FBI 18th June 2010

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June 2010

Finance Banking & Insurance

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Finance, Banking & Insurance FBI


Living within means t seems we are passing through a rough patch once again even before fully recovering from the US sub prime crisis and resultant economic slow down. We are disturbed by what is happening in the Euro Zone and equally by signals being given by our first peace time coalition government of Conservatives and Liberal Democrats that came to power after a historic election concluded on May 6. As evident from the speech of Her Majesty to mark the beginning of a new Parliament session, a drastic policy change is in the offing. We are also going to witness an emergency budget by Chancellor George Osborne on June 22 and obviously his proposals will have deep and far reaching effects on the economy. Let me piece together the events that led to the present ‘European sovereign debt crisis’. The Greek economy was one of the fastest growing in the euro zone during the 2000’s; from 2000 to 2007 it grew at an annual rate of 4.2 per cent as foreign capital flooded the country. A strong economy and falling bond yields allowed the government of Greece to run large structural deficits.. After the introduction of euro, Greece was initially able to borrow due to lower interest rates government bonds could command. As a result, government debt to GDP rose above 100 per cent.. Close on the heels of Greek fiasco, concerns were raised at the government deficit of Portugal, Italy, Ireland, Spain and UK too. All these countries have 10 to 15 per cent Deficit- GDP ratio. After weeks of delay and debate, European Union along with International Monetary Fund, a nearly $ 1 trillion financial backstop was approved to prevent Greece or other heavily indebted euro zone countries from defaulting. For some, this was a ham-fisted official response. Others dub it as ‘fundamental flaws’ in the euro project that was once perceived as rivaling the dollar as a global storehouse of value. Be that as it may, the strategies being worked out by the David Cameron government to salvage and reinvigorate the economy are closely watched not only by its counterparts in Europe but also by the world at large. After all, it is still sixth large economy of the world and has the resilience and capacity to storm the weather as it did many a time in the past. It is true that the country’s GDP has grown by a meager 0.2 per cent in the first quarter of 2010 and unemployment ratio jumped to 8 per cent in December- February 2010 quarter. The government deficit has risen to £ 800 billion or over 12 per cent to GDP. According to Tax Payers Alliance, the national debt continues to rise £ 5,169 a second. The question is- can we encounter the deficit problem by resorting to drastic cut in government spending? Another way to reduce the deficit is to raise


the taxation revenue. Will the government be able to do that? These are some questions which will test the wisdom of the decision makers. But there is a ray of hope. Latest statistics indicate that our manufacturing sector has continued to rebound at a rapid pace in May and export orders jumped. Estimates by the Office for National Statistics point to an annualized growth in manufacturing output of 7-8 per cent in the six months proceeding to March. Similarly, new export orders remained close to record levels for the survey. Another encouraging signal comes from foreign direct investment or FDI data. A Britain still remains a favourite with oversees investor companies, who created 20,000 jobs last year. Ernst and Young’s research suggests that the UK has managed to retain its leadership within Europe, largely at the expense of Ireland, Spain and Poland, other traditional destinations for FDI. So things are not as bad as some people fear. Britain or for that matter Europe can once again bounce back if they think out of box. Maire GeogheganQuinnn, the EU commissioner for research and innovation is right when she says, “Europe needs a change of mind-set”. George Osborne, the Chancellor too stresses on different growth model. He said in China recently: “if you’re looking to answer the big question for Britain, which is where the growth is going to come from in the next few years. I think exports and exports to an economy the size of China……He seems to be realistic when he says that the current Euro crisis could be solved only by living within means.What he has discovered now is practiced by Indians as one of the values in life. Friends, there is a way if there is will and I’m sure all of us wish to savor our time and celebrate the life. Incidentally this is decennial issue of FBI and I must congratulate L George, under whose proven leadership ABPL team worked hard to ensure that the milestone is rich in content and substance. CB Patel Publisher / Editor Asian Voice & Gujarat Samachar Asian Voice & Gujarat Samachar - 2010


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Finance, Banking & Insurance FBI

Cameron Clegg Coalition: Camelot or Crisis? s David Cameron stood before the door of 10 Downing Street for the first time as Prime Minister he made a speech echoing the famous words of John F Kennedy. Cameron said, "I want to build a more responsible society here in Britain, one where we don't just ask, 'What are my entitlements' but, 'What are my responsibilities'. One where we don't ask, 'What am I just owed' - but more, 'What can I give'. And a guide for that society that those that can, should - and those who can't we will always help." Not as eloquent as Kennedy – or even Obama, but you get the idea – the age of austerity means the age of smaller government and self-reliance. So what indeed does it mean for the markets? The Organisation for Economic Co-operation and Development (OECD) argues “A weak fiscal position and the risk of significant increases in bond yields make further fiscal consolidation essential. The fragile state of the economy should be weighed against the need to maintain credibility when deciding the initial


pace of consolidation, but a concrete and far-reaching consolidation plan needs to be announced upfront.” In economics credibility is all. Let’s look at the figures: Britain with an annual budget deficit of £156.1 billion for 2009-10, or 11% of GDP compares well to the United States, by comparison, the federal deficit is nearly $1.4 trillion, or 10% of GDP. Consumer price

inflation at 3.7% is above the official 2% target but not running away. Unemployment at 2.5m is 8% of the

workforce – again below the 10% for the Eurozone. The ratio of gross debt to gross domestic product was 68 per cent at the end of last year, compared to 73 per cent in Germany and 77 per cent in France and an average of 87 per cent since 1855. All of the above does not deny that public sector debt needs to be reduced, but it gives room for how Alpesh B Patel quickly. The economist Keynes famously said that the at times of depressed growth money should be injected into the economy and it did not matter even if it was buried in bottles and people paid to dig them up. Now, given the waste the Government is trying to cut, the logic seems to be that spending should continue – even waste! The problem is there is an injustice with waste and the stronger argument is that if spending cuts should be delayed then they should be reallocated to less wasteful areas. However, this is all moot. The Government will be cutting and cutting now. So will it lead to a double dip recession? The FTSE 100 stands today at about the same level as when Tony Blair became Prime Minister. So if you missed the dot-com boom (and bubble) all the great rises (and falls) during the last 13 years – don’t worry – you haven’t missed the boat – it’s circled back in time. But is the boat sinking? Let me tell you a secret. The British Prime Minister was correct to rely on a quote from the US President. The US market over the past 13 years has indeed outperformed the UK market – indeed it’s up 30% since July 1997! The point is the UK market shadows but underperforms the US market. In a whatever we do in Britain we are only re-arranging who gets what, but not necessarily able to make much of a difference to the overall economic outlook. We are left with ‘hope for the best, prepare or the worst.’ And another secret – if you add dividends then the FTSE 100 return is 70% over the same period! Whatever the Government does – go for dividend paying stocks regardless of whether the companies and the economy grows. Alpesh Patel is the founder of Praefinium Partners – a global Asset Management company and also the Consultant Editor of Financial Voice Asian Voice & Gujarat Samachar - 2010

7 06


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Finance, Banking & Insurance FBI

Beware the bursting Beijing Bubble ? n last year’s FBI magazine I wrote a piece warning of the dangers of Eurozone implosion, and that it might not be wise, as some had proclaimed, to jump ship from the UK across the Channel, despite the problems we had then and have in compounded form now. Fast forward to May 2010 and you will not have escaped seeing the headlines about Greek debt problems - followed closely by those of Portugal, Spain and Ireland- forcing the Euro into a downward spiral, whilst not forgetting our own massive debt headache too ! So what of China? Can its huge growth of the past few years be sustained in these times of extreme global uncertainty? Will it continue to be the March of the Giant Panda or a huge Beijing Bubble just waiting to burst ? What might be the impact of a Chinese currency revaluation? In the face of a barrage of U.S. criticism, Beijing has held the Yuan at about 6.83 to the US Dollar for nearly two years as the government tried to cushion its economy from the global financial crisis. Beijing let the currency climb 21% against the USD from 2005 to 2008, but some economists think it remains as much as 40% undervalued given the country's bulging current and capital account surpluses. In the past two years we have seen an appreciation of around 15% making its goods even cheaper on world markets, with the Dollar’s value appreciating in recent months. Some Chinese officials say their ultimate goal is an internationalized Yuan. A free-floating currency that could rival the Dollar, but they envisage this happening over the course of decades, not years, let alone months. Others say it is only a matter of time. Parallels with Japan in the 1980’s and it’s subsequent decline are bound to be drawn however imperfect. Like China today, Japan was a roaring economy with a large trade surplus, a buoyant property sector and a currency widely seen as undervalued. Much of Beijing's $600 billion stimulus has been spent building yet more plant and infrastructure so that China can keep itself as utilized as possible. Credit has exploded and China is rolling as much steel as the next eight producers combined. It is churning more cement than the rest of the world together. When we consider that vast areas have been torn down so that they can soak up stimulus by building it


again you get an idea of the internal combustion that could well appear if this need, for increased levels of utilization cannot be matched by increased stimulus in global demand. We should also consider the consequences of a US/Chino trade war if a Yuan revaluation is not forthcoming. President Obama has made it clear that Asia can no longer prosper by shipping goods Mike Paterson to Americans already heavily in debt. Any move by Beijing to liquidate its holdings of US Treasuries by way of retaliation could be neutralized, albeit as a last resort, by the introduction of capital controls. But this is a global affair and whilst cheap goods are welcome in times of austerity there comes a point when there is just not enough money left to go around. China can still be expected to provide the bulk of 2010 global oil demand but it will undoubtedly be reduced, and in times of falling oil stocks and rising prices this may be no bad thing. So as outlined above, albeit briefly given limited space available here, there is much to consider. The impact that China has made, and will continue to make, over the coming months and years is vast but must be set to change. A debt-ridden, belt-tightening global economy, as we must now envisage over the next 23 years at least, can only reduce demand for Chinese exports. Any revaluation in the Yuan will make their goods far less competitive thus exacerbating the problem for them still further. China will surely not be able to justify either its currency’s strength or its internal disparities much longer and will need to focus on building up demand within its own massive boundaries. That in itself presents far bigger uncertainties........ MSP Foreign Exchange Services For more information email mspfx@tiscali.co.uk Asian Voice & Gujarat Samachar - 2010


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Finance, Banking & Insurance FBI

Government Bonds – Will it yield long term? ast year I wrote about corporate bonds explaining why investors expect a higher yield from these securities by touching upon government bonds. A sentence to the effect of – ‘government bonds are low in risk and you are 100% guaranteed to get your money back’ has since come back to bite me. What a difference a year makes! For most of 2010, financial markets have fixated on this very asset class. Talk of sovereign debt crisis has filled the financial broadsheets and the airwaves. As a consequence of dealing with the aftermath of recession, countries like Greece, Spain, Portugal, Ireland and Italy have found themselves burdened by huge public debt, unsustainable budget deficits, poor growth prospects, and are on the verge of debt defaults. Worryingly, this unholy mess isn’t just constrained to Europe. UK and US (which are being overlooked) have levels of indebtedness on par with the Eurozone’s worst offenders but spending cuts are absent if not paltry at best.


