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Blog posts in Tax problems and investigations
Why the government needs to get tough on all tax avoiders
June 22, 2012
The headlines this week have of course been dominated by allegations that a number of celebrities are guilty of what has been described as “straightforward tax avoidance”.
An investigation by The Times alleges that high-profile figures, such as the comedian Jimmy Carr, and three members of the pop group Take That, have avoided paying the full rate of income tax by using an offshore tax scheme. The discovery provoked widespread outcry, with Prime Minister David Cameron singling out Mr Carr for heavy criticism. The Jersey based scheme, K2, is now under investigation by HM Revenue and Customs (HMRC).
This story will most certainly have raised the eyebrows of many small-business owners. Although plans to spot-check small businesses' tax records have been scaled back, HMRC has faced much criticism from business groups for taking a rather heavy-handed approach when it comes to SMEs. However, with tax avoidance schemes providing a loophole that has enabled some of the country’s top earners (and some of the UK’s biggest businesses) to avoid paying the 40% rate of income tax, a lack of consistency is apparent.
Although HMRC is seeking action over such tax avoidance schemes, it smacks of shutting the stable door once the horse has bolted. How has K2 been allowed to operate for so long – and how many similar schemes are out there?
Yesterday, Carr released a statement via Twitter in which he revealed that he ‘met with a financial adviser [who] said to me “Do you want to pay less tax? It’s totally legal.” I said “Yes”’. To be fair to Carr, I think most people would also answer ‘Yes’ to that question. After all, isn’t that why people seek financial advice – to minimise their tax liability?
Carr added: “Although I’ve been advised the K2 tax scheme is entirely legal, and has been fully disclosed to HMRC, I’m no longer involved in it and will in future conduct my financial affairs much more responsibly.” If HMRC knew of the scheme, why didn’t it act? And if Carr was advised to use this “legal” scheme, shouldn’t we address our questions to Mr Cameron rather than HMRC? Surely the onus lies on the government to change the law?
While many small businesses continue to struggle in a difficult economic climate, the government must ensure greater consistency. It’s not right for small businesses to be singled out. It’s time for the government to take action, and by action I mean clamping down on all culprits – not simply using one comedian as a scapegoat.
Why business and government must act to combat the UK's late-payment culture
April 26, 2012
The late payment of trade invoices is threatening the profits, growth and survival prospects of small firms – but few use formal procedures to tackle the problem. These were the headline findings of a report Graydon UK published recently, in partnership with the Forum of Private Business.
Of the 500 UK small businesses we surveyed, 51% said late payment of trade invoices was a problem and 23% of these described it as a serious problem – while 16% said they have almost been put out of business as a result.
Highlighting the ‘domino effect’ of late payment down the supply chain, 56% of those respondents not paid on time have been forced to pay their own suppliers late. Furthermore, 45% said late payment has eroded their profits and 23% said it has undermined their ability to invest in growth through innovation.
Changing terms without consultation
Another problem is customers persisting in changing payment terms without consultation. 65% of respondents reported customers extending their payment terms without notice or consultation. 27% said suppliers had universally changed terms and conditions and a quarter said customers had withheld final payments – without consent – to first assess the quality of work. 14% reported customers demanding discounts for prompt payment not agreed at the outset and 12% said supplier credit had been withdrawn without notice.
Our research also shows that businesses with credit control procedures are significantly less likely to suffer as a result of late payment. However, only 44% employ formal credit control procedures, with 38% instead relying on a mix of formal and informal processes and 16% juggling payments on an ad-hoc basis.
Only a third of respondents offer prompt payment incentives, while just 30% use existing legislation to charge interest on overdue invoices and 40% use cashflow management software. Debt-collection agencies are employed by 42% of respondents; while 43% keep a reserve in the bank to offset late payments. Invoice discounting is seen as a solution by just 26% of businesses.
Understanding the risks
The current economic climate makes it more important than ever that businesses clearly understand the risks and opportunities associated with their operations. This includes identifying cashflow and other risks triggered by late payment of trade invoices.
Businesses cannot achieve sustainable growth if they aren’t paid on time. This is why having a formal credit management process based on reliable, accurate customer payment behaviour information is essential for businesses who want to transact with confidence and fulfill their sustainable growth potential. The business community and the government must join forces to stamp out the UK’s late payment culture.
Graydon is a credit-referencing agency specialising in company credit checking, credit reports and credit risk management services.
Personal indemnity
December 16, 2011
James, 46, spoke to ConstuctaQuote, an online insurance quote comparison website, about why he believes Professional Indemnity (PI) insurance is an essential purchase for businesses.
Tell me about your company?
I secured my dream job as an advertising consultant around ten years ago, and after three years of learning, I decided to set up my own small agency in the heart of London. Half my business specialises in digital advertising and the other half concentrates on editing.
