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Rising compliance costs increase burden on small businesses

Small firms are spending increasing amounts of time and money on complying with laws and regulations, research by the Forum of Private Business (FPB) has shown. The FPB estimates that the total cost of compliance for small businesses has increased by 1% since 2009 to 16.8 billion per year. Tax-related regulation and employment law were among the greatest burdens cited by respondents in the survey. The FPB's head of campaigns, Jane Bennett, called for "the authority of the Local Better Regulatory Office to be maintained" emphasising the need for "targeted support, sympathetic enforcement and grading of compliance."

 

 

Government announces four more enterprise zones

The Government has unveiled four enterprise zones in Birmingham, Bristol, Leeds and Sheffield. The zones are designed to accelerate local economic growth and create 24,000 new jobs by 2015. Plans for the zones, which will benefit from discounted business rates, super-fast broadband and lower levels of planning control, were announced in the Budget earlier this year. A further ten enterprise zones are yet to be revealed.

 

Rising compliance costs increase burden on small businesses

Small firms are spending increasing amounts of time and money on complying with laws and regulations, research by the Forum of Private Business (FPB) has shown. The FPB estimates that the total cost of compliance for small businesses has increased by 1% since 2009 to 16.8 billion per year. Tax-related regulation and employment law were among the greatest burdens cited by respondents in the survey. The FPB's head of campaigns, Jane Bennett, called for "the authority of the Local Better Regulatory Office to be maintained" emphasising the need for "targeted support, sympathetic enforcement and grading of compliance."

 

 

Small firms under threat from rising costs, research shows

Eight in ten small business owners cited rising costs as the most significant threat to the longevity of their business, according to research by business consultants Make it Cheaper and the Centre for Economic and Business Research (CEBR). The research shows that 55% of small firms believe that if costs continue to rise they will not survive. Jonathan Elliott, managing director of Make It Cheaper, said rapid cost increases are "dampening the entrepreneurial spirit so crucial to economic recovery." Small firms say the greatest burdens include the rising costs of transport, energy and insurance premiums, all of which are set to grow throughout 2011.

 

The Budget 2011

The Chancellor of the Exchequer, George Osborne, presented the 2011 Budget earlier today.

The Budget builds on announcements in the Spending Review 2010 and the June Budget 2010 which can be found at HM Treasury website along with all the detailed announcements.

The Budget sets out a package of measures with the key themes of Growth and Fairness.

The Budget also launches the Government’s Plan for Growth, a package of measures aimed at supporting private sector investment, enterprise and innovation. This includes measures to increase the competitiveness of the UK tax system; reduce the burden of regulation; and increase incentives for business investment.

Key measures in the Budget for businesses include:

  • a reduction in the main rate of corporation tax by a further one per cent. From April 2011, the rate will be reduced to 26 per cent with further yearly reductions of one per cent until 2014 when it will reach 23 per cent;
  • new Controlled Foreign Company rules to allow groups based in the UK to compete more effectively with those based overseas;
  • the abolition of 43 tax reliefs whose rationale is no longer valid – following recommendations from the Office of Tax Simplification;
  • dropping existing proposals for specific regulations which would have cost business over 350m a year;
  • 100m for local authorities to repair potholes caused by the cold winter weather;
  • increase the rate of R&D tax credits for small and medium-sized enterprises from 175 per cent to 225 per cent by April 2012;
  • 21 new Enterprise Zones, to focus growth in specific parts of the UK;
  • fuel duty will be cut by one penny per litre from 6pm on March 23. The April 2011 inflation-only increase in fuel duty will be deferred to 1 January 2012; the April 2012 increase will be implemented on 1 August 2012;
  • a further increase to the income tax personal allowance for under 65s of 630 to 8,105 in April 2012;
  • additional work experience placements and additional apprenticeships for young people;
  • help for homeowners facing difficulties by extending the temporary changes to the Support for Mortgage Interest Scheme for an additional year and providing 250m to support first time buyers to purchase a new-build property.

Summary of tax changes

The Government has published a single supplementary document containing further details on all tax changes announced at Budget.

 

 

Plumbers Tax Safe Plan: useful links

Stage 1 Notification:
You must notify by 31 May 2011. At this stage you just need to submit your details, tax reference and NI number. You can notify your intention to disclose in one of three ways:

Click here if the above links do not work: http://www.hmrc.gov.uk/trades-disclosure/notify.htm

Stage 2 Disclosure:
You must notify by 31 August 2011. You can make your disclosure in one of two ways:

HMRC expect most people to have to pay a maximum of six years but there will be some who need to pay more.

Deliberate defaulters
People who have been in business since before 6 April 2005 who have either:

  • deliberately told HMRC they have earned less than they have, or
  • have deliberately not told HMRC anything at all about their plumbing income.

may need to pay up to 20 years.

As soon as you think you might need to include years prior to 2005-06 in your disclosure you will need to use this form (PDF 164K) to enable you to do this. It is not possible to disclose online in these circumstances.