What does this mean for bonds (Gilts) issued by the UK government? Are my holdings still safe? - I hear you ask. In order to know whether yields on Gilts are headed higher or lower, a decision needs to be made about whether the economy will face inflationary or deflationary pressures. Inflation is kryptonite for bonds. As investors demand higher yields to compensate for inflation eroding real returns, bond prices fall. The opposite effect holds true for deflation. In the short term, Gilt prices appear to be anchored but deflation risks mean that there may be an advantage to holding them. The Monetary Policy Committee’s Adam Posen recently warned of the risks of deflation in the UK, drawing financial parallels to Japan’s ‘lost decade’. Deflationary pressures are also apparent in spare capacity in manufacturing and labour markets while doomsayers also see a fall back into recession brought on by sovereign risk contagion. What about the long term? Can we look past the hung-parliament-turned-coalition government, a sizeable deficit of 11.5% of GDP, sovereign debt crisis, and

looming credit downgrades? Even if the fallout from Greece is contained, the UK faces a struggle. Austerity measures have to be put in place to get the monstrous deficit under control or else bond markets will demand higher yields as compensation for holding large amounts of public debt. The resulting fall in bond prices and eleAparna Jagjeevanram vated yields will only serve to make the UK’s debt harder to service; imagine having to repay your borrowings to a lender who keeps increasing the interest rate. It’s not going to be pretty! The government will have to borrow more to service higher interest costs (by issuing more Gilts)... and round and round in circles we go! So buying Gilts now and having to sell at a lower price in the above scenario would not be a winning investment. But let’s imagine that the new government successfully manages to sidestep the sovereign debt crisis contagion, controls the deficit through a regime of higher taxes and lower spending, what then? What challenges might Gilts face looking even further out? One key issue to consider is that of demographics. Whether we like to face up to our own mortality or not, we have to admit the country is getting older. According to the Office of National Statistics, by 2033, 23% of the population will be aged 65 and over compared to 18% aged 16 or younger. The number of people aged 85 and over is projected to account for about 5% of the total population. Rapidly ageing populations present a number of countries with the prospect of enormous future costs (which can currently only be guesstimated) that are not wholly recognised in current budget projections. Spending will likely outstrip savings, yields may well be in double digits – all this while an increasing amount of pension liabilities come due and there are decreasing savings to support the economy. Above target inflation may not be out of the question. If you needed to sell your gilt holding in this falling price (increasing yield) scenario, it would result in a capital loss. On the other hand, if the Gilt matured, the eroding nature of inflation (or even hyperinflation) may mean you lock in a negative real return. This long-term scenario is the definition of a lose-lose outcome for the government bond! Aparna Jagjeevanram is a Research Analyst at Seven Investment Management. For more information visit www.7im.co.uk Asian Voice & Gujarat Samachar - 2010


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Finance, Banking & Insurance FBI

Greece is the word for market volatility pril was one of the busiest trading months across all asset classes, as it seems sovereign debt problems in Europe are escalating. The actions of the ratings agencies have left the major markets in disarray, and until a confidence restoring resolution is announced, it is likely that markets will continue to operate under a cloud of uncertainty. Despite the heightening of the debt problem, many firms had positive results to report, so it is no wonder last week showed so much volatility. The week's standout issue was the decision by Standard and Poor's to cut Greece's sovereign debt to 'junk' status, and Portugal's sovereign debt status from A+ to A-. The bond markets plunged into a meltdown on the back of this and equity investors headed for the nearest exits, as risk aversion saw stock markets across Europe post their biggest one-day declines in weeks. Some commentators are now questioning Greece's ability even to fund its day-to-day requirements with the European Central Bank. It has also illustrated yet again the power of the ratings agencies. Should Moody's and Fitch follow Standard and Poor's and downgrade Greece to 'junk' status as well, then Greek bonds will be ineligible as collateral at the European Central Bank. It is likely that some form of debt restructuring may now be the only option for Greece, despite the IMF and the EU Commission insisting that this is out of the question. Such reasoning also puts increased pressure on sovereign debt bonds. Portugal's debt downgrade also throws into sharp focus how the problems of one country can spread very quickly once investors lose confidence. Portugal, along with other EU member states, carries the added burden of having to contribute to Greek bail-out funding, though at current market rates this would seem unlikely now as 10-year Portuguese bonds were spiking above 5.5% earlier in the week. Ireland's contribution to the Greek problem is set to be around â‚Ź500m. The US dollar has been one of the main beneficiaries of the eurozone battles, hitting 11-month highs against a basket of currencies. Federal Reserve chairman Ben Bernanke is also likely to remain upbeat on the US economy, which would be positive for the dollar, but there is also the likelihood that US rates could start to edge up before European rates over the next few months. The Fed also decided to maintain the status quo with respect to interest rates and statement tone. This saw stock markets and the euro stabilise to some degree, despite Standard and Poor's late downgrade of Spain on Wednesday afternoon. There has also been the small matter of the continuing earnings season, and the tone of that was positive. Numbers in both the US and Europe showed


strong growth and a good performance in the last quarter. Most notable were Lloyds Banking Group, the big pharma firms in the UK and Apple in the US. Between January and February, Irish exports of medical and pharmaceutical products rose by 18%, and in keeping with the growth motive, AstraZeneca in the UK has upped its profit target for Kunal Bharadia the full year. It posted a sharp rise in earnings in the first quarter fuelled by strong growth from key drugs and in emerging markets. Astra's key rival, GlaxoSmithKline, also cited strong emerging markets growth as it posted a jump in profits for the first quarter. Doug Suttles, British Petroleum's chief operating officer for exploration and production, agreed on Thursday with a US government estimate that the oil leak resulting from a rig explosion on 20 April could be pumping up to 5,000 barrels a day of crude into the Gulf of Mexico, five times more than previously thought. The oil company is leading the clean-up and is alleged to be spending more than $6m a day on what is being called the largest oil spill containment operation in history. BP shares were subject to a massive sell-off last week and have declined sharply since the explosion; they closed at the time of writing at £5.84. The commodities market as a whole has not been immune to the sovereign debt issues in Europe, but US crude rose on Thursday, channelling hope that the joint EU-IMF bailout of Greece may be sooner rather than later. The euro also gathered a little strength against the dollar, having hit a one-year low on Wednesday, making oil cheaper for traders of other currencies. US crude for June delivery rose to $85.10, after climbing almost 1% on Thursday 29th April 2010, driven by the euro-dollar bounce as well as the stabilising stock markets. The gains were boosted by the recent fall of 11,000 in US jobless claims – always an important statistic giving a positive signal that the economic rebound is lifting the labour market. This material is for general information only and is not intended to provide trading or investment advice. The content contained herein is based on information generally available to the public. Your attention is drawn to the important disclaimer (http://www.cmcmarkets.co.uk/legal/marketing-disclaimer). Asian Voice & Gujarat Samachar - 2010


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Finance, Banking & Insurance FBI

The Old Lady of Threadneedle Street es, the lady in question is none other than the Bank of England. Although generally sound, she was recently ruffled in the midst of global financial crisis, bank failures and government bailouts. Founded in 1694 by a Scotsman William Paterson and a group of London merchants to finance King William III’s war against France, the Bank of England is Britain’s central bank popularly known as the Old Lady of Threadneedle Street or simply the Old Lady; with the HQ in the financial heart of London (Threadneedle Street) opposite the Bank underground station. Its worth knowing that before the Bank, the business of banking was done by the goldsmiths who made extensive loans to merchants and the Crown. Since its inception the Bank went from strength to strength and soon became the largest and mos prestigious financial institutions in England, however, it was forbidden to lend the money to the monarch without the consent of parliament, so as to prevent him/her using the Bank as an alternative source of income. It grew in importance and prestige in the era of Industrial Revolution (18th and 19th centuries) and provided a firm basis for a stable currency which all trading nations need. It occupies a vast handsome looking building with a colonnaded front (pictured) resembling a fortress upholding the popular adage ‘as safe as the Bank of England’ used to describe things that are safe and sound.


Bank of England Guardian of the country’s financial system since its foundation, the Bank has been the banker to the other banks, a model which other countries would later develop. Its roles and functions have evolved and changed over its three hundred- year history. Unlike other banks it has many specialised functions. It manages the government’s borrowing, administers exchange control regulations and stores the national gold reserves. Moreover, it acts as lender of last resort,

advises the government on monetary matters, set the interest rates to control inflation, and issue banknotes produced at a state-of-the-art factory in Essex (incidentally, coins are issued by the Royal Mint, a separate organisation). In addition, the Bank maintains close link with other financial institutions of the country and with the central banks of other Dr Anil Mehta nations, and regularly issues the summary of business conditions in the UK. Perhaps its nickname the Old Lady aptly describes its role as the guardian of the country’s economy. The Bank of England was nationalised by the post-war Labour government. It’s managed by a Governor and Court of Directors appointed by the government. It’s closed to public (except on open days, check with the Bank), but you can visit its museum (MF, 10-5, admission free) housed on the same premises (entrance in Bartholomew Lane). It was opened in 1988, and traces Bank’s history from it’s foundation to its role today as the nation’s central bank. Interactive programmes and audio-visual displays explain the Bank’s many and varied functions. The museum though small and compact is very interesting. The intriguing story of England’s financial system is vividly displayed here (a real treat to everybody!). It displays the finest collection of old and new coins and notes, and outlines the latter’s development from simple hand-written receipts of the late 17th century to today’s technologically sophisticated banknotes. Other historical displays include bankrelated documents, photographs, and silver-plated decorative items. The most elegant part of the museum is the rotunda. Large show-cases around it focus on important themes or periods in the life of the Bank. In the centre of the rotunda are displays of Roman as well as modern gold bars – large and small, alongside pikes and muskets once used to defend the Bank. To one side is a heavily protected glass case containing a genuine 2 stone (13 kilo) gold bar worth about £299,470, which you are free to handle (I lifted it but with great difficulty!). Shame, I was not allowed to take it away as a souvenir! Dr. Mehta is a (retired) scientist turned travel writer specialising in history and heritage of Britain and India. He regularly contributes to history column of Asian Voice. He lives in Leeds.

