HMRC Roadshow Essex

The headline billing of the event I attended last week was as above, but upon arrival I was handed a brochure in which HM Revenue & Customs welcomed me to their Business Advice Open Day. The venue chosen, the Five Lakes Hotel was excellent, with plenty of room downstairs for the various stands as well as excellent conference rooms for the seminars going on throughout the day. We will gloss over the catering for which one cannot hold HMRC responsible.

I had heard on the grapevine that the roadshow was coming to Essex, but booked online using the information sent in a mail shot. In view of the very large number of attendees it was clear that the advance information and booking system had worked very well, for which credit should go to the organisers.

I am a tax professional, and the event was very much aimed at business in general, and small businesses in particular. Nevertheless, I have to say that I gained quite a lot from the day. Seven of the twenty-four stands represented various divisions of HMRC. They were promoting heavily their online services, and naturally encouraging businesses that had not yet taken the plunge to do so, highlighting the incentives and advantages. They had a stand where one could chat about VAT, and being a direct tax man myself I sounded them out on an issue which I had just started thinking about and had not got round to consulting an expert. The input was useful and the chap was very helpful.

HMRC also had stands for international trade (customs duties etc.), National Insurance and Research and Development Tax Credits, and one for the Olympics, the actual purpose of which I did not manage to ascertain, and for general advice. All the staff I spoke to were helpful.

Various other Government agencies were represented, from ACAS and Companies House through to local authorities and the Environment Agency. As one would expect, Business Link was very prominent, and they also ran some of the seminars. The non-profit concern Prime was also there, reflecting the reality that older people becoming unemployed need to consider how they might make a living in a hostile environment, perhaps becoming self-employed. Again, all the personnel on the exhibition stands were very helpful and I collected a lot of useful literature.

Turning to the seminars, I managed to fit in three. The first I went to was presented by a representative of the Intellectual Property Office. It was really excellent and the presenter is to be congratulated. The seminar was very informative and at a level designed not to blind everyone with science, and though I have been round the block, I learned quite a lot from it. It was made interesting by including a number of very brief examples of key points involving major companies of which we had all heard. It was really very good value for a 45 minute session.

The second seminar was frankly a demonstration of how not to do a presentation. The subject was “An introduction to Importing and Exporting”. It was a real “Death by PowerPoint” recitation, and rather than talking about the nuts and bolts of how to do things as was the IP talk, it consisted of listing the numbers of all the forms to be filled in at each stage of the process of importing or exporting, and frankly not much else. The tax rates on the slides were out of date, which seemed to surprise the presenter.

The last seminar I went to was from Business Link, and entitled “How to manage your business through a recession”. Wearing my critic's hat as a small business adviser myself, there was indeed some good generic material which would be useful and make people think. A few minutes were spent on dealing with the banks, and as the presenter was an ex-bank manager (of which there are going to be a few more) he did know what he was talking about. The Captain Mainwarings of today are useful people to know when you can get to talk to them. Anyway, this was a good presentation with useful information as to where to get further help, business coaching and training.

I enjoyed the day and HMRC deserve a good deal of credit for staging the event. They do need to use experienced and competent presenters rather than just experienced staff at their seminars, but maybe I am nit-picking at what was a very worthwhile exercise. If you have an HMRC Business Advice Day in your area, I recommend that you make the time to go.

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Casualties in the tax world

It seems there are a considerable number of people in the accountancy and tax world who have lost their jobs, and many more who will fear the axe. I was surprised to hear of a quite senior person who had left his Big Four job at a regional office having moved house and uprooted his family to move there. No matter what “leaving package” he has been given, the reality is that if he does not find another post soon his standard of living will fall and he and his family will have to draw in their horns. There are many people in the job market now in our sector and the over forty-fives will have great difficulty in finding jobs even after the recession recedes, though realistically that may not be for two or three years, even taking the more bullish view.