Non-deliberate defaulters
In the event that a default is not deliberate, there is no requirement to go back any  further than six years. Each case should be considered carefully on  its own facts and circumstances.

If any of the above links stop working, click here for details: http://www.hmrc.gov.uk/trades-disclosure/notify.htm

Cable to ease small business audit burden

Business secretary Vince Cable has pledged to remove the  need for independently audited accounts for tens of thousands of small  businesses.

The auditing changes form part the government’s overall growth review and come at the same time as CBI calls for economic growth in the forthcoming Budget.

While still at the consultation stage, the auditing proposals are expected to save 42,000 small firms up to 40m per year.

The government has identified accounts production and regulation as one of the greatest burdens to small business.

Cable said: “It’s important that we free small firms up so they can  grow and drive the economy. The changes I have announced today mean  that small firms will be able to concentrate on growing and taking on  more people instead of paperwork.”

To read the full article click here

 

 

UK economy heading for Q1 upswing

With the 2011 Budget announcement edging closer into view,  financial information services company Markit’s latest research points  to an economic upturn in the first quarter.

Chris Williamson, chief economist at Markit, has pulled together a range of data spanning manufacturing, services  and construction, resulting in the economy expanding at 0.4% quarterly  rate in February and 0.5% in Q1.

The underlying growth trend is 0.2% based on the last four months and the all sector PMI (Purchasing  Managers' Index) Output Index averaging 54.3.

The PMI surveys  points to further robust growth in February, suggesting GDP will have  recovered in Q1 from the decline seen in the final quarter of last  year.

According to the research, growth in Q1 is flattered by  the recovery from the snow-related disruptions to many businesses in  December, notably for construction, travel and transport and other  consumer-oriented services.

Dividend waivers: Get the details right

HMRC's increasing focus on close companies has clouded the picture about what constitutes a settlement when share waivers are used. Jennifer Adams offers a simple-to-follow summary of the main technical requirements.

When to use a dividend waiver: Dividends are paid at the same rate for each category of share in accordance with the number of shareholdings held. Such inflexibility could mean the distribution of profits not being made in the most tax efficient manner or produce difficulties for a shareholder who does not want or need the payment - a dividend waiver may offer the solution.

How it works: The shareholder voluntarily waives entitlement to their share of the dividend, allowing the distributable profits to be divided between the remaining shareholders in the proportion of their holdings.

Scenario 1 : ABC Ltd has distributable profits of 50,000 and wants to pay a dividend of 400 per share; the shares are held by three brothers as follows:

  • A         50 shares
  • B         25 shares
  • C         25 shares

A can waive his dividend and B and C will receive 10,000 each with no matters arising; A’s dividend remains within in the company.

Scenario 2: Same details as above with A waiving his dividend but B and C receiving an increased amount of 15,000 each (600 per share). HMRC may challenge this waiver contending that A has settled 2,500 on each of his brothers and he will be taxed thereon on the grounds that an element of bounty is present. Although the actual total amount of dividend paid (30,000) is less than the amount of distributable profit (50,000), if A had not waived his dividend the company would not have had enough distributable profits to pay the increased 600 per share (600 x 100 = 60,000).

When will HMRC become interested?

Comments made on the AccountingWeb site show inconsistency in HMRC’s approach to dividend waivers despite instruction given in the ムTrusts, Settlements and Estates Manualメ [2] (TSEM 4225). However: In practice HMRC are only likely to take the above settlement point where the waiver is considered to create a tax advantage. They will try to argue that the waiver indirectly provided funds for an ‘arrangement’ or ‘settlement’ under Income Tax (Trading and Other Income) Act 2005 Pt 5 Chpt 5 s623; an element of bounty being needed for the settlement provisions to apply.

If the transfer is between spouses HMRC will deem the settlement to be one of income and unless there is an outright transfer/gift of ownership of the shares protection under s624 (husband and wife exemption) will not apply ( [3]Buck v HMRC (SpC 716) [4]).

Buck v HMRC also confirmed that a company may legally distribute all of its distributable reserves/shares* to a single shareholder if all of the other shareholders waive entitlement but again in the taxman’s eyes that could represent bounty and if present the settlement provisions would apply.

Specific points; A formal deed of waiver is required, which must be signed, dated, witnessed and lodged with the company

It is imperative that the waiver be in place before the right to the dividend arises because a waiver after payment is a transfer of income which constitutes a settlement. Therefore an interim dividend must be waived before being paid; a final dividend is payable once approved at an AGM unless confirmed to be payable at a future set date.

HMRC would prefer to see a commercial reason for the waiver (again see Buck v HMRC). Therefore, best to state in the deed that the waiver has been made to allow the company to retain funds for a specific purpose.

Dividend waivers should be used sparingly - don’t waive every year. HMRC will look more closely at arrangements which are repeated, the practical effect of which reduces the overall tax payable (again see Buck v HMRC). Nothing should be given in consideration of the waiver.