Asian Voice & Gujarat Samachar - 2010


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Finance, Banking & Insurance FBI

Achieving Remarkable Success n September 2009 Partha Banajee attended a forex course from Knowledge to Action. At that point he had lost AUD15,000 (£9,150) through forex trading, but by applying his training was able to change his fortunes and grow his trading account from AUD10,000 (£6,100) to AUD22,000 (£13,420) at time of writing. It's an inspiring story that shows how much one person can achieve. We caught up with Partha to find out more about his remarkable success.


Partha, what difference has forex trading made to your life? It is a dream come true. I can spend far more time at home with my wife – she likes the new lifestyle as much as I do. When did you start trading? Before my Knowledge to Action course I had tried intra-day trading on forex, and in equities. To be honest I had got nowhere in two and a half years. Did you have a job at this point? Yes, I am an engineer by profession and later moved into IT software. I worked at the software company SAP for 11 years. Why did you go on a course? I had attended a few seminars from other training companies before, and bought some training DVDs. The Knowledge to Action course was the first one I signed up for and the strategies and live trading exercises were absolutely vital. Do you find trading stressful? If you understand the market and are in synch with it, trading is not at all stressful. If you do not understand it, then it is very stressful. It helped me that my course emphasised the importance of psychology. What sort of hours are you spending at the screen? I spend just one or two hours a day choosing trades then I relax and just keep an eye on my positions. Why do you think most people don't succeed at trading? I think there are only two reasons:

They don't have an effective strategy or a defined goal They do have a strategy, but they're not following it. What would you say to someone just starting out? I would say do the demo [paper] trades for each strategy as many times as you feel you need to. If you are clicking and taking the trades then go for it! Do you talk with others about what you do and share your thoughts? I do not discuss specific trades with others – you often need to act quickly - but generally, yes, I discuss what I am doing with my wife and with two friends I met on my course. What about the future? Will you stay with trading or retire when you have enough money? I love trading, it is my passion, and that is more important than the money. Six months ago I was a novice trader, my goal was to go professional – now that I have done that I just want to continue. Headline: Could Forex change your life forever? You might think that Forex trading is just for sharp-suited slickers in big corporations, but more and more ordinary people are using it to make money and change their lives for the better. You can start trading while keeping your job, and if you're successful enough to do it full time you can enjoy an enviable lifestyle, working from home. So what is forex? Let's suppose you buy units of an Asian currency with pounds in the UK, make your trip, then buy pounds back with any Asian money you still have on your return. In essence you have done a foreign exchange trade. Whether you've made or lost money will simply depend on how the exchange rate has changed while you have been away – and the commission you paid. With forex trading, you are buying and selling other currencies, not for use abroad, but solely to make money. What are the advantages? Potentially, forex trading can offer huge rewards, from just a few hours trading a day. It's also highly tax efficient. Most novice traders use spread betting to trade which means your money is never technically invested in the market, and you don't pay tax on returns. Asian Voice & Gujarat Samachar - 2010


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FBI Finance, Banking & Insurance Getting started in trading At a minimum you need a computer and internet connection, but you may prefer to opt for training. You could buy books or DVDs, or go on a course run by a professional training company. Be aware that approaches vary and you should understand exactly what you are getting before you sign up. First, here are some tips: Manage the risk It is vital to understand and limit how much you stand to lose on each trade. Have a goal Many people lack a clearly defined, and realistic goal that will help keep them motivated and focussed. Stick to a strategy You could spend the rest of your life learning strategies without ever placing a trade. What you need is one strategy that works – and the discipline to stick to it. Trade often Spend an hour a day finding hot trades, and back them. Network with others Talk about trading with others. A course can give you a network of peers, and a professional mentor. What would a course teach you? Depending on the course, you could learn how to: Set up your trading and investment accounts. Use specialist trading software.

Analyse charts and recognise price patterns. Understand what influences the price of a currency. Manage both your own psychology and that of the market Apply proven trading strategies. How do I find out more? Some training firms offer a free seminar which can give you a better view of what's involved. To compile this article we spoke to Knowledge to Action, based in Chelsea, who are now Europe's leading training company in their field. Visit www.freefxseminar.co.uk for more details. Max Idzik has been a Trader Coach for 3 years with Knowledge to Action’s Live Trading Floor .

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Asian Voice & Gujarat Samachar - 2010

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Sec 2-19_A4 Temp 07/06/2010 12:10 Page 19

Finance, Banking & Insurance FBI

Is this the right time for gold ? ou probably think gold is in a bubble. After all, it hit new highs in dollars, pounds and euros over the last few weeks – and has pretty much quintupled since its lows of 2001. What's more, everyone from Germany to China is still keen for it. Last month, the FT reported that the Germans have been snapping up coins and gold bars faster than they did even in the aftermath of the Lehman Brothers' collapse. In the UAE, you can buy bars direct from a vending machine. At Harrods, you can pick up a variety of gold coins over the counter. But look at the actual price of gold and it is hard to see real evidence of a bubble. Gold may have hit new highs in nominal terms, but it hasn't come close to hitting its old highs in real terms. Adjust the 1980 high of $850 for US inflation and you get a price of around $2,400 – a level only the most bullish are predicting even now. Then look to the last few years. The bears would have you believe that the gold price has somehow gone "parabolic". But, in fact, the price in US dollars has only risen around 25% in the last two years. Compare that with, say, shares in Rockhopper Exploration, the lucky owner of the prospects where oil was struck off the Falklands recently. Its shares started the month at around 40p and have since more than quadrupled. But no-one is shouting "bubble!". Far from it; instead, they are all claiming the company has seen a transformational event, which makes its shares worth more than they are even now (which arguably they are). But hasn't there been a transformational global event that has changed the case for gold, too? Back when gold's bull run kicked off, there were precious few gold bugs and we tended to make the case for the metal based on likely demand for "bling" from the new middle classes of emerging markets. We only mentioned in passing the fast rising US and EW countries national debt and the nagging fear that fiat currencies might not be all they were cracked up to be. Today, however, gold has reverted to its historical role as the global currency of the last resort. You no longer buy it because you think the Chinese and Russians are likely to increase their consumption of gold-plated mobile phones. You buy it because you think there is a chance that governments, caught in a debt trap from which there is no honourable escape, will eventually think they have no choice but to print their way out of it. And the risk of hyperinflation is a transformational event for gold, it being the only global currency that can't be printed on the whim of a cen-


tral bank. We have also identified other events and reasons below which point towards a long, sustainable growth in gold prices. Last month’s IMF announcement of its plan to sell 191.3 tonnes of bullion on the open market under the Central Bank Gold Agreement put pressure on gold prices.This negative price response seems to be due to the perceived lack of demand from official sectors to purchase the IMF balance – last year only 150 tonnes of a planned sale of 400 tonnes was sold. Given the publicity that surrounded the Indian central bank’s purchase of gold, reluctance from other large central banks to take the IMF balance may be as a result of an unwillingness to disclose their views and subsequent moves relating to the dollar or gold. Instead they may be pursuing a strategy of steady accumulation over time in the secondary market. Actual and anticipated monetary tightening in China has also coincided with gold price declines this year. For example, on 12 January 2010 and 12 February 2010, the Chinese central bank announced an increase in bank reserve requirements in response to the rapid increase in bank lending.The People's Bank of China said it will raise the reserverequirement ratio for banks by half a percentage point from Feb. 25, the second increase this year. This will make it standard for major banks to keep 16.5pc of their deposits on reserve, though rates can vary by bank. Further tightening may trigger similar declines. Currently, there is the possibility that the Australian government may scrap the state-based royalty taxes that apply to mining projects and replace them with a uniform national resource rent tax in order to raise more revenue.Should adoption of this tax discourage marginal gold production in the world’s third largest gold producer, the longer-term impact of the tax may be positive for gold prices. In theory, the longer-term impact of President Obama's bank proposals on gold may be negative. Passage of his proposed legislation could curtail the volume of commodity trading, which on balance is likely to be negative for gold. The result of January’s US Federal Reserve Open Market Committee meeting is more bullish than bearish for bullion going forward.Although the outlook for inflation is stable according to the Federal Reserve’s statement, we believe the reaffirmation by the Federal Reserve that rates are likely to remain low for an extended period should be supportive of gold prices in the long term. Recent euro weakness is the result of fiscal issues in Greece and other peripherals rather than a longerterm fundamental bearish issue, therefore this is not Asian Voice & Gujarat Samachar - 2010


Sec 2-19_A4 Temp 07/06/2010 12:11 Page 20

FBI Finance, Banking & Insurance likely to be negative for gold in the longer-term. Gold’s physical market – jewellery fabrication – appears to have been stronger in the early part of this year, suggesting acceptance of higher prices.According to the World Gold Council’s latest update, global demand for jewellery dropped by 20pc in 2009, the biggest annual decline on record, while survey data was the weakest in over 20 years at less than 1,700 tonnes – nearly 50pc lower than 2005 – but it appears that this may now be reversing. "There is simply more global debt than can be comfortably serviced," says Tim Price of PFP Wealth Management. And official public-debt-to-GDP figures omit liabilities such as pension and health benefits, for which no money has been set aside. Factor these in and Britain's debt pile, for instance, rockets to more than 300% of GDP. "The temptation to inflate away" debt will become "irresistible," says Morgan Stanley. Meanwhile, gold production peaked a decade ago, central banks are buying gold again, and Chinese demand is expected to double over the next decade. What's more, the gold market is small and thinly traded – long-term bull markets usually end in "parabolic blow-offs", notes Rosenberg. So it's easy to see the yellow metal spiking much higher over the next few years. The price of the precious metal rose 277 per cent during the past decade, with investors particularly attracted to gold during the recession as they sought a safe haven for their money. Overall, gold, silver and platinum increased in value by 242 per cent between December 1999 and December 2009, the equivalent of an average annual return of 13.1 per cent. It means precious metals outpaced inflation which has increased by 30 per cent during the decade or by an average 2.7 per cent a year. Despite the slump in the housing market in the past two years, property has produced the second highest return after previous metals during the past decade of 187 per cent or 11.1 per cent a year, according to the findings by Halifax. Shares saw an average return of just 18 per cent over the decade, while cash returned 57 per cent. It comes despite savers seeing their rates of return plummet to record lows after the Bank of England cut interest rates to just 0.5 per cent a year ago. Suren Thiru, an economist at Halifax, said: "Precious metals were the top performing asset during the noughties, largely reflecting increased demand from China and India for industrial uses and jewellery." He said that the prospects for prices of investments such as gold and property will be driven in the year to come by the extent and pace with which UK and global economic conditions improve."Monetary and fiscal policy decisions, the outcome of the General Election and the strength of demand from China and


