HMRC reduces external debt collectors by 50 percent

Yesterday, we wrote about the UK tax-burden according to a recent report by UHY Hacker Young.

The same company has revealed that HMRC spent £6.8m on external debt collectors in 2014, compared to £14.8m in 2013.

This reduction is down by half, and is likely to have happened after the public backlash about the way in which debts were being persued.

The use of external debt collection agencies began in 2009 as HMRC were under pressure to get the most out of its tax take and reached a high in 2013.

Head of private client services at UHY Hacker Young, Mark Giddens, said;

"Debt collection agencies are rarely the most appropriate way for HMRC to collect unpaid taxes.

"HMRC need to be absolutely certain that they are correct when employing these sort of tactics. There is no guarantee that HMRC's databases are exactly up to date. The danger is that if errors are made then taxpayers are left out of pocket and fighting for their own money against a government agency.”

HMRC can now also, rather controversially, taken on the power to demand that any disputed tax is paid up front. They are also looking at the possibility of taking unpaid taxes directly from people's bank accounts.

What do you think of this whole affair? Is HMRC always right? What about genuine disputes and mistakes?

If you would like to talk with us about your business cash-flow then request a free of charge call back from this website; we are here to help advise and guide when it comes to all money matters for your company.

UHY Hacker Young report finds UK economy over-taxed

According to research by UHY Hacker Young, Top 50 firm, the UK economy is paying way over the global tax average. Britain has a tax burden of 18% above everyone else around the world.

So yes, it is fair to say that we are somewhat over-taxed as a nation.

The high effective rate of 32.9% GDP could well be meaning that our growth could be in jeopardy; the global average is 27.8% of GDP. The US is at 25.4% GDP and Ireland is at 28.3% - even Japan come in at 29.5%.

In saying this, many of our European counterparts also have high tax burdens, with most coughing up around 40% in tax.

The report by UHY Hacker Young warned that such high tax can put off investors, which has knock on effects when it comes to large corporations choosing to locate their bases outside the UK where the tax burden is lower.

UHY Hacker Young tax partner, Roy Maugham, said;

"While our tax burden compares favourably with some of our Western European neighbours, increasingly, that is not where the most intense competition is coming from. It needs to be a clear ambition to make our economy globally competitive by keeping a close eye on the overall tax take - perhaps even setting a specific target.

"That will need to be balanced by greater efforts to ensure that spending on the public sector delivers the best results for its customers.

"How much tax is too much ought to be discussed much more openly during the election campaign."

What do you think of the latest report? Are we running the risk of falling behind with the rest of the world due to our high taxes? Let us know your thoughts @OmnitasTax & join in the conversation on Facebook – with the General Election only weeks away, the debate is certainly sure to be a lively one!

To Dom or non-Dom? That is the question

Labour has announced that it will remove the existing tax benefits in April 2016 if it gets into power. This follows the recent Budget announcement where a £90,000 charge was introduced for non doms (a person who lives in a country but is not legally domiciled in it, in other words) who have lived in the UK for 17 out of the last 20 years.

Whichever party forms the next government, it appears that non doms are clearly in the sights of the major political parties and the long standing tax benefits future looks bleak. Most non doms should now consider the likelihood of the tax benefits they receive continuing in the long term as remote.

To dom or not to dom? That is the question

It is estimated that its abolition would affect 116,000 people but there are no certain sources as to how much tax would be generated. What is certain, however, is that it would make the UK less attractive to those who have the resources to choose where they live and work.

Obvious casualties would be the high end London property market and businesses like hedge funds that can easily relocate to more tax friendly jurisdictions.

Like many tax strategies, the long term effects may take years to materialise; new businesses may simply not chose to come to the UK.

Weighted against this is the prevailing view that everyone should pay their fair share of tax. Historically, non dom status is an aberration in the tax system and its original reason for existing has long disappeared.

So what are your thoughts about it all? Do let us know and join in the conversation @OmnitasTax and Facebook – we are also here to help with any tax advice that you may need so please do feel free to call us on 01902 837 408 or click here.

When should we put a share agreement in place?

Usually, it is best to put a shareholders’ agreement in place when you form the company and issue the first shares. In fact, it can be a positive exercise to ensure there is common understanding of shareholders’ expectations of the business.