A waiver may cover a single dividend, a series of dividends or dividends declared during a specified period of time. Ensure that the dividend declared per share times the number of shares in issue does not exceed the amount of the company’s distributable reserves (see scenario 2 above).

Are there any other options?

The shareholder who does not want the dividend will have to transfer his shares to another shareholder(s) before the dividend is declared. This will mean no further involvement in the company and would be more difficult to reissue shares to him at a later date; the procedure also needs Board approval.

Re-categorise the shares into A and B shares with the same rights except for dividends; then declare a dividend on the A share only. The owner of the B –type shares will not receive dividends for the time being but remains involved with the company.

Final Note

A waiver of dividends will not be chargeable to IHT as a transfer of value if made within 12 months before the right to the dividend arises. (IHTA 1984 s15).

 

 

The Purpose of Management Accounting in Small and Large Companies

The purpose of management accounting is to provide managers with financial and statistical information which will help them carry out their responsibilities.  It is critical to help make informed decisions.

Many businesses don’t use management accounts and they lose money every year because of it.  The managers of those business place their future at risk because they don’t have a perspective of the future.

 

The accounting system is the major quantitative information system in almost every company and it should provide information for three broad purposes:

1. Internal reporting to managers, for use in planning and controlling routine operations;

2. Internal reporting to managers, for use in making non-routine decisions and in formulating major plans and policies;

3. External reporting to stockholders, government, and other outside parties, for use in investor decisions, income tax collections, and a variety of other applications.

The third purpose, external reporting, emphasizes the historical, custodial, and stewardship aspects of accounting. This area is usually called financial accounting. Financial accounting is concerned with identifying, measuring, recording, and communicating the economic transactions of companies. On the other hand, internal reporting, the first two purposes, focuses on management planning and control. This area is usually called management accounting. Management accounting is the identification, measurement, accumulation, analysis, preparation, and communication of information that assist executives in fulfilling organisational objectives.

Accounting cuts across all facets of a company. The study of modern cost accounting which is often called management accounting yields insight and breadth regarding both the accountant's role in a company. A management accountant is concerned with identifying why the information is required so that the most appropriate technique can be used to supply information to managers which will be of value. Management needs this information to enable them to plan the progress of the company, control the activities and see the financial implications of any decisions they may take.

Financial accounting aims to present a true and fair view of business transactions and is conducted within a regulatory framework. This means that there are certain legal and other obligations which different companies must adhere to. Management accounting is concerned with providing financial information which is of value to managers. It therefore offers a number of general advantages, such as helping the organisation to be more profitable.

Not all companies employ a management accountant. In a very small company the owner may keep the financial records and employ a firm of accountants to draw up the financial statements and sort out tax matters at the year end. In larger companies an accountant is more likely to be employed. In large companies it is normal to employ some staff who specialize in financial accounting and some who specialize in management accounting.

The purpose of management accounting is to provide managers with financial and statistical information which will help them carry out their responsibilities. The responsibilities of managers in any organisation can be classified as planning, controlling and decision making. Therefore the financial information they require should help them to control the resources for which they are responsible, plan how those resources can be most effectively used and decide what course of action they should take when a number of options are open.

A major purpose of management accounting is to accumulate the costs of an organisation's products and services. This product-costing purpose helps managers. For instance, managers can use product costs to guide the setting of selling prices. In addition, these product costs are used for inventory valuation and income determination.

Management accountants and financial accountants are often members of professional accountancy bodies, usually the Chartered Institute of Management Accountants (CIMA), the Association of Chartered Certified Accountants (ACCA), Institute of Chartered Accountants (ICA) etc. Members of these noble professional bodies would have trained as accountants in industry and passed a number of rigorous examinations. After the examinations they are also entitled to use letters like FCA, FCCA, ACMA, FCMA, CMA, and CPA.

 

ISA savers may need to shop around

ISA savers could be missing out because they keep their money in accounts with poor returns.

Some savers could be sacrificing as much as 1,300 a year by not switching their savings to accounts with higher interest rates.

Michelle Slade of the financial website Moneyfacts said: "Many people are sitting on sizeable savings of they have taken out ISAs over the  past decade. So while it makes sense to check you're getting the best  rate you can on any new ISA, the priority should be to make sure your  existing ISA savings are still earning a fair rate."

Some banks and building societies lower the rates on older ISA accounts.

The figures from Moneyfacts suggest that anyone who has invested the  maximum amount allowed in an ISA account each year could have a savings  pot of almost 50,000 before any interest payments.

However, if such savers had moved their money to the highest yield  one-year fixed-rate accounts for each of those years, then their savings could now total 70,000.

In truth, most ISA savers will have enjoyed much lower returns. The  average return delivered by a cash ISA is just 1.71 per cent. Some offer as little as 0.1 per cent.

Yet some deals provide interest rates as high as 4.3 per cent.

Ms Slade continued: "This difference in interest rates can add up to a significant sum if you are sitting on ISAs worth £50,000."

Kevin Mountford of Moneysupermarket.com pointed out that the banks  and building societies, hungry for cash, have been promoting several new ISA offers: "The traditional ISA season appears to have started early,  and, in general, savings providers are being more aggressive than  normal.

