Time To Pay – Update

HM Revenue & Customs’ Time to Pay (TTP) scheme is under scrutiny once again. This time, it has emerged that the taxman has been agreeing multi-million pound TTP arrangements without requiring businesses to undertake independent reviews to check their viability.

Earlier this month, HM Revenue & Customs released its figures on TTP arrangements, and an analysis of the data by industry publication Accountancy Age showed that 140 high-value arrangements (over £100,000 a year) worth £45m were made in June, at an average of £321,000 each. This compares with an average of around £180,000 to £200,000 in each of the previous 15 months.

HM Revenue & Customs has stated that a small number of very high-value arrangements made in June skewed the figures and, if it were not for these, the average would be similar to other months. Research showed that these arrangements would have to be collectively worth around £17m to skew the June average figures to this extent.

Back in 2009, Alistair Darling announced in the Pre-Budget Report that HMRC would require businesses applying for TTP for debts of £1m or over to provide an independent business review (IBR) supporting their request. This involves the businesses appointing insolvency practitioners to review their long-term viability – but a freedom of information request has shown that no IBRs were carried out in June, and only six had been carried out in total between January 2010 and June 2011.

Senior Partner Paul Carvell comments: “HMRC has claimed that an IBR is not always required in £1m+ cases, because each TTP request is considered on its own individual merits and circumstances. However, in light of the taxman’s recent reluctance to agree TTP arrangements with so many struggling businesses, this seems rather an odd situation. It would appear that, for a few large-scale enterprises with outstanding tax liabilities, HMRC is prepared to be more lenient. When you contrast this with the declining number of TTP arrangements made for smaller sums, one has to wonder whether it’s one rule for bigger companies and another for SMEs.”

Vince Cable Fined By HMRC

There has been fresh embarrassment for the government as it has been revealed that business secretary Vince Cable has been fined for failing to pay up to £25,000 in VAT on money he received for his media work.

Mr Cable, who has publicly condemned tax avoidance in the past, was ordered to pay a £500 penalty by HM Revenue & Customs after it emerged that he had not paid the tax on time. The cabinet minister is believed to have made a considerable sum from media work and book deals in the two years before he assumed his current role, with estimated earnings of £192,000 on top of his annual MP’s salary. However, he failed to register it.

Paul Carvell, senior partner at Stewart Fetcher & Barrett, comments: “Despite his claim that the mistake was made unknowingly, Vince Cable must realise that this is not the sort of error that the business secretary can make without incurring a substantial backlash. HMRC rules clearly state that if a person’s turnover of VAT-liable goods and services over a 12-month period exceeds the current £73,000 threshold, they must register for the duty within 30 days.

“Considering his previous comments about tax avoidance, he has now left himself in an untenable position, whereby he himself is open to ridicule, and the government is exposed to further embarrassment.”

Don’t ‘do a Vince’ – call Sasha in our tax department now on 02476 384171.

Would You Fail A Business Records Check?

HM Revenue & Customs (HMRC) has announced an extension of its business records checks programme – after the pilot scheme found that around 44 per cent of businesses visited had issues with their record-keeping, while around 12 per cent of those visited had seriously inadequate records. Business records checks were piloted earlier this year in eight key areas, and involve checks on the adequacy of small and medium-sized enterprises’ business records.

HMRC will employ 120 full-time staff to implement the programme, and plans to complete up to 12,000 business records checks by the end of the current financial year, with 20,000 provisionally planned for 2012/13. Initially, only the most extreme cases of poor record-keeping will incur a penalty – however, in the longer-term, HMRC intends to issue penalties of up to £3,000 for serious inadequacies in record-keeping.

Adam Bexon, partner at Stewart Fletcher & Barrett, said: “The importance of good record-keeping cannot be overstated. It will help you pay the right amount of tax – no more and no less – thus helping you to avoid interest and penalties. Keeping adequate records will give you a clearer idea of your financial situation, which allows you to make business decisions that will give you the best chance of success.”

Research by the Organisation for Economic Cooperation and Development (OECD) indicates that poor business record-keeping generally leads to an underassessment of tax, even where there is an audit-type check into a return for the period covered by such records. On this basis, poor business record-keeping is responsible for a loss of tax in up to two million SME cases annually.

