or broad enough to guide those responsible for developing strategy and communicating with stakeholders. In the current environment, lenders and investors will be looking for regular reassurance that their money is safe and the business may also have to react quickly to market fluctuations, so it is vital that senior management has involvement in a process which can help to shape the future of a business. As the uncertain economic conditions rage on, the usual variables that would have previously been used in a forecast are now covered in uncertainty. Sales volumes, prices and availability of finance can all change dramatically in a short time. Businesses can’t even be confident that their main suppliers or customers will be around for very long. All of these elements have a dramatic impact on a business’ ability to develop strategy, after all, it’s pretty hard to look six months or a year ahead, when you’re not even sure what the next week is going to bring. KPMG’s research found 61 percent of business directors are responding to the uncertainty in which they are operating by interrogating their data much more frequently while 50 percent are using different information to help guide them. Our experience with clients supports these findings. We are working with a range of clients to help build forecasts for companies that incorporate a wider range of data which may include more detailed competitor analysis; customer viability studies; energy, raw material and labour costs; as well as market demand, prices and the cost and availability of credit. One of our current projects is with a power company who wanted advice in helping them analyse what they are doing across many sites to manage and hedge their raw material and commodity purchases.



Asian Voice & Gujarat Samachar - 2009

At the same time, streamlining and simplifying the data gathering process is important to speed up the resulting planning process, which is not always possible given the unwieldy nature of many companies’ forecasting processes. Projections often involve pulling together incompatible chunks of data from all over the business, which Nina Amin must somehow be consolidated into something useful. All the above factors have meant that forecasts have tended to follow rather than precede major decisions whereas increasingly business owners are recognising that a dynamic, flexible forecasting process can help to shape both immediate and longer term decision-making – and enable them to react swiftly to a constantly changing environment. For example, a company director may need to make some tough decisions about how to respond to falling sales. Scenarios ranging from cost cutting and cash maximising, to site mothballing and closedown may need to be examined, each with their own series of follow on questions such as what are the costs of a redundancy programme; how much could be raised by the sale of an asset or part of the business; what actions are my competitors taking; what are the fixed costs of a mothballed operation and how easy would it be to restart production when the upturn comes? After two decades of planning for growth many business owners have no blueprint to help them answer the ‘what ifs’ involved in decision making in a downturn, but those that can draw on timely and relevant data, and use this to create realistic scenarios, will have a sounder base on which to build future plans. Only then will they know how their business is shaping up in these ever changing times. Nina Amin is a Tax Partner at KPMG For more information please visit www.kpmg.co.uk


niAbroad is structured to be the holding company of an educational services group. Its intended principal activities comprise:


Uniabroad Partnership Programme Offshore University Campus Virtual University / Distance learning centres Executive Development/Professional Development programmes Global Student Exchange Programmes International Second Innings (New skills for 50+) Vocational Courses Overseas Student Support - Jobs/ Accommodation Travel/ Scholarships Exhibitions and Seminars globally Education, training and skill development is a universal requirement for growth. UniAbroad is focussed to fulfil the requirement by matching the providers of education, training and skilldevelopment programs to the door-steps of those who need them at a price which is affordable. However, UniAbroad goes beyond a traditional educational consultancy. The firm has created multiple channels to service the needs of its stakeholders (students, corporates, government departments, and top institutions). UniAbroad’s growth strategy is based on the concept of ‘Shared Destiny’ and acquisition led growth. The UNIABROAD ‘Shared Destiny’ concept

finance, banking & insurance

is based upon a powerful business concept -franchising which is “the single most successful business concept ever.” The franchising model is based on: Building on partnerships with a. The top institutions in education, training and skill development b. The best distributors for the products provided from the institutional partners c. The existing consultants who can use our extensive services and products Creating Blue Oceans (creating new market segments where there is no competition) a. Uniabroad has identified significant opportunities in the market which are untapped at the present time b. Strategic Investors supporting UniAbroad programs

