Friday 28 September 2012

IHT

HMRC has published the updated Inheritance Tax Toolkit to assist agents when completing their clients' returns and forms.
These toolkits provide guidance on areas of error that HM Revenue & Customs (HMRC) frequently see in returns and set out the steps that you can take to reduce those errors. They should help you to:
ensure that returns are completed correctly, minimising errors
focus on the areas of possible error that HMRC consider key
demonstrate reasonable care
The updated toolkit is available from HMRC.

Late payments

UK SMEs are in danger of failing due to a mounting tide of late payments, according to research by Bacs Payment Schemes.
The findings reveal that the average amount owed to UK SMEs is £36,000. Yet over a third (35%) say late payment debts of up to just £20,000 would be enough to put them out of business.
Over one million SMEs – with a total collective debt of almost £36.4bn – are now under serious threat, the survey discovered. The problem is deemed to be particularly prevalent in the south of the country, where the average amount owed in overdue payments to the region’s smaller companies is £53,000. Almost half (49%) of those surveyed said that it would take up to £50,000 - to put them out of business.
Midlands SMEs face similar problems and the while the average outstanding debt is significantly lower, at £22,000, some 37% of companies said unpaid invoices of up to £20,000 could cause their business to fail. In the North, where the average debt is £27,000, more than a quarter (27%) said the same.
The research found that around six out of ten UK SMEs (59%) experience late payments. In the south, the proportion of smaller businesses facing overdue settlement echoed the national average, ahead of northern companies at 55% and their Midlands counterparts at 63%.
The average UK SME experiencing late payment now has to wait 43.4 days beyond payment terms for their invoices to be paid – with northern businesses forced to endure the longest wait, with an average delay of 46.8 days before bills are settled.
One consequence of the late payments culture is that hard-pressed businesses are being forced to invest an average of almost 14 days every year – or almost three working weeks - in chasing overdue bills.
Nationwide, the majority – 37% - say the worst offenders are large companies, although a quarter (25%) of companies surveyed claimed fellow SMEs were also guilty of paying late. Government and not-for -profits were at the bottom of the offenders’ list, with just six per cent of SMEs experiencing late payments at their hands.
The most common excuse SMEs hear is that the delay is down to cash flow problems within the company being invoiced.

HMRC targets you!

An expansion of a HMRC team targeting tax evasion by wealthy people has been broadly welcomed, but some experts fear the crackdown on tax dodgers is muddled and not radical enough.
Douglas Alexander, the chief secretary to the Treasury, said earlier this week that an extra 100 inspectors and specialists will be recruited to scrutinise the tax affairs of the 500,000 wealthiest people in the country.
HMRC’s “Affluent Unit”, set up in October 2011, will target people worth £1m, instead of the current threshold of £2.5m.
Another part of HMRC, called the “High Net Worth Unit”, focuses on the UK’s richest people with assets of more than £20m. The unit has collected £500m in extra tax since its creation in 2009, exceeding expectations, HMRC said.

Thursday 27 September 2012

RTI letters

HMRC is set to send out letters to every UK business that did not take part in its Real Time Information pilot, alerting them to the steps they must take to prepare for the biggest shake-up in the operation of PAYE for over 60 years.

RTI is a key element of the government’s plans to introduce a single benefit payment system in October 2013, which will be managed by the Department for Work and Pensions. The first real time submissions will be made in April 2013.

Under real time reporting, employers and pension providers – or agents, payroll bureaux and other intermediaries acting on their behalf – will send the taxman information about tax, National Insurance Contributions, student loans and other deductions each time they pay their employees. HMRC say this will help it to keep more accurate records and ensure more people pay the correct tax.

Steve Wade, employment tax director at KPMG in the UK, said he was concerned that while large employers were gearing up for the shift, smaller companies could be caught unawares.

Wade continued:

‘Many small and medium-sized businesses are likely to be blissfully unaware of this radical change. If they have up to date payroll software, hold current and accurate employee data and their software provider is gearing up for the more to real-time reporting then they may find that the transition is smooth. But if not, they are likely to face significant problems complying and may incur penalties.’

In July, the All-Party Parliamentary Taxation Group’s (APPTG) PAYE at the Crossroads report highlighted the challenges surrounding RTI implementation.

Its chairman, Ian Liddell-Grainger, said:

‘Progress has been made with the introduction of the National Insurance and PAYE Computer Service and will continue with Real Time Information (RTI) reporting. RTI is undoubtedly the biggest change to PAYE since its introduction back in 1944, but it should be regarded as a stepping-stone, not the final destination.’

‘Universal Credit makes it abundantly clear that PAYE is no longer just an HMRC issue, it’s a cross-governmental issue.’