"If you have had an ISA for more than 12 months, the chances are you  will be on a much lower rate, and it will be beneficial to switch."

The vexed issue for many ISA savers is that the majority of new  offers revolve around a short-term bonus rate. The rates, which can be  attractive, usually have a built-in obsolescence: they only last for a  year and represent somewhere in the region of half the interest to be  paid.

When the bonus is withdrawn, the interest rate slips to a  below-average rate even though the money generated is still protected as tax-free.

Matters are compounded by the fact that most providers introduce a new ISA each tax year.

Michelle Slade continued: "This can lull savers into a false sense of security. If a bank offers one of the best-paying ISAs year in, year  out, customers could be forgiven for thinking they are getting a good  long-term deal on their money. In reality, they are probably getting a  good deal for 12 months on a relatively small sum of money, while the  bulk of their savings is earning next to no interest."

To make sure their money is working harder, savers who invest in  fixed-rate ISAs should seriously consider swapping accounts once the set period has elapsed.

Andrew Hagger of Moneynet.co.uk highlighted a further reason for good planning of ISA savings and for moving accounts ahead of investing in  new deals.

He said: "Although transfer times have reduced, it is still likely to take 15 working days to switch ISAs from one provider to another - and  this is if nothing goes wrong. It doesn't make sense to leave it until  the end of the tax year to start transferring these accounts as ISA  providers are likely to be concentrating on new business, and it could  take even longer."

 

Guidance on new pension rules

HM Revenue and Customs (HMRC) has issued new guidelines on the recent changes to the tax relief available on pensions.

As part of the changes, the annual allowance for tax relief on pensions has been cut from 255,000 to 50,000 for 2011/12.

The announcement was confirmed last October.

The annual allowance covers how much can be paid into a pension pot while attracting tax breaks.

Now HMRC has published its latest, updated guidance on what the new limit means for pension savers.

In some circumstances, HMRC said, savings added to a pension fund  between 14 October and 5 April may come under the remit of the new  rules.

The new guidance can be found at http://www.HMRC.gov.UK/pensionschemes/annual-allowance/index.htm

 

Tax changes needed to encourage start-up investments

The Chancellor should use the forthcoming Budget to create extra tax  incentives for investors who put money into start-up enterprises and who fund firms at the concept stage.

The call was made by the British Venture Capital Association (BVCA).

The BVCA argued that, between 2007 and 2009, private investments in  enterprises that were still on the drawing board slid by two-thirds;  investment in start-up firms by business angels shrank by 90 per cent.

Follow-on funding, once a business is up and running, is also scarce, the BVCA reported.

In its submission to the Chancellor, the BVCA put forward the case for amending the rules on entrepreneurs' relief.

At the moment, the rules place a ceiling of 10 per cent on capital  gains tax on the sale of business assets under set conditions.

The BVCA said that the relief should be extended from business owners to include all angel investors.

The qualification of a minimum 5 per cent holding requirement should  be removed, so that employees and investors with small equity stakes can take advantage of the tax break, and the limit of a 5 million lifetime cap should be abolished.

The BVCA went on to say that the Enterprise Investment Scheme (EIS)  should include preference shares in order to offer an incentive to seed  investments from early-stage backers. It is argued that many such seed  investors are discouraged by the possibility of being placed at a  disadvantage when venture capitalists, who may require preference  shares, invest during a later stage in the development of the  enterprise.

Investments made though Venture Capital Trusts (VCTs) should be  expanded to cover firms employing up to 250 workers (the present limit  is 50) and the annual investment limit should climb to 5 million, up  from the current 2 million, so that greater efforts can be made to  close the equity gap for enterprises wanting more than the banks will  lend but less than might interest large-scale venture capital companies.

The BVCA concluded by urging the Government to open up its 1.4  billion Regional Growth Fund to co-investment deals with local networks  of business angels.

 

 

Entrepreneurs' Relief: wider benefits for share schemes

Nobody likes a tax rise, and the increase in capital gains tax (CGT) announced in the 2010 Budget was no exception. However, there was some good news: the retention of Entrepreneurs' Relief and the increase in the lifetime limit to 5 million. And now it seems that the application of the relief to employee share schemes could be wider than first thought.

The normal rates  of CGT are now 28 per cent, or 18 per cent for standard rate income  tax payers (where the gain doesn't take them into the higher tax  bracket). Entrepreneurs' Relief reduces the rate to an effective 10 per  cent on the first 5 million of lifetime gains, a massive saving. But relief is available only to officers or employees of a company who  have held at least 5% of a company's share capital, accounting for at least 5% of the voting rights, for a year or more.

This would seem to exclude most participants in employee share schemes.  Holders of share options, for example in an Enterprise Management Incentive scheme, don't qualify at all since they hold options, not shares. And  employees holding shares, for example through a deferred share purchase  scheme, won't qualify unless they hold 5% of their employer's  share capital.