a. Custom/Tailor-made programs with the specialists focussed on skill development of the end-user. b. Distribute the programs to masses as programs are affordable and meaningful Apart from it’s shared destiny approach, UniAbroad is also adopting an acquisition led growth strategy. The management of UniAbroad are in negotiations with specialist financial training centres that provide education, coaching and support as well as organise educational seminars to help people and business owners understand the world of investment-shares, options, securities and equities. The organisation already has an investment club network of approximately 934 share clubs, 20,000 graduates worldwide and 600 in the UK. As part of the growth strategy UniAbroad is looking to raise it’s profile by listing in the PLUS market and in light has appointed William Albert Securities Ltd as it’s corporate advisors. University of Sheffield Asian Voice & Gujarat Samachar - 2009


finance, banking & insurance


The current global financial crisis was accelerated in the second half of 2008 by the bankruptcy of Lehman Brothers due to its exposure to toxic sub-prime US housing assets. Globalisation was the link by which the crisis rapidly spread around the world, first tipping developed economies into recession and then turning into financial contagion affecting developing countries, including India. So, how has India fared thus far? How long will it be before economic recovery sets in? What will be the impact of the General Elections, now in their first phase at the time of writing this article, once results are announced on 16 May? What has happened to the stock market and how do foreign investors, who significantly influence the Indian bourses, view India now? Answers to these questions will be attempted to give an overview of how India has fared in this current global crisis.

India’s economy grew at an average rate of 9%+ in the last 3 years to March 2008. Since then the country has been hit by the “credit crunch” although not as hard as many others. Its banking sector is about 70% national-


Asian Voice & Gujarat Samachar - 2009

ized so bureaucratic and regulatory hurdles luckily provided an effective firewall against the credit virus from the West. Indian exports account for under 15% of GDP (vs about 30% on average for Asia) and this has also helped since the country has a large domestic market. However, this is a global slowdown and India has not escaped. Many sectors Deepak Lalwani of the economy, especially export-related, have slowed down considerably, causing major job losses. Manufacturing activity fell for the fifth month in February due to depressed demand as loans, which had fuelled previous consumer growth in sectors such as autos, housing and white goods, dried up for consumers and industry. Exports fell for a fifth consecutive month in February, showing an annual 21.7% retreat in that month. Demand from the US and Western Europe, which together account for 35% of Indian exports, slowed considerably as economies there sank deeper into recession. The service industry, which accounts for about 58% of the economy, has also slowed down, while agriculture remains a laggard. GDP growth is consequently expected by the Government to fall in the year to March 2009 to “just under 7%”. The Asian Development Bank (ADB) forecasts 7%, while we forecast a more cautious 6.6%. Going forward the Government expects growth of 6% in the year to March 2010, the ADB 5%, while we expect 5.5%. These are rates well below the average of 9% + seen in the last 3 years, but India is still faring relatively better than many others. Alas, there is no room for complacency as India needs economic growth rates of at least 6% p.a. to add new jobs, as a lower number implies “recession” levels for the country.

In the last 15 years coalition Governments have become a feature of the Indian political landscape. Coalition governments in themselves are not bad news in India; but the make-up and tilt in the power base can be, as recalcitrant partners are very often irksome and slow the pace of reforms and thwart the taking of tough decisions. Currently, with the SENSEX near a 2009 high,


finance, banking & insurance

investors are pricing in a pro-business coalition government led either by Congress or the Bharatiya Janata Party (BJP), in a close race. These two major parties are pro-reforms and share similar economic policies. The threat of a “Third Front” upsetting the political scene is increasing. Based on past experience of Indian politics, one should expect surprises!

After a spectacular 5 year bull run to end 2007 during which the SENSEX gained over 500%, the index lost 52% in 2008 as Foreign Institutional Investors (FIIs) sold a record US$13bn of equities, after buying a record US$17bn in 2007. Their sales last year partly reflected the redemption pressures they faced in their home markets as losses mounted there. So far in 2009 they currently remain net sellers of equities worth about US$1bn, but have been buyers in the last few weeks on perception that Indian shares offer attractive value. SENSEX 8000 has proved to be a good floor this year. Currently, the SENSEX around 11,000 trades at a P/E ratio of 11.3x and is capable of testing 12,500 (P/E 13x) if a coalition led by the Congress or BJP party forms Government. A surprise win by the Third Front could result in a market sell-off of about 25-30%, with the SENSEX again testing the year’s low of 8,160 (last seen on 9 March 9) as investors anticipate political instability and fresh elections by year-end again.