The report acknowledges the solid work put in by HMRC but says some uncertainty still exists among the business community. It also says software costs that have to be borne by employers will be greater than initially anticipated.

More details are available from HMRC.

HMRC e mails

HMRC is inviting SME’s to sign up to receive regular emails offering tax help and support.

The new service is primarily aimed at those who are new to business, either setting up or expanding.

Colin Ford, HMRC’s head of SME education design, said:

‘Starting and running a business is challenging and HMRC recognises that its customers sometimes need help to understand their tax affairs.’

‘Signing up is a simple process. We do not ask for any personal information beyond a name, e-mail address and phone number.’

‘At a time when businesses need all the help they can get, HMRC is keen to do everything possible to ensure SMEs have the information they need to make their tax affairs as smooth as possible.’

Once signed up, the business will receive around six emails signposting a range of help. The advice available includes videos, interactive tools, factsheets and online presentations or webinars.

The help will be tailored to the level that the SME indicates it needs and the likely cycle of tax obligations. But the email service will not be able to provide answers to specific questions from the signed up companies.

More details are available on the HMRC website.

ONS get wrong again!!!

In July the ONS gleefully rushed out some figures that showed the economy contracted by 0.7% in the second quarter of the year. This pushed us into a "double dip" recession. The figures were seized upon by the media and it was trumpeted that the Government's strategy was all wrong and not working.

Lots of experts questionned the figure at the time as it made no sense in the context of other econo...
mic data - employment was rising strongly and unemployment is now back to pre recession levels.

Last month the ONS were humiliatingly forced to admit that they over estimated the recession of the second quarter by 29%! This was barely reported by the media, especially the BBC.

Today, in a further humiliation, the ONS were forced to admit that they over estimated the second quarter recession by a whopping 44%! Most experts agree that the new figure is still highly doubtful. Needless to say the new figures have had hardly been mentioned in the media and were not featured at all on the BBC six o'clock news!

It's no wonder the economy is in a mess - if I ran my business like that and told my bank manager how much I'd made in the second quarter, only to slash it by 44% three months later, quite rightly, he'd ask me if he could rely on any of the figures and certainly wouldn't lend me any more money!

Wednesday 26 September 2012

Libor

The British Bankers' Association (BAA), the organisation that sets the Libor interbank rate has said it will support any plans to strip it of its responsibility for Libor, if required.
On Tuesday, the BBA said in a statement that it seeks to work with the Wheatley review team as they complete their consultation on the future of Libor. It added that:
‘If Mr Wheatley's recommendations include a change of responsibility for Libor, the BBA will support that.’
Martin Wheatley, appointed by the Treasury to review the way the current regime operates, is expected to publish a report into how to reform Libor on Friday. He has already branded the existing system ‘no longer fit for purpose’ and is expected to recommend radical changes to the way the rate is calculated.
The Libor system is currently overseen by the BBA but not formally regulated by the FSA or Bank of England. In an attempt to rebuild confidence in financial markets, the BBA may be replaced by a formal regulator that will oversee the rate that is used to set prices on a range of financial instruments, such as mortgages and interest rate contracts.
Heavy criticism has come in the way of the BBA and the way it has run Libor, although it argued that it was not directly responsible for compiling the rate. While the BBA has published the rate since 1986, it has never been directly regulated, despite the special role it has in being used as a key and global benchmark against which banks decide to lend to companies and individuals.
This latest development follows a string of dramatic turns in the Libor scandal including, the resignation of former CEO of Barclays, Bob Diamond, and Barclays having to pay £290m in fines over the rigging of Libor.
The saga is set to continue as further investigations into how other major banks could have conspired to influence the level at which Libor was set take place.
Lloyds Banking Group and Royal Bank of Scotland are among the banks currently being investigated.

Tuesday 25 September 2012

Demographic timebomb

http://uk.finance.yahoo.com/news/record-numbers-reach-retirement-age-051609370.html

Trust your accountant!!

Small businesses are twice as likely to trust financial advice from their accountant as their bank manager and are resorting to out-dated sources in their desperation for increased funding, according to research carried out by Hitachi Capital.
A survey of 1,000 UK SMEs revealed that only 21% would seriously consider the advice of their bank manager, compared to 43% who said they would trust the wisdom of their accountant.
The study also found evidence of an endemic problem with cashflow as 43% admitted to having had or still experiencing difficulties in the past year, and John Atkinson, head of commercial business at Hitachi Capital says ‘it’s hard to hear that one fifth of those couldn’t get help from their banks’.
He said:
‘We are in a very different business environment at the moment, not only are economic times tough, but our faith in the banks is at an all time low. This has created a difficult situation for businesses as companies don’t know where to turn.’
Atkinson described it as ‘scary’ that nearly half of the SMEs polled were sourcing finance from secured loans (20%), bank overdrafts (17%) or credit cards (12%). And while these are more expensive and complicated than other sources, 28% confirmed that friends, family, life savings and selling off of assets were used to increase finance and cashflow for their business.

