Identify your ‘on’ time and schedule it

Your ‘in’ time will always happen because of the urgency factor.  And in challenging times it will have a little stress and adrenaline thrown in as well.  As you walk into the office at ten to eight and start clearing email, you will be sucked into an ‘in’ day.  It’s not a bad kind of day, but it’s a fire-fighting day, a surviving day; it’s not a thriving kind of day.  Take your schedule and block out some on time.  Time you will preserve at all cost.  To invest, to improve, to step beyond the day-to-day stuff.  It will of course depend on your role but here are some suggestions:-

  • 15 minutes at the start of the day where you take stock, scan the strategic plan and think beyond the day-to-day pressures.
  • 30 minutes at lunchtime where you get out, take a walk and think.
  • 15 minutes at the end of the day where you review success and note key points for later in the week or month.

Schedule further sessions during the week for planning and team meetings.  When they appear people will resist but remind them they are investing to make things easier in the future.

Key message – Invest for future success.

TAX INVESTIGATIONS

HMRC Visits: Trouble in store?

Many businesses dread a visit from HMRC. There is always the worry that something may come out resulting in paying more tax but there is also an understandable sense of dread at the potential disruption it could cause in the run up to the visit, during the visit and even following the visit. However, there are a number of things you can do to make the experience far less stressful.

Preparation

Most HMRC visits are pre-arranged either by telephone or letter. If the appointment is made by telephone, ask the officer to confirm in writing the details of the visit – not only the date and time but the expected length of the visit. Ask for confirmation of who will be coming, what their roles are in the enquiry overall and exactly what records, if any, they want to see. Ask at the outset are there any particular risk areas they have identified in selecting you for an inspection and have all of the requested records ready for the visit.

If they are to be left in a room make sure it is clean and only has the information requested in it. Of course it may not be possible to prepare in advance if HMRC don’t give warning of a visit.

Unannounced Visits

There are generally two types of unannounced visit and you should clearly establish at the outset what is happening. The first is generally where a routine inspection is being carried out but there has simply been a failure somewhere along the line to notify the trader. You may simply ask HMRC to come back another time when you will have the records ready and will also have time to let your accountant know of the visit.

The second is what is where HMRC deliberately does not forewarn the business but simply turns up. In this case there will be a formal notice signed either by a Tribunal or An Authorised Officer of HMRC. This notice is actually a request to enter the premises. IT DOES NOT GIVE HMRC AUTOMATIC RIGHTS OF ENTRY. There is no penalty for refusing entry for a notice signed by the Authorised Officer. There could be an initial penalty of £300 if the notice has been signed by a Tribunal but even then only if it is held that there was not a reasonable excuse for not permitting entry perhaps because the trader wanted his accountant to be there perhaps. These visits are not random and our advice would be to seek professional advice before letting them in.

Be aware that the visiting Officers will initially ask for the business owner. If he/she cannot be traced they can ask anyone who is in charge at the time. If no one is actually in charge at that time they can simply enter the premises and leave the notice displayed in a prominent place. They need only be told “no” once and they should not enter.

Know Your Rights

HMRC does not have any absolute right to meet the business owner. Both announced and unannounced visits are inspections not searches. They have the right to ask to see any business record which is reasonably required to check your tax affairs. If there is any uncertainty over whether an item is reasonably required HMRC should be challenged instantly rather than afterwards. Also, the extent of the inspection should have been made clear prior to the visit and this should not be extended without justification.

You do not even need to have the inspection at your business premises if it would be better or more convenient to have it at the accountant’s office. Their attendance at your premises must still be reasonably required in preference to elsewhere. HMRC must be courteous and polite to you at all times and explain what they need to see and why.

Be Nice

HMRC Officers are human beings and have the same right to courtesy as the rest of us. An Inspector that feels he has he has been mistreated will be far more inclined to dig his heels in to find something and also when negotiating penalties. Refreshments and warmth are expected.

Take Advice

 If HMRC make any contact with you direct you should always let your accountant know who called and what they said. Let your accountant decide if they need to get involved. Always let your advisor know the outcome of the visit. It is good practice to ask HMRC to issue any follow up in writing.

If you are not currently protected against the professional costs incurred when you have a tax investigation or enquiry, please contact us for more information.

What does your website say to the world?

You know very well its a busy, busy world out there.  More so in recessionary times, and in times of financial hardship people are often a little stressed as well.  So, once they have decided to find out about you by looking at your site, is it a straightforward experience or do they have to wait for a clutter of clever graphics to load?  Can they find your phone number in seconds? …  An overview of your products? … An address if they want to send you something? 

Make it easy to deal with you – even in the most traditional of businesses, your website is increasingly how you are viewed.  Check that everything, especially prices if revealed, are up-to-date and that you are being analysed properly on comparison tables.

Key message – Create a brilliantly simple and basic website.

WORD OF MOUTH MARKETING

‘Word of Mouth’ is still one of the most effective marketing techniques, online or offline. In today’s tough market, businesses are fighting for their share of sales. If you can create a reputation and get people talking, you can win new business for your firm.