Asian Voice & Gujarat Samachar - 2010

India are all likely to be important determinants in 2010," he said. Modern bullion coins allow investors to own investment grade gold (between 0.90 and 0.9999 fineness) legal tender coins at a small premium to the spot price of gold as quoted on the markets. The value of bullion coins and bars is determined almost solely by the price of gold and thus follows the bullion price. Larger bars are not generally taken delivery of due to the cost of insured delivery and the security implications of having very large amounts of bullion outside the chain of integrity (say in a private residence). A London Good Delivery Bar weighs 400 troy ounces and costs over $400,000, £270,000 and €300,000 (prices as of 20/11/09) and is prohibitive in terms of cost and thus big bars are normally the preserve of large companies, institutions and central banks. Buying investment grade gold bullion bars and coins for investment is stamp duty free and tax free (VAT exempt) in the UK and EU due to the EU Gold Directive of 2000. For further details, please contact tel: 020 7283 7752 Email: info@goldinvestments.co.uk website: goldinvestments.co.uk Live Gold prices available on our website to buy



વી.અે.ટી. વવના FOR SALE ગોલ્ડ ઇન્વેસ્ટમેન્ડ સોનાની લગડીઅો અને સોનાના વસક્કાઅો (મેપલ, સોવરીન અને ક્રુગરેન્ડ) વેચે છે. અાપની જર્ૂરીયાત માટે અાજેજ સંપકક સાધો.

GOLD BARS and gold bullion coins (Krugerrands, Maples, Sovereigns & Others) City Office: 88 Gracechurch Street, London EC3V 0DN Tel: 020-7283 7752/4080 Fax: 020-7283 7754 Email: info@goldinvestments.co.uk www.goldinvestments.co.uk

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Finance, Banking & Insurance FBI

Foundation - A new concept in wealth protection ollowing approval from the UK Privy Council, The Foundations (Jersey) Law 2009 came into force on 17th July 2009. The foundation (the “Foundation”) is a new type of entity offered by Jersey’s finance industry. It has features similar to both companies and trusts. The Foundation is more familiar to inhabitants of civil law jurisdiction than those of common law jurisdiction.


remuneration. l A beneficiary has no rights in the assets of the Foundation but has a right to approach the Royal Court if he or she has been denied the benefit from the Foundation. The Foundation is not obliged to provide information on the Foundation to any person unless required by the Foundation’s Law, an order of the court or by the charter or regulations of the Foundation.

The main features of the Jersey Foundation are as follows:

What are the differences between the Foundation and the trust? The main differences are: l The Foundation must be incorporated and its charter will become a public document.

l The Foundation is a legal entity without owners which has all of the powers of a natural person. The person who requests for the Foundation to be incorporated is the founder. The Foundation can hold assets in its own name although it may not directly acquire, hold or dispose of immovable property in Jersey or engage in commercial trading unless it is incidental to the objects of the Foundation. l The Foundation has to have a charter, which is open to public inspection, and regulations, which are private. It is managed by a council of persons, who can be either corporate or natural. One member of the council must be a `qualified person` and who has additional obligations as a person regulated in Jersey by the Jersey Financial Services Commission. l The members of the council must conduct the Foundation in accordance with its charter, its regulations and the Foundation’s Law. The duties of the council members are to act honestly and in good faith, and to exercise the care due diligence and skill of a reasonable person. The Foundations Law provides that nothing in the terms of the charter or regulations will relieve a council member from liability for that person’s fraud, wilful misconduct or gross negligence. l The council members do not owe any fiduciary duty to any beneficiary of the Foundation. l A particular feature of the Foundation is the requirement for the regulations to provide for the appointment of a guardian to ensure that the council carries out its functions. The guardian may require the council to account to the guardian for the way that it administered the Foundation’s assets or acted to further its objects. The guardian can have power to approve or disapprove any specified actions of the council. If he or she considers that it is in the best interests of the Foundation to do so, he or she can sanction or authorise action which is not permitted by the charter or regulations. The regulations must provide for the appointment and retirement of a guardian and for his or her

l There is no mechanism for registering a trust whose existence and terms can remain confidential. l The Foundation is a separate legal entity, unlike a trust, where the rights and obligations are vested in the trustees. l The trust must have beneficiaries who have rights to enable them to enforce the trust against the trustees. l The beneficiaries of the Foundation have very limited rights and it is the role of the guardian to ensure that the council is administering the Foundation in accordance with its objects. l The founder of the trust has the rights given to him or her by the charter and the regulations which can be extensive, but he or she need not provide any funds to the foundation which comes into existence on incorporation. l The settlor of the trust can reserve certain rights to himself or herself or grant them to another in the trust instrument, but the initial trust assets must be given to the trustees to establish the trust. The fact that the Foundation exhibits characteristics of both a company and a trust makes it interesting entity for taxation purposes. In Jersey, the Comptroller of Income Tax has confirmed that Jersey foundations will be charged to income tax at the 0% rate of tax. Therefore, the Foundation is more desirable for UK domiciled individuals than the better known and more traditional trust. The three main UK taxes which are likely to be relevant are inheritance tax, capital gains tax and income tax. For more information please contact Dilip Unarket or Vasanti Patel or Hirji Patel of John Cumming Ross Limited on 0208 864 6689, email Dilip.Unarket@jcp.uk.com, Vasanti.Patel@jcp.uk.com,orHirji.Patel@jcp.uk.com

Asian Voice & Gujarat Samachar - 2010


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Sec 20-44_A4 Temp 07/06/2010 11:23 Page 27

Finance, Banking & Insurance FBI

Insurance Claims – Beware of the Pitfalls! ow that the dust has settled as far as the economy goes and there is a glimmer of confidence in various sectors of the industry. As far as the Insurance industry is concerned, the ripple effect has yet to reach its peak. With the adverse climate effects and major disasters insurance companies are reviewing the long-term impact on the insurance industry in relation to how claims are going to be paid and the levels of cover provided under the current Commercial Policies. In addition, the word ‘INCREASE’ has become a common word in every field of the Insurance Industry.


l Increase in fraudulent claims l Increase in e-commerce and technological claims l Increase in reinstatement costs l Increase in risk requirements l Increase in premiums l Increase in legislation and regulations It is imperative that every policy is reviewed to ensure that adequate cover is in place for potential eventualities. More and more claims are being rejected by insurers on various grounds. Particularly common areas are: l Under-insurance l Non-disclosure l Cover excluded

the policy is not PREMIUM driven but COVER driven. It is essential to review cover under the policy and disclose to the Broker the exact nature of the one’s business activities. One of the most common areas experienced by businesses is under-insurance. Recently due to the adverse heavy snow insurers have been Mukesh Mamtora very pernickety in settling roof damage claims purely because the sums insured are not ADEQUATE but have been understated.

EXAMPLE Roof Damage due to heavy snow/rain February 2010 ABC Ltd has a 30% flat roof area and had severe weather damage. After great negotiations the claim was accepted by the insurers, on the grounds that the client was able to provide proof of maintenance (repairs to the roof that were just over a year old). Following costs were agreed: Roof Repairs Electrical Repairs (CCTV/Alarm) Internal Decoration Sundries (Clearance/Skip etc) Total (excluding VAT)

£3,650 £1,900 £1,800 £1,200 £8,550

Because of the under-insurance identified, payment was reduced as follows: Sums insured £316,000 _________________X £8,550 (Claim) = £6,432 Actual reinstatement costs £420,000 Shortfall of £2,118

The onus is now shifting from the insurer to the client in providing details of what has to be disclosed. In line with this the Broker has an enormous responsibility to interrogate the client in matters that are likely to be requested by Underwriters for material facts. Hence the need for a Broker is now more than ever before to hold the client’s hand in ensuring that

Therefore, from the above example it clearly shows that the onus lies on the client, not the BROKER nor the INSURER. No better time than NOW to ensure that the premiums you pay do reflect ‘value for money’ and sufficient cover for all your insurance policies. No better time than NOW to let/appoint an Independent Broker to take all the worries of the above ‘pitfalls’. Mukesh Mamtora is the Director, Forum Insurance. For more information please visit www.foruminsurance.com

"Love All Serve All" Asian Voice & Gujarat Samachar - 2010


Sec 20-44_A4 Temp 07/06/2010 11:23 Page 28

Sec 20-44_A4 Temp 07/06/2010 11:27 Page 29

Finance, Banking & Insurance FBI

The Roller Coaster Gold Ride old recently hit an all time record high of $1249.3 on almost panic level buying by institutional and retail investors. Great news for those who have been long term investors and holders of gold, but these elevated levels disappeared almost as quickly as they were reached. Many retail investors are now accessing the gold market via the medium of spread betting and CFDs, as they allow any retail investor access to invest in gold and other commodities in a manner that they have never had access to previously. Low margins, the ability to speculate from as little as £1 a point, easy access via the internet, and a wider awareness via widespread media coverage has made trading in commodities and currencies via spread bets hugely popular of late. So what caused the recent surge and subsequent plunge in the price of gold and what should investors have been doing to make the most of the moves? Where does gold go from here? These are the type of questions that I am asked all the time by clients and here is my take on the current situation.