New Lib Dem taxes

Liberal Democrat members of the Cabinet have been busy over the weekend announcing a range of tax initiatives set to resonate with its party faithful at its Brighton party conference this week.
Deputy PM Nick Clegg said he would not back any more spending cuts without a new tax being slapped on the rich.
But Clegg admitted that he been unsuccesful in persuading the PM David Cameron and Chancellor George Osborne to support his demands for a mansion tax that would add a 1% charge on properties above a threshold of £2m.
Mr Clegg told BBC1's Andrew Marr Show:
‘I will not accept a new wave of fiscal retrenchment, of belt tightening, without asking people at the top to make an additional contribution.’
‘'I don't think you can ask people on middle and low incomes, who after all are the vast majority of the British population, to bear the brunt of this adjustment.’
As part of the government's attempts to create a 'fairer economy', Mr Clegg said parents and grandparents would be allowed to draw on pension pots to secure deposits for younger family members in order to boost home ownership.
In a Mail on Sunday article, fellow Lib Dem, chief secretary to the Treasury Danny Alexander heralded the start of a new crackdown on the tax affairs of the rich.
He said another 100 staff would be employed at HMRC’s Affluence Unit (AU) to manage the additional workload created by targeting people with assets worth more than £1m, such as Premier League footballers.
Yet an Independent article highlighted a number of British billionaires and multi-millionaires who pay their taxes.
The newspaper’s list reveals a mix of investment gurus, finance chiefs and property businessmen such as David Harding, founder of Winton Capital, the world's largest hedge fund, and Mark Coombs head of Ashmore investment house.

Monday 24 September 2012

Business bank

http://www.bbc.co.uk/news/uk-politics-19691162

Solicitors



London lawyers have become the latest target in HMRC’s taskforce initiative as the Revenue widens its net to tackle tax dodgers from hair and beauty businesses to the motor trade in Scotland.

Tuesday 18 September 2012

Auto -enrolment

I was watching TV last night when an advert came on from the Department of Work and Pensions about auto enrolment.

First thing that struck me was the title - Department of Work and Pensions. I don't get it - I employ you to do a job and pay you for it. Why is your retirement anything to do with me? Surely its up to you to sort it out?

The second thing that hit me was, after the succession of people proclaiming "I'm in" was the bloke announcing - "and the best bit is that your boss has to contribute".

Well that's true, but it's also very missleading. We as businesses have a choice of strategies:

  1. we could just bear the cost like the advert suggests but that will mean we have less money to re-invest in the future of our business (in our own case as we are a labour only business, the extra cost burden is equivalent to employing an extra person!)
  2. we could try to pass it on to our customers but if everyone does this, then inflation will rise and we'll all be worse off
  3. we could cut our employees' wages to leave our overall payroll cost the same

It's interesting that the Department of Work and Pensions assume that because we are in business we must be making loads of money and therefore can go route 1. Of course, for many businesses that is not the case and options 2 or 3 will be taken up. Most likey for a lot of businesses is option 3, leaving employees worse off!!

The whole auto enrolment thing is a massive missell too.

If you assume that a 25 year old male on average earnings of £26000 pa puts in £200 per month (including his employers 3% contribution) then when he gets to age 65 his pension pot will be about £85,000.

Why so low? Well it's because the stock market has drifted sideways for 12 years with no sign of picking up. As a result pension funds have averaged a 1% pa return for the last 25 years.

So he then goes along with his pension pot and buys an annuity. Because annuity rates are so low, currently £85000 would buy a pension of about £4500pa.

What a waste of time and certainly not the pension that he would have expected.!

He'd have been better off saving the £200 a month or paying his mortgage off quicker!

Monday 17 September 2012

VAT defeat

HMRC has lost the latest leg of a long-running VAT battle with a five-a-side football pitch operator. The company Goals Soccer Centres is set for a £500,000 windfall in backdated tax payments, after judges overturned an original ruling that had considered block booking of five-a-side pitches for amateur football leagues should not be exempt from VAT.
The successful appeal removes the potential scenario of Goals charging players in the leagues having to pay an extra £1 on the current £5.50-a-head fee to cover the extra cost.
News of the decision saw share prices in the company rise by 3%.
At this stage, HMRC have not decided whether to appeal but issued a statement following the ruling. A spokesperson said:
‘HMRC is considering the Tribunal's decision and will respond further in due course.’

changes to employment law

http://howespercival.createsend4.com/t/ViewEmail/y/73D9EDA8A00E25E6/D1AD857D3159C6E2148F9D201EEB5695

Sunday 9 September 2012

Would you pay an IFA?