A closer look at  the legislation, however, reveals that the 5% limit refers only to voting shares. The other rights normally attaching to shares, in  relation to dividends and capital, are not mentioned. This raises the  possibility that employees could be issued with shares having 5% of the voting rights, but very limited rights in other respects.  These shares would still count towards the 5% threshold for  Entrepreneurs' Relief.

How could this be  used in practice? Let's take the case of option holders, who would  normally never qualify. One possibility would be to issue them with  shares carrying 5% of the voting rights but with very limited  dividend or capital rights. Assuming these shares were held for at least a year, then any shares acquired later through option exercise would  also qualify for the relief, even if the latter shares had been held for only a short time between exercise of the option and the share being  sold (for example on the sale of the company).

A similar  technique could be used to benefit holders of real shares, as  opposed to options, but who hold less than 5%

Obviously, even  shares with voting rights but very limited other rights would have some  residual value. The recipient would have to pay tax on that value,  either through PAYE when the shares were received or (if there is no  market for the shares) through self-assessment. However, if the value  was likely to be significant then the shares could be acquired on  deferred terms. This would provide full beneficial ownership but without the employee having to make an up-front cash commitment .

Any changes to a  company's share capital need to be made carefully - there may be legal,  tax and other implications and changes may be needed to any shareholder  or subscription agreements. There is also an obvious limit on the number of 5% stakes that can be given out without unacceptable  consequences for a company's voting structure. If successive 5% issues are made, the later issues will dilute the earlier ones and  possibly cause them to cease to qualify. Finally, it must be recognised  that this is a "technical" solution. It is possible that the authorities may decide that the legislation was not intended to work in this way  and change the rules. It is also possible that they could make the  change retrospective, so that shares issued now would later become  ineffective for the purposes of Entrepreneurs' Relief. The costs of  issuing the shares (including any tax costs) would however already have  been incurred.

 

 

HMRC to look at centralising PAYE tax system

HM Revenue and Customs (HMRC) is considering proposals that would see the tax authority given the power to calculate and deduct PAYE taxes  centrally.

The proposal would require employers to  supply HMRC with 'real time' information about employees' incomes and  tax and NIC deductions at the time of payment rather than once a year as is the present case. HMRC would hold the information in a consolidated real time tax  account for each individual employee, along with details of their  personal tax allowances and other reliefs that may be owing them.

The tax authority would also set in place a central calculator on  which would be worked out the appropriate tax deductions, national  insurance contributions and student loan repayments.

The plan, according to HMRC, would mean that the right amount of  individual tax could be calculated "in almost all situations" and would  "reduce error and confusion caused by tax codes". It would also save  employers some 500 million a year in admin costs, HMRC estimated.

The HMRC paper said: "Under Centralised Deductions, the employer  would send the gross payment through the electronic payment system to a central calculator where the deductions calculated by HMRC would be made automatically. The resulting net payment would then be sent to the  individual [employee's] bank account and the deductions would be paid  directly to the government."

The current regime sees employers working out employees' tax  liabilities according to their earnings from a particular job. If  someone gets income from more than one source, such as a worker with  extra part-time employment, HMRC will reconcile the information it holds on each taxpayer to make sure that the correct amount of tax has been  paid.

The reconciliation usually takes place at the end of the tax year,  but HMRC has conceded that such is the level of work involved that a  significant backlog of unresolved cases has accumulated, going back as  far as six years.

HMRC emphasised that, under the plans, it would not have direct  access to any money or information contained in individual taxpayers' bank accounts. The report said: "The system would adhere to the high standards of  taxpayer confidentiality that characterise the existing system."

A HMRC spokesman added: "These are not proposals; they are ideas  intended to get a discussion going about what could be done to improve  PAYE.

"It is for Treasury ministers to decide about any possible changes.  The government is committed to making PAYE better serve all taxpayers.  The discussion document is designed to start a conversation about as  many ideas as possible. The centralised deductions concept is not about  wages being centrally administered by HMRC or any other agency."

John Whiting, tax policy director at the Chartered Institute of  Taxation (CIOT), doubted whether the paper in its entirety was feasible, but detected merit in some of the proposals. Mr Whiting said: "You can see the idea of HMRC effectively running  the whole of the payroll system is a non-runner, quite frankly.

"But we should talk about how some of the more desirable aspects of  the paper - the centralisation of information by the Revenue, the axing  of paperwork and the reduction of the burden on employers - could be  brought forward. If they had been in place, the problems we are now  seeing in tax coding would probably not have happened."

 

HMRC gets tough on dodgy directors facing court action

By Insolvency  News, 14 June 2010.

The number of directors of insolvent firms facing disqualification proceedings for not paying business tax has jumped 24 per cent in the  year to March 2010.

A total of 813 directors had proceedings brought against them in  court for non-payment of company tax in the year ending 31 March 2010,  compared to 654 in the previous year, according to figures obtained by  independent finance provider Syscap.

Separate figures from the Insolvency Service show that the number of  company insolvencies declined by 17.8 per cent over the same period.

