I am not going to re-iterate the provisions of the “Pre-Budget Report” as these are mainly widely known now.

But was the chancellor right to do what he has done?

Was it formal budget in all but name just so that this government can force these changes through without discussion and all party approval? The sceptic in me says YES.

Little has been made of the total debt the government are running up overall. We hear snippets that suggest borrowing this year of £78bn and then another £118bn next year. I haven’t seen much reference to the total the country will be in debt by in a couple of years… a staggering £1,000 billion.

All this tinkering about is just to make the government look good before a general election.

We all know that the repayment pain of this staggering pile of debt will start just after the next election. NI is going to rise, VAT will be back at its current rate again, higher rate tax will be 45%, road tax will have significant changes (most likely upwards) with 6 new bands of vehicle excise duty etc..

As far as business owners are concerned, they now have to reprice everything in their stores, websites, brochures, tills, menus etc all by Sunday evening . Any compensation for this - no.   Oh, and don’t forget we have to put it all back again next christmas when VAT goes back up.

Already hardpressed hauliers are going to suffer another cost blow because the VAT they currently reclaim in fuel is being reduced and replaced with fuel tax they cannot reclaim. Thanks mate!

All this fuss about we will give businesses time to pay their tax bills is a smoke screen. This has been going on for years now ever since self assessment introduced the creditcard like statement for the tax owing. Maybe the penalties will be suspended for a bit - we will see how that works in practice because VAT is a funny tax and there is not yet any provisions in the law for this to work and interest to be paid. Perhaps we will see the magic wand at work again on this and law mysteriously changed overnight.

The recession will be over next year he says. Wasn’t it just a few weeks ago the government denied any prospect of a recession? Get real mate. No recession runs its course in less than a year - and the £20bn being dropped in the ocean now (sorry, over the next few months) is not going to make a jot of difference.

I bet there will be retailers, already offering big sales discounts, who will say thank you and use the VAT reduction and keep it to boost their margins rather than pass it on - partly to soak up the recent rises in minimum wage. I would. I very much doubt though that it will stir anyone to start buying no-essentials again just yet - certainly not houses.

A big thing has been made about the loss relief businesses are being given. The fact is that these reliefs have been around since before my day (and that’s a very long time ago). All he has done is extend them slightly. But as he expects the recession to be over next year, why has he made loss relief now available for 3 years and limited the extra relief to a mere £50k?

Oh yes.. We mustn’t forget, he has also promised £15m to offer debt advice. I wonder if he has taken any himself?

Why couldn’t he do something more constructive like bring back mortgage tax relief, give some sort of council tax relief, force the banks that have taken billions of our money to start lending again to businesses and house buyers??

This government is seriously dangerous to our financial health. I used to be a conservative in years gone by, but then they had a long run in government with a large majority and power definitely corrupted the way they conducted themselves. This led to Maggies downfall and John Major losing all credibility and thus opening the door to new labour. I was pleased when there was a change, a new breath of life - but not for long.

Once again, we now have a government of 11 years or so and they are becoming desperate to hold onto power. We should have had an election when Tony went but they knew they couldn’t win it so we didn’t. We should have had an election last year when all the hints and spin made us think one was imminent and then Gordy bottled it because he knew he couldn’t win it.

So here we are. The country is in trouble. We have an unelected Prime Minister leading us. The government are throwing money around as if they can stop the dike bursting (like the little dutch boy with his finger). They panic supported Northern Rock with about £100bn. They recently “invested” how much was it into banks - about £200bn.

To get that bank figure I looked at some Treasury websites and had to laugh. I found this quote when they announced £37bn for HBOS, Lloyds and RBS on the 14th October 2008:-

And of course, that came to pass didn’t it!

The problem is if labour are kicked out (which I doubt at the next election because of these give aways) who would replace them?

I don’t think the conservatives are acting much like a government in waiting at the moment and the Lib Dems don’t seem to have much chance - so who?

And whoever wins… they are going to catch the economic fallout of all this gambling and we are going to be taxed until the pips squeak - no doubt back to the old labour ways - just to get this gargantuan £1,000 billion debt pile reduced a bit.

And very quietly, they are planning to sell off at least the Royal Mint and the Met Office to raise a bit of cash to help.