What will our redundant colleagues do whilst the economy bottoms out, and will they all find it harder to get back in in a profession where there is a culture of filling roles from younger and cheaper trainees rather than appointing the more experienced?

I wonder how smaller practitioners will be affected by new payers forced to come into the market as sole practitioners or small partnerships. In the online world this is easier than it used to be, but for those used to maintaining a good standard of living there would be considerable pain whilst building a practice against those of us who came into the market from the last accountancy recession. I think that many will be forced to go elsewhere and be more flexible.

I remain optimistic for my own business because it already “lives lean”, whilst providing a quality service, and there are only so many clients out there though there will be more start-ups as time moves on. For an established firm, it is important to maintain standards and market as well as we can. My firm had an advantage in that it was born at a time when there was only a downturn in the accountancy world. Now it is national and global. It is a sad situation when able people who have worked hard to be qualified and to be good at what they do, only to be dispensed with en bloc in a numbers game.

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Online issues and January procrastinators

I do not normally use the HMRC online software to do Tax Returns as third party is much less hassle. However, I did have occasion to try it recently and found that in dealing with lettings where there is a loss in the year and a loss brought forward the HMRC system is unable to aggregate them and carry them forward. When I telephoned the helpline and finally got through I was told it was a known issue and I should make a diary note of losses brought forward for 2008-09.
 
I would have thought that this loss scenario would be the most common given the highish interest rates on mortgages that prevailed to the end of 2007-08. It is extraordinary that this issue has not been sorted out. I decided the safest approach was to make a white space note about it.

I have just taken a call from a new enquirer. He sold his company twelve months ago for a lot of money, received a termination pay off as well, has a lot of paperwork to go with it and can I quote a fee for working out his tax position without having seen any detail anyway? Can I do his Tax Return for 2007-08 by Saturday week?

Well, no I cannot quote other than the high fee I told him to err on the safe side. Would you ask a painter to quote to decorate your house if he hadn't been to it? Could we do it anyway in the time when we haven't seen any of the paperwork in detail and other clients are in front of him? We're happy to do it in February and in the context of £100 fines it seems more important to get it right given the amounts involved rather than lose sleep over a late-filing penalty. Anyway, what kept him so long?

I am sure our marketing friends would think I missed a trick somewhere and sales people would think I should have "closed", but what with the shortage of telephone boxes to change in I am not sure what I could promise if the Return had to be done by the end of the month. I believe I did the right thing and am not going to lose any sleep over it.

Back to work with the other January late runners and thank goodness for my more considerate clients!

Tearing my hair over small company housekeeping

Like others in the profession I try to drum into my clients that they should practice good housekeeping in their businesses, remember that their company's money is not their own and to ask me before doing anything out of the ordinary. This is the time of year when we tend to find that some clients have ignored our advice and painted themselves into a corner from which even I with my skills and long experience have difficulty getting them out in a painless fashion. There are some golden rules in running a company and I am not normally into quoting Government ministers, but this is what Margaret Hodge recommended in 2007 when at the DTI:

1) Act in the company's best interests, taking everything you think relevant into account

2) Obey the company’s constitution and decisions taken under it

3) Be honest, and remember that the company's property belongs to it and not to you or to its shareholders

4) Be diligent, careful and well informed about the company's affairs. If you have any special skills or experience, use them

5) Make sure the company keeps records of your decisions

6) Remember that you remain responsible for the work you give to others.

7) Avoid situations where your interests conflict with those of the company. When in doubt disclose potential conflicts quickly

8) Seek external advice where necessary, particularly if the company is in financial difficulty.


All this is pretty important – keeping the company's money away from the owners' own money, minuting all payments to directors and all dividends to shareholders, and avoiding conflicts with personal finances. Obvious stuff and I even send the above list to new owners of companies.

The other golden rule is asking their tax adviser before doing anything they haven't done before. I really could scream sometimes because often even after we get a client's books and records in it is only with close questioning that we can get to the bottom of what they have done. This is not because they are dishonest but because they are suddenly too embarrassed to tell us what they have done as they know we will not be pleased. It is like dealing with naughty children and we just have to be patient, but why do we have to find out when up against deadlines? It's no wonder I'm getting thin on top but I always present a calm demeanour and will never tell a client off except in the most polite terms.

