Did you have a bad credit event in recent years? Do you have less than two years in the same career field? Is your monthly income less than three times your proposed payment? Fear not, when your financial picture doesnt fit neatly into the box, you may still qualify with some lenders. Here’s how.
When you apply for a mortgage, lenders use four pillars to measure your finances and put together a loan suited to your purpose. Your credit, debt, income and assets play integral equal roles in lenders’ eyes. Lets break down the nuts and bolts of what lenders want to see on loan applications, and how working within these four pillars may help you find a mortgage to suit you, even if your situation isn’t “perfect.”
The credit score is the best-known financial barometer to predict a borrower’s future likelihood of default. Of course, youre not planning to get a mortgage to subsequently go delinquent, but lenders nevertheless use it to measure your payment predictability. Lenders want a credit score of at least 620 or better. Beyond the credit score is the credit report, which reveals details about your past and current financial habits. Mortgage companies consider delinquent payment patterns a red flag including old collections of all kinds, past-due balances even on accounts that are no longer active. Expect an inquisition on such accounts.
So what if you have a previous bankruptcy, foreclosure, short sale or loan modification? What if more than one of these events exist in your credit history? Again, fear not, but do be prepared to answer all questions regarding such events. If you have supporting documentation, provide it to your mortgage broker upfront. Generally, even today you can still get a mortgage just a few years out of one or more of these credit events. Most commonly, there’s a three-year wait time for government financing (ie, FHA) and seven years on conventional financing (with the exception of a short sale the waiting time is now four years). The most recent date is considered if one or more such credit events exist in your credit history.
Active trade lines (meaning open credit) are another lending hot button. Youll need to have at least two forms of open and available credit that you use regularly – that doesnt necessarily mean carrying a balance, but it does mean you need to show credit activity. Unfortunately, gone are the days of using alternative forms of credit, like a cell phone bill or a cable bill, in lieu of credit report trade line.
Checking your credit in advance of applying for a mortgage can give you time to work through any issues, or to take time to work on your credit score if it needs to be higher. You can check your credit reports for free once a year from each of the three credit reporting agencies, and you can see two of your credit scores for free on Credit.com.
A lender wants to see every single minimum payment obligation you have – whether or not it’s on your credit report independent of your general household expenses.
The typical forms of debt a lender must account for when determining how much mortgage you can afford are: any form of car payment, minimum payments on credit cards, student loans, personal loans installment loans, alimony or child support, garnishments and IRS debt.
This seems simple enough, but sometimes the way a debt is listed on your credit report can cause a problem. Let’s take a common example: Student loans. You may have multiple student loans through one creditor, and they are all listed out on your credit report that way, but you make one monthly payment to that creditor for the multiple loans. The fix: Youll need to provide your mortgage broker a payment letter from the creditor identifying what loans are included with the student loan creditor and the amount of your monthly payment.
Another common issue is co-signed loans – specifically, loans someone else took out that you co-signed. In order for the other partys debt to not hurt your mortgage application, youll need to provide documentation that the other person is making the payment directly to the creditor and has been since either the inception of the loan or the most recent 12 months. This is usually accomplished with bank statements or canceled checks. Reducing your debt load is immensely beneficial when trying to qualify for a loan.
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Lenders must be able to show that your income supports your proposed mortgage payment plus your other debt payments. If your debt, including the proposed mortgage payment, exceeds 45% of your income, you may need to look for less house, borrow less money, or pay off some of your debts to improve your numbers. (You can use this calculator to give you an idea of how much house you can afford.)
When it comes your income history, lenders like to see a minimum two-year period of working in the same or a similar field. Dont have it? Thats OK. Make sure you explain this to the lender in writing, and be sure include any occupational gaps. If you’re an hourly wage earner, expect your banker to average your year-to-date income. If you’re salaried, it will be much more transparent in terms of qualifying because typically a salary is a more stable form of income.
The down payment amount you have can dictate the loan program and ultimately how much mortgage you can handle. Assets include both funds for a down payment as well as savings in the bank post-closing of escrow. Mortgage brokers, banks and lenders expect to see two to six months of savings post-closing, and at least 3.5% of the purchase price for down payment. If you have access to funds that aren’t yours, gift money, for example, is a viable alternative, just be sure provide the full paper trail in any exchanging of funds.
*Mortgage tip: When buying a single family home, your full down payment funds can be gifted.
If youve been told that you cant get approved for a mortgage, get a second opinion perhaps even a third or fourth. Make sure to disclose all the pertinent known facts about your financial situation. A quality professional will ask you to provide details on the who, how, what, when, where and why which can help make your quirky financial picture much more cohesive and thus more likely to get you approved for a mortgage.
More on Mortgages amp; Homebuying:
- Why You Should Check Your Credit Before Buying a Home
- How to Find amp; Choose a Mortgage Lender
- How to Get a Loan Fully Approved
Image: Getty Images
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By Keith Leslie, The Canadian Press
TORONTO – Officials with the Toronto 2015 Pan Am Games billed Ontario taxpayers for everything from dress shirts and parking tickets to orange juice and wine before reimbursing them, documents released Friday reveal.
The Toronto Pan Am committee released five years worth of expense claims and credit card reports — about 5,000 pages of documents — to all media after a newspaper filed a freedom of information request.
TO2015 CEO Saad Rafi said the government had no say in the timing of the document dump on Friday, one day after the legislature recessed for two months.
We of course work with the government on all these matters, said Rafi. In the past the expense claims for the organization garnered a lot of attention, so we wanted everybody to have that information at the same time.
The expense reports, which often do not include the name of the executive making the claim, show Pan Am officials frequently charged taxpayers for their coffee, bottled water and snacks. Some also put cash advances on government credit cards, at very high interest rates.
The inappropriate expenses, some going as far back as 2010, only turned up after the FOI request, and the reimbursements were made in recent weeks, said Rafi.