Foreign Direct Investment (FDI), after years of tepid growth, surged to US$32bn for the fiscal year to March 2008. The figure is expected to slow down to around US$26bn to March 2009 reflecting tighter credit in overseas markets delaying investments. The attraction of India as an investment destination has not waned materially. Recent economic data, although poor, suggests a slowing down in the deceleration of the economy. There is creeping optimism that the worst may soon be over and a weak recovery, led by revived consumer demand, may start by October this year. However, election results will impact the economy also. Deepak Lalwani is Director-India at London stockbroker, Astaire. He is a qualified UK accountant and was elected a Member of The London Stock Exchange over 20 years ago.

Independent UK and International Tax Advisers

PRINCIPALS John Chown John Dewhurst Kaushik Desai Kevin Offer $,+# 0.##0 ,+",+

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finance, banking & insurance


ention life assurance mis-selling and everyone thinks of endowments. Those with a slightly longer memory might think of pension transfers, too. But just because endowments and pensions hit the headlines a little while ago does not mean they are the only products that were mis-sold. At least one specialist firm is now regularly helping new clients to claim many thousands of pounds in compensation for life policies and investments of all kinds and one of the surprising aspects of this is that most of the people winning big pay-outs did not even know that their policies had been mis-sold!


Most mis-selling was not caused by dishonest salesmen; it probably resulted from either poorly trained advisers, or from the financial enticements the companies used to make them sell – their commissions. And these reasons applied to pretty much every type of life policy and investment and to people in all walks of life, whether they have been paying just a few pounds a month or thousands of pounds in premiums. Savings plans with life cover, whole of life plans, pension mortgages, any life cover with increasing premiums, bonds, PEP’s, ISA’s etc. arranged in the 1990’s or earlier, are all quite likely to have been mis-sold. It doesn’t even matter if the policy has already matured or been surrendered – compensation could still be payable. Sometimes people have a feeling their policy isn’t really what they needed, but more often than not, they don’t have the slightest idea! Unfortunately, not only do most people not know they have been mis-sold a


Asian Voice & Gujarat Samachar - 2009

plan, they don’t know how to get matters put right, either. So a number of life companies are relying on the fact that policyholders in this position are doing nothing about it. Essentially, if you are one of them, all you have to do is complain, but there are pitfalls, because rushing in and complaining to the life company that, for example, a policy Bipin Pandya isn’t worth as much as you thought it should be is not likely to get you very far. You need to know what reasons will make your complaint succeed in the first place and you need to be prepared to argue your corner in what could become prolonged and detailed correspondence. Knowledge of a range of factors, such as the alternatives that may have been available at the time, the regulations that applied and of how to deal with the company if it refuses to pay up could all be very important.

Using a reputable, specialist, financial services claims management company, however, means that they should take on all the hard work for you. And if they work on a no-win no-fee basis, you have absolutely nothing to lose by asking them to look at your policies. If they take your case on, they will claim the maximum compensation they can for you in return for a small share of the pay-out when it is received. The Ministry of Justice now regulates this area of claims management. For further information contact Bipin Pandya at Life Policy Reclaim Ltd on 020 8220 6792 or 020 8220 9596. Or email us at info@lpreclaim.co.uk

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finance, banking & insurance


ith the recent indices reporting a reduction in the decline of house prices, we are looking at the beginning of an upturn in the UK property market. Currently prices are at the same Price as in 2004. It is important to note the price reduction in property was not due to a lack of demand for property, it was due to the lack of available credit in the market. Buyers have never left the market they just didn’t have the same access to credit as they did previously. What they lacked were mortgage products. When you look into the definition one wonders why anyone would want one! The origins of the word mortgage come from the ancient French words mort (death), and gage(a pledge). Anyhow it was the lack of these things which caused the down fall in house prices and it is the supply which will cause the up lift. Interestingly recent auction prices have defied common sense while the perception was not to buy property. The results defy and mock this commonly held perception. It seems there was more going on beneath the surface, investors have been picking up property despite the current climate. Or perhaps investors have been picking up property because of the current climate. The Auction results have defied the down turn and continued to provide even stronger results. For example let’s look at the Allsops results.