At that point, the shareholders should, as far as is possible, be of a similar mind about what they expect to offer and get from the company. Indeed if the differences of opinion between you at this stage are too strong to form a shareholders’ agreement, it is likely to ring warning bells about the nature of your future working relationship.

When should we put a share agreement in place?

You may choose to defer discussing a shareholders’ agreement in order to get on with the important task of establishing the business. While you may have every intention of return to it at a later date when there is more time, the appropriate opportunity may not arise and something else always takes priority.

Even if you do pick it up later, by then the shareholders’ expectations and feelings towards the business may have diverged, making it more difficult for them to agree to the terms that should be included in the shareholders’ agreement.

What should I ask to be included in a shareholders’ agreement?

This, as described above, will depend on your level of shareholding and the number of your fellow shareholders.  The key provisions, however, that you should consider including in a shareholders’ agreement are those relating to:

• Issuing and transferring shares – including provisions to prevent unwanted third parties acquiring shares and how a shareholder can sell shares.
• Providing some protection to holders of less than 50% of the shares – including requiring certain decisions to be agreed by all shareholders.
• Running the company – including appointing, removing and paying directors, deciding on the company’s business, making large capital outlays, providing management information to shareholders, banking arrangements and financing the company.
• Paying dividends
• Competition restrictions
• Dispute resolution procedures

We will look at these and other things you might want to include in a shareholders’ agreement in a forthcoming article.

It is possible that the contents of the shareholders’ agreement may overlap with other company documents, particularly the articles of association. The articles will, for example, contain provisions relating to decision making and transfers of shares and in another article we explored what investors should look for in a company’s articles of association.

Consider seeking legal advice if you are not sure which provisions to include in which documents, but overall do ensure that the shareholders’ agreement and articles of association are consistent with one another.

To find out more, feel free to request a free of charge call back from our website or click here and we will contact you by return.

What is a shareholders’ agreement?

A shareholders’ agreement is, as you might expect, an agreement between the shareholders of a company.
It can be between all or, in some cases, only some of the shareholders (like, for instance, the holders of a particular class of share).

Its purpose is to protect the shareholders’ investment in the company, to establish a fair relationship between the shareholders and govern how the company is run.

A shareholders’ agreement will:

• Set out the shareholders’ rights and obligations
• Regulate the sale of shares in the company
• Describe how the company is going to be run
• Provide an element of protection for minority shareholders and the company
• Define how important decisions are to be made

The shareholders’ agreement will contain specific, important and practical rules relating to the company and the relationship between the shareholders.

How will a shareholders’ agreement help me if I am a minority shareholder?

Without a shareholders’ agreement, a minority shareholder (one owning less than 50% of the shares) will on their own have little control or say in the running of the company. Indeed, the control will often rest with one or two shareholders.

Companies are generally run by majority decision and even if the articles of association include provisions that protect the minority, these can be changed via special resolution by holders of 75% of the shares.  There are laws that provide limited protection to minority shareholders but these can be costly to enforce and may not achieve the required redress.

Protecting your rights as a minority shareholder

Being a minority shareholder and having a shareholders’ agreement that includes the requirement for all shareholders to approve certain decisions ensures that you have a say in the important decisions that impact the company.

This could be decisions on the issue of new shares, appointment or removal of directors, taking on new borrowings or changing the main trade.  However, if the shareholders’ agreement requires all decision to be unanimous this could cause problems and ultimately prevent your company carrying out its business.

As a minority shareholder, you may want a provision included that if someone is willing to buy the shares of a majority shareholder, that shareholder can only sell the shares if the same offer is made to all shareholders including you as a minority shareholder. This is often referred to as a “tag along” provision. This should then ensure that you receive the same return on your investment as the other shareholders.

How will a shareholders’ agreement help a majority shareholder?

If, as the majority shareholder, you want to sell your shares but a minority shareholder is unwilling to agree then including a provision forcing that shareholder to sell their shares is important.

This is often referred to as a “drag along” provision.  This will then allow you to realise your investment at a time and price that you feel is appropriate.  Obviously the price and other payments for the sale will need to be fair for all shareholders, including the minority shareholders.

In addition you would want to prevent minority shareholders passing on confidential company information to competitors or setting up rival businesses, each of which can be included as a provision within a shareholders’ agreement.

