June 2006

Points to Ponder

This is now our eighteenth newsletter – produced during June 2006 and issued in July, to keep you up to date with some of the changes in Income tax, National Insurance and VAT along with compliance regulations for businesses. We have been running these notes on a rolling three or four month basis, but they have become rather bulky so it’s just new news from now! If you would like a copy of any past newsletters, please call and we can either send or e-mail them to you.

1. New Office

220 Chessington Road is fully operational with Angela and her new assistant John back up to speed. We do apologise for the delay in clearing work; as with all moves there are always unexpected hiccups. Our main problem was that the computers didn’t want to talk to each other and needed a great deal more hardware and software than we had originally been told to expect. However, that is now all sorted and the system seems to be running better than it ever has (touch wood). Please do drop in to whichever office is more convenient for you, but Angela will be pleased to have visitors at 220. She has the limited company files there and is now planning to expand our tax advice service. If you would like a tax “health check” or need to do some tax planning for the future, please do call Angela.

2. CIS Arrangements (Call Dave or Sue)

Although the new CIS regulations have been delayed until April next year, we intend to try and bring in the changes in our arrangements for handling these returns as soon as possible, so that any glitches will be well ironed out before the new regime of over-the-top fines is introduced. For many of our building contractor clients, we agree the sub-contractor payments quarterly, when we complete the VAT returns, and any omissions or differences are corrected at that point. Under the new regulations, returns and payments must be made on time each month or a fine of £100 will be levied. This includes nil returns too!

The new regulations will mean a much heavier burden of paperwork but we shall make things as easy as we can for you, but will need your full co-operation to make sure nothing is overlooked and that there are no errors. If you are a partnership or a sole trader and using sub-contractors, we seriously recommend that you consider becoming a limited company for protection. Although this will involve more costs, it will offer more benefits. We would also urge other clients, whatever their trades or professions, to seriously consider this option, especially when the business incurs debts and has to allow credit to customers. Once upon a time, this would be almost the last thing we would advise, due to costs and regulations, but circumstances certainly are changing.

3. Company Secretarial Obligations (Call Angela)

Although we have just recommended limited liability company status to you, we feel we should remind you about the obligations for a company secretary. Apart from ensuring that the annual returns to Companies House is made on time and that all other statutory forms are completed, you should also retain minutes of all meetings, especially the AGM, and all company decisions. In addition, ensure that there is a Health and Safety policy. To date, we haven’t heard of any fines being levied for insufficient statutory records, but feel it is only a matter of time before the Government starts looking at this potential additional source of income. We now have a “Company Secretarial” section in our software package which we use to maintain these records where we are company secretary, but if you have someone else acting as your Company Secretary, please do ensure everything is up to date. If you would like some guidance, please call.

4. New Minimum Wage from October 2006 (Call Dave)

From October, the hourly rates change as follows:

16 – 17 from £3.00 to £3.30

18 – 21 from £4.25 to £4.45

over 21 from £5.05 to £5.35

5. HM Revenue & Customs announce targets for collecting extra tax (Call Angela or Sue)

We all knew that Revenue enquiries were designed to collect extra tax, but this was originally denied by “official sources”. However, they have at last admitted that Revenue staff have a target of collecting extra tax in 78% of all enquiries. What is of more concern is that they are achieving over 80%. Our fee protection insurance covers our costs in helping you fight the Revenue but unfortunately doesn’t cover the extra tax and interest you may be charged. I would say though that not all enquiries end in an extra tax bill, several we have handled have been closed with no penalties although the time taken in dealing with the Revenue is frightening.

6. Which returns are likely to be targeted (Call Sue or Angela)

Although returns are supposed to be selected at random for Revenue enquiries, certain ones are being targeted first – and that’s official. The main criteria are late returns, late payment of tax, omissions (for example, missing taxed interest off your returns when the Revenue know you have received it – it may have been taxed at source and may only be pennies, but it must go on your form) and property income. If you have estimated entries on your returns with insufficient explanations as to why they have been estimated or if you submit amended returns, expect a letter from your (un)friendly inspector. Please also see note 10 concerning off-shore accounts.

