Yes, it’s that time of year again. Isn’t it worrying how quickly it comes around each time. I am sure it gets quicker each year!

The 31st October 2008 is the deadline for sending in a paper Self Assessment Return (SAR) and if you want, HMRC will calculate your tax for you - more on that in a minute.

You can submit an electronic SAR right up until 31st January 2009 but if you would like your outstanding tax collecting through your tax code, you need to submit the SAR before 31st December 2008.

Not everyone who is liable to submit an SAR uses a bookkeeper or accountant, in fact less than 50% do. This means there are a significant number of small business owners who do everything themselves, no doubt in a misguided attempt to save money on fees, and who are at serious risk of a full and lengthy tax investigation into their business and private affairs.

The Tax Office love dealing with “undefended” taxpayers because they are much more likely to have a “successful” (more expensive for the taxpayer) outcome than someone who has an accountant and professional fee insurance in their corner.

Back to the option to have HMRC calculate your tax for you if you submit your paper SAR before the end of October 2008. Why would you???

They will not give the same care and attention to your business records and particular circumstances that an accountant would. You are likely to deal with a low level assistant and just be one of their 100 odd tasks a day. They simply do not have the time or professional knowledge to do everything in their power to minimise your tax bill. They will not understand you or how you run your business and you will pay much more tax than you should.

And, you are no less likely to have a full in-depth investigation because HMRC have done it for you (despite some pub talk I have heard). In fact, you are more likely to have problems because someone higher up has to check the work of the afforementioned low grade assistants who do this for you.

The moral is - use an accountant. I don’t understand plumbing and twice this week I have had near disasters because I thought I could cope and not wait around for the busy expert. Everyone has their field of expertise, but if you want an accountant to come round and fix your blocked toilet then call me, you will get a much more professional, insured and trustworthy job done if you call a qualified plumber but I will be cheaper!

Dealing with the Tax Office at the moment is best left to the professionals. The only consequence of me doing my own plumbing was s### all over the bathroom floor. The consequence of dealing with the might of the Tax Office on your own could be a heck of a lot messier and cost you a fortune.

If you would like to talk about your Self Assessment form, if you are not sure if you should still deal with it yourself, if your present accountant isn’t giving you the time and attention you need - please call me on 0800 047 0731 for a no-obligation chat.

I never charge for the first 30 minute interview and sometimes this is all it takes to put someone’s mind at ease. But if you would like us to take over your case, we will bring all our expertise to bear on your situation until it is resolved.

I never let a tax return out the office without personally going through it, and the supporting information, to ensure nothing slips through un-noticed.

Remember though, if you choose to become a client, you will be expected to either join the Federation of Small Business, or let me see that you are covered for professional fees for a tax/vat investigation. This helps us maintain the highest reputation with the Tax Office and ensures you have the best possible team behind you if an investigation does start.

So, ring me today on 0800 047 0731 and let’s have that 30 minute free chat.

~Ray

Recent activities of the Tax Office now make professional fee insurance against Tax/VAT Investigations essential.

The new investigations start innocently enough by HMRC saying they merely wish to look over your business bookkeeping. This has led people into a false sense of security thinking that it is not a full investigation and catching them off guard.

But as sure a night follows day, something will crop up in this review of the books which turn the whole thing into a much more sinister in-depth investigation.

Why is insurance necessary?

Most accountants are like your local doctor. They deal with the day to day problems and issues that crop up but are not experts in dealing with these new investigations. Like your GP, would you want them doing open heart surgery on you in their consulting rooms? Probably not! You would expect them to refer you to a consultant who does nothing else but the operation you need.

Your accountant is likewise a general practitioner. They may deal with two or three investigations a year, but they are not experts. An in-depth investigation can rack up professional fees of £’000’s.

If you are covered by insurance, you have access to the best consultants available who work hand in hand with your accountant to get the quickest and best result they can without any costs to you.

If you are not covered by insurance, you foot the bills yourself and will probably rely on your accountant. This will not give you the best outcome and will cost you dear in terms of time, fees and tax!

Don’t go another day without this insurance. It is as necessary as car insurance!

~Ray

Lost records have been a problem since time began. Sometimes the loss is genuine and records ruined in fire or floods etc., but sometimes the “loss” is a smokescreen because the business person thinks they can outsmart HMRC by claiming the records are lost.

HMRC has lots of information sources they can access in these situations, including digging into your bank accounts when the statements are lost (have you any idea how much the banks now charge for each statement HMRC ask for? between £5 and £25 each depending how far back they are needed), looking at your lifestyle to get a handle on how much money you spend, interest information, dividend information etc.