Anybody else got any views??

~Ray

Watching breakfast tv this morning, my ears pricked when they heard a story about women “officially” now being able to top up their pensions if they have too many years contributions missing, by making payments of £400 per year for each year missed.  These missing years usually occur when time is taken for having and bringing up a family.  But they can also occur when husbands employ their wife/partner in the family business but only pay them just under the NI limit to save a bit of tax on their own business, and also when people think they are being clever in drawing dividends from their Ltd Company and just enough salary not to pay any tax at all.

For many years I have been advising clients against the normal trend of paying no NI contributions if possible in any tax year and I have had quite a bit of stick for it.  But people are generally tremendously short-sighted and will look to save a £1 now rather than think about pensions which may not affect their thinking for another 35 years or so.  I have always tried to persuade clients to pay their spouse above the NI limit enough so that no gap years accrue unnecessarily.  Sometimes I have been successful, but sometimes not.  People with gaps in their contributions have always had the opportunity to make up a year to a qualifying year by paying voluntary class 3 contributions - but that was as popular as chocolate teapots.

The thing is that everybody has always had the option to pay and make up for missing contributions which is why I found it funny this morning to hear the generous proposal being offered by the government, but £400 per year is the highest it has ever been to make a year qualify.  Perhaps now Gordon Brown has finally started to realize we actually are in a recession - something most people have known for a least a month or two - he sees this as a chance to scoop in a bit more money into the nation’s coffers!

I can hear you asking why missing years are important.  Well, to qualify for a full state pension when we get to age 65, we are supposed to have made 39 years contributions into the system by way of National Insurance contributions.  I didn’t hear this morning if that has changed but if you have less than 39 qualifying years you have to pay £400 per missed year to bring you up to 39 years if you want to receive a full state pension.  So… if you have been working since you left school at 18, you have a potential to accrue 47 qualifying years.  If you go to University and leave at 21, you have a possible 44 years.  It doesn’t leave much does it.  Over your entire working life, the government says you have to have had no more than 5 missing years of NI contributions or they will punish you by severely restricting the pension you are entitled to.

An average lady with a degree, who has taken 15 years to have and bring up her family before returning to work, will have to make up 10 years of contributions totalling some £4,000.

Each year you leave it by the way, the total needed will rise - it always has.

The expert chap who was talking about this on tv this morning said it would probably be worth getting a loan to make up the missing years or you could just rely on pension credits to come to your rescue if your pension is too small to live on.  I am not so sure.  It would have been much cheaper if people paid each year as they went along and stopped this live for now attitude of not paying tax or NI and opting for dividends instead, and who says pension credits will still be around in 15 or 20 years to bail people out??

The moral to the story is, pay your spouse/partner a proper wage each year and let them pay some tax and NI - remember - it is tax deductible from your profits anyway (paying the back instalments for them won’t be).  Dividends are a way of reducing your overall tax liability, but remember the consequences of trying to beat the system.  I always advocate paying a salary that is enough to live on and have the excess profits voted as bonuses.  That way you protect your position for retirement and still enjoy the benefits of your business success.

Don’t just rely on a state pension for your old age though.  We should all be making other arrangements as well - but that is a subject for a whole series of articles!!

~Ray

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

This is a question that I, as an accountant, find incredible when I am occasionally asked.  Why would any busy business owner think there would be a need for more than one set of records?  There is barely time to keep one set, let alone more.  The only time I have found two serious sets of books was when fraud was involved and a grim determination by the businessman to pay as little tax as possible.  No, he didn’t escape prison - 2 years in fact.

Sometimes the question is born out of a huge distrust of computers and computer based bookkeeping packages.  There is more than a little reluctance to rely on the machine - just in case it breaks down, or accidentally wipes all data off it’s hard drive - so should we keep a hand written set of books “just in case?”  The answer is no.  Just make sure you have a disaster recovery procedure - and check your backups regularly just in case they cannot be restored when you really need them.

Sometimes the question is genuine as the questioner heard somewhere, usually the pub, that as VAT on some expenses cannot be reclaimed, that these need keeping in a different set of books.  Likewise, entertaining and other expenses which are not tax deductible should be kept separately from other expenditure which is tax deductible.  The answer again is no.  One set of records is all that is needed and let your accountant worry about what is tax allowable and what isn’t when he prepares your annual accounts.