Traditionally gold has been the safe haven investors flocked to in times of crisis. This was certainly part of the reason which saw gold surge past its previous record high of $1226 set in December 2009. Global investors were rattled by the exploding sovereign crisis in Europe, particularly Greece, the ‘Flash Crash’ of May 6th and rising fears of a rise in inflation in the global economy. Add to that the target to take out the previous high by speculators jumping on the band wagon, and short covering from investors betting against a rise in the price of gold and the conditions were ripe for the $100 surge in just three weeks. Then just as quick as the panic set in, it started to abate. But something unusual also started happen. As global

stock markets continued to plunge in recent days, gold has also been hit hard – dropping nearly $70 in just 5 days. Normally in times of stock market slumps investors flock to gold. But the events of this week have been abnormal. Global institutions have been removing all forms of risk form their portfolios as more financial panic set in. Some have also used Raj Patel this as an excuse to take profits, as the prospect of dipping to the $1,150 area has now been opened. Also as margin calls were being made around the world on losing equity and currency positions, institutions have been forced to dump profitable gold positions to free up cash. For now, strong buying has appeared around the $1,175 level as traders again eye the new $1,250 resistance area. Another factor subduing the gold price is reduced risk of inflation. The minutes from the Federal Open market Committee's meeting at the end of April revealed that the Fed believes long term inflation expectations are stable and that "core inflation would remain subdued through 2012." This news along with data from the Labor Department that the consumer price index fell 0.1% in April took the inflation fear off the table, for now. So that goes someway to explain what was been moving gold in recent weeks. But what should you as an individual have been doing to try to profit from these gold movements? The great thing about spread betting on gold with a company like Spread Co is that you can invest as little as £80 in a trade. As our minimum stake is £1 per point and an ‘Initial Margin Requirement’ of 80 points is required, you can place a £1 a point bet with an 80 point ‘stop loss’. When I say per point, gold trades per 0.1 movement, so a $1 movement in gold would be the equivalent of a 10 point move. Buying $1 a point at $1200 and selling it at $1240 would have netted 400 points or £400 profit. Where would have been a good entry point? $1150 where there was historical support/resistance, and also at $1200 – once it got above $1200 it found good support and took off again from there. The $1175 level and also the $1150 level now look to be good buying opportunities. Asian Voice & Gujarat Samachar - 2010


Sec 20-44_A4 Temp 07/06/2010 11:33 Page 30

Sec 20-44_A4 Temp 07/06/2010 11:34 Page 31

Finance, Banking & Insurance FBI It does look like gold will continue to go higher. Prior to breaking the $1033 major resistance with a follow through to over $1200, gold broke the $720 mark which was previously another major resistance. From $720 gold subsequently rallied to $1033, a move of over 40%. Gold made another 40% move when it surged through the $500 barrier to $720.One may infer from these observations that we are possibly going to get another 40% move. Considering the breakage of the $1033 resistance area, this gives us a potential gold price for the present move of $1446.20. This is a rough estimate but it would not be unreasonable to expect gold prices to move up towards $1400/ounce during this major rally. And of course, don’t forget the impact the Indian wedding season has on gold, as the demand from India and indeed other parts of Asia soar in the September-December period. A 2008 JP Morgan report showed that since 2002, the price of gold has increased 10 per cent during the wedding season. Apart from weddings, Indian jewellers also buy the gold for the Hindu festival of Diwali, or the Festival of Lights. In the short term, look for buying opportunities around the $1150 - $1175 area, keep a relatively tight stop loss and look maybe to close some of the position should we head towards the $1250 resistance again. Better to take some cash off the table than to see it all

slide away again should the resistance hold. Raj Patel is the Head Trader at Spread Betting and CFD company Spread Co. The views above are those of Raj Patel and not of Spread Co. Please remember that spread betting and CFD trading carry a high degree of risk to your capital and it is possible to lose more than your initial deposit. Please ensure you fully understand the risks involved and seek independent advice if necessary. Spread Co is based in Northwood Hills, and are authorised and regulated by the Financial Services Authority.

Asian Voice & Gujarat Samachar - 2010


Sec 20-44_A4 Temp 07/06/2010 11:30 Page 32

FBI Finance, Banking & Insurance

The Property Market - Then and now THEN The rise in property prices were fuelled by abundant credit. The paperwork required for obtaining loans was little or nonexistent. Even at 95% loans were approved without any paper work apart from basic identification. Why was this case? There were two main reasons. Firstly, property prices were rising, so that the Loan to Value offered initially would be decreasing with time. Secondly, the lenders had little or no concern regarding the quality of their loans since, once issued, the loan would be sold on. This inevitably means that they will stop caring who takes the loan. The long term responsibility of issuing the loan is divorced from the issue of the loan. Selling mortgages is highly profitable which explains why many small mortgage companies entered this lucrative market. However, these companies are no longer in business as they were unable to survive in the current regulatory environment due to the many changes implemented by the FSA. It is important to understand that the prices have not dropped because the demand for houses dropped. Prices had dropped because there was a lack of credit in the market. Demand for property will not be satisfied. The Barker Report commissioned by the Government and published the 17th March 2004 confirms this: “I do not believe that continuing at the current rate of house building is a realistic option, unless we are prepared to accept increasing problems of homelessness, affordability and social division, decline in standards of public service delivery and increasing the costs of doing business in the UK – hampering our economic success�

The above was stated in a report when the level of house building was 160,000 units per annum. Currently, the level is less than 70,000. The Government has house building targets which are measured by house building figures. House building figures are a leading indicator for monitoring the 2007 Comprehensive Spending Review (CSR07) target to increase the number of net additional homes provided per annum to 240,000 by 2016. Progress against the above target is published on an annual basis; the figures for 2008-09 show that the number of net additional homes reached 166,570 dwellings. New build completions fell by 20 per cent between


Asian Voice & Gujarat Samachar - 2010

2007-08 and 2008-09, and completions in financial year 2009-10 were 15 per cent lower than in financial year 2008-09. Thus, it is likely that the number of net additional homes will fall between 2008-09 and 2009-10. The above, in short, means that property supply is unlikely to meet demand. Therefore the price rise of property is assured for the Suresh Vagjiani future. Money is not fixed. Its supply can be turned on and off as opposed to land supply which is finite.

NOW The main question now is whether the level of credit which helped fuel property prices previously will again return. The credit market has changed permanently, in my opinion. Money laundering has become a priority and every accountant, solicitor and mortgage broker has been told to put on the cap of Inland Revenue tax collector and a spot the terroisist officer. This means that it is currently becoming more difficult to simply pile undeclared income from a business staright into a propery. Current legislation has been enacted to rid cash from society and we are heading into cash less society which means everything can be tagged and traced. Currently there is much talk on the new CGT stumping the BTL market and there are numerous press articles fuelling this subject. However, when the CGT dropped to 18%, was there a rush to purchase property? Not to say that this does not have an effect. Of course it does especially for deals in the pipeline. This factor did not spear head investors to go into the buy to let market. When the drop was announced it merely enhanced the investment for BTL investors. The main point CGT is only applicable at the point of sale. So why would you sell and pay the tax, especially if you are a high rate payer when you can simply refinance currently at 80% LTV and keep hold of the property for generations to come? As we head into the Olympics, property prices will rise in London. And the long term future of UK property is assured due to fundamental demand increasing and the restrict supply to meet so rest assured it is now a good time to invest. Suresh Vagjiani is the MD of Sow & Reap who specialise in sourcing property in Central London and Providing a turnkey solution for clients.

Millennium Suite-FBI_A4 Temp 07/06/2010 16:09 Page 1

Millennium Banqueting

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Call now for booking Contact: Tapasvi Mehta

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Sec 21-48_A4 Temp 07/06/2010 14:49 Page 33

Finance, Banking & Insurance FBI

'This degree is validated and awarded by the University of Wales, UK. For further details regarding the University and it's validation services, please log on to www.wales. ac.uk/validation or e-mail validation@wales.ac.uk

www.londonsam.org.uk London School of Accountancy & Management 12-20 Camomile Street, London EC3A 7PT T: 44(020) 7623 8777 F: 44(020) 7623 8778 training@londonsam.org.uk London SAM is approved by the UK Border Agency as a Tuition provider Tier 4 Licence No: J73HAWW44



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Asian Voice & Gujarat Samachar - 2010


Sec 20-44_A4 Temp 07/06/2010 11:35 Page 34

FBI Finance, Banking & Insurance

2 Good 2 B True – A Real Amnesty! irstly, it should be said that the taxman rarely, if ever, gives something for nothing.There are various expressions in the English language like “Never look a gift horse in the mouth”, “Manna from Heaven” or “Too good to be true”. All of these expressions accurately describe probably the most significant giveaway in recent tax history by H M Revenue & Customs. When did the taxman last agree that you would not have to pay tax for some ten years? When did you ever come across the taxman saying that you could disclose whatever tax matters you wanted and he would turn a blind eye to any possible criminal recourse without regard to how many millions might be involved? When did the taxman last promise you that you could tell him about any tax indiscretions for earlier years and he would allow you to submit figures with a bare minimum of work on the part of your accountant? If you can relate to these questions and if you, or your husband, or your wife, or your children, or your grandchildren, or other family and friends would be interested in a ten year tax Sean Wakeman amnesty then read on. This article does, of course, refer to the Liechtenstein Disclosure Facility, otherwise known in professional circles as the LDF. Firstly, let us dispel the myths. To take advantage of the LDF you do not need to have had historically a bank account or other investments in the tiny principality of Liechtenstein. Equally you do not need to have ever had any complicated or sophisticated tax structure there in order to benefit from the LDF. Having such accounts or structures provides the most obvious route to take advantage of the LDF but it is not the only route. In brief, the LDF offers a means to make a disclosure to the taxman of UK tax irregularities where monies are (or have been) held in bank accounts anywhere in the world, or where overseas property (which may itself generate undeclared income) has been bought using undeclared monies, or where offshore companies may have been used to evade tax. The only condition is that any bank accounts held personally or by the offshore companies should have been opened outside the UK (i.e. by not



Asian Voice & Gujarat Samachar - 2010

visiting a UK branch of the overseas bank). Individuals or companies who wish to avail themselves of the LDF to declare (and perhaps repatriate) monies held overseas, will first need to acquire “relevant property” in Liechtenstein. This will usually mean opening a bank account in Liechtenstein and moving some or all of the monies Anand Unalkat held overseas to Liechtenstein, or migrating an existing offshore or overseas trust to Liechtenstein. Taking such a step will enable individuals or companies to use the disclosure facility in Liechtenstein in order to put right their tax affairs. The advantages of the LDF include a ten rather than 20 year maximum disclosure period (HMRC is allowed to assess up to 20 years where deliberate behaviour is involved), a flat rate 10% penalty of the tax unpaid (penalties for deliberate behaviour can be up to 100% in most cases), 100% guaranteed immunity from prosecution for tax offences and a disclosure mechanism which is no more onerous than the last domestic disclosure facility (the New Disclosure Opportunity which closed on 4 January 2010). The only exemptions to being able to use this facility relate to anybody already under a criminal investigation by HMRC, typically but not exclusively an investigation under HMRC’s Code of Practice 9 (“cases of suspected serious fraud”).