Disqualification orders ban individuals from being directors of a  limited company or from being involved in the promotion, formation or  management of a company for up to 15 years. Directors who have been  disqualified have unlimited liability for the losses of any company that they have been involved with in contravention of the disqualification  order and may also be criminally liable.

Syscap claimed the figures show that despite HM Revenue & Customs (HMRC) taking a less aggressive approach to collecting tax from  distressed businesses, HMRC is increasingly prepared to instruct the  Insolvency Service to take individual directors to court.

Philip White, chief executive of Syscap, said: “This is a huge  increase in court proceedings against directors. It’s all the more  shocking because the number of company insolvencies has declined sharply over the last year.

“These figures are a wake up call for directors of companies  encountering cashflow difficulties. On the one hand HMRC is allowing  companies to defer tax, but with the other it is taking an increasingly  aggressive stance towards individual Directors who fail to meet their  obligations to the taxman.”

He adds: “Directors often choose to pay suppliers over HMRC in the  belief that this will ensure the immediate survival of their businesses. Continuing to trade while neglecting to pay HMRC is a risky strategy  that could backfire if the company subsequently becomes insolvent.”

Syscap points out that HMRC is rejecting a higher proportion of  applications for its Time to Pay scheme and is scaling back the amount  of tax it is prepared to allow businesses to defer.

The firm claims that businesses unable to meet their tax obligations  and who are not eligible for Time to Pay can still obtain credit to pay  their tax from funders.

White says: “With HMRC making it harder for businesses to defer tax  under Time to Pay and the government under intense pressure to maximise  tax receipts, we may well see even more prosecutions of directors for  failing to meet company tax obligations in the coming year.”

 

 

Charity shop profits show 8% rise on same quarter last year

Association of Charity Shops attributes rise in  profitability to cost-cutting. The profits of charity shops were 8 per cent higher in the first  quarter of this year than in the same period last year, according to  figures published today by the Association of Charity Shops.

Quarterly sales data collated by the association, which has about 300 members, showed income, excluding Gift Aid, reached 110m during the  period. This was just 0.4 per cent up on last year.

David  Moir, head of policy & public affairs at the association, attributed the rise in profitability at a time of flat sales to shops reducing  their costs.

"Increased charity shop profits - that is, vital  funds raised for charity - are very welcome at a time when demand for  charity services is high," said Moir.

About 70 per cent of the  6,800 shops represented by the association participated in the survey.  Shop sales recovered after a poor January, when the weather was bad  and prevented many shop volunteers going to work.

Moir said:  "Like other retailers, charity shops took a real hit from the poor  weather early on. These sales figures suggest charity shops were perhaps hit a bit harder. So the fact that they increased their profits is  excellent news."

BRC-Nielsen shop price index May 2010: Shop Price Inflation Slows

Overall shop price inflation slowed to 1.8% in May from 2.0% in  April. Food inflation rose to 2.2% in May from 2.0% in April. Non-food  inflation slowed to 1.6% in May from 2.0% in April.

Stephen  Robertson, British Retail Consortium Director General, said: "In May, overall shop price inflation slowed compared with the previous  month, despite big rises in some costs.

"Past rises in the  price of oil continue to put pressure on transport costs. International  shipping prices are up over a third. Cotton prices are up 40 per cent.

"But clothes and electricals are cheaper than they were last year, as retailers hold prices down in the face of customers' reluctance to  spend. With margins already being squeezed, a VAT increase  would be an inflationary pressure too far.

"Food inflation was  up slightly, but that should ease. Tinned and packet foods were the main cause because recent falls in commodities, such as wheat and coffee,  have yet to work through to shop prices."

Mike Watkins, Senior  Manager, Retailer Services, Nielsen comments: "Food inflation  that is imported, seasonal or weather related is still impacting shop  prices but the rate of increase since the start of the year has started  to slow. With headline sales growth in food retailing struggling to get  to three per cent in recent weeks, retailers have to maintain promotions and offer further savings to get sales momentum. Shoppers continue to  be price-aware and weak demand has not helped non-food retailing where  we have seen more discounting and bigger price reductions - all of which can be expected to continue on the high street for the immediate  future."

Coalition unveils plans to cut red tape and encourage small businesses

The new coalition government has unveiled a more comprehensive summary of its "programme for government", which contains many plans which could benefit the UK's small businesses.

Understandably light on numbers prior to the emergency budget on June 22nd, some of the main proposals (which can be downloaded here) are as follows.