I didnt know they existed, he said. When I saw those things, I said you know what, thats not going to stand.
The Progressive Conservatives said the Liberal government has clearly not been able to change the culture of entitlement at the Pan Am organizing committee.
If youre appointed to a committee by a Liberal, you can basically expense whatever you want, thats the message that I think the public is hearing now, said PC Pan Am critic Todd Smith. The scandalous spending is continuing even after the new regime has been put in place.
The New Democrats said Premier Kathleen Wynne and the Liberals appeared to have learned nothing from a similar scandal involving inappropriate expenditures at eHealth Ontario, which forced then-health minister David Caplan to resign.
Ontarians are footing the bill so Pan Am officials can go shopping at Harry Rosen, the LCBO or the Beer Store, said NDP Pan Am critic Paul Miller. For the Liberals, to wait until the day after the legislature rises makes a mockery of transparency and accountability. It’s just absurd and manipulative.
Rafi, who took over the top spot last January, rejected Opposition claims that people working with the Pan Am committee have a huge sense of entitlement.
I think what were doing here is trying to instill a sense of responsibility that this is predominantly a taxpayer funded games and people have that obligation to the taxpayer, he said. We are trying to continue with being open and transparent and make sure people follow the rules.
Its not the first time expenses by the Pan Am executives have come under fire.
Former CEO Ian Troop, who was paid $477,000 a year, was criticized after he billed taxpayers 91 cents for parking, $1.89 for a cup of tea and $8,561.19 for a Mexican hotel and cocktail party.
The opposition parties also complained about a $7-million bonus package for TO2015 executives, including Troop, who would have been eligible for a $780,000 premium if hed stayed and the Games came in on budget.
Ontario taxpayers already shelled out over a million dollars to fired Pan Am executives, including a years pay and $27,300 in retirement benefits for Troop, who also got $10,000 in outplacement payments, $3,500 in legal fees and medical benefits of $15,800.
Former Pan Am vice-president of human resources, Elaine Roper, was paid $300,000 when she was let go, while Louise Lutgen got $271,000 after she was dismissed as the vice-president of cultural affairs.
The Progressive Conservatives said the latest round of expenses showed the Pan Am committee spent $5,800 on tickets to the PGAs golf championship, and $8,200 on tickets to Toronto Argonauts CFL games.
TO 2015 is probably the perfect example where this type of behaviour has continued over a four-year period and doesnt seem to be stopping any time soon, said Smith.
The total budget for the Pan Am Games, which will be held in communities across southern Ontario next summer, is about $2.5 billion.
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In 2015, the three Ebola-affected countries will start offering cash payments for families hit by Ebola, as well as survivors having trouble re-acclimating to society out of stigma for the disease.
Every aspect of Guinea, Liberia and Sierra Leones societies have taken a hit from Ebola, and the disease has shocked what were once fragile but growing economies. Public spaces are now forbidden, so markets are empty, tourists are no longer traveling into the countries and international companies have largely pulled out, including large industries like mining. The World Bank estimates the aftershock of Ebola to already weakened economies will be devastating.
We are seeing a backwards slide of development of about 10 years, says Boaz Paldi, chief of media and advocacy at the United Nations Development Programme (UNDP). The outlook is not good. We are fearful for these countries. Thats why instead of waiting for caseloads to reach manageable numbers, the three countries, with the help of UNDP and other partners, are laying the groundwork now for rebuilding the damaged economies. One of the first major initiatives to be rolled out in the new year are cash transfers and payments to families who no longer have breadwinners and survivors out of work. Many women in the Ebola-affected countries have taken in orphaned children of their family members or neighbors, despite having no steady income.
According to UNDP leaders, plans for the payment process are still being refined. Lists of names of affected families and survivors are being collected and coordinated for small pilot programs, starting early next year, to test the effectiveness of the payments in preparation for widespread efforts. UNDP has calculated that around $50 will keep a family of five going in the three countries with essential needs for one month, with some variations by country. The group is anticipating making monthly payments to 150-200,000 people in each of the countries.
WASHINGTON, 11 December 2014 / PRN Africa / — Summary:
EXECUTIVE SUMMARY AND OVERALL ASSESSMENT South Africa#039;s financial sector operates in a challenging economic environment. Despite remarkable progress since the end of apartheid in 1994, South Africa still has one of the world#039;s highest unemployment and income inequality rates. Slow economic growth since 2008 has further aggravated unemployment, real disposable income is stagnant, and households are heavily indebted. As a result, banks are increasingly exposed to credit risk, while households and firms are vulnerable to a rise in interest rates. The large fiscal and current account deficits, a weak growth outlook, the reliance of banks on money market funds (MMFs) for short-term wholesale funding, and banks#039; active trading in the over-the-counter (OTC) derivatives market make South Africa susceptible to contagion and sudden stops of capital flows. This susceptibility and potential for spillovers have been exacerbated by the significant concentration and interconnections in the financial system, and the substantial expansion of South African banks into sub-Saharan Africa. These vulnerabilities became apparent in August 2014. African Bank, a boutique lender catering mainly to low-income households, was placed under curatorship after record losses from unsecured lending. Although its small size would have suggested no systemic implications, its problems are a reminder that asset quality can quickly deteriorate in a weak economy and even small institutions can entail systemic risk due to high interconnectedness. Relatively high capital buffers as well as sound regulation and supervision have helped mitigate the risks. Banks and insurers are well capitalized and profitable. The South African Reserve Bank (SARB) is a proactive supervisor, with a high level of compliance with international standards on effective banking supervision. The SARB#039;s decisive action in placing African Bank under curatorship limited contagion. Its proposed bail-in of senior unsecured creditors to share in the burden of resolution is also welcome and a step in the right direction of reducing the “too big to fail premium” for the large banks. Overall, financial sector risks and vulnerabilities are elevated but manageable. Stress tests (ST) confirm the capital resiliency of banks and insurance companies to severe shocks but illustrate a vulnerability to liquidity shortfalls. Some banks have difficulty meeting Basel#039;s requirement to hold enough high quality liquid assets (HQLA) to survive a stress scenario lasting 30 days without assistance from the SARB. They face even bigger challenges meeting a more stringent requirement to hold a minimum amount of stable funding over a one year horizon. Although these requirements will be gradually phased in, African Bank#039;s experience highlights the importance of ensuring the large banks maintain adequate liquidity. Given significant downside risks to the economy, strong regulation and supervision are essential to ensure financial sector resilience. The outlook for lackluster growth amid an uncertain global environment requires intensifying scrutiny on asset quality. Remaining gaps in the supervisory and regulatory framework should also be closed. The FSAP recommends the following actions: o Reduce systemic liquidity risk by introducing deposit insurance and variable net asset value (NAV) for MMFs.