Sec 20-44_A4 Temp 07/06/2010 11:36 Page 35

Finance, Banking & Insurance FBI an individual who has previously been investigated and signed false certificates of full disclosure or false stateThe tax authorities are interested to ensure that UK resident and domiciled ments of assets and liabilities, who individuals are declaring their worldwide income or capital gains including now wishes to correct his earlier statebank interest arising on offshore accounts as well as checking the source of ments can also benefit but will not get the sums deposited. In the case of UK resident non-domiciled individuals, the 10% fixed rate penalty. Such false they want to ensure that any income or capital gains remitted to the UK has statements have historically been treatbeen declared and taxed. ed very seriously by HMRC and resulted in criminal prosecutions. Q. What are the key dates? Horwath Clark Whitehill LLP will be able to assist you with any tax dis1 September 2009: date when registration for LDF opened. closure as a result of our extensive experience in all aspects of tax investi31 March 2015: date by which disclosure must be made and duties paid. gations including sensitive and sometimes complex tax disclosures. This is Q. What taxes are covered by the LDF? a specialist area where careful and expert handling of a disclosure is essenn Income Tax n Pay As You Earn tial if the full advantages of the LDF are n Capital Gains Tax n National Insurance to be gained and the potential pitfalls n Inheritance Tax n Value Added Tax avoided. We also have well established n Corporation Tax n Other taxes administered by HMRC relationships with a number of banks in Liechtenstein to whom speedy and For the avoidance of doubt, anyone who is curconfidential introductions may be made with minimal rently under investigation at local tax office level who fuss. may not have been entirely truthful and who has addiFor further information or to arrange a free initial tional tax issues to disclose can qualify for the LDF (subconsultation, please telephone Sean Wakeman, ject to meeting the paragraphs above) and will receive Partner, on 020 7842 7285 or Anand Unalkat, guaranteed immunity from prosecution, the benefit of Tax Senior, on 020 7842 7143. the 10% penalty and the ten year limitation. Similarly,

Q. What is HMRC looking for?

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 - 2010


Sec 20-44_A4 Temp 07/06/2010 11:44 Page 36

FBI Finance, Banking & Insurance

Changing times in property investment 010 has been an uncertain time for the property market with increasing market confidence tempered to a degree by the doubts which always arise at election time and the worry that a change in government could unsettle the already nervous market. Initial worries about a coalition government seem to have eased and they appear comfortable together busily working with a common purpose to rebuild the economy. Property seems to have weathered this with a general feeling even before the election that all the main political parties are agreed on the need for stability despite worries from around the world and most particularly within the Euro-zone and the economic difficulties of the countries of southern Europe. Various commentators have observed that the property market continues to show signs of recovery despite these uncertainties although in April the RICS did observe that there was evidence of buyers holding back until the outcome of the election was known The most recent RICS survey of residential property sales has noted that prices are again rising almost everywhere in the UK as did the Nationwide in April, which showed a 1% increase, although these contrast with the Halifax report which alone suggested a 0.1% fall house price in the same period. What must however be recognised is that these trends and market movements are not uniform. We have been reviewing the Land Registry data published since 1995 and note some intriguing variations. For ten years or so the trends were fairly similar with the London markets leading the way with prices up to about 300% while Birmingham lagged behind at 250% and Manchester was about 220% compared to the 1995 levels.


From January 2007 until January 2008 house prices in Manchester and Birmingham rose by roughly 5% for the year while prices in east London had moved up by some 12% and the greatest gains were seen in south and west London with growth rates for the year of 15%.


Asian Voice & Gujarat Samachar - 2010

HM Land Registry Sales Data All areas flattened out during the early part of 2008 prior to the credit crunch although Manchester peaked rather later and higher than other areas and in the crash which followed Manchester dropped by 25% while Birmingham and East London fell back to little more than 80% of the peak. South and West London fared little better dropping by about 18% from the top of the market. It is however in the recovery rate where the biggest variation could be seen with the midlands struggling to get back above 90% of the January 2007 figures and east London fares little better at 95%. The story is very different in south and west London where prices have now bounced back to around 105% of the January 2007 level and are heading strongly back towards the 2008 peak. The price variations which we have encountered in this are due in part to the restrictions still being felt by banks and their customers with severely reduced credit facilities on offer making such investment transactions very difficult to fund. These would historically have generally been highly geared and this is quite simply not an option today. As a result the owner occupier is strongly placed to compete with these investors in a way that was not possible a few years ago. The commercial property market is subject to some quite different pressures and has reacted rather differently over the last few years. April was a more cautious month in the both the residential and commercial sectors and the uncertainty following the inconclusive General Election is likely to last for some time so that this is unlikely to change in the very short term. The prime investment market is very much driven by the investors’ thirst for good covenants and long

Sec 20-44_A4 Temp 07/06/2010 11:45 Page 37

Finance, Banking & Insurance FBI leases which together provide secure returns in a time when many other forms of investment have struggled and interest rates are at an all time low. Prime values rose last month with yields falling 8 basis points on the month to an average of 5.79%, their lowest since May 2008 and while macro issues are a concern the recent improving occupational market news as well as supply shortages are helping to support investment sentiment and pricing. Tenant demand is however a key factor and economic uncertainties have had a major impact here with falling demand leading to declines in market rents leading rental growth predictions to be revised The investment market is very much operating in two tiers and while prime properties are secure from most perspectives and are limited mainly by the lack of available stock and the keen competition that exists the same is certainly not true of secondary stock which is more susceptible to changing sentiment. Secondary yields have been holding firm but there is little transactional evidence to underpin this and the fear remains that yields and rents may weaken in the months ahead as the economy and the property market alike await the impact of promised spending cuts and tax rises. The practical impact of these recent market movements became evident in project undertaken at Willmotts. We were instructed to value a substantial mixed estate for probate purposes in the summer of 2007 and agreed with HMRC a figure in excess of

£22M in the light of evidence available at that time. The executors subsequently needed to put the portfolio on the market and in mid 2009 after extensive advertising and negotiation a sale was agreed at discount of some 30% to the probate figure. The buyers were keen to recoup some of their investment early on and we have been able to assist in a partial break-up to take advantage of the rising market in south east London where the portfolio was located. These sales were largely to tenants and owner occupiers and have shown gains over the last year in excess of 35% over the portfolio purchase prices. Willmotts is always pleased to assist in maximising your investment’s performance with professional valuation advice and agency services on the sale or purchase of properties and portfolios.


= Audits and Accountancy = Business and Personal Taxation = Corporate Finance = Offshore Tax Planning = Management Consultancy = Company Secretarial Services

Charter House, 8-10 Station Road, Manor Park, London, E12 5BT

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Tel: 020 8478 5054 / Fax: 020 8514 7475 Email: info@lallondhia.com Registered as Auditors and regulated for a range of investment business activities by the Association of Chartered Certified Accountants

Associate Offices: Delhi & Isle of Man

Asian Voice & Gujarat Samachar - 2010


Sec 20-44_A4 Temp 07/06/2010 11:45 Page 38

FBI Finance, Banking & Insurance

Rapid Change in the Commercial Auction Market he commercial auction market has seen a rapid change in fortunes for many and with that has brought about more cautious investors into the room. In the years leading to the boom in 2007, many novice investors were attracted to the room due to the liquidity present as a result of the irresponsible lending on behalf of the banks. Subsequently prices were driven up for not only prime blue chip investments but also the more risky investments in secondary or even tertiary locations. At one stage there was not a big difference in the yield profile between prime investments and secondary investments and yields of 5% were considered the norm. Therefore if an amateur investor bought anything at a yield of 6%, it was considered a bargain regardless of location, tenant profile or even lease length. The novices were seen to be out bidding many auction regulars and this was all down to the bank’s unrestricted lending criteria. One must also bear in mind that the interest rates were in the region of 4% plus the bank’s margin on top so there was no real cash outflow from the investments. This still did not discourage the general investors as banks were giving you up to 80% loan to value on pretty much any investments so it seemed to make sense that by gearing up to these levels one could have access to an investment that normally would not be within their financial capabilities and to add to that they were doing so on an interest only basis so the mortgage was just about covered by the rent. The problem with the over gearing was that it created a false market as once the recession came upon us, values had gone in the opposite direction as liquidity had all but dried up. Banks tightened the screws on their lending criteria therefore as a result investors were not able to buy the secondary riskier assets as readily as before. The banks have now become extremely risk averse and will not lend on anything with a lease of less than 5 years to secondary tenants. As a result of all of this we are now seeing secondary yields moving out drastically from prime investments. The many investors who purchased in the height of the market particularly with investments in secondary location to secondary tenants have seen their values plummet up to 30%-50%. There have been many



Asian Voice & Gujarat Samachar - 2010

scenarios where the banks have requested the investors to inject capital into the assets to meet their loan to value ratios otherwise they would be in breach of their loan agreements and this would result in the banks repossessing the properties. For the relatively new investors who put his hard earned savings into properties at the height of the market Vishal Patel will most definitely think twice before buying in the auction. We are now seeing the values of prime investments increasing as banks are lending up to 65% loan to values on investments let on good leases to solid covenants. The terms are different as capital repayments are required but it is evident at these levels that the bank’s position is safe if ever a crash were to happen and also the investors position is also safe as he will be under less pressure from the lenders to meet the loan to value ratios. The positive position of the markets now is that with record low interest rates, investors who acquire investments today will be seeing a positive cash flow after interest and capital repayments. Auctions offer transparency to many investors and allow the novices’ access to properties that they otherwise would not be able to obtain. It is a simple way of marketing properties to the general public and puts everything down in a very manageable way of understanding what is on offer. The private treaty markets act very different and many deals are done purely on the basis of a strong relationship with the selling agent. There are strict time restrictions with auction properties and in general once the hammers falls you have 4-6 weeks to finance the deal and complete. What the recession has taught us is to be selective on what you buy and not to think that by buying in the auction you will acquire a bargain as many have found out. It is also important that you seek the necessary advice on any investment before going into the room and simply putting up your hand. That finger in the air or wave of the catalogue could be your costliest mistake. Vishal Patel is a director of Prideview Properties Ltd. For more information please visit www.prideviewproperties.co.uk

Sec 20-44_A4 Temp 07/06/2010 11:46 Page 39

Finance, Banking & Insurance FBI

270 High Road






Ha3 7BB

t: 0208 863 8680 f: 0208 863 2115 e: enquiries@prideviewproperties.co.uk

Pub investment in Cannon Street, City of London

Commercial and Residential Investment close to Edgware Road tube station, London


“ We will assist you with the purchase, funding including valuations and disposals of commercial property investments nationwide. our expertise lies in both the commercial property auctions and the private treaty market.”

