Pre-pack administrations targeted by Tax Man

From 6 April, HMRC will have extra powers to demand a ‘bond’ from companies whom it considers a serious risk in avoiding paying their PAYE or NI contributions.

The crackdown is aimed at unscrupulous Directors and business owners who deduct tax and NI from their employees’ pay, but then fail to pay it over to the HMRC coffers. There has been a steep rise in the number of so called ‘pre-pack administrations’ whereby a new, debt-free company is established, leaving it free to continue trading whilst the defunct company is left with all the debts and no way of paying of them.

HMRC have stated that failure to pay the security, which could be by way of a cash deposit or bankers’ draft, will be punishable by a fine of up to £5,000. The size of the bond will be determined by the amount of tax at risk, together with the company’s ‘previous tax behaviour’.

The move to require a ‘bond’ follows the decision by HMRC to abandon their overhaul of ‘pre-pack administrations’ with measures to protect unsecured creditors from the ability of firms to be collapsed, restructured and sold to new owners (often the existing  owners and/or management) without their consultation.

9:31 am February 21, 2012

Student Loans chief in “tax avoidance” scandal

Here at Cog Blog towers, we note that its been widely reported this week that Ed Lester, CEO of the Student Loans Company, has been ‘avoiding tax’ by having his £182,000 remuneration paid to a private company (owned by Mr Lester) rather than going on the Government payroll and paying PAYE and NI.

Whilst many observers have been crying foul and shouting that Mr Lester has saved as much as £40,000 per annum in tax (a figure that is hard to believe hasn’t been sexed up), we here at the Cog Blog think that one crucial point has been overlooked in this whole saga.

By receiving payments directly into his own personal service company, Mr Lester is caught under the Government’s own IR35 legislation and would be subject to PAYE and NI regardless! What will be interesting, however, is to see whether this fact has been divulged on his tax returns for the period over which such payments have been received.

As ever, we will keep you up to speed with events right here on the Cog Blog.

8:12 am February 6, 2012

The 12th Annual Cognitor/Acorns Childrens Hospice Golf Day

Following on from the runaway success of our 2011 Golf Day which raised over £5,800 for Acorns Children’s Hospice, we are pleased to announce that our 2012 event will again be held at the idyllic parkland course at Moseley Golf Club.

Acorns depends heavily on fundraising for its survival so help this very worthy cause and have some fun at the same time.

The date for your diary is Wednesday 13 June. Entry costs £350 per team of four and includes soup and sandwiches prior to tee off, followed by a 3 course dinner with wine and prize giving once corporate bragging rights have been decided out on the course.

Places are strictly limited and are filling up fast, so to reserve your team’s place at this unique event, call Kim on 01527 836 836.

1:16 pm February 1, 2012

Our predictions for 2012

A very happy and healthy new year to all our regular and new readers of the Cog Blog!

As part of our New Year resolutions here at Cog Blog towers, we thought we’d put our neck on the line and make some bold predictions for the year ahead. Some may not make happy reading, but they are all relevant to every single small business:

1) One or two countries will be forced to leave the Euro and in a worst case scenario, France and Germany will be the last two standing using the single currency.

2) There will be a modest and temporary recession in the UK. Economic data is already indicating we are heading for ‘double dip’ recession but we think it will be far shorter and less painful than the first one.

3) UK household incomes will be effectively frozen as businesses look to ride out the latest storm.

4) On the other hand, we expect inflation to fall back to a much more sensible level of around 1% (from its current 5%).

5) Following on from #1, at least one major French or German bank will need to be bailed out by the Eurozone.

6) England will win Euro 2012 (well, 5 out of 6 isn’t bad!).

The Cog Blog will be reporting back on the success (or otherwise!) of its predictions in December, so watch this space. In the meantime, we would suggest everyone’s new year’s resolution is to keep reading the Cog Blog!

10:14 am January 6, 2012

Season’s Greetings

All of us at Cog Blog HQ would like to wish our loyal band of readers a very Merry Christmas and a happy and prosperous new year.

We’ve already made our new year’s resolution and that’s to keep continuing to provide incisive, relevant and clear analysis and dissection of the news and events that matter to the smaller business.