SOURCE International Monetary Fund (IMF)
LOS ANGELES, Dec. 11, 2014 /NEWS.GNOM.ES/ Legal-Bay LLC, The Lawsuit Settlement Funding Company, announced today that theyve updated their news on all major hip litigations to date. Legal-Bay continues to assist plaintiffs with needed lawsuit cash advances while the various hip litigations move through the courts. Legal-Bay strives to help those who are waiting for settlement payment, and they also provide patients involved in hip litigations with up-to-date news involving each particular litigation.
In recent news involving the Stryker hip cases, the company recently settled thousands of Stryker Rejuvenate and ABG II hips for a total of $1.43 Billion, which was a $300K base hip award for cases with revision surgery. Stryker also made headlines this month when a former head of a Stryker Corporation subsidiary pleaded guilty to fraud. According to NorthJersey.com, charges were placed against him alleging that he sold unapproved surgical tools used for knee replacements to surgeons around the country. California-based OtisMed Corporation was bought by Stryker in 2009, after the fraudulent transactions occurred, but according to NorthJersey.com, Strykers OtisMed unit agreed to pay $80 million in criminal and civil penalties after pleading guilty to a felony charge. The former chief executive officer of OtisMed who was charged and pleaded guilty to three misdemeanor fraud counts, Charlie Chi, will be sentenced on March 18th and faces up to three years in prison.
Patty Kirby, COO and Head of Client Relations, commented on the hip litigation updates, We remain steadfast in our efforts to aid Hip Recall victims with pre-settlement funding and settlement funding on all of the manufacturers. We also continue to advise and ensure clients who need funding and have not contacted a lawyer to do so quickly if they want to claim up to $300K in possible settlement amounts on Stryker or other hip manufacturers.
To apply for lawsuit pre-settlement funding or settlement funding up to $50K on any of the pending hip litigations, feel free to apply online at: http://lawsuitssettlementfunding.com/stryker-wright-hip-recall-settlement-funding.php
Here is an update on the major hip litigations provided by Legal-Bay:
After working out a few kinks, including standardizing how the services were delivered and moving from a walk-in model to a more predictable booking system, the business boomed – even through the 2008-09 recession, as clients sought pampering during difficult economic times. Her second location, which came three years later, was more of a challenge. Ms. Wood says she “misfired” in terms of location in a less desirable area of Leslieville and by hiring some consultants whose advice turned out to be an expensive mistake. She persevered, opening two more locations — a third in Toronto’s Bloor West Village and fourth in nearby Hamilton.
Today, The Ten Spot has grown to 14 locations (she eventually moved the one in Leslieville), including 11 franchises. She plans to open another four locations by the spring, including three in British Columbia. Ms. Wood, 33, describes her journey growing up as a daughter of an entrepreneur and the job loss that launched her career.
When did you know you wanted to be an entrepreneur?
I’m originally from Winnipeg. My dad is retired now, but he had a diamond drill bit manufacturing plant there. Growing up, he always said to us: “I don’t care what you do, as long as you make it a business.” I remember him teaching me the word entrepreneur as a kid. I knew that’s what I wanted in life, but that I needed to be in the workforce and know what it’s like to be an employee so I could be a good boss.
What are some of the jobs you had to hone your skills to run a business?
I did a lot of waitressing and took a lot of internships. I moved to New York after school and landed an internship at a PR company, and later at Vice magazine. I also worked at a nightclub there. I moved back to Montreal and did a graphic design program, then worked as a graphic designer in Toronto. I had gone into graphic design thinking I would get a more tangible skill. The company I worked at dissolved and I got laid off. I thought: “This is it. The stars are aligning. I’m going to do something right now.”
How did you come up with the idea for The Ten Spot?
A week after I was laid off, I was having pie with a friend, thinking I need to come up with my idea. I asked myself, “What do I want?” I thought it would be fun to have my own little business, open up my doors, turn on my lights and have my customers. We brainstormed ideas and I thought, there’s nothing in Toronto that married the worlds of what’s great about the chop shop [a low-end nail salon] but had the quality and service of the high-end spas. I thought that could be a really good idea. This was when Paula Adbul had that fungus [caused by an unsanitary manicure] and it was a huge story. I knew going in that the main downfall of the industry was the hygiene standards. I knew I wanted to communicate to people that we would be beyond the book in terms of our hygiene standards.
Where does the name ‘The Ten Spot’ come from?
I came up with it while putting together my business plan literally overnight. I didn’t want the name to be a descriptor such as Polish Beauty Spa or something along those lines. I wanted it to have a meaning, but not be obvious. I thought about 10 fingers and 10 toes, that 10 is in my name and has always been my lucky number and that I was born in October, the tenth month. I also didn’t want it to be gender specific. Then I thought about hot spot, or perfect 10. I just conjured up The Ten Spot. Then I checked to see if the URL available, and it was.
How did you raise the money to start the business?