Regulation

Save the Planet

Peter Bakker, president of the World Business Council forn Sustainable Development, said at the recent Rio Earth Summit that "it was the accountants who would save the planet".

Audits

More than 100,000 UK businesses could opt out of annual audits as the government announces plans to change qualifying thresholds and reduce auditing and reporting requirements.
The government’s response to the consultation on Audit Exemptions and Change of Accounting Framework confirms plans to allow more companies to make a commercial decision about whether or not to have a statutory audit.
Business secretary Vince Cable said:
‘Reporting requirements have become increasingly demanding and costly over the years. We listened to business, who made a strong case for reform, and I am delighted that we are now taking this opportunity to make audit more flexible and targeted.’
The changes to audit rules are likely to save companies up to £2.4m per year in fees, according to BIS.
Currently, to be eligible for an audit exemption in the UK, small companies must be less than a certain size in terms of balance sheet and turnover. The new regulations will align mandatory audit thresholds with accounting thresholds, meaning SMEs will be able to obtain an exemption if they meet two out of three criteria relating to balance sheet total, turnover and number of employees. This change will allow 36,000 more companies to opt out of an audit.
Under the current thresholds, qualifying SMEs must comply with two of the following criteria: they must have no more than 50 employees; no more than £3.26m on their balance sheet; and less than £6.5m in turnover.
Simon Letts, head of audit quality at Deloitte, says:
‘This is an innovative and welcome initiative offering flexibility to companies. While an audit is a valuable service to provide assurance to shareholders and directors, these benefits may be considerably lower for wholly owned subsidiaries.’
‘Directors of both parent companies and subsidiaries will need to balance their assurance needs, the potential savings in audit fees and the potential exposure under a guarantee.’
The government will also exempt most subsidiary companies from mandatory audit, as long as their parent company guarantees their liabilities. A further 83,000 subsidiary companies fall into this category. In addition, another 67,000 dormant subsidiaries will no longer need to prepare and file annual accounts, provided they receive a similar guarantee.
Following consultation by the Financial Reporting Council (FRC) on changes to UK GAAP, the government has also decided to allow companies that prepare their accounts under International Financial Reporting Standards (IFRS) to move to UK GAAP and take advantage of reduced disclosures.
The regulations are expected to come into force for accounting years ending on or after 1 October 2012.
(Accountancy Live, 6 September 2012)

Tax avoidance

One half of the Hargreaves Lansdown financial services empire has dubbed the entire cabinet “muppets” and said his business is one of just two in the FTSE 100 not using offshore or other tax avoidance arrangements.
Peter Hargreaves’ bold pronouncements were made in the wake of Hargreaves Lansdown announcing that its pre-tax profits leapt by a market-defying 21% to £152.8m, with its tax bill rising by 16% to £39.5m.
In an interview with the London Evening Standard, he said the Cabinet reshuffle this week was ‘just one bunch of muppets exchanged for another bunch of muppets’.
On tax issues, he said:
‘We are one of only two FTSE 100 companies which do not use offshore or other tax avoidance arrangements. In fact, we are probably one of the highest tax paying companies in the index.’
Two years ago the company brought forward its dividend payout to avoid the 50% top tax rate for the core beneficiaries — Hargreaves and co-founder Stephen Lansdown. This year, though, he will be coughing up the full 50% on his £34.4 million dividend.
The accountant, who launched the company from the spare bedroom of his Bristol flat in 1981, when Britain was ravaged by strikes, high unemployment and rioting, is about to wave goodbye to his business partner, Stephen Lansdown.
Lansdown, who recently celebrated his 60th birthday, will not to seek re-election as a director of the company and is set to step down from the board following the investment management group’s annual meeting.
Hargreaves Lansdown now employs 650 staff and is headquartered in Bristol.

HMRC Toolkits

HMRC has published the updated Small Profits Rate and Marginal Relief Toolkit to assist agents when completing their clients' 2011-12 Company Tax Returns.
These toolkits provide guidance on areas of error HMRC frequently see in returns and set out the steps that you can take to reduce those errors. They should help you to:
ensure that returns are completed correctly, minimising errors
focus on the areas of possible error that HMRC consider key
demonstrate reasonable care
Details of the latest update is available from HMRC.

Finance Act 2012

The Finance Act 2012 received Royal Assent on 17 July 2012. It has 687 pages, 229 sections and 39 schedules. It is longer than all the Finance Acts added together for the 1950s. George Osborne and Vince Cable promised to reduce the burden of red tape strangling British businesses - how about starting with making the tax system simpler and easier?