So to keep up to date with the best ways to grow your business or save a festive-sized sack of tax, keep watching this space. We’ll see you on the other side of the turkey and trimmings, presents, chocolates, mince pies and mulled wine in 2012.

3:30 pm December 19, 2011

Autumn Statement 2011

Following the Chancellor’s Autumn Statement last Tuesday, the Cog Blog dissects and presents the key points and pitfalls:

• A £20bn credit easing initiative to make funds easier access for small and medium sized entities. A good plan, in theory, but there was no mention of how long it will be before its available and what hoops businesses will have to jump through to get it!
• The burden of complying with employment law is a heavy one for small businesses to bear. The changes announced (essentially making it easier for such businesses to hire and fire staff) will both help tackle the nervousness of hiring new staff and making the red tape around employment easier to comply with and understand. Let’s hope the Chancellor himself isn’t effectively fired come the next election then!
• Existing business rate holidays will be extended for an additional six months. To be particuarly warmly welcomed by the small retailer.
• Whilst no one wants to see accidents at work, the Cog Bog welcomes the initiative announced to simplify health and safety regulation which has previoulsy created a burden on small businesses. The reduction and simplification of red tape and form-filling coupled with high compliance costs which are not proportionate to the real risks is something to be welcomed by all small businesses.

In addition, whilst there were no announcements on any changes to key rates of direct taxation (other than those previously announced in the Budget in March), it is worth reiterating that planning for the timing of purchases of significant items of plant becomes very important over the next year (and particularly any purchases before April 5th) to ensure that the maximum available Annual Investment Allowance (AIA) can be secured.

If you would like to discuss any of the content of this Cog Blog and how it may affect your business, give Graham a call on 01527 836836.

9:13 am December 5, 2011

How to maximise your commercial property tax allowances

Legislation expected to come into force on 6 April 2012 will force all capital allowance claims for plant & machinery and fixtures inherent in buildings to be made within one year of when they are spent.

If claims are not made in this time, capital allowances will not be available to either the original owner, nor any subsequent purchaser. HMRC will also require a ‘record of agreement’ for purchases to demonstrate how much of the original cost relates specifically to inherent capital allowances.

Of course, assessing what constitutes plant & machinery is a specialised subject. Cognitor therefore strongly recommend that commercial property owners who have recently acquired or refurbished premises to review what they have and have not claimed allowances on, before it’s too late.

8:10 am October 25, 2011

2,250 Tax inspectors to be hired in HMRC crackdown

The Chief Secretary to the Treasury has announced the recruitment drive to ‘crack down on the wealthiest people in the UK’ and ensure that the nation’s 350,000 top earners ‘pay their fair share’ of tax. Over one thousand of these posts are currently being advertised.

The targets are individuals whom HMRC believe should be paying the controversial 50p tax rate but don’t because of taking advantage of advanced tax planning strategies or manipulating loopholes and grey areas in tax legislation.

What HMRC fail to recognise (yet again) is that these individuals are very often the entrepreneurs and risk takers who are trying to stimulate the economy which in turn would raise a significant amount more in tax for the nation’s coffers. And this is very often after their companies have already been taxed to the hilt in other, indirect ways (VAT, corporation tax, dividends) before the money hits their own pockets.

Whilst the promise to “find you and your money and make you pay your fair share” may grab the headlines, maybe HMRC shouldn’t be cutting off its nose to spite its face.

12:50 pm September 23, 2011

HMRC to verify mortgage applications

Potential homeowners who apply for a mortgage could face a tax investigation as part of a new fraud prevention scheme. The Mortgage Verification Scheme (which came into force on 1 September) means lenders can pass on applicants’ details to HMRC for further checking.

If what’s on their application form doesn’t match up with their tax return, then they can expect a tap on the shoulder from the Tax Man very soon. The scheme is designed to help HMRC to risk assess whether information it has been given on applicants’ tax affairs is correct and ultimately reduce mortgage fraud.

Of course, the scheme can work both ways – the Council of Mortgage Lenders (which set up the scheme) reckons that there will be a considerable number of applications that will be approved because of the checks, which give lenders more confidence in the credence of the applicant.

With all this talk of bricks and mortar, let’s hope that HMRC can get its own house in order!