I had a $30,000 line of credit and borrowed another $100,000 through the Canada Small Business Financing Program. My thinking was that I needed to go in this with a splash. I wanted it to look like something really different. I also have a good brain for not getting overwhelmed with the risky stuff. I didn’t worry at first about how to pay the rent or whether I would get enough clients.
Why did you decide to go the franchise route?
Our first locations already ran like franchises, with managers working on their location while I was working on expanding the business. I thought it would be so great to give other people the freedom and thrill that only entrepreneurship can bring. Also, it meant we could expand at a more rapid rate because you don’t need the same type of capital that you need when you’re building out bricks and mortar places. You need a lot of money in the bank to do that. It allowed us to expand the brand without having to pay for it.
What is your vision for the company?
My goal is to be the most recognized and reputable beauty bar brand in the world. I would like to follow in the footsteps of [franchise pioneer] Martha Matilda Harper, with more than 500 locations. We’ll be at almost 20 in the spring, then I’d like to hit 60, then 100 and go from there. Within the next couple of years I would like to be open in the US It’s a big market. My plan is to be in markets such as Miami and California, where it’s summer longer [which is good for business catering to exposed legs and toes], then Chicago and New York.
What advice do you have for other entrepreneurs?
If people are in their 9-to-5 job looking to make the leap I tell them to look at it this way: If opening your business is your Plan A and it doesn’t work out and your Plan B is to get a 9-to-5 job, you’re kind of living your worst-case scenario right now, so you might as well go for it. My company was an idea over a slice of pie and it could’ve stayed that way. I could’ve just gone out to find another job. Sometimes you have to take a risk.
This interview has been edited and condensed.
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Cannonsburg, PA (PRWEB) December 05, 2014
Both Stephen and Michelle Chung had reputable jobs in corporate America — Stephen as an analytical chemist for 20 years and Michelle as a chemical engineer for 10 years. But when the couple relocated from New Jersey to Pennsylvania, they grew tired of having their destinies dictated to them. Wanting to take control of their future, they decided to buy their own business.
The couple chose to purchase a 9Round fitness franchise, which offers variable 30-minute kickboxing and circuit-training workouts, aimed at getting people fit “nine rounds at a time.” Stephen explained, “There are no class times, so you can work out on your [own] schedule. The best part is a trainer is always there to help you, motivate you and keep you energized.”
The Chung’s entrepreneur coach recommended they contact Guidant Financial for help in financing their new venture. With Guidant at the wheel, they leveraged funds in their retirement accounts to invest in their franchise through a strategy known as Rollovers for Business Start-ups. This structure, which Stephen succinctly described as “smooth,” did not trigger a taxable distribution, saving them more money to invest in their business and their dream.
Both Stephen and Michelle now enjoy the fact that they’re in control of their destinies. “Everything we put into the business is what we are going to get out of it,” Stephen said.
The Cannonsburg 9Round, located at 3339 Washington Rd., will celebrate its grand opening this Saturday, Dec. 6, with a ribbon-cutting ceremony, vendor giveaways, mini demonstrations, competitions and a prize wheel. To learn more about the fitness programs offered at 9Round, call 724-260-5693, email andrew(dot)chung(at)9round(dot)com or visit 9round.com/fitness/mcmurray-pa-x1458.
9Round is a specialized fitness center dedicated to serving clients seeking a unique, fun and proven workout that guarantees results. 9Round offers traditional boxing and kickboxing fitness programs that incorporate functional, interval, cardiovascular and circuit-training regimens. The programs consist of a proprietary system of nine challenging workout stations developed by a professional fighter. For more information about 9Round, or to find the facility nearest you, visit http://www.9round.com.
About Guidant Financial
Guidant Financial helps people create the life they want through innovative small business financing. They are the premier provider of rollovers for business start-ups (ROBS). Guidants services allow people from all walks of life the freedom to purchase small businesses and franchises using their retirement funds without taking a taxable distribution or getting a loan, in addition to offering traditional funding options such as SBA loans, portfolio loans and unsecured credit. Visit Guidant on the Web at guidantfinancial.com.
Back in 2008 the Finance Act introduced sweeping changes to the
way non-UK domiciled individuals resident in the UK were to be
taxed. The Government#39;s principal objective was to extend the
definition of remittance so that it would be easier for
overseas income and gains to be taxed in the UK when they (or
assets representing the same) were brought, enjoyed or used in the
UK. Having said that, the legislation was far from clear cut and as
a result HMRC published detailed guidance on how it would treat
certain arrangements in light of the new legislation. Some of that
guidance was on relevant debts ie where an
overseas loan is brought to the UK (eg to purchase a UK property)
and the security for the loan comprises untaxed foreign income and
HMRC#39;s 2009 Guidance
Provided the overseas loan was on commercial terms and foreign
income or gains were not being used to meet interest payments or
repay capital, HMRC confirmed that it was possible to use foreign
income and gains as security without triggering a taxable
remittance for UK tax purposes. They further confirmed that if
clean capital was used to service the debt or repay the loan then a
remittance would not arise.
Many non-domiciled individuals resident in the UK have since
relied upon HMRC#39;s Guidance when structuring their property
purchases. They have been careful to ensure that they entered into
commercial arrangements and used clean capital to service or repay
the debt. As a result HMRC#39;s tax take has been minimal and
without the resources to investigate the commerciality
of all the arrangements, they were significantly motivated to
change their stance which was announced without notice on
HMRC#39;s new 2014 Guidance
With immediate effect, on 4 August HMRC revised their Guidance
stating that they would deem there to be an immediate remittance
where foreign income or gains were being used as security for a
loan used in the UK. Furthermore, the servicing of or repayment of
the loan with foreign income and gains would still constitute a
remittance . In short, a double remittance could now arise and this
is not limited to loans relating to property.