Without records, investigations become much easier for HMRC because you cannot provide any rebuttals to assumptions they make about your financial affairs and those investigations always end up with a much higher settlement than if all the records are available.

So… try hard not to lose them - they are worth their weight in gold - literally. Micro-fiche them, scan them, copy them, protect them as best you can so that if the originals do go AWOL for any reason - then it is no big deal at all

~Ray

This question comes up a lot here at the office.  I am asked at least 3 times a week as there seems to be lots of confusion out there in the “real world” amongst business people.

The answer is it depends…

If you just complete a Self Assessment Return each year as a consequence of having a company car or other employment benefits, then you should keep your paperwork relating to your claims and expenses for 2 years.  The reason for this is that HMRC have a full year after the filing deadline to open an enquiry into your affairs.  So for the tax year just ended on 5th April 2008, you need to keep this paperwork until at least April 2010.

However, if you are a business owner, the records need to be kept for at least 6 years but preferably longer.  If your accounts year end is 30th June for example, your 2008 Self Assessment will include your accounts information for the year ended 30th June 2007.  So paperwork for that year runs from the 1st July 2006 onwards.  You should realistically therefore keep those records until at least April 2015.

I personally recommend people keep as many years as possible because you just never know when they may be useful.  I know we are told from all quarters that Identity Fraud is rife and can only be prevented by shredding everything the minute you receive it, but a lack of important records during a full tax Investigation can make defence against HMRC proposed additions very difficult indeed.

If you are thinking of disposing of business records, I would strongly recommend you take advantage of micro-fiche techniques as much as possible, or keeping endless backups of your paperless office (as I do) so that all possible information is stored in a way you can get to it.  Then you can shred with confidence knowing you can still answer probing questions easily.  Most modern micro-fiche services and paperless office systems allow searching of documents so tracking things down is simplicity itself.

I hope this clears up a little confusion about business records but please do not hesitate to contact me if you have any questions, or would like any more information.

~Ray

Did you know you could get insurance cover for this?  Do you know why you need insurance cover for this?  Do you know that a poorly defended Tax investigation could bankrupt you?  Do you think this could never happen to you??

OK.  Enough questions, what about the answers?  - Oops, that was another question!

Let me answer the questions in reverse order…

Firstly, if you think a detailed in-depth tax investigation could not happen to you - WRONG.  It can happen to any business from the smallest sole trader to the largest global company.  The current tax regime is policed by these investigations, either started at random, or as a result of something coming to an Inspectors attention.  This could be from a malicious letter or phone call, or something that just doesn’t stack in the forms that are submitted each year with accounts information on.

However it starts, a tax investigation will be a part of your life for up to two years.  And don’t think that having one now will prevent you having another in the near future either.  It doesn’t. 

Secondly, if you think you can get away with paying next to nothing as a result of an undefended tax investigation, think again.  The Tax Office love businesses without professional fee insurance because it is much easier for them to find things to adjust and increase your profits.  You may rely on your accountant to help you out but unless they are constantly engaging in tax investigations, they know as much about how to tackle it as you will, but will still charge tax investigation level fees to you anyway.

Where does the possibility of bankruptcy creep in… the settlement in an undefended investigation can be massive.  Then there will be interest and most importantly, penalties.  You then get 30 days to come up with the full amount of the settlement by raining a mortgage or other loan, but if you cannot do this perhaps because of a poor credit rating, then bankruptcy is a quick option for the government if you have some assets they can sell.

Finally, why do you need insurance cover for this?

If you have had the foresight to make sure you have insurance for this, then when the letter from the tax Office arrives, you simply notify the insurers and let the appointed consultants deal with everything for you.  These experts do nothing else but deal with the Tax Office and don’t give an inch in any respect in their dealings on your behalf.  Settlements in investigations defended by these experts are usually minimal and manageable.

This type of professional fee insurance is an integral part of membership of some trade bodies such as Federation of Small Business and British Institute of Innkeepers, you can buy it from various insurance companies and it is even part of some home contents and office policies.  The thing to do is check that you are covered by someone.

If you are looking for cover, you should consider joining a trade body such as the FSB and the BII as membership includes lots of other benefits as well as the insurance cover such as 24hr legal help lines etc. rather than just the insurance cover for a similar price per year.

Finally, if you are still not convinced that you need cover and are prepared to pay the accountants/consultants fees if, and when, it is needed… then be aware that the fees can range from about 3 years normal accounts fees as a minimum, up to exorbitant amounts if your case is complex and ends in court with barristers and other legal expenses!!  Or FREE if you have the recommended insurance cover.

~Ray