If your trade or profession would normally carry stock or work in progress and no entry appears on your accounts or there are no adjustments for private use, especially of motor vehicles, the Revenue will want to know why not.

Again the Revenue won’t admit that they are targeting specific trades but will continue to closely watch the construction industry. It’s 1984 and Big Brother moved in to the 21^st Century.

7. Houses in multiple occupancy (Call Sue)

If you let a property with 3 or more stories to over 5 or more persons in 2 or more separate households, you need to licence your property. With more houses being let, this is another move to regulate by the Government. Under the guise of Health and Safety, this is also another means of ensuring that all rental income will be declared. For more information, visit the Government website at htpp://www.odpm.gov.uk/embedded_object.asp?id=1164426

8. Free Health & Safety Advice (Call Sue)

With so much publicity about Health and Safety, it is advisable to ensure you are properly covered under all this new legislation. The Health and Safety Executive is offering free advice to small businesses via their information line on 0845 345 0055 or from the website at http://www.hse.gov.uk/involvement

9. Compulsory on-line filing (Call Sue)

The number of statutory returns that can be filed on line is being increased in a move to make all such submissions electronic compulsory. By 2012 all company, sole trader and partnership tax returns, PAYE, CIS and VAT and payments will have to be on line unless you can prove you are computer illiterate. There are some concessions given for on line filing, such as the tax-free sum for filing your year end PAYE returns electronically and an extended payment period for VAT payments, so it is possible that you could benefit from on line filing now.

10. Offshore accounts and the Revenue (Call Sue)

High street banks are now obliged to inform the Revenue of all offshore accounts held by UK residents. Please insure that you give us all the information relating to these accounts, so that your Self Assessment returns are complete. If these accounts are paying large amounts of interest, the Revenue WILL investigate the source of the funds and levy tax accordingly. Please be warned.

11. Crackdown on silent calls.

At last – one piece of good news – the Government has promised a crackdown on those infuriating silent calls when an automated call centre dials your number but has insufficient staff available to deal with every answered call.

12. New Royal Mail pricing structure (Call Sue or Dave)

From 21^st August 2006, the Royal Mail is introducing a new pricing structure, based on the size of the item as well as its weight. This means that the large envelopes we use to send out accounts will cost more but nothing will be going down, I’m afraid. Please do check thoroughly as under-paid post takes an age to be delivered. We recently received a letter that had been posted in January with insufficient postage paid on it. This was sent by a client to the Inland Revenue and contained his self assessment returns. The Revenue refuse to accept underpaid postage, so it was eventually returned to us as it had our letter attached to the returns. Needless to say, the client has been fined for late submission, with no appeal allowed.

13. The two biggest problems.

Recent research has confirmed that the two biggest problems for small and medium businesses are staff absenteeism and late payers. Does this match your experience?

14. Immediate invoicing (Call Angela or Sue)

A recent test case has upheld a new ruling by HM Revenue & Customs that all jobs must be invoiced as soon as they are completed or HMRC has the right to assess for late tax and VAT on any work carried over. This has lead to more paperwork for businesses, such as ours, where we now have to invoice for payrolls, for example, each month rather than quarterly as before. We apologise for any inconvenience this may cause, but the first businesses to fall foul of this regulation were accountants and solicitors!

15. Staff (Call Sue or Angela)

Now we have expanded in to our second office, we have desk space for another book-keeper. We are looking for someone with a thorough knowledge of TasBooks or Sage to work in the Gilders Road office, so before we advertise in the paper, does anyone out there know of a likely applicant?

16. Summer’s here!

After having the wettest holiday I can ever remember, we are now in to the hottest time on record! True to British tradition, we’re moaning about it. Please forgive us if we sound irritable and blame it on the weather! If we survive the sunshine, the next newsletter will be out in August.