With the benefit of hindsight HMRC now refer to their 2009
Guidance as concessionary and the August announcement
as a withdrawal of their concession. However, it remains to be seen
whether this was the case and whether legally they are able to
introduce and withdraw concessions in this manner bearing in mind
we now have legislation specifically dealing with Extra Statutory
Concessions. Professional bodies such as CIOT, The Law Society,
STEP, The Expatriate Forum and ICAEW met with HMRC on
11th September to obtain further clarity. However it
would appear that HMRC are standing their ground and might be
prepared to face judicial review proceedings in the future.
What type of loans are caught?
- Secured lending (ie a loan secured
over real estate, an investment portfolio or a cash deposit
comprising mixed funds).
- Overlapping secured lending (ie a
secured loan where some of the secured assets are in the UK and
some are outside the UK, or some are clean capital and some are
- Floating charges on an all
monies basis (unless HMRC change their view after they have
reviewed typical TCs ).
Unsecured lending will not be caught even if it is made on the
basis of offshore accounts and investments comprising foreign
income and gains managed by or disclosed to the lender.
Individuals affected have been requested to notify HMRC; this is
a request and not a legal obligation. If the arrangements satisfy
the published 2009 Guidance the foreign income/gains will not be
taxed PROVIDED THAT by 31 December 2015 a written undertaking is
provided to HMRC confirming that before 6 April 2016 either:
- the offending form of security will
be changed to clean capital; or
- the loan remitted to the UK will be
HMRC will issue an assessment if:
- the arrangements are not commercial
(ie fall foul of the 2009 Guidance);
- the written undertaking is not
adhered to; or
- it is discovered that a notification
has not been made,
unless the arrangements are restructured by 6 April 2016.
Next steps for existing arrangements
- For tax years up to and including
2011/12 – if Self Assessment Tax Return filed on time, do nothing
because the tax payer acted in line with HMRC#39;s published
practice and the enquiry window has now closed (Note: HMRC might
not take this view).
- For tax years from 2012/13 onwards –
do nothing if felt the arrangements are commercial and sit neatly
with the 2009 Guidance and the debt arrangements have already come
to an end.
- For arrangements remaining in place
after 4 August 2014 – restructure to limit security to clean
capital (ie non-relevant foreign income or gains) or UK real
estate possibly in conjunction with a third party guarantor.
- Consider making a claim for Business
Investment Relief before 31 January 2015 for qualifying loans
brought into the UK on or after 6 April 2012.
- Be careful about restructuring:
further drawdowns (ie via an open facility), automatic renewals
and revolving loans might be seen as new debt arrangements.
Options for future property purchases
- Structure before an individual
becomes UK tax resident when clean capital is easier to
- Make use of Business Investment
- Make use of borrowings from non
- Make use of derivatives and secondary
HMRC are considering further guidance, perhaps in the form of
FAQs but advisors would prefer revised and clearer legislation.
Draft clauses have been submitted to HMRC for their review so this
area of the law and HMRC#39;s Guidance is likely to continue to
develop making regular review of existing and new arrangements
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
It has been four months since Winterboer, a senior partner at PwC, took over as curator for the ailing bank.
Since then, he and his team have drawn up a new business plan and applied for a new banking licence.
They have also interviewed and sent a list of candidates for a new board position to the Reserve Bank and transferred R26-billion worth of loans to the good bank.
Things seemed to have been going according to plan until recently, when they had no choice but to postpone the listing from the first quarter of next year indefinitely.
The team also failed to publish African Banks annual financial results as scheduled.
David Gard of PwC London, who has been working with Winterboer to help South Africas largest unsecured lender get back on its feet, fired a warning shot at a group of debt holders that may lobby against the Banks Amendment Bill.
Gard said that if the Reserve Bank halted its support it might result in the curator having to change his plans. Investors are concerned that the bill may result in the reduction of some of their rights as creditors.
He could not say whether the Reserve Bank would discontinue its support for the curators rescue plans for African Bank should the amendment bill be blocked.
However, he said: It should be recognised that the support structure we have is time limited. It is not an open-ended support structure.
The Banking Amendment Bill gives the administrator of a failed bank the power to sell assets and rejig capital structures without consulting investors. This is what has most bondholders tied up in knots because they may lose their money altogether.
But the curators team does not see things that way.
These sorts of amendment are done throughout the world, the team said, adding that the central bank needed to be sure that it would not be putting taxpayers money at risk if it were to commit to additional liquidity for the embattled lender.
Gard hopes that once bondholders and other investors understood this point they would change their views.
He said the move was a critical part of providing certainty for the recovery of the senior debt.
The bill, which will move through parliament next year, provides curators with a timely restructuring, he said.
To be honest, if I am senior creditor I would see this in the context that it provides a clear ability for us [curators] to deliver the deal. And they will be able to move forward with their investments, Gard said.
African Banks collapse in August sent shock waves throughout the financial sector.
One of the effects was that Capitec delayed its rights offer.
When former governor Gill Marcus stepped in to rescue the bank, she told bondholders that they would have to take a 10% haircut while other investors might lose everything until there is a successful relisting of the bank.
South Africas top six banks and the Public Investment Corporation formed a consortium to raise R10-billion for the group.
Warren Riley, head of equities at Warrick Wealth, said African Bank should take as long as it needed to prove that it was worth investing in again before it listed, while Winterboer reminded investors that it did not necessarily need to list on the bourse.
Riley thinks the uptake when it does return will be huge. Unsecured lending is not going away, but is here to stay, he said.
“The disposition to admire, and almost to worship, the rich and the powerful, and to despise, or, at least, to neglect, persons of poor and mean condition… [is] …the great and most universal cause of the corruption of our moral sentiments.”
The quotation is meant to invoke exactly the shock that it does. There is a palpable relief when one explains that words are from Adam Smith’s Theory of Moral Sentiments, which was published in 1759, almost 100 years before the Communist Manifesto was published (1848). In fact, the other durable literature from the same period is Oliver Goldsmith’s poem The Deserted Village, published in 1770. Goldsmith’s haunting words include:
Ill fares the land, so hastening ills a prey,
Where wealth accumulates, and men decay;
Princes and lords may flourish, or may fade;
A breath can make them, as a breath had made;
But a bold peasantry, their country’s pride,
When once destroyed, can never be supplied.