Another concern is where one of your fellow shareholders could transfer their shares to anyone.  This could cause problems for you and the other shareholders, especially if the sale is to a competitor or someone else you do not want involved with the company.

Conversely, however, to force an unhappy shareholder to stay may cause more problems than having a new unknown shareholder who is interested in the company being successful.  You and your fellow shareholders need to get on with each other for the business to thrive.  To overcome these problems, shareholders’ agreements will often include rules around share sales and transfers – who shares can be transferred to, on what terms and at what price.

In our blog tomorrow, we will discuss when the best time is to put a share agreement in place. In the meantime, if you have any queries or would like to discuss your situation in more detail, request a free of charge call back from our website or click here and we will contact you by return.

Do you need a shareholder agreement?

When setting up a company with family or friends it is easy to assume that nothing can go wrong in the future.

You might assume that - as you trust one another - you do not need to put in place something like a shareholders’ agreement. 

In fact, you might think that asking for a shareholders’ agreement will make it sound like you don’t trust or respect your new business partners.

Hopefully, nothing will go wrong in the future – after all, nobody sets out expecting it to! However, even family members and best friends fall out and, unforeseen circumstances can occur.

If the worst should happen, you could then end up with nothing. Or you might face the breakdown of a friendship alongside a costly and acrimonious legal dispute related to the business.

Why do you need a shareholders’ agreement?

Although the company’s articles of association will help to some extent, a fully considered and well drafted shareholders’ agreement can act as a safeguard and give you and your fellow shareholders more protection against these types of scenario.

Although some people with a shareholders’ agreement will never need to rely on its terms, there will be many more cases where shareholders wish they had taken the time to put a proper agreement in place.

If you are going into business with others and are looking for confidence about your future relationships with them, you should carefully consider putting a shareholders’ agreement in place to protect both the business enterprise and your own investment in the company.

Our next blog will explain what a shareholder agreement is – in the meantime, if you have any queries or would like to discuss your situation in more detail, request a free of charge call back from our website or click here and we will contact you by return.

Getting your Self Employed tax return right

Getting your Self Employed tax return right

To work out whether you must pay income tax, you need to fill in the self-employment supplement (SA103) as well as the main tax return.

Usually, this is sent to you automatically once you've registered as being self-employed.

If you have registered but don’t receive one, you can download it from the HMRC website or get a copy by calling the HMRC orderline (0845 900 0404).

Tax return supplements

There are now two tax return supplements – a short one and a full one.

You can fill in the short one if your turnover for 2014/15 was £77,000 or less and there are no complications like a change of accounting date, for example.

However, you cannot use the short one if your accounting period is not the same as your basis period (i.e. your business year), so you may not be able to use it in the first year. The onus is on you to make sure you get the right supplement.

Getting the right advice and an affordable accountant

Of course, by instructing an accountant, you can avoid worrying about this – self employed tax return services from Omni Chartered Accountants start from as little as £95.

To find out more, request a free of charge call back from our website or click here and we will contact you at your convenience to discuss the options available to you.

ICAEW report shows gender pay gap in accountancy practices widens

ICAEW report shows gender pay gap in accountancy practices widens

According to the latest survey from ICAEW, the gender pay gap for accountants working in the business sector has widened. Women over the age of 45 have experienced the biggest drop in salaries from 2014, according to the institute and Stott & May.

Male chartered accountants earn an average salary of £100,900 whereas females earn an average of £63,900 – this gap has widened since 2014 by 5.4%.

Women over 45 experienced an average salary drop of £6,500 compared to the previous year; this is despite men of the same age category enjoying an increase of £4,200.

The pay gap is at its smallest for among chartered accountants under the age of 30.

Sharron Gunn, ICAEW commercial executive director, said;

"We need to face the hard truth that there has been desperately slow progress to correct the gender pay gap, given the Equal Pay Act was introduced 45 years ago. While it's a national trend across all professions, we have a gender pay gap problem in accountancy too.

"With men more likely to hold more senior posts and chartered accountancy being a route into leading businesses, we must look again at how businesses are developing their pipeline of female leaders.”