The best thing about word of mouth marketing is that it doesn’t cost the business any money. Instead, satisfied customers tell people about their positive experience of a business, a brand, a product or service. The key is to ensure that your current customers are satisfied.

Go the extra mile for you clients. Make them feel special – like they have purchased something that delivers real value to them. They will think positively about your business and your brand and will endeavour to tell friends, colleagues and contacts about the positive experience that they have had with your firm.

People do business with people they know and like. Many of us purchase a product or service because it has been recommended to us by a friend or colleague. If that friend or colleague knows or likes a particular product or service, you will most likely trust the firm that offers that product or service.

You can encourage your existing clients to spread the word about your brand by asking for referrals. In order to avoid coming across as desperate for a sale, take a subtle approach. Something along the lines of “We are glad you are satisfied with our product / service. We are very busy but we always welcome a referral”.

The golden rule is – “ask for the business”. After all, people generally want to be able to recommend someone to a friend.

TIPS FOR IMPROVING CLIENT RELATIONSHIPS

One of the most important parts of any business is maintaining and enhancing relationships with clients. This makes the time spent on a project more enjoyable, satisfying and effective. Improved relationships also improve the chance that the firm will get referrals and future business.

Be clear and open with client – This is the number one guideline for a successful client engagement. Be clear and open with everything from a sales proposal through to the final contract and this will assist in developing strong working relationships which should contribute to repeat business from loyal clients.

Get to know your client  – Relationships are better when the individuals involved take the time to get to know one another. Learn about the client’s interests. You will likely spend many hours with your clients so you should take the time to build a positive working relationship with them. Make it a point to learn something new about each client in every meeting you have. Once you learn something new, keep track of that information in your CRM system or in a client file.

Ask questions – When we ask questions we understand situations better. Take the time to ask your client how they feel about the service so far, what other services your business could provide, etc. Ask the client about their company – showing that you are interested will help them to feel like a valuable and important client of your firm.

 

Be willing to say “No.” – In many cases, clients ask us to do things beyond our capabilities or interests. When these new requests are outside the contract agreement, be willing to say no. Take time to understand both the client’s reason for asking as well as your ability to deliver. Don’t automatically say yes, because if you agree to something and then fail to deliver, you could risk spoiling the client relationship.

Be willing to say “yes.” – Sometimes yes is the right answer – and only you will know when. Sometimes it is worth going the extra mile for a client. Perhaps they are very profitable or they may be a source of good referral work. If so, then it may be worth putting in the extra effort in order to gain new opportunities.

Solve problems for your client – Clients want value. Deliver that value to your client by solving a problem for them. Whether you sell a product or a service, using that sale to provide a solution for the client will help them to see the value that your firm offers and will create loyalty towards your brand.

SOME GLIMMERS OF HOPE

 

SOME GLIMMERS OF HOPE

Despite the doom and gloom, there are several ways that any business can maximise opportunities in 2013:

The first thing to do is sit down and think about your strategy – what you want your turnover, profit, market share to be and set targets.

Then think about increasing market share.  Smart businesses with competitive products and astute marketing skills are well placed to grow their respective market share at the expense of weaker or ailing competitors.

The big question is: “What can we do to increase our market share?”

Maybe if flexibility is the key – consider adding to your product or service offerings – this may give you the scope to move into adjacent markets that are currently underserved, maybe there is some space for newcomers.

Also consider selling into new foreign markets.  Foreign exchange commentators suggest the level of sterling will continue to favour British exports in 2013.  With this tailwind, UK companies that can hone their products to the specific needs of overseas customers have the opportunity to open up new international markets with competitive prices.

Opportunities in 2013 do exist for those businesses that can demonstrate the right approach and product offerings.

The top three strategies being adopted by our clients in 2013 are:

1)            Taking business from competitors;

2)            Lowering costs; and

3)            Using technology to improve efficiency.

Take time to think about these and how you can maximise your opportunities!

 

What Keeps You Awake At Night?

The most common answer is NOT KNOWING WHERE YOU STAND with respect to your business.

If you’re not getting reliable information on a regular basis in a format that you can understand, we can help!  We’re experts at developing accounting systems and reports.

Alternately, we can prepare the figures for you, accurately and promptly, and offer you an outsider’s view on your performance.  We can also help you develop an annual budget and show you how you’re doing every month against your targets.
Please remember that we are here to help and support you at all times.

 

 

Disincorporation relief

Disincorporation Relief

When the draft clauses for the Finance Bill were published, a week after the Autumn Statement, it became known that the Government had decided to remove one of the tax charges which may arise when a small company ceases trading and its business is taken over by one or more of the shareholders.  The draft clauses show that the relief, which will apply from 1 April 2013, will take the form of ‘rolling over’ the notional but taxable gain that would otherwise on the transfer of the company’s goodwill and premises to the shareholders, so that no tax is payable by the company immediately, but more tax may be payable by the shareholder when they eventually dispose of the business (or the business premises).

To pause there for a moment, in reality the trading premises are often held outside the company, by the shareholders personally, by a family trust, or by the directors’ pension scheme.  In such a case, no transfer of the premises will be required and so the new relief will apply only to the goodwill.