I advise anyone who asks this question to focus on keeping the most up to date, detailed books they can - just the one set! - or let someone like me deal with it for them for a monthly fee.

Please do not hesitate to contact me if you would like to know more about our bookkeeping bureau service.

~Ray

After more than 34 years working as an accountant, it is clearer to me more now than ever that many accountants are letting clients down in spectacular fashion.

Unfortunately, you may never know and you may never find out unless a good friend strongly recommends you have another expert look over your figures and points things out that have gone awry.

I recently took on a new partnership client and they had been using an accountant recommended to them for the last 3 years. When an existing client of mine was talking to them about accountants, tax bills and general service given by expert advisors, a number of alarm bells started to ring in the ears of this partnership.

Why is that?  My client was talking about the presentation of their accounts and how the bank manager clearly understood them when it was time to review the overdraft.  “What’s a balance sheet?” asked the senior partner.  “Our turnover is about the same but why do you pay so little tax in comparison?” asked the junior partner.  Many other questions followed…  “Why won’t our bank manager talk to our accountant and why won’t he give us the backing we are asking for, and need?”,  “Why did our accountant rush around to our homes last January 31st to get us to sign another tax return as she had lost our original ones?”,  “What is filing online?”,  “Does your accountant really speak to you in plain english and actually answer a question immediately in terms you understand?”,  “Can you really call your accountant on his private mobile if you need a quick answer?”.

Once the partners plucked up the courage, and I know it is not something easy for a business owner to face up to, to call me and let me review their last 3 years accounts and tax returns, they quickly realized just how bad things were.

For example, the senior partner had been doing the bookkeeping himself on a number of excel spreadsheets.  The accountant had never explained the dangers of doing this from a defence against the inevitable tax investigation point of view, nor of the massive benefits the business would gain if the books were done properly.  He had a spreadsheet for each heading of expenditure and one for sales. The accountant would just use the total of these and prepare a statement of profit and loss. No balance sheet had ever been prepared, no balancing of the spreadsheets to the bank account had ever been done to make sure all expenditure was in there, no-one was tying up the cash movements.  Cash taken from the “hole-in-the-wall” was ignored, even though the partners used it to put fuel in the coaches, etc….

The accountant had not even asked them about their personal expenses, for instance the drive from their home to the yard which was a 24 mile round trip for each of them, 6 days a week.  They each bought spares and other items for the business from their own drawings and never thought to record it anywhere.  They had never been led through a detailed examination of their business; the records; the potential opportunities for growth; the savings that could be realized.

This story is not just hearsay or made up. It is very real and very recent. Please ring me if you would like the name and address of the business and I will put you in touch with pleasure.

So, what was the result of my doing the most recent year for them?  Tax savings in excess of £10,000 and establishment of a solid bookkeeping system that now lets them track the monthly profit and loss, accurately, and which makes the VAT return a one mouse click event.  We also held detailed discussions about the future of the business and how to stop the senior partner rushing round in ever decreasing circles.  The opportunity to get the extra 2 operator licences for 2 coaches that were taxed, MOT’d but kept in reserve in case of need.  These will soon be active and earning the business money and no longer just sucking it away whilst parked up.  Awareness of how to claim back every penny they spend of their own money on the business and how to claim the government approved mileage rates for using their own cars for business travel.  Generally giving the partners back control of their lives, awareness of how the business is running, and a plan for how the business is to progress.

This brings me to why I am writing to you today.

I am sick and tired of coming across businesses that are simply not getting the service and quality of care from their accountant that they have every right to expect.

The worst cases I have come across tend to be businesses of about the size of yours, as in the coach business I outlined above.  It tends to happen because when you start out, the choice of accountant is generally made by plucking one quickly out the phone book when, at the last moment, you realize the Tax Office needs those tax forms when the ad’s start to appear on the TV around Christmas. Or you speak to another small business owner for a name of their accountant.

Unfortunately, the choice is rarely one made at leisure, more like “can you sort this out for me today? yes - ok” and then no need for change appears necessary until someone, such as an existing client of mine, starts talking to you a couple of years later.