Please contact vishal Patel on 07947 791 689 to assist you with any enquiries you may have Bank investment in Clapham, London

PRIdE ManagEMEnt offer a full Commercial and Residential PRoPERty ManagEMEnt SERvICE and can assist you with the following: Lease renewals Rent reviews Maintenance of buildings and their services (Service charges) Collection of rents and other charges Compliance with health and safety and other statutory requirements l Landlord and tenant services l Planning applications l Refurbishment and building works l Building Insurance quotes and renewals l EPC’s at most competitives rates and ce unted i o V co sian al dis e of: A i e t We PRIDE ourselves c l at o Qu a spe ent r ercia m m e e in relieving you from v m g ei rec mana or Co rties ial F the pain of Property e ent % rop 2.5 P Resid s Management. e For erti 5% Prop

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Please contact Jesal on 07903 054 842 or Priyen on 07815 207 924

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Asian Voice & Gujarat Samachar - 2010


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FBI Finance, Banking & Insurance

Are you facing pressure from the banks? Many businesses have recently experienced increasing pressure from their bankers to provide monthly or quarterly management accounts, information relating to trade debtors and a summary of the liabilities. During these difficult times when many businesses cannot afford to employ bookkeepers, we can help by providing efficient, cost-effective bookkeeping services using our online accounting back office facilities. Documents are sent to us electronically and our bookkeepers then process the information and provide the necessary reports to the client to submit to their banks and funding providers on a regular basis. Clients can choose to receive the reports either through the post, by email, or by accessing our website using a password and verification code provided to them. For smaller clients, the services include basic bookkeeping, preparation of the management accounts, either on a monthly or a quarterly basis and the preparation of the annual statutory accounts. For larger clients we can do the same work as above or, in certain situations, we simply deal with the processing of their purchase and/or sales ledgers and produce detailed aged debtor/trade creditor listings on a monthly basis. Our service is tailored specifically to meet the requirements of each client. In addition to dealing with bookkeeping and accounts preparation matters, the department also provides the following services: payroll processing, VAT returns, accounts payable, accounts receivable, and document management systems.

Case study We recently took over the bookkeeping and accounting work for a company, operating three restaurants in London. Our client previously employed an internal bookkeeper who was perfectly competent at a basic level, i.e. dealing with bought ledger, cash postings, bank reconciliations, VAT returns, etc., but was out of her depth when it came to preparing meaningful trading reports and management accounts. The company utilises bank facilities which were put in place in order to acquire two of the restaurant units. Last year they were informed by the bank that if they wished to continue with the facilities they would need, on a regular basis, trading figures and quarterly management accounts. Due to the bookkeeper’s inexperience and lack of expertise, the company was significantly in arrears with the submission of the required information to the bank. The information that was sent was not reviewed properly beforehand, therefore on a


Asian Voice & Gujarat Samachar - 2010

number of occasions the bank required further explanation of the figures and additional information supplied. FisherE@se took over the entire bookkeeping for the company by installing scanners at the three restaurants. Each of the restaurant managers scans the basic information to us, comprising delivery notes, Navin Thaker purchase invoices and daily takings summaries including bank details and petty cash summaries. The information is captured and retained on our ‘Gravity’ document management system and at the end of each month all information is posted on to the Sage Line50 accounting system. On a monthly basis, trading information is provided to the company for each of the restaurant units, along with a list of trade creditors and the reconciled bank position. Once a quarter FisherE@se also prepares management accounts, with commentary on important issues such as gross profit, wage costs, etc. The up-to-date information enables the shareholder director to decide on the levels of dividends to be taken, and our Company Secretarial department prepares all the documentation necessary for the statutory records of the company. FisherE@se also prepares the company’s statutory accounts, Corporation Tax computations, Corporation Tax Returns, VAT returns and annual returns, and assistance is provided to the client to prepare P11D information and to make Class 1A National Insurance Contributions. We also manage the payroll and organise payment to the staff by BACS. Although the level of service FisherE@se provides is far superior and comprehensive, the overall cost to the client is no more than the cost of the bookkeeper. The company receives a great deal more relevant information and on a timely basis, allowing for greater efficiency of the client’s business and better control of its costs. This more streamlined system not only keeps the bankers happy, it also allows the shareholder director to monitor the company’s status and take any necessary corrective measures if margins start to slip or costs start to get out of hand. Please contact Navin Thaker on +44 (0)20 7874 7958 or nthaker@hwfisher.co.uk for more information on how FisherE@se can help your business.

Sec 20-44_A4 Temp 07/06/2010 11:47 Page 41

Finance, Banking & Insurance FBI

What are non-doms doing with their money?? aving been asked to write an article in a specialist magazine which has been successfully produced over the years by Asian Voice, I thought I would rise to the challenge and request that a member of CB Patel’s dynamic editorial team provide me with a topic that they would like to see in this annual publication. They provided me with the title “Wealth: non-doms under attack – what are the wealthy doing with their money?”. Having considered the area in detail, I came to the conclusion that it is not a question as to what the wealthy are doing with their money, but it is a question of what tax planning opportunities are available to non-domiciled individuals and how can they mitigate the high taxes that are currently imposed on them. My immediate reaction was to consider offshore tax planning. Offshore tax planning has become increasingly popular over the years as more and more wealthy individuals try to mitigate the high taxes imposed in many of the wealthy developed countries.


In order to plan efficiently to mitigate tax liabilities, there are two key components that need to be considered in the process:l Understanding the tax rules in your current country of residence and l Understanding the tax regimes of other countries, and how they interact with those of your country of residence. With regards to an individual’s current country of residence, if we assume that we are referring to nondomiciled individuals residing in the United Kingdom, one can correctly make the assumption that in all respects, tax rates are likely to rise in the future, and, they have already begun to do so. With the introduction of Income Tax at a rate of 50% for earnings in excess of £150,000, and the current political vibes that appear in many publications indicating that Capital Gains Tax is likely to rise from a generously low 18% to 40% in the forthcoming Budget, and many other factors, all indicated that the wealthy are going to be faced with increased taxes in the future. Moreover, many channels are also likely to be closed in years to come. So the question arises as to how one mitigates the ever increasing tax liabilities and the solution lies in the use of tax havens. A tax haven is simply a country that allows you to reduce the amount of tax you pay in comparison to your country of residence. One has to understand the reasons why tax havens are used and the moral issues surrounding the use of tax havens. As a general understanding, one must accept that the use of tax havens is not wrong in any way whatsoever so long as the regulations surrounding the taxation of income and gains of any sort

is not infringed in the country of residence. It is important to assess the legality of the use of a tax haven before one takes advantage of all such opportunities to maximise your wealth and mitigate tax liabilities. In general terms, there are three different types of tax havens that exist in the world:l Zero tax havens l Overseas source exempt havens l Low tax havens I will consider each of these in turn:-

Kiran Patel

Zero tax havens These are countries that do not have any of the main types of direct taxes, such as Income Tax, Capital Gains Tax or Inheritance Tax. These include territories such as the Cayman Islands, Dubai, The Bahamas and Bermuda. Although these do not have any taxes, the cost of incorporating a structure within the tax haven and the annual maintenance fees for the set up of companies and trusts or foundations in these territories tends to be extremely high. This effectively provides the local Government with a revenue stream. You need to understand and weigh up both the set up costs involved and the annual maintenance costs against the tax savings to be achieved before committing to invest in such territories. Overseas source exempt havens These are generally tax havens that only levy taxes on revenue generated locally to them. These locally derived taxes can sometimes be significantly high. Good examples of these are Panama, Costa Rica, Hong Kong and Singapore. This type of a tax haven exempts any income or gains earned from foreign sources from taxation, on the basis that it does not involve any local business activity. In certain instances, the structure to be established in these tax havens has to be decided at the onset and there is very little scope for changes to the structure once it has been set up. Different territories apply different rules to the definition of revenue generated locally, therefore in deciding which one to use, careful planning and consideration of all circumstances need to be taken.

Asian Voice & Gujarat Samachar - 2010


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FBI Finance, Banking & Insurance Low tax havens Low tax havens are countries that do impose taxes on residents on their worldwide income, however, the rates applied are significantly lower than those in the individual’s country of residence. There are two main areas of consideration when entering low tax havens and that is firstly, to establish the special concessions that offer considerable tax advantages in certain circumstances and secondly, the clever use of double taxation treaties that countries enter into with others should allow the individuals to benefit from the lower overall tax position available to them. In most instances, zero tax havens do not establish treaties with countries in the developed world and therefore it is sometimes better to plan your tax affairs so that you may be in a position to use a more efficient low tax haven combined with double taxation treaties than simply to rely on zero tax havens and have to disclose your income in the country of residence and pay tax locally on the foreign income. Examples of low tax havens are Cyprus, Barbados, Switzerland, Belgium, Denmark, The Netherlands and Austria. Other considerations When planning to consider placing your wealth in a particular territory, although the most important perceived factor tends to be that of tax mitigation, it is not the only point to consider.