9:55 am September 5, 2011

Time to Pay disappearing quick for SMEs

Following our Cog Blog post of 27 June, it appears that Time To Pay schemes may indeed be a thing of the past for small businesses. HMRC agreed to just over 4,000 arrangements in June compared with over 15,000 in January, a startling and worrying decrease.

A spokesman for the Tax Man stated that this was down to an increase in the number of repeat applications, together with HMRC believing that some companies making the applications just simply weren’t viable, so called “zombie businesses”.

So what does the future hold for small businesses unable to pay their HMRC bills? Well, we don’t actually know. Yet. The nature of the scheme will certainly change, but as to whether in favour of small businesses or not, the Cog Blog will keep you posted.

7:03 am August 9, 2011

HMRC scraps for spare paper!

It’s our very first “you couldn’t make it up” blog. And who better to star in this unique post than Her Majesty’s finest at Revenue & Customs.

It appears that in the melee to send out the millions of reminder letters to those who should have been making their self assessment second payments on account by 31 July, someone forgot to order enough letterheads to actually send them out on. Definitely a case of “pulp fiction” then!

HMRC have apologised for the faux pas and stated that any tax payer who didn’t receive a reminder would be given an extra 30 days to pay and would not incur any interest charges.

We can only hope that HMRC have actually solved the problem and aren’t just papering over the cracks.

1:18 pm July 29, 2011

HMRC refuses payment plans to dividend paying companies

Further to our post of June 27, the Cog Blog has learnt that HMRC are increasingly refusing to agree to Time To Pay schemes for those companies that use dividends to reward key personnel.

Time To Pay allows companies to defer monies owed to HMRC by paying in a fixed number of instalments. Although HMRC have previously agreed to around 95% of applications and only on very rare occasions (normally when the moon is blue and Shergar is romping home in the Grand National) turning down first time applicants.

But, it seems the Tax Man is getting tough and refusing to be being used to fund other creditors. A fair point, maybe but it is not always that clear cut; for example paying a bonus as a dividend is much more tax efficient than through PAYE. Not to mention those companies who use dividends as part of a sensible tax planning approach. The Cog Blog feels that the Tax Man has got out his big tar brush and made a very sweeping generalisation.

11:34 am July 8, 2011

HMRC targets yet more sectors in tax clampdown

Regular stalwarts of the Cog Blog will be all too aware of HMRC’s aggressive tactics in clawing back tax from Plumbers and the Medical Profession (see 26 May post). Well now, it seems that online traders and private tutors are next in line for a tap on the shoulder from the Tax Man.

In a low key press release, HMRC announced that its campaign will focus on those who buy and sell goods and services online and fail to pay the amount of tax owed. By using sophisticated ‘web robots’, HMRC is planning on scouring the internet to collect data on businesses trading online and matching this against its own records to find out who hasn’t paid their fair share or hasn’t registered with them in the first place.

A slightly sneaky approach (and one that will no doubt provoke a fierce privacy debate) but one that the Nation’s coffers could no doubt do with.

6:58 am July 1, 2011

Simpler Tax Regime for Start-Ups?

Cognitor have welcomed (with a pinch of salt) the proposals to slash the administrative burden on start-up businesses by allowing them to pay PAYE at a flat rate for their first 5 years of existence.

The move would simplify the bewildering calculations that are currently needed to work out exactly how much tax to hold back from employees’ pay and pay over to the Government. In addition, it would also reduce the amount that small businesses pay in charges and interest for paying the wrong amount, often on the bad advice from HMRC themselves!

The Treasury Advisory Board responsible for this bright idea are still very much beavering away behind the scenes. Any developments will be shared here on the Cog Blog.

7:16 am June 29, 2011

HMRC losing patience over Time To Pay

HMRC has confirmed that of £970million owed to it by small and medium businesses, a whopping £650million of it has still not been coughed up. Not surprisingly then, the Tax Man is starting to get a little impatient (but we won’t mention how long it can take to get some money back from the Revenue though!).

Many small and medium size businesses agree “Time To Pay” schemes with the Treasury, whereby smaller amounts are paid over on a regular basis until the debt is cleared. The scheme is supposed to provide some breathing space for those businesses that need it, but the system is being increasingly abused with many companies simply defaulting (or choosing not to pay) on their scheme.

The result? It won’t be long before HMRC tightens the criteria for those it allows on to the scheme in the first place. You can’t have your tax cupcake and eat it, it would appear.

