TaxPersonal TaxCouncils hope to spread Icelandic investment pain

Councils hope to spread Icelandic investment pain

UK councils are likely to spread their loss in their revenue accounts over up to ten years rather than taking a bit hit in a year, PwC partner says

Local authorities are likely to try to write down losses from investments in
collapsed Icelandic banks for up to ten years to help ease pain for their
finances, according to a public sector finance expert, in a move that would
attract criticism from taxpayer groups.

UK councils, including
Kent County Council and
Nottingham City
Council
, have invested more than £850m in Icelandic banks such as
Landsbanki, and are likely to ask permission from the government to spread any
losses that result from the problems faced by the institutions, experts said.

‘The likelihood is that authorities will want to spread their loss in their
revenue accounts over up to ten years rather than taking a big hit in one year,’
said Michael Kitts, a partner at
PricewaterhouseCoopers.

Councils are still in the dark as to how much they will eventually lose from
the investments, with the government pledging limited support to councils hit by
the move.

Iceland’s prime minister Geir Haarde has been condemned for failing to
guarantee British savers’ deposits.

‘From the point of view of taxpayers, whose money has been lost, it would be
wrong to obscure the fact that [council investment in Icelandic banks] has been
a massive mistake. Some cynical local authorities might use [spreading their
losses over a number of years in their accounts] as a device to diminish the
criticism that will fall on them,’ said Mark Wallace, campaign director at The
TaxPayers’ Alliance.

A Local Government Association spokesman said writing down debt sounded like
a good idea, although it would probably not be suitable for all councils.

A spokesman for Nottingham City Council, which has around £42m deposited in
Icelandic banks, said: ‘We have not yet made any decisions on this and will
await guidance from government before doing so.’

For
more on local government, click here

Related Articles

LITRG urges government to consider tax changes in disability work plan

Administration LITRG urges government to consider tax changes in disability work plan

5d Lucy Skoulding, Reporter
HMRC appeal rejected in Tottenham Hotspur case

Administration HMRC appeal rejected in Tottenham Hotspur case

3w Emma Smith, Managing Editor
HMRC urged to clarify impact of income allowances on Self-Assessments

Personal Tax HMRC urged to clarify impact of income allowances on Self-Assessments

2m Alia Shoaib, Reporter
New trading allowance: simplicity, but not as we know it

Administration New trading allowance: simplicity, but not as we know it

2m Emma Rawson, ATT Technical Officer
Wealthy individuals could circumvent top tax rate rises

Personal Tax Wealthy individuals could circumvent top tax rate rises

4m Alia Shoaib, Reporter
Italy grants first successful non-dom status application to former UK non-dom

Personal Tax Italy grants first successful non-dom status application to former UK non-dom

5m Emma Smith, Managing Editor
Industry reaction: Taylor Review does not go far enough in addressing tax issues

Legal Industry reaction: Taylor Review does not go far enough in addressing tax issues

5m Alia Shoaib, Reporter
Does the Taylor Review sufficiently address the gig economy?

Corporate Tax Does the Taylor Review sufficiently address the gig economy?

5m Alia Shoaib, Reporter