Toni Hunter's SuperBlog

If you have a pension, then you are about to see a significant reduction in the amount of money you can put into it without paying tax.

From next April

The Government will slash the annual tax relief limit on pensions from £255,000 to £50,000. There will also be a reduction in the lifetime allowance on money that can be saved in a pension fund from £1.8 million to £1.5 million, which will come into effect from April 2012.

The Government hopes the changes will save it more than £4 billion a year, which it will use to tackle the budget deficit.

Warning

Experts have already warned that some people with long service in final salary pension schemes could suddenly face higher bills, particularly as the increase in accrued pension will now be multiplied by a factor of 16 instead of the current factor of 10.

However, the Government says that the changes would affect 100,000 pension savers a year, 80% of whom earned more than £100,000 a year, meaning that very few people earning less than that amount would actually have to pay any pension tax.

Utilising your allowance

Anyone with unused annual allowance from the last three tax years will be able to carry them forward if they are a member of a pension scheme during that period, meaning that if a pension contribution is more than £50,000 then they may not have to pay the annual allowance charge.

At George Hay, we can advise you on all aspects of pensions, including how the above changes might affect you.

For further information on whether you are getting the best from your pension, please contact us.

The information provided in this blog illustrates my opinions and experiences, it does not constitute advice and I do not accept responsibility for any actions taken or refrained from as a result of reading this post.

If you are planning to treat your employees to a festive event, take care not to create a taxable benefit, that would certainly make your event expensive for both your business and your staff – Bahh Humbug!

The rules clearly state that employers can spend up to £150 a head annually on staff events, not a penny more. If the total cost of the event (including travel, accommodation etc) divided by the number who attended equates to £150.01 the whole amount is taxable.

The £150 is inclusive of VAT and can be spent on one or more events in the tax year.  The type of event you chose is not an issue, but all employees must be invited and it must be considered an annual event.  So a one-off party to celebrate a retirement for example does not qualify.

Unfortunately, you need to plan and budget carefully.  Its a delicate balance between being a generous, hospitable boss and playing Scrooge.

The information provided in this blog illustrates my opinions and experiences, it does not constitute advice and I do not accept responsibility for any actions taken or refrained from as a result of reading this post.

If you were among those hit by the new 50p top tax rate back in April, then you could now be more likely to receive a rather unwelcome knock on the door from the taxman.

Proposal

Under plans unveiled by the Liberal Democrats at their recent conference in Liverpool, half of the UK’s 300,000 higher earners affected by the top tax rate face having their tax affairs checked over by HM Revenue and Customs (HMRC).

This means that the number of tax investigations will rise from the current figure of 5,000 to 150,000 a year – an increase of 3,000%.

Why?

The £900 million drive is designed to crack down on tax avoidance, the legal practice of using existing provisions within the current tax regime to minimise your tax liabilities. This should not be confused with tax evasion, where tax liabilities are avoided by illegal means, amounting to tax fraud.

Those who ‘hide’ money in offshore accounts will also come under scrutiny as part of the increased investigations.

As a result of the scheme, the number of criminal prosecutions relating to tax matters is expected to increase five-fold, while the Treasury has announced that it expects the initiative to bring in £7 billion a year by 2015.

While tax avoidance is certainly not illegal, the announcement highlights the importance of seeking professional advice on all tax matters to ensure you do not fall foul of any investigation.

Impact on small business

Even if you have nothing to hide, tax investigations can be both costly and time-consuming, particularly for smaller businesses which have neither the time nor the money to spare.

Need support?

Friendly, approachable, reliable professionals

At George Hay, we can advise clients on all aspects of taxation and can help you ensure that all your tax affairs are in order. We can help you ensure you do not pay too much or too little tax and, should you find yourself the subject of an investigation, can offer as much assistance as you need.

We are also able to offer tax investigation protection. As with any insurance, everyone hopes they will never need to use it, but taking out cover now could save you thousands of pounds in investigation fees should the taxman come calling – money that could be put to better use in your business.

For more information on any area of taxation, including tax investigations, or to find out more about tax investigation protection, please contact us.

The information provided in this blog illustrates my opinions and experiences, it does not constitute advice and I do not accept responsibility for any actions taken or refrained from as a result of reading this post.

Everyone in business has heard the term “Cash is King” and understands the importance of cash flow, but when in the day to day ‘busy-ness’ of business it is easy to take your ‘eye off the ball’.

So in these difficult times, if you find yourself in a position where cash flow becomes a matter of urgency rather than a procedural chore, what can you do to turn things around?