These two contemporaneous pieces of literature, now some 250 years old, speak to a profound set of difficulties that faced what is now the UK. The question in the current context that arises is, what do our writings of the present reflect? And how would they be read 250 years hence? Who is admired? Who flourishes? Who is despised? Who is in the process of being destroyed?
These questions arise from the perennial debate about values in society. Surely the most important challenges of this milieu are poverty and inequality. Granted, these are not uniquely South African challenges, but they assume a particular significance because our struggle for liberation was driven by so much hope, and the Constitution in its making brought so much promise. All of these experiences are so recent (the Constitution was adopted only 18 ½ years ago) to still be fresh in all of our minds. The inequalities that Smith and Goldsmith wrote of remain so very current and topical. The concern that we should all express in the context of a discussion about the Constitution is the risk that for many, it may appear, that the constitutional promise is now either extinguished or deferred.
I want to invite you into a discussion that we must have if we consider our responsibilities in the context of the Constitution. I want to emphasise that we have achieved much in our young democracy, but if we want to drive this nation forward on an inclusive basis, then we must talk about those challenges that present, and which if left unattended may sully the very achievements we are so proud of. Inequality is prime among the challenges that confront us.
You may argue that all of this is the consequence of economic policy decisions only, but it is important that we consider the constitutional context. Pause and reflect again on the preamble, or the “promise” of the very Constitution. We adopted the very document so as to
o Heal the divisions of the past and establish a society based on democratic values, social justice and fundamental human rights;
o Lay the foundations for a democratic and open society in which government is based on the will of the people and every citizen is equally protected by law;
o Improve the quality of life of all citizens and free the potential of each person; and
o Build a united and democratic South Africa able to take its rightful place as a sovereign state in the family of nations.
Granted, our much-admired Constitution is about much, much more than the binding objectives articulated in its Preamble. We will need to distinguish between the constitutional form — a democracy with regular elections, a voiced Parliament, an independent judiciary and an accountable Executive. All of those are fundamentally important victories secured — they did not exist in South Africa before democracy. Yet, I submit that they are merely the form of democracy — and we can tick all of the boxes for these claims. We must, however, turn our attention to the substance of democracy.
Are we moving in a direction that continually “improve(s) the quality of life of all citizens and free(s) the potential of each person”? Are we creating a sense of a rising floor of rights and opportunities? And are we consciously creating a sense of hope, measured by the feeling that each day is better than the previous one? In this context, we need to consider that it is entirely possible that we can tick all the boxes correctly about the form of our Constitution, yet avoid dealing with the substance thereof.
What do we want, and what should we expect? Even in a discussion on “sustaining our constitutional democracy”? There is the common assumption that we all want the same things but that we may chose different paths to get there. This is simply not true. It is unfair to assume that the poor who are dependent on a salary for their income, public services provided by the State and whose daily experiences are so vastly different from the wealthy want the same things. The rich derive an income from accumulated wealth; they are able to acquire the services that they need from the marketplace such as private education, private healthcare and security. The disparities are much greater than simply a matter of income and services.
So how do we sustain of our constitutional democracy? And do we, a gathering such as we are, have the absolute right to determine what the needs and expectations of others ought to be?
Perhaps one of the biggest obstacles to overcome as we grapple with the challenge of sustaining our constitutional democracy is the sense that the circumstances of parents serves as too great a determinant of the opportunities available to their children. And that in the main, these circumstances are a direct product of our history. So, in large measure, the landscape of opportunities still reflects the apartheid contours. This is not to deny the fact that opportunities for the advancement of blacks and women, which was not possible under apartheid, now exist. We must also recognise the statutory and institutional mechanisms created to advance the interests of “persons or categories of persons, disadvantaged by unfair discrimination.” This has resulted in the advancement of significant numbers of historically disadvantaged people. But for the majority, those opportunities still remain out of reach.
The trends over the past twenty years are actually quite disturbing. In 1995, the poorest 40% of the population received about 6% of national income.
Today, that figure is slightly below 6%, notwithstanding a massive expansion of social grants. In 1995, the top 20% of income earners earned about 72% of national income. That figure today stands at about 70%. For the top 10%, however, the figure has actually gone up. More starkly, the unemployment rate for young, black South Africans stands at over 50%. The comparable figure for white South Africans is below 10%. Notwithstanding significant social change, the chasms remain unbearably large.
The problem of growing inequality is, of course, masked by the mathematics of aggregation and averages. For elites, like ourselves, there is a sense of boundless accumulation, which may numb our senses to the harsh lived reality for the majority. Robert and Edward Skidelsky, in their authoritative book, How much is enough? Money and the good life, write,
Experience has taught us that material wants know no natural bounds, that they will expand without end unless we consciously restrain them. Capitalism rests precisely on this endless expansion of wants. That is why, for all its success, it remains so unloved. It has given us wealth beyond measure, but has taken away the chief benefit of wealth, the consciousness of having enough.
But, to the point of capitalism having given “wealth beyond measure”, I must add, “misery without measure” for the majority.
It brings me back to that extract from the preamble to our Constitution (yes, we are still on page two of the Constitution) that defines its very purpose (so as to), “improve the quality of life of all citizens and free the potential of each person”. What do we ask of civil society to do in order to check the excesses of some and to open opportunities for the many?
The first provocation is that it would help tremendously if we were neither neutral, nor indifferent to these unfolding realities; we need an understanding amongst the elites in society that they might be part of the problem. Secondly, we must expand our understanding of development impelled by a focus on “capabilities” — which is defined as concrete powers of thought and action. Thirdly we should engage in a discussion about how we can assert the voice of those who feel excluded. Fourthly, we must revisit our common purpose.