If you are worried about failing a business records check, why not try out our free online business records checker here: http://www.sfb.uk.com/business-record-checker.htm

HMRC In Gobsmacking New Blunder

In a development straight out of a Seventies sitcom, H M Revenue & Customs has failed to send out around half a million tax reminders – because it ran out of paper.

The farcical development may amuse many, but it means those people may have forgotten to pay their final demands by last Sunday’s deadline. In mitigation, though, the taxman has stated that taxpayers who have not received a reminder have 30 days to pay from the date it is finally delivered.

Four times more people than last year owe money on bills that should have been paid in January. They were expected to pay the money owed by July 31, but HMRC did not order enough paper for reminder letters.

An insider has been quoted as saying: “It is a shambles. They have literally run out of paper to send out the reminder letters.” Red-faced revenue bosses admitted the gaffe at the end of last week, and there has been speculation that staff cuts are to blame.

A spokesman for Revenue and Customs said: “We very much regret any inconvenience.” The statements will now be sent out “as soon as possible,” so anyone who is worried that they have not yet received one can rest assured that it IS the taxman’s fault, and they will still have time to pay.

Thank goodness for that – if anyone else’s business was run like this it wouldn’t last two days…

PAYE Tolerance Level Slashed

People who have underpaid due to PAYE errors will soon find themselves being chased up for smaller sums, as H M Revenue & Customs is to slash the current £300 ‘tolerance’ level to £50.

When it was introduced last year, the National Insurance & PAYE System (NPS) led to a huge number of errors for 2008-09 and 2009-10, which have affected an estimated 15 million people. As a consequence, HMRC agreed to write off the debts of taxpayers who owed less than £300. Now, however, this is set to change, as the taxman has announced that this sum will be reduced to £50 for the estimated 1.2 million people who underpaid tax in 2010-11.

An HMRC spokesman said: “We’ve used a tolerance since PAYE was introduced to achieve a balance between the costs of sending out tax calculations for relatively small amounts of tax with the cost of that work to the taxpayer. The six-fold increase to £300 was always intended as a temporary measure while we reconciled two years at one time. That work is now complete so it’s only right that we return the threshold to its normal level.”

Because of this, taxpayers are likely to see more and more P800 tax calculations being issued, which could be problematic for employers operating weekly or multi week payrolls who have processed a week 53, 54 or 56, as the Revenue’s new computer system does not recognise these additional weeks – and can therefore make no additional allowance for the underpayment of tax.

The announcement is also likely to hit vulnerable groups hard. For example, some pensioners on low incomes, who may have had their payments written off in the previous two years, will find they will have to pay the accrued limit. However, HMRC insists that there are schemes in place to help those who may encounter difficulties in paying – despite its decreasing leniency in such situations.

If you would like more information about how this could affect you, call one of our experts now on 02476 384171.

No More Time To Pay?

Business who are struggling to pay the taxman have been dealt a severe blow by the news that there has been a huge increase in the number of ‘Time to Pay’ (TTP) arrangements being rejected by HM Revenue & Customs.

According to recent figures released by HMRC, 3,390 TTP requests were refused in the first three months of 2011, compared to 2,440 in the same period in 2009 and 2,360 in 2010.

Only 32,900 requests were agreed in the first quarter of this year, compared with 82,000 in 2009 and 57,800 in 2010.

HMRC said that the scheme “continues to be available to help companies address short-term cash flow difficulties that result in an inability to pay their tax in full and on time”. It also claimed that the criteria determining whether arrangements were agreed or rejected had not changed in any way.

However, many professionals (including ourselves) see this as yet another sign of HMRC’s tough new approach towards individuals and businesses who are already struggling in a harsh economic climate. Even requests with secure guarantees are being turned down, and deals are being restricted to payments within three months. Those who have not previously had a TTP arrangement in place are far more likely to have a request accepted than companies that have already been subject to one.

If you are worried about any difficulties with tax payments, it is a good idea to have a plan in place. Talk to one of our experts to find out how we can help you with this. http://www.sfb.uk.com/

Online, Offline – What’s Going On?

After imposing new rules requiring tax returns to be iXBRL-tagged and filed online, HMRC is in the embarrassing position of being forced to admit that its systems cannot accept the electronic files. In fact, it will not actually be ready to accept post-31 March 2011 returns until its online portal is updated in October.