Here are my top five quick fixes, each one worthy of a post of its own.

1. Debt Collection

Focusing on getting paid for what you have provided is an obvious place to start. 

Don’t allow customers to improve their cash flow at your cost and don’t get lazy when it comes to implementing rigid credit control procedures. Many ledger clerks are instructed by their managers not to issue payment until a debt has been chased both in writing and verbally, so don’t cut corners or get caught off guard. 

If you are uncomfortable with this discipline or you have accepted that this is not your skill set, outsource it.  I recommend Ken Brown from Direct Route for everything from collecting a single difficult debt to completely managing your sales ledger. 

Also, be sure to focus on servicing customers that do stick to your payment terms.  Don’t forget my previous advice about allowing “he who shouts loudest…” to distract you from those that are key to your success.

2. Improve terms and conditions of sale

Meet with each of your valued customers without delay and renegotiate terms.  By prioritising their needs and building confidence in your business relationship, agreements regarding quick payment, or even payment on delivery can be made. 

If need be, offer an early payment discount to encourage quick settlement.  Often the reduction in margin, is substantailly less than the cost of finance such as overdrafts or the deminished goodwill from not meeting debts as they fall due.

Don’t forget that it costs a lot more to attract and service new business than it does to obtain more business from your current clients.

3.  Get your bank manager onside

Having up to date management accounts, a clearly defined business plan that demonstrates that the current difficulties are short term and building an open, honest business relationship with your bank manager will no doubt create flexibility. 

Once they have built confidence in you as a business owner, they will at short notice be able to offer solutions and support.  Involve your accountant in this process.

4.  Manage suppliers

This aspect is often not given enough attention.  In the same way that you manage customers, prioritise, negotiate and treat your suppliers with respect. 

Being honest with them and honouring any payment arrangements you have agreed with them will keep your integrity and prevent suppliers from ‘digging their heels in’.

Also, if you hold stock, review your processes and speak to your suppliers about delivery times etcetera, they may be able to help you to manage a ‘just in time’ system by offering you a priority service. 

5.  Increase profitability

Certainly not the easiest or quickest approach and one where you might want to seek support from your accountant or a business coach.

Looking at overheads is an obvious point, but how about reviewing historic data to identify which products/services in your sales mix generate the biggest contribution and assign time and effort in pushing these.  Perhaps redirect your marketing budget and reward your team for selling these items or finding innovative ways to deliver these at lower costs.

As well as focusing on your most profitable products/services, take time to identify your most profitable clients

Budgeting can take time, but often some ‘quick wins’ can be discovered by carrying out these accounting exercises.  They can also drive long term process and cash flow improvements. 

The information provided in this blog illustrates my opinions and experiences, it does not constitute advice and I do not accept responsibility for any actions taken or refrained from as a result of reading this post.

For more advice on subjects such as this, please ‘join my lists’ for a monthly business support newsletter.

If you do not currently offer your employees a company pension scheme then you need to take heed of a new scheme announced by the coalition Government.

All employers

From October 2012, all employers, no matter how small, will have to enrol staff in the National Employment Savings Trust (NEST), unless they already offer a comparable pension scheme to their employees.

NEST

NEST is a scheme designed to give people more access to good quality pension savings, especially for those on low to middle incomes. The Government hopes that this will prompt people to start saving for their retirement, particularly with people now living longer with little or no savings.

Phased implementation

Each employer will be given a date from when the changes must be in place. The reform will be phased in over a four-year period to 2016, starting with larger firms and then working down through medium and then small and micro-employers. The size of an employer will be based on PAYE data.

A minimum contribution level will also be phased in gradually, with employers eventually contributing at least 3% of qualifying earnings by October 2017.

Eligibility

To be eligible for enrolment, staff must work in the UK, be at least 22 and under state pension age and not already be in a suitable pension scheme. They will have to earn at least £7,475 a year, which will be the threshold for paying income tax from April 2011.

Transferable and may be used by multiple-employers

Friendly, approachable, reliable professionals

The advantage of NEST is that it can travel with a person from job to job, with more than one employer being able to contribute to a member’s retirement savings pot at the same time.

If you are an employer or considering employing someone, then George Hay can advise on a wide range of pension and tax issues to help ensure you are fully prepared for the changes.

The information provided in this blog illustrates my opinions and experiences, it does not constitute advice and I do not accept responsibility for any actions taken or refrained from as a result of reading this post.