Date of auction

Percentage sold

19 February 2009 17 December 2008 13 November 2008 30 November 2008

93% 85% 96% 91%

Lots for sale 428 472 401 595

These are excellent results in any market. The main purchasers were cash rich investors chasing repossessed property in these times of turbulence. This was done for two reasons: Firstly the rental yield after many years is now sufficient to provide a very strong return. Certainly far stronger than the bank and most would agree safer. Secondly it is a rarity these property prices will come again. Below illustrates a simple example of why the returns in purchasing even a plain vanilla property are excellent. This obviously has been done with assumptions to make the example to the point. However conversely given the current market, the


Asian Voice & Gujarat Samachar - 2009

price used is high, with some leg work and due diligence the actual price can be much lower. Let’s consider a normal 2 bedroom flat in Wembley going for £179,000. I would imagine the deal can easily be done at £170,000. The deposit required is £42,500 at 25% No stamp duty is payable as currently we Suresh Vagjiani are in a stamp duty holiday for any property below £175,000. The mortgage will be £127,500 which at the going rate of 5.5% makes a monthly payment of £584 pm, which comes to £7,015per annum. On the other side the rental will be £950pm. Let’s even include an agent’s fee of 6% and a service charge of £1,000. This will leave you with a surplus of £2,708. This gives a yield of 6.3% beating any bank returns. Note the above example does not even take into account any of the uplift in property price which most sane people will agree will happen if we take a medium to long term perspective. If we take a modest uplift of 3% over a 5 year period we are looking at growth rates of over 50% on the initial deposit of £42,500. The figures below illustrate the uplift side: Uplift


Year Estimated Price Return on amount invested Return in percentage

1 2 3 4 5 £175,100 £180,353 £185,764 £191,336 £197,077















Central London Agents have also reported an influx of foreign buyers. It is easy to see why. Foreign buyers have been looking specifically to purchase in Central London due to a combination of the weak pound and fallen property prices. Both of the factors combined give foreign buyers a discount of around 50%. This is truly a Property Sale for them or indeed any one with money overseas. Will the UK market ever be the same and carry on growing as it once did? There are sound reasons as to why UK property will increase. The demand for UK property has always been there due to the very fundamental reason of a growing

FBI population, according to the Kate Barker report which was published in 2004, and commissioned to address the lack of supply and responsiveness of housing in the UK: ‘Demand for housing is increasing over time, driven primarily by demographic trends and rising incomes. Yet in 2001 the construction of new houses in the UK fell to its lowest level since the Second World War. Over the ten years to 2002, output of new homes was 12 ½ per cent lower than for the previous ten years. This Review is concerned with the issues both of volatility and of long-run supply.’ If this was the case in 2004 it will clearly be an even greater problem currently with the recent decline in house building. I anticipate the UK housing market to be reported as rising within a 6 month period. This will spell the end of the down turn and property prices will start to rise again for the cycle to begin again. The areas which will experience the highest

finance, banking & insurance

growth will be London and the South East, according to Savills. “The recovery will be led by London and the South East, with a ripple effect filtering out from the capital. The assumption is for London and the South East to recover peak values by 2012, with peak values restored to all areas of the UK by 2018 at the latest.” Savills UK Residential Forecast, November 2008 Suresh Vagjiani is the MD of Sow & Reap who specialise in sourcing property in Central London and providing a turnkey solution for clients.