7:29 am June 27, 2011

Cognitor Golf Day raises £5,801 in aid of Acorns Children’s Hospice

For the eleventh year in a row, the Cognitor golf day was a resounding success. As in previous years it was held at the idyllic parkland course at Moseley Golf Club.24 teams battled it out over 18 holes for corporate bragging rights and individual glory.

A total of £5,801 was raised through a combination of entry fees, raffles and donations in aid of Acorns Children’s Hospice, a charity which cares for life limited children and their families across the West Midlands Region.

As usual, the Cognitor team were slow starting, slow to finish (and slow in the middle), ending up in 18th place. However, Wragge & Co were the stars of the show and walked off with the top prize following a magnificent combined Stableford score of 95.

The day marked a great deal of effort put in by those involved, and, despite the odd showery downpour, the entire event was a monumental success for organisers and participants alike and one which is sure to be repeated for a twelfth time in 2012.

For more information on Acorns, or to make a donation, please visit www.acorns.org.uk

12:01 pm June 17, 2011

HMRC sharpens talons in tax clawback

The Deputy to the head honcho at HMRC has admitted that targeting certain professions has swelled the nation’s coffers by clawing back previously unpaid taxes.

The tax man used to target taxpayers on a one-to-one basis, but is now doing so on a one-to-thousands basis as it casts it web across such diverse areas as offshore bank accounts, the medical profession and plumbers.

HMRC have widely publicised their ‘plumber amnesty’ by offering them lower penalties for declaring underpaid tax and is expected to offer similar schemes for other trades. With a £917m fighting pot of cash to fight tax evasion and fraud, it would appear that no trade can consider itself immune.

Those affected will have to hope the tax man’s claws aren’t as sharp as feared, or have at least been blunted in other fights!

8:15 am May 26, 2011

HMRC sweet on Swiss tax deal

UK citizens will have to start handing over millions of pounds in backdated taxes on secret Swiss bank accounts after HMRC struck a disclosure deal with Swiss authorities. Known for its secretive bank accounts, HMRC reckons up to £125bn may have been stashed by UK citizens in the Alpine country without paying any UK tax (now that’s a lot of Swiss chocolate in anyone’s books!).

The deal will probably include a withholding tax taken by the Swiss banks on dividend and interest payments, together with a levy on previously untaxed income. This will be remitted to the UK by the banks without any individual details of from whom the tax has been deducted, thus maintaining secrecy for those concerned.

The banks will only hand over individuals’ details if (and it’s a big ‘if’) HMRC can prove they’ve been evading tax. The level of burden of proof is not yet clear (final details are due in May), but those UK citizens affected will surely be hoping it’s not as easy for HMRC as taking candy (or in this case, Swiss chocolate) from a baby.

7:54 am April 27, 2011

More money for your miles

Approved mileage allowance payments rose to 45p a mile for the first 10,000 miles on 6 April meaning a slight respite from rising petrol and diesel prices for those employees travelling on business.

Having not changed since shortly after the turn of the millennium it’s a move that has been warmly welcomed and was probably a little overdue. The rate of 25p a mile for those doing more than 10,000 miles, however, remains unchanged.

Putting a tiger in your tank whilst zig-zagging the British Isles on business just became a little less painful.

8:16 am April 12, 2011

The great income tax return heist

Times are tough at UK plc and HM Treasury needs every penny it can lay its hands on. The result? Well, the million or so people who are required to file a tax return, but do so after the 31 January deadline each year will now be digging a little deeper into their pockets in the way of fines to bolster the country’s bank account.

For those who file their return six months late from now on, the penalties will soar by nearly 1000%. Under the new regime, late filers will still pay the current £100 fine, but will also have 5% of the outstanding balance levied on them after one month and £10 per day thereafter (up to maximum of £900) and a further 10% levy after 6 months.

The new regime is specifically aimed at persuading those late filers of the benefits of filing on time, whilst ensuring that the Government gets what’s owed to it sooner.

And, although HMRC reckons it just wants to ‘clamp down on persistent tax-dodgers and late filers’ it’s also worth noting that the penalties apply even if there is no tax outstanding, but the form is filed late.

Tax doesn’t have to be taxing, right?!

1:40 pm April 6, 2011