George Hay Chartered Accountants continues to expand its team with the addition of a new senior tax manager.

Heather Irvine will work at all three offices supporting our Tax Partner, Barry Jefferd.

Heather gained her Association of Taxation Technicians (ATT) and Chartered Tax Adviser (CTA) qualifications in 2000. Prior to that, she spent 10 years working for the Inland Revenue.  She joins the firm from Edwards and Keeping, in Dorchester, Dorset, where she was a tax manager.

Commenting on her new role, Heather said: “I’m looking forward to the diversity of clients and opportunities that working at George Hay will bring.”

Tax Partner Barry Jefferd said: “Following the increase in the amount of tax work we now carry out, we have been looking to strengthen our team and Heather brings with her a wealth of experience that will be of great benefit to our clients. We are delighted to have her on board as a valuable addition.”

During his first budget speech in the Summer the current chancellor announced that the standard rate of VAT would be increased from 17.5% to 20% on 4^th January 2011, the third rate change in two years. 

If you are using the flat rate scheme, this change will affect you too.  Be sure to check your new rate on the HMRC website.

Administrative Burden

For business that supply goods and services to other VAT registered businesses, the burden will be one of administration.

• The default rates in bookkeeping systems such as SAGE need to be altered – ask for help
• Business owners and bookeepers need to be clear about the tax point being used – the time of supply is important.
• If you are using the Cash Accounting Scheme it is imperative that you can identify payments received on or after 4^th January 2011 that relate to supplies made prior to that date, to be able to account for them at 17.5%
• Make sure your book keeping is as up to date as possible, confusion surrounding work/supplies that span the VAT change are likely to be exacerbated if you are behind with your paperwork.
• If you display prices inclusive of VAT you will need to be prepared to change literature/brochures/websites etc.

Financial Burden

But for business such as tradesmen and retailers that supply goods and services to non-VAT registered consumers, there are additional considerations as the change may have a significant financial impact.

• How price sensitive are your customers?  Will they find a cheaper alternative or simply stop purchasing your offerings if you add another 2.5% to your prices?
• If you don’t increase your prices, can your business afford the reduced margins?  If you don’t increase them now, when?
• Speak to your customers, they may be willing to pay a deposit in advance of receiving your goods and services to take advantage of the current VAT rate. (For full details on whether this ruling can apply to your business click here )
• Ensure you have procedure in place that will allow you to measure the amount of work carried out up to the date of the VAT rate change, such as detailed timesheets, as you are entitled to split your invoice.  i.e. work performed in 2010 charged at 17.5% plus work carried out in 2011 at 20%.

Effect on Economy

The Chartered Institute of Personnel and Development has predicted that the VAT rate increase will result in the loss of an estimated 200,000 UK jobs.

The effect on an already under pressure retail sector is going to be huge, I don’t think anyone dare to hazard a guess at how huge.

We have been fortunate enough to benefit from one of the lowest rates of VAT in Europe for many, many years, but will this increase really have a significant effect on our huge deficits?  I am not convinced.

For guidance on how to implement the change and minimise the impact on your business, please get in touch.

Another easy to read article about the VAT increase and price sensitivity : What’s a small business to do?  

The information provided in this blog illustrates my opinions and experiences, it does not constitute advice and I do not accept responsibility for any actions taken or refrained from as a result of reading this post.

From 1st October 2010, workers who earn the national minimum wage will see a difference in their pay packet.

What’s changing?

• The age threshold and the hourly rate are increasing
• The hourly rate for young workers is increasing
• Apprentices are now covered by the minimum wage legislation, albeit at a lower rate
• Employers will be able to offset the national minimum wage by £4.61 for each day that accommodation is provided.

Planned changes

While these new rules come into effect on 1st October 2010, further changes relating to temporary workers are set to come into force from 1st January 2011.

In particular these regulations focus on “potentially exploitative arrangements” surrounding tips and expenses.

Need more information?

For full details of the changes and rates, please click here

If you are an employer, then George Hay  can advise you on what the new national minimum wage means for your business. We can also help you ensure you comply with the regulations and help you plan around any changes.

The information provided in this blog illustrates my opinions and experiences, it does not constitute advice and I do not accept responsibility for any actions taken or refrained from as a result of reading this post.

How good are your I.T. skills?

If you have not yet completed your Tax Return for the year ended 5 April 2010 they may need to be fairly good as HM Revenue and Customs  are encouraging taxpayers to file online.  If you continue to use paper Returns, the usual 31 January timeline is substantially reduced to 31 October 2010.