Knowing this, I am writing this to ask you to accept a challenge. A totally FREE and no obligation challenge.

I am offering you the chance to have me, with my 34 years experience, go in-depth into your last set of accounts, tax computations and tax returns.

I promise to give you a full, detailed report, into my findings of tax saving opportunities that I may find, of improvements into your bookkeeping that may be highlighted, of simple suggestions for growth and expansion for your consideration, and any other matters that I feel need bringing to your attention - completely free of charge - within just 3 weeks.

There is no obligation on you at all.  I would just love the chance to prove to you either that your accountant is doing a fantastic job and you are fortunate indeed for having them, or that you should give my report to your accountant and ask them openly why they haven’t done this, suggested that, or cost you more tax than necessary.

I am doing this for FREE because I want as many businesses in the position you are in to make sure they are getting the best quality service possible, and if not, a chance to be made aware of it without it costing any money at all.

Yes, I would welcome you as a client as a result of my review and report, but you have no obligation to me at all.

Once you have read and digested my report you have two options:-

1. Receive the report, act on it, benefit from it - which I sincerely hope you will anyway - but never have any more contact from me and carry on with your existing accountant. Or…..

2. Receive the report and contact me for a one hour chat, either at my home, or in your office, whichever suits you better, and I will gift you another hour completely free, to go into much more depth than my initial report and chat about any aspect of your business that you want.

Whichever option you choose, although I would really love you to choose the meeting option, you still have no obligation what-so-ever to me for my time spent on the report, or the meeting.

You really have nothing to lose, but possible a huge potential of tax savings and growth possibilities to gain by accepting my challenge.

I will do the review myself.  I will not pass your personal information onto another living soul.  It will be just between you and me.

If you would like to take advantage of my challenge, please ring my office as soon as possible on 0800 047 0731.  I will collect the information personally from you at work or at home, or you can bring it round to my home by arrangement, and I will immediately get to work on it.

Let me reiterate.  This is a limited time offer just for you as my research has shown you to be in the demographic that I have experienced is the worst treated by accountants.  It is totally FREE, no obligation of any kind to you, offer.  It will remain totally private between you and me.  If the report shows your accountant is doing a good job, show it to them and give them some praise for doing their best work for you.  If the report shows opportunities that haven’t been spotted by your accountant, show them and ask why they are not giving you the best possible service.

I really look forward to hearing from you shortly.

~Ray

p.s.  Remember, this gift cannot be offered for long, just over the summer whilst I have a little free time as most clients are on holidays.  So ring me Today on 0800 047 0731.

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

Further to my recent post on the drastic changes to Capital Gains Tax recently proposed by the Chancellor, Alistair Darling, I am pleased to pass on the address of a digital petition being mounted to try and persuade the Government that these changes are unwelcome, unfair, and dis-encourage entrepreneurs investing in the future.

Read the full story

Hi there.  I wasn’t planning a post today but I felt I just had to alert you what our government is up to in the Capital Gains Tax Department.

Not content with pinching other parties policies this week on Inheritance Tax, the Chancellor also announced sweeping changes to Capital Gains Tax from 6th April 2008.  I think there has been massive amount of disbelief from everyone since the announcement but now things are becoming clear.  Business Taper Relief is being abolished and nothing, nothing at all, is planned to replace it.  However, we are supposed to be content that the rate of tax will only be a flat rate of just 18% - that is instead of the gain being added to your income at your highest rate of tax, either 22% or 40%.

Read the full story

I am pleased to report that my very first webcast has finally been uploaded to the blog.  I apologize in advance for the amateur production of the webcast but I am sure the quality will improve with future webcasts as I get used to operating all the bits and pieces that go together to make the finished product.

The webcast in entitled “4 Ways To Defend Yourself Against An In-Depth Tax Investigation” and you can automatically start the webcast by clicking on this link.  You will then need to use your browser back button to get back to the main blog.

It is mainly aimed at small businesses who haven’t yet encountered the tender attentions of Revenue & Customs Officials and tries to make sure that those people know how their business affairs need to be presented to minimize the impact of an investigation.

I hope you find it interesting and I look forward to hearing comments about it - yes, both good and bad - so that future webcasts can give out the type of information people find useful - but don’t know where to go to find it.

~Ray