Asian Voice & Gujarat Samachar - 2009


finance, banking & insurance


here has been a significant change in the taxation of non-domiciled individuals and a new tax regime was introduced for “non-doms” from 6th April 2008 but overall the UK probably still has a favourable tax regime for non-dom individuals even when they have been in the UK for a number of years.


Under UK law, an individual has only one domicile which is more closely linked to the concept of a ‘permanent home’. A person is born with the domicile of origin which will generally be their father’s domicile. This can be changed when the individual is a minor by the father changing his domicile. Upon reaching the age of majority, an individual can acquire a domicile of ‘choice’. The parents of most Indians in this country would have been born outside the UK making both the children and their parents non-domiciled but it is important for them to ensure that they retain some connection with, or desire to return to, their specific domicile of origin which may be India, Kenya or wherever. This could include buying property in that country, marrying there, joining clubs there, making arrangements to be buried there, etc.

Previously, a non-domiciled individual with overseas income and capital gains would have elected to pay tax on foreign income and capital gains by reference to the amount brought into the UK – called the remittance basis but they had to make a claim to be taxed in this way. Up to 5th April 2008, it was only necessary to make a claim in respect of overseas investment income as overseas earnings and capital gains were automatically taxed on a remittance basis. From 6th April 2008, it is necessary to make a claim which will cover all overseas income and capital gains. From 6th April 2008, a special charge of £30,000 applies where an individual over the age of 18 years elects for the remittance basis and 1. he has been resident in the UK for seven of the preceding nine tax years; and 2. his unremitted overseas income and capital gains are £2,000 or more. The special charge does not apply to minors. If an individual does not elect for the remittance basis, he will be liable for UK tax on his worldwide income and capital gains. The diagram enables you to decide whether the £30,000 special charge applies or not in your individual circumstances if you are non-domiciled.


Asian Voice & Gujarat Samachar - 2009

Summary The taxation for non-doms has always been a complex area and has become even more complex in the new tax regime from 6th April 2008. The choice for whether to claim the remittance basis and pay the £30,000 or to pay tax on a worldwide basis is an annual decision. There are still significant benefits on Kaushik Desai a person having a nondomiciled tax status in the UK because if you make a significant foreign income or capital gain in a tax year, you could elect to pay the £30,000 and generally not have to pay any further tax in the UK provided you do not remit that foreign income or capital gain to the UK. There are also benefits under the UK/Indian double tax treaty for Inheritance tax (IHT) even where an individual with an Indian domicile is deemed domiciled in the UK for IHT - this occurs if an individual has been resident in the UK for 17 out of 20 years in which event liability to IHT would be on worldwide assets. The UK/India double tax treaty is so worded that it is possible to limit IHT to UK assets only – UK assets can be reduced by borrowings such that the net UK assets subject to IHT could be below the nil rate band of £325,000, thus avoiding IHT. India does not have estate duty at all. The whole issue of the taxation of non-domiciled individuals, including IHT is a complex area but for the tax-payer who is well advised and with appropriate tax planning, there are still significant benefits to be achieved in reducing the overall tax burden. We would strongly advise you to consult a professional adviser before you do any tax planning to rearrange your affairs or complete the tax return for the year ended 5th April 2009 which is the first tax return where the new rules apply. Kaushik Desai is a Principal in Chown Dewhurst LLP – Independent UK and International Tax Advisers. For more information call 020 7403 0787 or visit www.chowndewhurst.com


imed at raising money for the Treasury, Alistair Darling’s late April Budget will certainly be one that will hit a number of high earners in the years to