Not filed your Tax Return online before?

If you have not filed Tax Returns online in previous years, you will need to register with HM Revenue and Customs beforehand.  As this will take at least a week to process immediate action is required to meet the fast approaching deadline.

You will need to visit the website of HM Revenue and Customs on www.hmrc.gov.uk and select ‘Self assessment’ from ‘Do it online’. This will guide you through the process of creating a user name and password.

You will also need to have some personal details, including your Unique Tax Reference and National Insurance number or Post Code to hand.

Once you have done this you will be sent a personal activation Pin through the post, from the Government Gateway. With this you should be able to complete the registration process and to be able to file the Return online.

Need assistance?

Most people find the filing process relatively straightforward and there is help available on the website itself. There is also an online demonstrator showing how the service works and provides various specific examples. To see this go to www.hmrc.gov.uk/demo

Watch out: Not everyone is able to file online…

It must be pointed out that there are a few people who will not be able to use the online service due to some of the supplementary pages not being available on the internet site and, of course, if you do not have access to the internet you also have the problem of what you should do. The only answer is to contact ourselves as soon as possible and we will do our best to submit your Return in time.

Time

As emphasised above, for everyone who still has a Tax Return outstanding, the problem is time.  Can you do everything in time and stay focused on your business?

Why not contact George Hay Chartered Accountants for peace of mind?

Disclaimer: This article is for general guidance only.  All taxation planning should only be undertaken after appropriate professional advice.  George Hay Chartered Accountants are registered to carry on audit work and regulated for a range of investment business activities by the Institute of Chartered Accountants in England and Wales.

The information provided in this blog illustrates my opinions and experiences, it does not constitute advice and I do not accept responsibility for any actions taken or refrained from as a result of reading this post.

In the past few days, with the complete mayhem caused by HMRC’s PAYE coding fiasco , clients of ours have received some very strange calls apparently from HMRC asking for payroll references and other data that we know they already have on their records, so please be wary of all unsolicited emails and phonecalls purporting to be from the Tax Office.

Too good to be true

Of course, no one wants to pay more tax than they should, so being told you are due a refund will come as good news.

In some cases, it may seem too good to be true – and that’s because it is.

If you receive a telephone call or an email from someone at HM Revenue & Customs  (HMRC) informing you of a tax refund then the person on the other end of the line is not the taxman but a criminal “phishing” for your bank account details.

HMRC has reported an alarming increase in the number of people being targeted in this way, with a record 83,000 phishing attempts reported in one month alone.

Written Correspondence

In some cases, letters are sent out purporting to be from external companies acting on behalf of HMRC and beginning with a sentence such as “we have reviewed your tax return and our calculations of your last year’s accounts show a tax refund of XXXX is due”. The letter will give a specific figure which the victim is supposedly due.

Phishing  and identity fraud

The thieves ask for bank details in order to pay in the non-existent refund. However, they then use this information to try to take money from the victim’s account.

Victims not only risk having their accounts emptied, but their details could also be sold on to other criminal gangs who may target them further.

Tax office communication policy

HMRC does not contact customers who are due a tax refund by telephone or email. It always writes to them directly, without using any external companies.

Advice

Anyone who receives a telephone call from someone offering them a tax refund should not give out any information to the caller but report it to the police immediately. Likewise, they should not reply to emails but forward them on to HMRC at phishing@hmrc.gsi.gov.uk.

If you have already responded to a telephone call, email or letter and think you may have been the victim of a scam then you should contact your bank or card issuer as soon as possible.

HMRC Update – September 2010

An email from “HMRC Online Services – test@test.com’ is being issued, stating the recipient has one new alert message and should log in to their Online Account to read it.  The link in the email directs you to a fraudulent website where personal data is requested.  If you receive this notification, please forward it to phishing@hmrc.gsi.gov.uk.

Friendly, approachable, reliable professionals

At George Hay, we are experienced in all areas of taxation and can advise you on whether a genuine tax refund is due. If you are in any doubt about any communications you have received regarding a refund, please speak to us.

Disclaimer: This article is for general guidance only.  All taxation planning should only be undertaken after appropriate professional advice.  George Hay Chartered Accountants are registered to carry on audit work and regulated for a range of investment business activities by the Institute of Chartered Accountants in England and Wales.

The information provided in this blog illustrates my opinions and experiences, it does not constitute advice and I do not accept responsibility for any actions taken or refrained from as a result of reading this post.