New government business and tax proposals

  • Major reforms to the banking system, ensuring that SMEs have real access to credit via a major new loan guarantee programme.
  • Plans to slash red tape via a new 'one-in, one-out' rule which will ensure that no new regulation can be introduced without another being cut by a larger amount.
  • The controversial IR35 rules will be reviewed as part of an overall review of small business taxation.
  • The government will find a practical way to ensure that small business rate relief is automatic.
  • Reduction in the number of forms required to register a new business, and a move towards a ‘one-click’ registration model.
  • The public will be given the opportunity to challenge the worst regulations.
  • Corporation tax will be reformed in its entirety - including headline rates which will be reduced.
  • An aspiration for one quarter of all government contracts to be awarded to SMEs.
  • An aspiration to become the leading hi-tech exporter in Europe.
  • The personal allowance will be increased in stages to benefit the lower paid in particular.
  • As predicted, non-business CGT rates are likely to be increased more in line with income tax bands.
  • Generous exemptions to the new CGT rates will be made to encourage entrepreneurs.
  • The non-dom tax rules for individuals will be reviewed.
  • Tax avoidance will be a key priority for the coalition.
  • An end to the 'gold plating' of EU rules, so UK businesses are not disadvantaged compared to their EU competitors.
  •  

 

Cutting the UK's budget deficit the key priority for small business  owners

Two major surveys show that small businesses are overwhelmingly  in favour of making tackling the UK's budget deficit the key priority  for the new government.

In a poll carried out by the Federation of Small Businesses, 93% said that the coalition government must outline robust plans for reducing the deficit.

Two-thirds (66%) of respondents said that a cut in fuel duty would  help growth and 36 per cent would like to see an increase in the  personal tax threshold.

Just over 40 per cent (41%) of respondents said that the extension to the Time to Pay scheme announced in the last budget would have a  positive impact on business prospects and legislation to force big  businesses to pay invoices within 30 days would provide a boost for 46  per cent of respondents.

In another survey, carried out by the Forum of Private Businesses, when asked what the new  Government's immediate priorities should be, 77% of respondents to the  Forum's latest Referendum ballot listed repayment of the national debt.

Stronger regulation of utility companies and banks was the next most  popular priority listed by small business owners, finding favour with  62% of those surveyed. This was closely followed by simplification of  the tax system, on 61%.

The Chancellor will deliver his emergency budget on 22nd June, and has also announced the creation of an Office for  Budget Responsibility, an independent body which will look at the state  of public finances.

Minimum wage to rise by 2.2 per cent

The government has announced the national minimum wage is to rise by 2.2%.  From 1 October 2010, the hourly adult rate will increase from  5.80 to 5.93. The news was revealed in documents published following the Budget.

John Cridland, the deputy director general of the CBI, said: "This  moderate increase recognises that many businesses are struggling, and helps protect jobs at a time of rising unemployment. The  inflation-busting rise some unions had called for would have hit firms  hard and put many lower paid workers on the dole."

Other business groups, however, were not as welcoming.

Adam Marshall, director of policy and external affairs at the British Chambers of Commerce (BCC), said: "The national minimum wage increase  took some of the shine off a Budget that had small and medium-sized  businesses at its heart.

"It is astounding that the government would increase the minimum wage by 2.2% at a time when private sector wages are virtually flat, and companies across the country are still making tough choices to keep as many people in employment as possible."

The British Retail Consortium (BRC) described the increase as  "irresponsible".  Stephen Robertson, the BRC's director general, said: "A measure of  this magnitude should have been in the Budget speech. It's at odds with  government promises of prudence and public sector freezes and will  damage retailers' ability to maintain and create jobs. How can an  increase virtually double last year's be justified? Economic conditions  were far weaker in the run up to this year's decision than twelve months earlier."

Once the economy returns to stability, the BRC wants the Low Pay Commission (LPC) to establish a more predictable relationship between the  rate and average earnings movements.  This would mean that the LPC would provide a longer-term outlook for  the minimum wage, offering businesses greater certainty about the  direction of future costs, the BRC said.

The new rates, which will come into force on 1 October 2010 will  be: 5.93 per hour for workers aged 21 and over (a 2.2% increase on the current 5.80 rate); 4.92 per hour for 18-20 year olds (a 1.9% increase on the current 4.83 rate); and 3.64 per hour for  16-17 year olds (a 2% increase on the current 3.57 rate).

The government also announced that  it accepted the LPC’s recommendation to introduce an apprentice  minimum wage of 2.50 per hour.  The new rate will apply to those  apprentices who are under 19 or those that are aged 19 and over but in  the first year of their apprenticeship.

Business Minister, Pat McFadden  said: “The Low Pay Commission, which includes employers and trade union  representatives, carefully considered the latest economic data and  evidence before making its recommendations, balancing the needs of  businesses and workers.

“The recommendations provide a  welcome increase for workers, but the economy is still fragile and  government must continue to support the recovery in the months ahead.

“I’m also glad to see the LPC  recognising the significant contribution that apprentices make to the  economy. I hope this will encourage more people to take advantage of  this opportunity and invest in their skills by taking up an  apprenticeship."

 

PCG welcomes Tory review of "unfair" IR35 tax legislation

A professional association for freelancers has welcomed the Conservatives' proposals to overhaul "unfair" IR35 legislation and  other small business taxation rules.

Simon McVicker,  head of public affairs at the Professional Contractors' Group (PCG),  told BAD News: "It would take a lot of burden off people who are always  looking over their shoulder to see whether they're going to be open to a tax investigation. They have to act in a certain way to avoid it, and  it's a terrible stress for a lot of them."