Have you experienced any risks when running your company?
As an owner of a small business, every day is a risk, especially in such financially uncertain times. From securing new clients to maintaining current ones, every day is a challenge. Since starting up my small business, I try and take very few risks in my line of work and I do this by making sure everything I do is honest and legally protected.
What did PI insurance mean to you when you first set up your business?
I have always been told that if something is to go wrong it will do, and so, with this in mind, I saw PI insurance as a way of protecting my business against future risks.
What benefits does PI cover provide for advertising consultants?
As digital advertising consultants, PI cover is crucial for protecting our business against the risk that comes from working with clients who could file for professional error. Obviously, the level of PI cover will change depending on each project and client but it is extremely beneficial in each case, and gives you that peace of mind.
What areas of your company are most at risk?
As a business, you are always at risk. In my industry there are many risks around contracts and the work that we produce. If a client feels we have not stuck to the contract agreed for a particular campaign or damaged their brand through poor advertising, then of course, the client could sue for damages.
What is the most fascinating negligence claim you've heard of in your industry?
One of the most fascinating negligence claim cases I have ever heard of was when an advertising consultant inserted an incorrect phone number in a print and digital advert that went viral.
The result was catastrophic, with sales plummeting and brand image damaged. The consultant’s client then filed and won a claim based upon loss of income and damage to brand image. But it wasn’t all bad news for the client, as the prices of the claim were covered under the consultant’s PI cover. So, in this individual case, it really paid for the client to insure themselves from this potential risk.
This blog has been provided by ConstructaQuote, an online insurance quote comparison website dedicated to the SME market.
New Sectors Targeted By Taxman
November 16, 2011
In a bid to claw back £7bn annually in undeclared tax for the Government, Her Majesty’s Revenue and Customs (HMRC) has added landlords in Wales, scrap metal dealers in Scotland and builders in the North West to its list of sectors to target.
Previous campaigns have seen dentists, restaurateurs and, most recently, second homeowners put under the microscope.
Under this latest campaign, the taxman will be seeking out scrap metal dealers who appear to be suppressing their income or inflating their expenditure in a bid to avoid tax.
David Gauke, Exchequer Secretary to the Treasury, said in a statement: “We will not tolerate those who break the rules. The taskforce will come down hard on scrap metal dealers and their customers or suppliers who have chosen to break the rules or deliberately evade the tax they should be paying.”
Taxpayers failing to submit their tax returns in the South East of England will be targeted, as will landlords owning three or more properties but not paying enough tax in the North West of England or North Wales.
The taxman will flood a particular sector in short bursts with agents to ensure that tax is being paid.
It was also announced yesterday that taxpayers who do not submit their statutory returns across Corporation Tax, Income Tax, Self-Assessment, PAYE and VAT will be targeted.
Darren Boston, SME Business Unit Head for HMRC in South East England, said: “The taskforce will come down hard and fast on those who have chosen to break the rules and deliberately evade the taxes they should be paying but not submitting their returns.
Whilst business activities may have ceased in some cases, or there may in fact be no tax liability, HMRC will target those who are fully aware how much money they are due to pay but have made the conscious decision not to submit the necessary declarations,” he added.
This post was first published on 8 November 2011 by Harwood Hutton.
For more information, please visit www.harwoodhutton.co.uk.
Background checks - how to check if your clients and customers are financially sound
November 10, 2011
If you are a business that offers credit to customers you need to do what you can to ensure they have a good credit history and will pay you on time, every time. You could save yourself a lot of time and worry in the future by spending a little time researching them at the start of your working relationship.
Ways you can check a new customer’s credit history include:
- Information – Collect the right contact information from the start, including a named person in accounts, where possible.
- Research - Investigate the company, meet people, visit the premises they trade from and get a feel for how they do business. Also, with the internet you have the opportunity to research what others say about them.
- Contact suppliers you have in common – Ask trusted suppliers and customers about them to see what experience they have had with them whilst doing business.
- Bank credit checks – Some banks will carry out business credit checks for you for a small charge – you just have to ask.
- Checking software – Various specialist software tools on the market enable you to run credit checks on new clients before entering into a contract with them.
- Use specialist websites – You can check a business’s credit history online by using websites such as UKData.com
If you really want to do business with a new client, but the research and information you have collected doesn’t put a good light on them paying on time, you always have the option of asking for advance payment.
Anita Brook is a chartered accountant and owner of accountancy firm Accounts Assist. She also help businesses regain control of their cash flow with Debts Assist and helps entrepreneurs launch their own bookkeeping businesses with Brilliant at Bookkeeping.
UK business tax advice – find tax return help, tax calculators and how to get a tax refund | Tax Donut
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