So let us try to unpack some of the means to open opportunities for the many.
What would we want to happen in South Africa? How far would we push the envelope? What would civil society wish to do with their powers to sustain our constitutional democracy? Let’s return to what the organs of civil society might consider.
Firstly, in working to counteract the complacency that comes from indifference, we fail to appreciate that the burden borne by the poor in South Africa goes way beyond the absence of jobs, and money. There are a range of deep social problems that afflict the poor and their impoverished communities. We must be bold to draw the links between the realities of inequality and poverty and their manifestations in infant mortality, criminality, unemployment, malnutrition, teenage pregnancy, illegal drug use, alcoholism, gangsterism and associated ills. The deep tragedy is that frequently a very rapid addiction to some hard-hitting drug, such as methamphetamine, leads into gangs, and then petty theft that strips every material object that the family has accumulated. Add to this the high levels of personal indebtedness, primarily from unsecured lending that shackle the poor and drive them back into the abyss of poverty as soon as they are able to raise their heads above the precipice. So, if civil society wants to act to preserve our constitutional democracy, there is a veritable smorgasbord of opportunities.
I want to invite you to follow closely the litigation brought by the University of Stellenbosch’s Legal Aid Clinic against the ministers of justice and of trade amp; industry, the National Credit Regulator, 13 micro-lenders and a law firm. If the case succeeds, and I sincerely hope that it does, the legality of emolument attachment orders (garnishee orders, in the legal parlance), and the days of unscrupulous and exploitative micro-lending will end. With it, a small chink of light of the promise of the Constitution. It has taken a while, and dogged determination of some very resolute people — including employers, who cannot bear to see the impoverishment of their employees — to bring this particular matter thus far. The rest of us cannot merely cheer on their efforts; there is so much work for organisations of civil society to liberate people from the trappings of poverty. But, do understand that engaging in support of poor and exploited people, denied access to the joys of our Constitution, may cost you some friends.
The problem of rising inequality cannot simply be placed at the door of government, regardless of how you might feel about the general performance of government. The World Bank study released last week confirms that fiscal policy is significantly redistributive, on both the tax and spending sides — but it is not enough. The stark reality is that inequality will remain high until we campaign together for job creation. It is not a matter that can be left to either the government or the trade union movement alone. What distinguishes South Africa from our peer group countries — Brazil, Mexico, Indonesia, and Uruguay, for example, is that a much smaller percentage of our compatriots work. Regardless of how redistributive spending is, we will not deal with inequality without creating large numbers of additional jobs. This is a topic that has to involve current and prospective employers.
We can easily get trapped into a discourse where investment is weak, growth is weak, social mobility ceases and social tensions rise. This raises the probability of populist policies, which threaten investment. It is up to all of us, the elites included, to break this cycle.
It is worth repeating that merely being the proud owners of a Constitution such as we have, without working to implement its spirit, is actually quite futile.
The second provocation requires us to unlock the essence of what the Nobel Laureate, Amartya Sen, called the capabilities approach in “Development as Freedom. He argues that there are five components in assessing capability:
o The importance of real freedoms in the assessment of a person’s advantage;
o Individual differences in the ability to transform resources into valuable activities;
o A multi-variate of activities giving rise to happiness
o A balance of materialistic and non-materialistic factors in evaluating human welfare; and
o Concern for the distribution of opportunities within society.
Surely, we must be able to measure the value of the freedoms articulated by our Constitution to empower people to develop the courage of thought and action. Access to employment and the skills set to exercise choice in employment opportunities are fundamental to unlocking the energy produced by a capabilities approach. In understanding this aspect of our democracy, we re-enter the zone of the substance, rather than the mere form of democracy.
So how do we unleash the courage of thought and action? Obviously, it must come from the nurturing in society by virtue of a rational redistribution.
I would like to tie this up with the work of another great economist Thomas Piketty. In his much-talked-about book, Capital in the Twenty First Century, he helps resolve the capabilities problem and the problem of inequality as follows
Modern redistribution does not consist in transferring income from the rich to the poor, at least not in so explicit a way. It consists rather in financing public services and replacement incomes that are more or less equal for everyone, especially in the areas of health, education and pensions. In the latter case, the principle of equality often takes the form of quasi proportionality between replacement income and lifetime earnings. For education and health, there is the real equality of access for everyone regardless of income (or parents’ income), at least in principle. Modern redistribution is built around logic of rights and a principle of equal access to a certain number of goods deemed to be fundamental.
So what, for the majority of South Africans, impedes the attainment of these fundamental rights? We should raise education very strongly under this topic, and in this context, there are three issues that are worth exploring. First, whether the right is articulated strongly enough in Clause 29 of the Bill of Rights. The second question we have to answer is whether the education function is adequately resourced. And thirdly, whether there are other impediments that we should be conscious of. In respect of the first issue, I will take the plunge and proffer a view that the language in Clause 29 could have been stronger. As it stands, the phrasing about the right to a basic education, and to further education may not be as unambiguous as it could be. Perhaps when read with Section 28(2) “A child’s best interests are of paramount importance in every matter concerning the child”, it becomes a bit clearer. Perhaps we should raise the issue for further discussion so that there should never be a doubt about the intention of the clause(s).
Secondly, in respect of finances, I would hazard that we do not have a problem. In the 2014-15 financial year, the state provides R190.7-billion for Basic Education, of which R144.2-billion is for compensation, R18-billion for Goods amp; Services etc.; and an additional R 52.5-billion is budgeted for post-school education. I think that the allocations by the National Treasury pass the Piketty test.