Other areas of consideration should be as follows:1. Privacy. What level of disclosures are required? Will all your financial affairs be kept private from a number of third parties? 2. Ease of residence. Do you consider that you will be emigrating to a particular territory in the future? 3. Political stability. Is there a risk that your investments could disappear altogether? 4. Communications. It is important to be able to communicate with the authorities in the territory considered and also being able to travel to the country to deal with your affairs at ease. 5. Lifestyle factors. You need to consider whether you are interested in moving to a particular territory. Special consideration should be given to the climate, the cost of living etc. The above is a brief overview of the kinds of territories available in the world today. However, it is important to understand that these are continuously evolving and it is imperative that in embarking on tax planning matters you do seek sound professional advice before making any commitments. Kiran D Patel FCA is a partner at Weston Kay. If you require further information on any aspect of this article then please contact him on 020 7908 7496 or email him at k.patel@westonkay.com. This article has been written for general reading purposes and should not be relied upon to make specific individual financial decisions.

WESTON KAY CHARTERED ACCOUNTANTS NOT EVERY FIRM OF CHARTERED ACCOUNTANTS IS THE SAME! Located in the heart of London’s West End. Servicing clients throughout the country. A professional firm dedicated to helping business grow. Let us help you to deal with the current demanding climate of compliance and at the same time, assist you in planning for your own, your family’s and your business’s future.

To Find Out More About Us And How We Can Work With You Contact Kiran D Patel FCA At: 73/75 MORTIMER STREET LONDON W1W 7SQ Tel: 020 7636 7493 Fax: 020 7636 8424 E-Mail: k.patel@westonkay.com Web : www.westonkay.com

Partners : Joseph Weston, Melvin Kay, Kiran Patel, Jill Springbett


Asian Voice & Gujarat Samachar - 2010

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Finance, Banking & Insurance FBI

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Asian Voice & Gujarat Samachar - 2010


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FBI Finance, Banking & Insurance

Capital Gains Tax A threat by the coalition government idespread rumour suggests that the chancellor’s emergency budget on 22 June by George Osborne, is likely to result in an aggressive increase in the rate of capital gains tax (“CGT”). Successive governments have changed the basis of calculating capital gains and the rate of CGT. The Labour government introduced taper relief in 1998 for business and non-business assets, amended in 2002 such that after indexation, provided you held a business asset for 2 years or more, the effective tax rate for a 40% tax-payer was 10% whilst for a non-business asset it was 24% after 10 years. As tax advisers, we felt that the effective 10% regime for business assets held for 2 years or more was a generous CGT rate whilst the abolition of both indexation and taper relief in 2008 resulted in a CGT rate of 18% - low for non-business assets with no requirement to hold the assets for any length of time. We therefore fully expected the next government to raise CGT rate but the rumour for adding the capital gain to your normal income such that the gain is effectively taxed at the marginal rate of up to 50% is draconian. It is also unclear whether any increase in the CGT rate will apply from the budget date or some time later, like 6 April 2011. What is clear is that the rate is likely to be going upwards. If you therefore have an opportunity to realise a capital gain, particularly for nonbusiness assets, it would be useful to do so before 22 June such that you pay CGT at 18% as it is unlikely but possible that the CGT rate is increased with effect from 6 April 2010. A survey by LSL Property Services Ltd found that 26% of landlords plan to quit before the CGT tax rise is introduced and 71% would reconsider future investment in property. There are various mechanisms for triggering a capital gain and yet not dispose of the assets, although be aware of the bed and breakfasting rules for shares where you cannot re-acquire them within a 30 day period to be effective for CGT purposes. There is also a rush to sell second homes/let properties to crystallise these gains as these are normally non-business assets. However, provided you have taken some measures when acquiring a second home/let property, the gain can be reduced for certain periods of ownership as the rules allow you to nominate your main residence within 2 years of the purchase of the second home/let property. In addition, letting relief on gains of up to the



Asian Voice & Gujarat Samachar - 2010

lesser of the private principal exemption and £40,000 (for husband and wife - £80,000) are tax free. Using these reliefs, we have seen examples of clients who have paid little CGT on the sale of their second home/let property. The other main change being rumoured is the reduction of the annual exemption (currently £10,100). This is someKaushik Desai times misused, for example, where a husband and wife team together with adult children manage their investments such that they each generate an annual capital gain of say £10,000 (combined £40,000), and pay no tax at all. Their disposable income is significantly higher than a family who had to pay income tax on this income. In fact most tax-payers, given the opportunity, try and convert an income into a capital gain such that this income stream is taxed at 18% as opposed to the marginal income tax rate which could be as high as 51%, including NI. We believe it would be fair for the government to tax capital gains as income if the gain was realised on assets that were held for a short term, say a year or less, but that it is unfair to raise CGT levels to income tax rates if you have held assets for more than, say, 3 years. We hope that the coalition government, particularly when the majority of the coalition comprises of Tory MPs, takes a very hard look at implementing changes to the CGT regime - it would be unjust to the entrepreneurial spirit if individuals on the sale of business assets or savers who invest in shares and other assets for long term retirement planning had to pay income tax rates on capital gains. Watch this space! It is recommend that you take professional advice on your tax planning – an area which is full of potential pitfalls. Kaushik Desai is a Principal in Chown Dewhurst LLP – Independent UK and International Tax Advisers, tel: 0207 403 0787

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Finance, Banking & Insurance FBI


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PRINCIPALS John Chown John Dewhurst Kaushik Desai Kevin Offer 51 Lafone Street London SE1 2LX Tel: 020 7403 0787 Fax: 020 7403 6693 E-mail: info@chowndewhurst.com Web: www.chowndewhurst.com Asian Voice & Gujarat Samachar - 2010


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FBI Finance, Banking & Insurance Editorial Index Topics


Page No.

Cameron Clegg Coalition: Camelot or Crisis? Beware the bursting Beijing Bubble? Government Bonds- Will it yield long term? Greece is the word for market volatility The Old Lady of Threadneedle Street Achieving Remarkable Success Is this the right time for gold Foundation- A new concept in wealth protection Insurance Claims- Beware of the Pitfalls! The Roller Coaster Gold Ride The Property Market- Then and now 2 Good 2 B True- A Real Amnesty Changing times in property investment Rapid Change in the Commercial Auction Market Are you facing pressure from banks? What are non-doms doing with their money? Capital Gains Tax- A threat by the coalition government

Alpesh Patel Mike Peterson Aparna Jagjeevanram Kunal Bharadia Dr Anil Mehta Knowledgte to Action Oliver Temple Dilip Unarket Mukesh Mamtora Raj Patel Suresh Vagjiani Anand Unalkat Willmotts Visal Patel Navin Thaker Kiran Patel Kaushik Desai

5 7 9 11 13 15-16 19-20 23 27 29 & 31 32 34-35 36-37 38 40 41-42 44

Advertisers Index Company Name Afro Asian Insurance Services Ltd Appleday Associates Arm Associates Bank of Baroda Bank of India C & C Alpha Group Chown Dewhurst LLP Citibank CMC Markets ETX Capital Finance House Ltd Forum Insurance GFT Global Markets Ltd Gold Investments Ltd H W Fisher Horwath Clark Whitehill Incredible India John Cummings Ross Ltd

Page No. 17 43 45 8 43 Back Pg 45 Inside Back 4 Front Inside 33 31 6 20 16 35 28 18

Company Name

Page No.

Knowledge to Action 10 Lall Ondhia & Co 37 Life Policy Reclaim Ltd 22 London School of Accountancy and Management 33 Major Estates 43 New India Assurance Ltd 14 Premier Banqueting 45 Prideview Management 39 Prideview Properties 39 Punjab National Bank 37 SAS Consultancy 45 Spread Co Ltd 12 Tata Communications 30 Westfield Commercial Property Development 43 Weston Kay Chartered Accountants 42 Whizz Group of Companies 21 Willmotts 24-25

Disclaimer The ideas and conclusions expressed in the articles are the author’s own and do not necessarily reflect the views of any particular company. They are for general interest only and should not be taken as investment advice or as an invitation to purchase or sell any specific financial product. The publishers of Finance, Banking and Insurance (FBI) magazine are not responsible for the individual

views expressed by various authors in this publication and would like to direct readers to consult professional advisers or brokers if they require further information on any topic covered in this magazine. Some of the products, offers, opinions included in the articles and advertisements carry risk and readers should consider them at their own discretion.

Editor/Publisher: CB Patel

Editor/Publisher: CB Patel

Associate Editor: Anne Hoose

Managing Editor: Jyotsna Shah

Assistant Editor: Rupanjana Dutta

Executive Editor: Kokila Patel News Editor: Kamal Rao

Advertising Managers: Alka Shah, Kishor Parmar Business Development Managers: Urja Patel, L George Advertising Sales Executive: Rovin John George, Nikhil Gor, Bina Naik, Erien Dubash Chief Financial Officer: Surendra Patel Accounts Executive: Akshay Desai Graphics Design: Harish Dahya, Ajay Kumar Customer Service: Saroj Patel


Asian Voice & Gujarat Samachar - 2010

Asian Business Publications Ltd Karma Yoga House, 12 Hoxton Market (off Coronet Street), London N1 6HW. Tel: 020 7749 4085 Fax: 020 7749 4081

Email: aveditorial@abplgroup.com gseditorial@abplgroup.com www.abplgroup.com ŠAsian Business Publications Ltd

Sec 21-48_A4 Temp 07/06/2010 14:13 Page 47

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*Calls may be recorded and/or monitored for training and quality purposes.

Important information: Citibank and Citibank with Arc Design are registered service marks of Citigroup Inc (r) 2009 Citibank,N.A. NRI Citigold Wealth Management client status may be accorded by Citibank,N.A., India to clients whose total accounts with the Citibank NRI Business amounts to atleast USD 100,000 and subject to the NRI Citigold Wealth Management terms and conditions. The NRI Citigold Wealth Management program is distinct from other programs utilizing the Citigold name. Important information for United Kingdom residents: Citibank International plc. Registered in England with number 1088249. Registered office: Citigroup Centre, Canada Square, London E14 5LB. Authorised and regulated by the Financial Services Authority.

Sec 20-44_A4 Temp 07/06/2010 11:50 Page 48

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