come. Although time is of the essence, there are a number of ways in which those affected can attempt to mitigate the additional tax liability that is likely to arise as a result of the changes announced in the Budget on 22 April 2009. In my review of the Budget, I will highlight a number of ways in which tax payers affected by the increase in tax rates can reorganise their financial affairs to minimise the effect of these changes as follows:Sacrificing salary By replacing salary with other benefits from employers such as workplace childcare vouchers or replacing an element of the salary with a low carbon emission car will go a long way towards avoiding the new 50% rate of tax for those earning in excess of £150,000 per annum. For earnings in excess of £100,000, this could also result in avoiding the loss of the personal allowance which would be reduced by £1 for every £2 of income over £100,000. Dividend payments Dividend payments will be taxed at 32.5% until 5 April 2010. Thereafter, the rate of tax will rise to 42.5%. Provided there are sufficient reserves in your company, owners of owner managed companies can bring forward the payment of dividends and take advantage of the lower rate of tax applicable to those dividends for higher rate tax payers. This form of distribution will avoid the taxing of income at 50% from 6 April 2010. Employee share option schemes Where employers provide share option schemes for employees, it is worthwhile to sacrifice the salary in exchange for shares as an eventual disposal of the shares will be charged at a capital gains tax rate of 18% instead of the top rate of income tax at 50%. Please note that there are business risks associated to investing in shares of this nature. Consider early retirement High earners in their 50s could consider the prospect of early retirement because their income will now be taxed at 50%. From April 2010, the minimum age at which tax payers can take a pension, including the tax free one off cash, will rise from 50 to 55. Therefore, if you are aged between 50 and 54 between now and April 2010, there will be added advantages in considering early retirement. Reducing the hours worked For individuals who earn £100,000 per annum, it is important to consider whether taking on additional work and income is likely to be beneficial to you. As a result of the personal allowance being removed for income earners in excess of £100,000, the marginal rate of income tax increases to in excess of 60% and therefore, the net take home pay is likely to reduce. For example, an increase in gross income by £2,000 in excess of £100,000, is likely to result in a reduction in take home pay of approximately £500. Consider joint incomes With effect from 6 April 2010, a married couple where either one of the spouses is the only earner and is earning in excess of £200,000 is likely to be approximate-

finance, banking & insurance

ly £7,500 worse off. However, where the income is split equally between the spouses with each earning approximately £100,000 per annum, they will be no better or worse off from 2011. Consider charitable donations For income earners earning in excess of £150,000 per annum, from April 2010, you will be able to claim £37.50 income tax relief for each £100 donated Kiran D Patel to a registered charity under gift aid. Consider incorporation For those who are self employed, now is the time to consider incorporating your business into a company as this will have significant tax savings in the future. With income tax rising up to 50% and small company corporation tax rates remaining at 21%, there will be significant savings in the future. Consider moving overseas Although this is a very expensive basis on which to mitigate high earner’s tax liabilities, a consideration would be to move out of the United Kingdom into a lower tax regime such as Switzerland or Singapore. Consider lifetime gifts With the low property and share values currently being recorded, higher rate tax payers could consider making lifetime gifts of investments to their children with little or no capital gains tax to pay. The values assigned to the gifts will also be lower if inheritance tax has to be paid in the future. New business equipment In the current tax year, businesses of any size will benefit from immediate tax relief on the first £50,000 per annum spent on most types of capital equipment. The expenditure over £50,000 in a year will also qualify for 40% first year allowance for 2009/2010 only. Therefore, in order to take advantage of the additional first year allowance in the current year, you may consider acquiring new equipment for your business and taking advantage of the additional first year allowance available. Please however, do note that financing arrangements need to be considered carefully as, inappropriate financing could result in a withering away of the tax advantages gained. The above are a few ways in which tax payers can consider mitigating the liability of additional taxes that have been introduced in Alistair Darling’s Budget. However, it is recommended that you seek competent professional advice before taking any action on the matters mentioned above or in any other aspect in relation to changes that have been introduced in the Budget. Kiran D Patel ACA is a partner at Weston Kay Chartered Accountants. For further advice he can be contacted on 020 7636 7493 or emailed at k.patel@westonkay.com Asian Voice & Gujarat Samachar - 2009


finance, banking & insurance






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Signity Signs & Trophies

*,4 7<2-.


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Signity Signs & Trophies congratulate all the winners for their achievements

1+'7+ )'11 ,46 5+6743'1 :/7/8 '3* (64).96+7 '664;






Asian Voice & Gujarat Samachar - 2009


;87= 7<2-.

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Supplier of Trophies for Asian Achievers Awards

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