Taxing Times – October 2016

The dark nights have cut in, summer holidays (and sun) are a distant memory, yet Christmas still seems a long trudge away.  But remember that this is the calm before the storm of Christmas holidays and the dreaded January personal tax deadline,Tax Opps so it is a great time to (re) focus on your business or tackle something you have been putting off. 

Now settle down for a good autumnal read of this month’s Taxing Times, including some thoughts on winter-proofing your business, good financial housekeeping, and the latest dates & deadlines to keep you on track, as well as payroll and tax news.

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Some tips to winter-proof your business

Some people love it (snuggling down in front of the fire in their PJs, closing the curtains and shutting out the world), and others hate it (struggling with hats/scarves/gloves/earmuffs/wool coats and never seeing the sun as you leave home in the dark and get back in the dark).  But whatever your personal feelings towards the winter, it can be a challenging time for businesses.

It’s about getting customers through the door, or trying to keep your seasonal business alive to thrive after the off season, and keeping up your bottom line.

Whatever your challenge, here are some tips to winter-proof your business.

winter1. To quote George R. R. Martin, “Winter is Coming” – you know winter is coming each year. You should plan for the funds required to operate in the slow months as well as the demand required for the busy season.  Understanding your industry’s ups and downs and preparing for them is vital.

2. Manage your cash flow — As cash flow fluctuates, you must understand the timing of cash in and cash out. Anticipating cash flow is very important.  And building cash reserves will help your business to survive the off seasons.  Actively managing your budget and cash is key to your long-term viability. (This links to our next article Good Financial Housekeeping – so read on!)

3. Invest in marketing – While your network is crucial for your business, eventually it will be tapped out. Remember to promote your products and services.  Local media coverage, online advertising, social media marketing and a website that is mobile-friendly will expand your reach.

4. Cultivate customer relationships all year. You need to think about building loyal customers year around, and finding ways to reach out to them in the off season.  Satisfied customers will share promotions, recommend you and become a business ambassador for you whatever the weather.  So don’t forget to find ways to recognise and appreciate them.

Most businesses have an ebb and flow in business – the important thing is to try to prepare for the ups and downs.  No matter when your business hits the down cycle, your preparation will help you weather (or hopefully breeze through) the storm.

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Good financial housekeeping

It’s cold, it’s dark, you don’t want to go outside.  So isn’t it a perfect time to tackle your business’s financial housekeeping and get on top of things?  Honestly, you’ll feel better afterwards…and you will be way ahead of the crowd who won’t put it on their to do list until they make (and break) their New Year Resolutions!

55444426 - house cleaning product on the tableBecoming efficient probably shouldn’t feel as challenging as it does, but it often turns into a struggle because it just doesn’t get people excited (apart from accountants and tax advisers of course!).

But good financial housekeeping is a priority. Staying on top of the regular bank reconciliation work can make all the difference.

In our experience too many new business start-ups leave the upkeep of admin to either the weekend or the month end, often because it’s boring or seen as an add-on to the real business of chasing sales targets, providing services and keeping customers happy. So it is often put off,  leaving a business owner with a stack of work to wade through come the end of the month.

So, what does good financial housekeeping look like? Ideally, going through bank statements daily, keeping on top of expenses and making sure each sale is properly recorded.  Yes, it can sound like a real pain to do a bit of admin every day, but if you do, it means a couple of minutes at a time rather than days of soul destroying catch-up work!

6791947_sOften statistics are trotted out concerning the failure rates of start-ups – with some saying as many as 80 per cent fail due to some form of cash flow issues. This in itself can link back to keeping finances in order – for example, when it comes to VAT returns, if you get it wrong, you’ll be in for a big shock when it comes to cash flow.  And good financial housekeeping also means you will be able to actually track your business progress and have greater clarity as to how the business is performing.

So…resolve to tackle that paperwork, call upon your accountant for assistance to get you started, or to take over the payroll/the management accounts/whatever frees you up, or to point you in the direction of the right accountancy package for your business.  There is some great technology out there now but unless you take a breath and embrace it, you will be stuck using something that may make record keeping more laborious than it needs to be.  Honestly, it is worth the time talking to your accountant (hopefully us!) and exploring accountancy packages like Sage, Farmplan, QuickBooks or Xero (or others). After all, wouldn’t it be nice to find out if a new package can automate a lot of the work for you or make your monthly bank reconciliations a lot less troublesome?!

cat-image-01That leads on nicely to introducing you to our new CAT (Cloud Accounting Team) who are our in house team of specialists who deal with all things ‘cloud’. As with everything at Dodds we’ve always been independent and the CAT is no exception. We won’t push you to any one particular cloud package, we will look at a whole range of what’s out there and advise you on what’s best for you and your business.

So if you fancy starting your spring clean early and getting your books in shape before the New Year contact Kristina Gash on 01228 530913 or email and request your free Doddie CAT guide.