Mr McVicker explained  that IR35 is an unfair piece of tax legislation that penalises  self-employed contractors working for one client. He said: "IR35 was  brought in by the Government to stop false self-employment. If people  are acting in a freelance or contractual way when they've got one  contract with one client, often IR35 would catch them out and they would be made to pay NICs (National Insurance Contributions) and tax like an  employed person but they would get no benefits."

"Our argument is  that it's an unfair piece of legislation because people genuinely do  work on contracts for one client, for example in the IT industry where  many people only work for one client. HMRC (HM Revenue & Customs)  has quite often believed that these people are acting as permanent  employees and should be paying more tax."

His comments come after  Shadow Business Minister Mark Prisk announced that the Conservatives  would overhaul the tax regime for small firms and the self-employed if  they get into power.

Mr Prisk told The Telegraph: "For  the past 13 years, Labour has constantly meddled with the tax rules for  freelancers and self-employed. IR35 has especially proved to be  over-complex, uncertain and often unfair. At a time when Britain should  be open for business, Gordon Brown has made it harder to be  self-employed."

More reaction from the PCG is available on their website.

Read the full interview with  Mark Prisk on The Telegraph website.

More  information on IR35 legislation is available on the HMRC website.

Conservatives will scrap Business Link if they win election

Shadow Minister for Business and Enterprise Mark Prisk's announcement that the Conservatives will scrap Business Link if they win the general election has prompted mixed reactions from the business community.

Mr Prisk told The Sunday Times  he believes regional Business Links are "failing in their task" and wants enterprise agencies to take a bigger role in helping small businesses.

However, some people have questioned the efficacy of enterprise agencies as a replacement for Business Link. Len Tondel, chairman of the Home Business Alliance (HBA), told BAD News: "Although Mark Prisk suggests that enterprise agencies inherit Business Link's activities, enterprise agencies too have variable results. There are good and bad examples from both sectors. The wealth of experience and the loyalty of Business Link's advisers, who are independent professionals and not civil servants, is too precious to be cast aside, let alone suffer replacement by websites and self-centred local interests."

Jo Reese, leadership and management adviser at Business Link for the West of England, Gloucestershire and Wiltshire, agrees that Business Link provides a valuable service and that the welfare of small businesses should be at the heart of any decision to change business support facilities. She said: "You don't reinvent the wheel just for the sake of it. Sometimes the shape of the wheel might need to be changed but if your key priority is to build the economy through the sheer number of SMEs we have in this country then it's about the support they need to help them grow and develop and become stronger and more competitive. We're focused on what we can do to help our local economy."

Matthew Goodman, policy representative at the Forum of Private Business (FPB), believes that the continuity of support for small firms is the most important issue. He said: "We have some concerns about this, primarily because we believe there should be continuity of business support regardless of what colour the new Government is. The continuity of support is the most important thing."

However, he added that there is a finite amount of support Business Link can provide, which it should recognise. "Business Link does help," he said. "But I think it's important that it knows where to stop and to hand over businesses to an organisation that has better expertise."

The proposal to scrap the service altogether has been welcomed in some quarters, with a move towards more private sector business support being advocated.

 To read Mark Prisk's full interview in The Sunday Times go to:
http://business.timesonline.co.uk/tol/business/entrepreneur/sme/article7026236.ece

 

UK tax regime must change, FSB warns, as unemployment figures due to rise

FSB-ICM research shows that small businesses are keen to grow but need the right conditions to employ more people to help strengthen economic recovery

More than half of small businesses surveyed by the FSB-ICM January survey panel say UK taxes have prevented them from taking on more staff, as employment statistics due tomorrow are expected to show a rise in unemployment.

Businesses in the South East feel particularly strongly, with 64 per cent saying taxes have a negative impact, closely followed by the North West at 60 per cent and London at 59 per cent. Across the country the figure is 58 per cent. Concerned that the temporary boost to employment figures provided by the Christmas period is coming to an end, the FSB is stepping up its call to Government to freeze National Insurance Contributions and provide a National Insurance rebate for small businesses with fewer than 50 staff that take on more employees during 2010-11.

In late 2009, the FSB-ICM ‘Voice of Small Business' Annual Survey showed that 19 per cent of small businesses would take on new staff over the next 12 months in order to achieve business objectives, with London (27%), Northern Ireland (25%) and the North East (23%) the most likely to do so.

John Wright, National Chairman of the Federation of Small Businesses said:

"The January employment figures showed a welcome fall in the number of people out of work but we fear the severity of the recession will begin to be evident when the latest figures are released. What the UK economy needs is real action to get more people into work, especially under-25s, who make up a large proportion of those currently unemployed.”

"A cut in National Insurance Contributions would encourage small businesses to take on more staff and grow their business. Small firms can help to strengthen economic recovery if they are given a chance to grow and flourish, but they will need a helping hand.

Copyright 2008. All rights reserved
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