In the face of much mockery and disbelief, HMRC has stated that because of the lowering of the Corporation Tax rate to 26% (20% for small profits rate) on 6 April, its software needs to be updated. Unfortunately, it has no plans to do so until October.

The official notice from HMRC explains that “the rate changes only affect returns with accounting periods that end on or after 1 April 2011 with filing dates of 1 April 2012 or later. These changes will take effect on the date that Finance Bill 2011 receives Royal Assent (expected in July 2011). Corporation Tax Online will then be updated in October 2011 with the new rates. In the meantime Corporation Tax online will use the old rates.”

Before the new rules came into force in April, people were allowed to file paper returns early. With this option being withdrawn, many who have taken the time and effort required to properly undertake iXBRL tagging and e-filing are extremely displeased to be told now that they will be unable to file returns till October.

Stewart Fletcher & Barrett partner Peter White comments: “It does seem to many people that HMRC should really ensure it is able to deal with the consequences of any new policies it decides to push through before it requires everybody else to comply with them. Unfortunately, as with all of these things, there will inevitably be additional costs for clients, but this is something that the Revenue completely dismisses. While the taxman demands that ordinary people abide by the rules, it would appear that he is under no such obligation himself!”

HMRC ‘Determined To Increase Number of Prosecutions’

Following on from its recent tax amnesties, HM Revenue & Customs is coming down hard on tax evaders by launching its first 16 criminal investigations as part of its commitment to deliver a five-fold increase in prosecutions. Its enquiries, which have been aimed at specific categories of taxpayer, have raised nearly £500m so far – but this figure is set to soar as further industry sectors are targeted, with doctors now in the firing line.

Last month HMRC revealed that it had set its sights on restaurant owners in London as part of a new, industry-specific team approach which ushers in a “new era for tax compliance.” Now the medical profession is under the same scrutiny, with HMRC expected to soon publish details of members that have deliberately evaded paying tax.

Chris Harrison, HMRC Criminal Investigations deputy director, said: “We are confident that these and more cases will be taken forward in the future. This is proof of HMRC’s determination to increase the number of prosecutions we take forward in all areas – we are committed to ensuring everyone pays what they owe so that the maximum is available to spend on public services used by everyone.“

Another area being subjected to intense scrutiny is financial records. With HMRC taking a hard line on tax evasion and non-compliance, it is more important than ever to ensure that your tax affairs are in order. Call us on 02476 384171 to arrange a chat, or visit our website www.sfb.uk.com to access our free online checkers, including your own personalised records report.

Are Your Business Records Up To Scratch?

Businesses that are part of a mandatory pilot scheme from HM Revenue & Customs are being informed that they may receive another visit if their record keeping does not improve.

According to Accountancy Age, none of the businesses were deemed to have had adequate records, and they were told that inspectors may visit them again in the next three months to check whether they have made improvements in the areas mentioned.

HMRC has recommended that sales invoices should be issued with consecutive numbers and a cash book be maintained. Other recommendations included a drawings record always being kept, a mileage log being maintained and business records being written up at least weekly.

The importance of maintaining adequate records cannot be overstated. If you would like to take advantage of our free online business records checker, click here.

Small Businesses, Big Losses?

Shocking new figures indicate that around one in ten small business owners miss important tax deadlines and payments, while nearly a fifth have lost out on grants and tax breaks.

“In today’s economic climate, no business can afford to throw away money – but by missing tax deadlines and incurring penalties, that’s exactly what you are doing. For small businesses especially, these basic errors can affect your ability to succeed,” said Jon Sargent, partner at Stewart Fletcher & Barrett.

The survey of 500 small businesses, which was carried out by Clydesdale and Yorkshire Banks only last month, also found that 16% were unsure of where to turn for guidance on regulation, while 15% said they struggled to understand new rules.

This confusion arises when businesses either do not seek advice, or seek it from the wrong quarter. Conversely, speaking to a qualified expert can save you a great deal of potential grief, as well as money!

Maybe you don’t have time to research current legislation or grants available. Perhaps you find tax issues complicated, obscure or even (whisper it!) boring. Handling such matters when your speciality is running a farm, selling newspapers (or any other non-accountancy-related business) is frequently time-consuming and often enraging. We, on the other hand, love it!

Call us for an informal chat on 02476 384171, and you’ll see that we mean business.

http://www.sfb.uk.com/