What do you think about the gender difference in earnings – is it fair and actually, is it at all modern? Is this latest report down to the age of the individuals who have experienced the wider gap and the positions that they hold now? Will the younger generation change the outcome for the future when it comes to equal earning potential for men and women?

We would love to hear from you @OmnitasTax or why not join in the conversation on Facebook! 

Keeping ahead of the new UK tax changes from April 1st 2015

A cut in corporation tax to 20%, a new diverted profits tax against corporate tax avoidance and an increase in the bank levy were amongst the tax changes introduced by the UK government on 1st April 2015

Other UK tax changes include:

• New reporting requirements came into force on 6 April 2015 for employment intermediaries and agencies that engage and supply workers. They will now have to submit quarterly reports providing details of all workers they place with clients where they do not operate PAYE.
• Air Passenger Duty has been restructured, abolishing bands C and D
• Hospice charities, blood bikes, search and rescue and air ambulance charities will be eligible for VAT refunds
• Business rates changes (England only): the business rates multiplier has increased from 48.2p to 49.3p (47.1p to 48.0p for small business multiplier). This includes the 2% inflation cap.
• The Small Business Rate Relief scheme has doubled for a further year, providing 100% relief for businesses with a single property with a rateable value of less than £6,000, and tapered relief with a rateable value of £6,000 - £12,000
• The business rates discount for shops, pubs, cafes and restaurants with a rateable value of £50,000 or below has increased from £1,000 to £1,500
• The cultural test for ‘high-end’ TV tax relief has been modernised and the minimum UK expenditure requirement for all TV tax reliefs has reduced from 25% to 10%

If you have any questions regarding the above and how they affect you and your business, why not request a free of change call back from our website?

Follow us on Twitter @OmnitaxTax and Facebook for all of the SME business tax and accountancy latest news.

Is HMRC benchmarking the tip of the iceberg for the UK SME?

Is HMRC benchmarking the tip of the iceberg for the UK SME?

Benchmarking for driving instructors is a guide devised by HMRC for businesses to compare business performance with other business in the same trade.

It is a scheme that it is beginning to test on certain trades - one of these trades is driving instructors.

HMRC using benchmarking to check tax returns

The HMRC is testing the use of benchmarking as it believes that it will help business owners to make sure their Tax Returns are correct.

HMRC has gathered information over three years from driving instructors, analysed turnover and expenses. From this, it has worked out a net profit ratio.

HMRC has determined that the net profit benchmark ratio in this sector is between 39 and 59 percent.

This means that if you are a driving instructor, HMRC would expect your net profit to be in the region of 39 and 59 percent of your turnover.

If your business net profit ratio is not within this range, HMRC may believe that this indicates that there are errors within your tax return.

We are here to help with any queries that you may have regarding the benchmarking system and of course, to make sure that your tax returns are dealt with efficiently and accurately – making sure that no undue distress is caused by unnecessary errors!

For more information, request a free of charge call back from our website or click here to enquire.

Personal allowance wage taxation policies

Personal allowance wage taxation policies Budget 2015

In the Budget 2015 announcement, George Osborne confirmed changes that could make quite a difference to anyone who is working hard to earn a wage.

The goals are pretty ambitious – especially given that when the current government came to office, the taxation free threshold was £6,500, but changes have been made so far during their time in government where the lower tax threshold is now £10,600.

George Osborne announced that the personal tax-free allowance will rise to £10,800 next year and go up to £11,000 the year after.

As far as higher earners go, the 40% wage tax threshold will also rise from £42,385 this year to £43,300 by 2017-18. The higher rate threshold plans are to raise it to £50,000 by the end of the next Parliament year, in 2020.

What do you think about the Conservative Party personal allowance taxation policies? Do you think that they will deliver if they win at the General Election? Do you think that they are achievable? What do you think about their plans for small business growth?

Do get in touch with us @OmnitasTax or Facebook – we would love to hear your thoughts!

As always, we are here to offer advice on all aspects of taxation issues for your business or individually; just request a free of charge call back from our website www.taxandaccountancysolutions.co.uk or click here and we will come back to you! 

http://www.taxandaccountancysolutions.co.uk/personal-allowance-wage-taxation-policies/ 

The truth about pension withdrawal and tax

The truth about pension withdrawal and tax

If you’re planning to cash in your pension pot, you need to be fully aware of the tax rules or you could be in for a nasty tax shock.