To continue, the relief will not be available unless the combined value of the goodwill and the premises (if currently owned by the company) does not exceed £100,000.  Not only does this limit the relief to very small companies, it also means that the shareholder will have to value the goodwill (always a difficult task) before they know whether they are eligible for the relief.

Another problem is that, if the company has claimed Annual Investment Allowances on its machinery and vehicles, a substantial part of that tax relief may be clawed back at the time those assets are transferred to the shareholders.  Other tax problems may arise and, all in all, the whole process is likely to be very complicated and the new relief will by no means be a magic bullet for solving the problems of disincorporating a business.

The shareholders themselves are also likely to suffer a tax charge, because if they do not pay full value for all the assets they take over (premises, goodwill, stock, equipment, vehicles etc), they will be deemed to have received a benefit from the company which in most circumstances will be taxable either as income or as a capital gain.

We can only conclude by saying that whether a disincorporation can be achieved at an acceptable tax cost will depend on all the circumstances of the individual case.  If you have a company that you wish to wind up, we would be pleased to advise on the best method of disincorporation and on the likely tax and other costs of doing so.

 

Capital Allowances for Machinery and Vehicles

Capital Allowances for Machinery and Vehicles

 The Chancellor announced that, for two years from 1 January 2013, the annual ceiling on Annual Investment Allowances (AIAs) will be increased from £25,000 to £250,000.  Broadly speaking, AIAs allow the whole cost of machinery and vehicles (other than cars) to be written off, for tax purposes, in the year of purchase.

However, this does not necessarily mean that a company (or an unincorporated business) will be able to go out in January and buy even £100,000 of machinery that will qualify for the increased allowance.  This is because special transitional rules apply where the company’s (or the trader’s) accounting date is other than 31 December.  For example, if the accounting date is 31 March, the maximum qualifying expenditure for the whole of the year to 31 March 2013 will be:-

 

9/12 (months) x £25,000                         £18,750

3/12 (months) x £250,000                                   £62,500

                                                                                    ———–

Maximum qualifying expenditure                                    £81,250

                                                                                    ======

Of that £81,250, only £25,000 may be spent before 1 January 2013

 The full £250,000 allowance will then be due for qualifying expenditure in the next accounting year (to 31 March 2014).

 That was a very simple example, and in practice the calculation can be much more complex.  Furthermore, there are some complicated rules for determining when the purchase is treated, for Annual Investment Allowance purposes, as being made – it is not usually either the day you sign the order of the day you sign the cheque.  Accordingly, if you are contemplating a major purchase, or a programme of capital expenditure, we would strongly recommend you to contact us for individual advice.

 

Excessive CIS penalties

Tribunal Rules CIS Penalties Excessive

 

The First-Tier Tribunal has held that the statutory penalties charged for late filed Construction Industry Scheme Returns may be struck out as being (in human rights terms) disproportionate to the State’s legitimate objective of securing the payment of taxes, or may be reduced as being excessive.

 

Shortly put, under the statutory CIS scheme, a contractor is required to submit monthly Returns of payments to subcontractors.  The Case, Anthony Bosher v HMRC (2012) UKFTT 631 (TC), concerned penalties charged for Return periods before October 2011.  In outline, if a Return for such a period was not submitted on time, a fixed penalty of £100 was charged, with further £100 penalties if the Return was more than a month late, more than two months late, and so on up to twelve months.

 

If the CIS Return was more than 12 months late, an additional ’month 13’ penalty was charged.  The statutory maximum was £3,000, but in practice HMRC charged between £300 and £3,000 depending on how many times, in a rolling twelve-month period, a Return was submitted more than twelve months late.

 

Such penalties can of course quickly add up, and in Mr Bosher’s case, a total of £54,100 was charged for eighteen late monthly Returns – £19,300 of this was made up of fixed £100 monthly penalties and £34,800 of ‘month 13’ penalties.  The Revenue had offered to reduce this total to £14,600, the amount which would have been chargeable under the new system of late filing penalties which came into force in October 2011 (see page 148 of our June 2010 edition and page 67 of our December 2010 edition).

 

However, the Tribunal (Judge Aleksander and Ms Hewett) held that the monthly penalties were disproportionate, and so should be reduced to nil, and that the ‘month 13’ penalties were excessive and should each be reduced to an amount equal to the CIS tax shown on the Return or, if greater, £100 (making a total penalty charge of £6,287).

 

An interesting feature of the case is that Mr Bosher represented himself at the Tribunal and, in essence, simply claimed that ‘the fines are unjust’.  The Tribunal then based their decision on their own analysis of the law, though HMRC were represented by Counsel.

 

Finally, it seems to us that if the fixed penalties were disproportionate under the pre-October 2011 regime, they must still be disproportionate now.  The tax-geared penalties (charged on Returns more than six months late) probably are proportionate, though the statutory minimum penalty should probably be capped at an amount equal to the tax shown on the Return.

 

HMRC’s response to the decision is awaited.