Here’s a couple of great quotes to inspire you to get going:

“It always seems impossible until its done”. Nelson Mandela

“The way to get started is to quit talking and begin doing”. Walt Disney

“Action may not always bring happiness; but there is no happiness without action”. Benjamin Disraeli

“The secret of getting ahead is getting started”. Mark Twain

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Payroll Update 

Employers struggling to effectively manage an ageing workforce

older-peopleAccording to the Office for National Statistics (ONS), employment has never been greater, and 50-64 year-olds now make up 27% of the total workforce.  This is to be celebrated with people living and working longer but an ageing workforce can bring its own challenges.  Along with the removal of the default retirement age, employers have had to consider how best to look after their workforce as a whole and for longer, and the research indicates that some are struggling with accommodating the different needs they may have.

Some employers are embracing the needs of their older workforce and a popular plan is to introduce flexible working initiatives.  Others have introduced job sharing or have modified roles and procedures to accommodate older workers’ needs.  But while some employers have been proactive at looking at areas related to the actual job, they have been slower to focus on the health & wellbeing of employees.

National Minimum Wage – naming and shaming

If HM Revenue & Customs (HMRC) investigates an employer that is breaking the minimum wage law they will be issued with a Notice of Underpayment.  This is a formal notice that sets out the arrears of minimum wage to be paid by the employer together with the penalty for non-compliance with the requirement to pay workers the minimum wage.   The Government has increased the penalties imposed on employers that underpay their workers in breach of the minimum wage legislation from 100% to 200% of arrears owed to workers. 15431411_l

An information sheet is given to the employer at the start of the investigation which sets out details about The Department for Business, Innovation and Skills (BIS) naming scheme.  The employer will have 28 days to appeal against the Notice of Underpayment issued by HMRC.  If the employer does not appeal or an appeal has been unsuccessful HMRC will refer the employer to BIS for automatic naming under the scheme.  HMRC have produced a range of educational material to help employers comply with employment regulations and they are making it clear that non compliance with minimum wage regulations will not be accepted.

Meanwhile….Sports Direct workers to receive £1m in back pay

Workers at Sports Direct’s Derbyshire distribution centre will receive back pay of around £1m for non-payment of the minimum wage.  Sports Direct founder Mike Ashley admitted workers were paid below the minimum wage when he faced MPs on the business select committee.  The billionaire businessman acknowledged that search procedures carried out on staff after they had finished their shifts meant pay had not always met the statutory minimum.

Ashley also faced questioning over his company’s “Victorian” working practices and admitted that the company’s policy of docking workers 15 minutes’ pay for arriving on shift as little as one minute late was “unfair”.  The payments, which Unite union says could be worth up to £1,000 for some workers, will be backdated as far as May 2012 and delivered in full to staff directly and indirectly employed by Sports Direct.

Apprenticeship Levy

apprenticesIn April 2017, the way the government funds apprenticeships is changing, through the introduction of the Apprenticeship Levy.  UK employers whose annual pay bill is greater than £3 million will be required to contribute to a new Apprenticeship Levy.  The payment of the levy will be collected from these larger employers and paid to HM Revenue & Customs via the PAYE return each month.  The levy amount is 0.5% of a company’s payroll and the employer gets an allowance of £15,000 to offset against the amount they owe.  All businesses that pay the levy will be able to access their contribution in their online digital apprenticeship service account.  This account can be used to pay for apprenticeships training and assessment in England.

The overall purpose of the levy is to encourage employers to invest in apprenticeship programmes and to raise additional funds to improve the quality and quantity of apprenticeships so as part of this review there will be changes to the funding for apprenticeship training for all employers.

HM Revenue and Customs has published the first set of draft regulations for a period of technical consultation, which will close on 14 November 2016. Money bags 2

The levy is set to raise £3 billion a year to help fund the government’s target of 3 million apprenticeships but has received mixed reviews with some business organisations voicing concerns that larger business will also have to find additional funds to pay for the ‘on costs’ of recruiting more apprentices.  One thing that all seemed agreed on is that the arrival of the levy will raise the profile of apprenticeships amongst all businesses and this is likely to have an impact on small businesses that are considering apprenticeship programmes.

The Boss Made Me Do It! A Cautionary Tale About Fraud

It’s no secret that fraudsters are becoming increasingly sophisticated -and the numbers of businesses targeted is on the increase.

So what should you look out for?

Phishing continues to be an issue with the fraudsters asking you to click through to genuine looking websites to update your details or win a prize. Think before you click should be the order of the day.

profile-pic-337x338And moving on from “Phishing” is “Vishing”. This is simply the voice version of the above. An example is where you are contacted by telephone and asked to give account numbers or other access details to the person purporting to be the “official representative” from perhaps a bank, HMRC or a utility company on the other end. So another golden rule is – if in doubt – don’t give out!

Finally the scariest one – the Bogus Boss. Apparently this scam has been so successful, that businesses have been duped out of over £100m – so far. It works something like this.

An email is sent from the account of a partner/senior manager in the business to a real person in the organisation asking them to do something financial, usually along the lines of a transfer of funds to someone.  That “something” will be something that the recipient does as part of their job so it won’t obviously look as if there is anything fishy about the request, because they will get lots of these genuinely as a matter of course.