From 6^th April 2015, if you’re over the age of 55, you are now free to cash in your Defined Contribution (DC) pension savings. 

Apart from a tax-free lump sum of 25%, you will be liable to pay income tax on the rest.

Also:

If the amount you withdraw takes your annual income over £42,386, you’ll pay 40% tax

So it might not be in your best interests to take out your whole pension; it could actually be better to stagger the payments.

As with any financial dealings, it’s always best to take independent advice, and we will be happy to introduce you to a financial consultant if you would like to chat to someone about your pension.

Of course, we’re always here to talk through any tax concerns and work out the best ways for you to maximise your income. 

Our tax planning services cover a range of business strategies to benefit companies, as well as specific plans to make sure individuals receive everything they’re entitled to – including pension pot tax issues.

Above all we recommend you take time to digest the changes and take expert professional advice BEFORE you make any decisions, there is no rush.

To get in touch, click here or request a free of charge call from our website www.taxandaccountancysolutions.co.uk  

Are general election worries slowing down UK business growth?

Are general election worries slowing down UK business growth?

Amidst general election and eurozone worries, it seems that UK businesses are slowing down their spending, which could be having an effect on our economic recovery. 

ICAEW lowered growth forecasts for 2015

The Institute of Chartered Accountants in England and Wales (ICAEW) has lowered its 2015 growth forecasts for the UK economy from 2.5% to 2.4%.

Compared to 2014, this is a slowdown – last year, growth achieved was 2.6%, which was the fastest rate of annual growth since 2007. It was also the strongest of all the G7 economies.

Oil company spend, eurozone and China concerns

The ICAEW downgraded its forecasts for growth in business investment this year from 7.2% to 5.2%, in part because of the fact that oil and gas companies are reducing spend due to the slump in the price of crude.

The possibility of Greece leaving the eurozone and the slowdown in China are also having an impact on UK business spending – recently, China reduced its growth target to 7%, which is its slowest expansion rate for twenty five years.

UK General election and EU

Here in the UK, our own concerns around the general election outcome in May are leaving SMEs uncertain about future government policies and also the possibility of leaving the EU after a referendum if the Conservatives win.

ICAEW chief executive, Michael Izza, said;

“The potential slowdown in GDP growth is a clear sign that UK firms are pressing the pause button on their attempts to drive economic growth. Their exposure to international risks, ranging from the eurozone crisis to China’s cooling economy, has subdued their capital spending plans for the year ahead.

“We cannot overstate the effect of the general election either. Businesses remain concerned about the potential makeup of the next government and its policy towards business. Any steer towards a potential exit from the EU is also causing anxiety. All this means consumers are key to the recovery.”

 “Low inflation is ensuring the first annual increase in employee real incomes since the financial crisis, and the average worker will have more money to spend. However, the government must ensure that growth isn’t predicated solely on a rise in household debt, otherwise we could find ourselves back where we were before the financial crisis.”

The current government has argued that to move forward, the UK economy must steer away from its reliance on consumer debt and move more towards investment, manufacturing and exports.

Do you think that the chancellor’s target back in 2012 to double UK exports to £1tn by 2020 is still within reach? Let us know your thoughts on Twitter @OmnitasTax or Facebook!

What is the best way to expand your business?

What is the best way to expand your business?

As a UK SME, getting up and running is only half the battle – at some point, when your business becomes a success, you will need to expand your operation and employ more people.

The cost of employee turnover

For this reason it is important to choose what staff roles are important and also the consideration of the extra outgoings of wages and of course, PAYE. 

Company cars may be part of the package and of course, there is the issue of pensions.

It is important to understand the cost of staff turnover; if your company changes employees regularly, this can cost valuable time and money when it comes to replacing them and training new people to carry out the role.

Inevitably, this can lead to downtime and loss of productivity during the time that the training is taking place.

Of course, offering an affordable yet enticing package to new employees will not only attract talent that could prove very valuable for your business but in the long term, it will help employee retention.

Expanding your business

If you are considering expanding your business venture, why not give us a call for a free initial consultation? Omni Chartered Accountants are specialists in helping UK businesses with their expansion plans – click here for more information, call 01902 837408 or request a free of charge call back from our website today.