The third component to understanding whether we are equipping a generation of young people with capabilities is, of course, the conduct of teachers themselves. Nowhere is this more clearly articulated than in the papers and resolutions of the recently-held (South African Democratic Teachers Union) Sadtu conference. Mr Mondli Makhanya recently wrote of this conference: “With education having been universally identified as the most effective tool to take society forward, it would stand to reason that those who stand in the way of a better educated society are an impediment to progress. And with the most evidence pointing to the fact that Sadtu’s bullying tactics stymie efforts by government, parents, civil-society and hard-working teachers to improve the education system; the union is definitely an obstacle to progress.”
What value does our rights and freedoms guaranteed in the Constitution have if we are not able to conquer the fundamental challenge of unlocking the capabilities in society?
We will not advance the cause of equity and inclusion unless we can campaign together to produce better outcomes from our spending in education, tackling those who impede the passage of the children of the poor, as Mondli Makhanya does, might be one of the responsibilities we must shoulder.
It brings me to the third provocation in the battle to deal with the challenges presented by inequality: we need to consider the functioning of democracy as provided for by our great Constitution. I was persuaded by the arguments of President Michelle Bachelet in the Nelson Mandela Memorial Lecture she delivered in Cape Town on August 9 this year. She analysed the quality of democracy, a bold approach in an environment where so many citizens now have access to information from a variety of sources. She commented on the fact that the hallmark of democracy sets a legal frame for regular elections of representatives. What struck me about her address was the fact that she argued that basic standards of legality and representative democracy were simply no longer enough for citizens. This is in the context of the civility of institutions and with regards to rights already been achieved. She made the compelling point that “on top of demands for democracy, and an equal distribution of opportunities, goods and services, the demand for participation is essential.”
How would this participation be achieved by organs of civil society? And what are the risks? There are various initiatives to close the gap between elections; the Swiss system of frequent referenda, and the Californian system of propositions stand out among these. There remains, of course an enormous risk that some propositions may produce outcomes that may not articulate with our constitutional values. The question is whether the risks outweigh the opportunity to explore the argument presented by President Bachelet on the inadequacy of merely the standards of legality.
In many respects, legislation and funding allocations provide for a closing of the gaps between citizens and political power. I have established that the parliamentary system, that is the National Assembly and nine provincial legislatures, will spend approximately R800-million this year to support the 860 members to perform their responsibility of engaging the electorate, by closing the information gap and dealing with the needs and lived experience of citizens. The averages are quite amazing — the numbers average out at one elected representative for each 65 000 people, and give or take an allocated approximately R1-million annually to serve the electorate; and to these numbers we must add the actions and spend by directly elected ward councillors.
The Constitution [S42 (3)] says: “The National Assembly is elected to represent the people and ensure government by the people under the Constitution.” To enable the principle of ‘government by the people’ the parliamentary programme is so adjusted that its members are required to be in Cape Town for parliamentary committees and sittings for about three days of the week. Mondays, weekends and of course the periods that coincide with school holidays are set aside for constituency work and while Fridays according to the Rules are parliamentary working days, it is seldom used for plenaries with only a handful of committees that meet. All citizens should know how the system works for them, in closing the gap between officialdom and their daily lives.
This is not an unimportant point in the context of this evening’s discussion — we are remembering Helen Suzman, perhaps the most tireless of MPs, in spite of having been a sole representative for a long period of time. So my question to civil society is: why are you so tolerant? If President Bachelet is correct and ‘mere representative democracy is not enough’, how do we energise democracy?
The final provocation is, what exactly is our common purpose. Perhaps the most persuasive articulation of common purpose is expressed in the Constitution itself. Earlier I drew on the preamble to our Constitution — that well–crafted, cogent piece that gives us purpose. It does not stand alone; it is followed by the Founding Provisions that similarly leave no space for guesswork.
It lists the following values:
(a) Human dignity, the achievement of equality and the advancement of human rights and freedoms.
(b) Non-racialism and non-sexism.
(c) Supremacy of the constitution and the rule of law.
(d) Universal adult suffrage, a national common voters’ roll, regular elections and a multi-party system of democratic government, to ensure accountability, responsiveness and openness.
And defines citizenship by stating that:
All citizens are:
(a) equally entitled to the rights, privileges and benefits of citizenship; and
(b) equally subject to the duties and responsibilities of citizenship.
So there are clearly no problems whatsoever with our Constitution or the clarity of argument used to set the course for transition. No court would ever have to think very hard to answer the question, “what was in the mind of the legislators?” The language is so abundantly clear — it says for example, “law or conduct inconsistent with it is invalid, and the obligations imposed by it must be fulfilled.” There is no stronger language possible in constitutional law. The problem seems to be that we have forgotten why we co-exist in the same geographic space. The author Tony Judt speaks directly into this vacuum of purpose when he wrote: “If we remain grotesquely unequal, we shall lose all sense of fraternity: and fraternity, for all its fatuity as a political objective, turns out to be the necessary condition of politics itself. The inculcation of a sense of common purpose and mutual dependence has long been regarded as the linchpin of any community. Acting together for common purpose is the source of enormous satisfaction, in everything from amateur sports to professional armies. In this sense, we have always known that inequality is not just morally troubling: it is inefficient.”
So, if civil society is asking for a re-examination of its role — it has to be that because it does not need permission — there are four provocations that I submit it has to respond to –
o the indifference to what we see, feel and hear, and bear in mind that Helen Suzman’s motto was “See for yourself”;
o the need to focus on the concrete power of thought and action, or capabilities, that the key public services must unlock;
o the energizing of our democracy by paying close attention to both the representative and the participatory elements thereof; and
o re-establishing our common purpose.
In conclusion, ladies and gentlemen, our Constitution is drafted in a manner that sets an enormous, ongoing task to create a society that, not only deals with the deficits of the past, but one that is considerably better for all. The deviation from this path is measured by the gross inequalities that obtain. We can and must use this fact as a measure of our collective neglect. It can and must be dealt with, because we know that it will not self-correct. The actions required of us start with each of us, making a choice about what we want our country to be.
This is an edited extract from the annual Helen Suzman Memorial Lecture