15056961 - scam computer keys showing swindles and fraudUp until now, it was possible to hover over email addresses to see if they were genuine, but this no longer happens with this scam – to all intents, it looks like the request has genuinely come from an internal person  – and cleverly, the fraudsters are doing their business research so they choose to use the email address of someone who truly would have the authority to request such transfers.  The transfer requested is also a random number i.e. not a round sum, so again it looks “real”.

Obviously the names of business partners and managers together with their contact details are clearly available on websites these days for the fraudsters to obtain –and these calls and emails can be very convincing.  So the rule is, if you get asked to “immediately” send any money or give out any account or customer details from any source – double check! And tell your staff the same!

Dates & Deadlines

1 October 2016

NMW (National Minimum Wage) – the NMW rises to £6.95 per hour for 21-24 year olds; £5.55 for 18-20 year olds; £4 for 16–17 year olds and £3.40 for apprentices.  The National Living wage for those aged 25 and over continues at £7.20 per hour.

Payroll Web Image5 October 2016

Personal Tax Self Assessment – last day for individuals not already registered for self assessment to notify HMRC of chargeability to income tax or capital gains tax for 2015/16.

19/22 October 2016

PAYE – last day for employers to pay tax and Class1B NIC due under PAYE settlement agreements for 2015/16 (19th if paying by cheque and 22nd if paying electronically).

31 October 2016

Personal Tax Self Assessment – deadline to file paper tax returns (they have to reach HMRC by midnight).  If the notice to file a return was issued after 31 July 2016 then you have three months from the issue date of that notice to make the paper filing.

Corporation Tax – returns for accounting periods ended 31 October 2015 should reach HMRC.

Company accounts – private companies with 31 January 2016 year ends should file their accounts with Companies House.

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What’s new in the world of tax? 

Advisers face 100% fines if they help tax “avoiders”

The financial secretary to the Treasury, has opened consultation over new proposals of governance that could see enablers of tax avoidance face fines of up to 100% of the money lost to HMRC. A Treasury source said the proposed crackdown would mean that “any kind of middle man” involved in a scheme struck down in the courts could be pursued by tax officials. The new powers would allow tax officials to pursue accountancy firms, lawyers and bankers for devising and selling schemes designed to avoid tax.

22801064_sFrank Haskew, head of the tax faculty at the Institute of Chartered Accountants, said: “The government needs to ensure any new rules are targeted only to tackle those advisers that promote aggressive tax schemes rather than the vast majority of reputable advisers engaged in ordinary tax planning.” John Cullinane, policy director at the Chartered Institute of Taxation, urged caution, saying: “The government needs to be careful that in their efforts to wipe out avoidance schemes they don’t prevent taxpayers from getting access to honest, impartial advice on the law. Definitions will be crucial.”

The pace of tax change is unrelenting and there have been huge changes in policy and approach by HMRC over the last few years, not to mention a raft of consultations about many different areas of tax, and likely changes to the penalties regime.  This year’s changes to tax compliance sees new criminal offences being introduced and further toughening up on tax avoidance.  It is therefore more important than ever that ordinary taxpayers with everyday tax problems get the help and guidance they require without the threat of ambiguous, unclear or inconstant rules about what is or is not tax avoidance hanging over their advisers’ heads.  So we will watch this space with much interest and not a small degree of concern….

HMRC texts warnings to taxpayers

48482327_mHMRC has started to send out text messages to taxpayers warning that they are being “monitored” to ensure they pay on time. More than 13,000 self-assessment taxpayers have taken part in trials which have seen them sent SMS messages. The taxpayers, who had previously been contacted by HMRC about their debt, received three types of message from the Government’s “Nudge” unit or Behavioural Insights Team. The ‘standard’ SMS message alerted the recipient to the debt and told them how to pay, while the ‘monitoring’ message pointed out that HMRC would be monitoring whether the debt was paid in the following week. The ‘penalties’ message included the phrase, ‘Most people pay on time to avoid penalties’. HMRC says it has gained an extra £210m from taxpayers by using ‘nudge’ tactics that predict how people will respond to official communications and encourage them to make the ‘right’ response. However, Anita Monteith, senior tax policy adviser at the ICAEW, warned that ordinary taxpayers could become needlessly alarmed by the messages.

Selfie help for tax officials

Finance ministry officials in Greece are trawling the social media profiles of possible tax cheats, monitoring about 1.8m people believed to be declaring an income inconsistent with the lavish lifestyles they document online!

Treasury refuses inquiry into tax credits contract

The Treasury has said it will not hold an inquiry into outsourcing firm Concentrix’s failings, despite complaints from MPs about the number of people wrongly deprived of tax credits. Jane Ellison, the financial secretary to the Treasury, confirmed HMRC had decided not to renew Concentrix’s contract over the quality of its work.

No penalty for failure then.

Poldark star hires mum for accountancy advice

Perfect red heart vector isolatedPoldark actor Aidan Turner has hired his mother as his accountant after fearing that his finances would be investigated by HMRC. The 33-year-old said: “I have hired my mum as my accountant, which is great because it means I know the taxman won’t be knocking at my door.”

If only we’d known that job was going…swoon!

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