The real point of this piece is not to have a moan, but to emphasise the importance of good record keeping, good planning and asking advice before doing anything out of the ordinary. Even for small companies and businesses good corporate governance is essential. It is only common sense after all!

Recession blues or an opportunity?

The tax world is not immune from the current economic problems and already many tax department employees of larger UK firms such as KPMG have been made redundant, most particularly in the corporate sector. The financial press has reported employee shedding by KPMG during much of 2008 and we must assume that other firms are also making their staff redundant. These are strange times and it will be shattering for those who suddenly do not have a job and may have difficulty finding a position anywhere given the surfeit of people suddenly on the market.

One supposes that whilst the employment agencies may have a huge number of candidates on their books, they are also facing the immediate future with trepidation, given the limited opportunities.

Few of those perhaps very capable and well qualified tax specialists now out of work will have much immediate prospect of work. Whilst personal tax specialists might try to eke out a few pennies going self-employed there will be meagre pickings as it is the wrong time of year to be starting and almost none will be commercially street-wise in understanding how small independents find work in the first place.

I cannot suggest that I thought myself particularly lucky when I found myself in the position the newly redundant in our sector are now in; seven years ago I did not want to be redundant and indeed thought I was a pretty good performer. My then employer panicked somewhat over the Arthur Andersen debacle / crash and embarked on a last-in first-out campaign with its staff. Therefore I had my own recession to deal with seven years ago, and it took me the best part of a year to reconcile myself to running my own business. Now of course I would not want to do anything else, despite the fact that conditions are undoubtedly very difficult with fee resistance and slow payment being a particular problem. It is a time to sell on value and at least I know many of the tricks now.

I believe that the opportunity small practitioners have is in compliance. Of course none of us can really sell what is perceived as very cheap. We have to buy equipment, software, reference resources and CPD quite apart from the overheads of running an office. However, small is definitely beautiful in terms of income-to-cost ratio. The particular trend I have seen is actually an increase in demand from clients for tax compliance, but at the same time advisory work has dropped off. One place where there is no recession is enquiry work, and that is largely thanks to HMRC (did I think I would ever say that?) in their campaign against the black and grey economies, which has pushed several new clients into my lap. No, I am definitely not complaining.

It seems to me that my marketing must concentrate on good value compliance with useful advisory work available. Indeed I would recommend it to anyone in my sector and of similar small size. We can succeed where others with larger offices, overheads and a need to provide training cannot.

So, the answer is to stay positive, offer value for our clients, and give them every bit of help we need. We need to get out and network, meet as many people as possible and help them. I know it might be hard to grasp in our sector, but give out some free generic advice and a helping hand, send out a newsletter, use on line facilities to keep as high a profile as possible and keep reminding your business contacts what you do. If you are stuck for marketing ideas talk to my invaluable friend and marketing expert Fraser Hay. This last paragraph applies to everyone in business too, including my clients, not just us working in the tax sector.

We have to stay positive because we have no choice, but to reiterate, there is an opportunity for the small practitioner. Call me on 01702 205066 or email jon(at)tax-adviser.biz if you need clarification. Good luck!


Jon Stow

Gordon in Wonderland

The BBC reports the Downing Street reaction to the comments of Peer Steinbruck, the social democrat German finance minister but The Times reports the comments with less spin.

I would not have thought the remarks were that controversial. I expressed similar views in this blog on 28^th November, and I was not alone.

"You are old, father Gordon," the young man said,
"And your hair has become very grey;
And yet you incessantly stand on your head
Do you think, at your age, it's the way?

"In my youth," father Gordon replied to his son,
"I feared it might injure the brain;
But, now that I'm perfectly sure I have none,
Why, I do it again and again."

Thanks and apologies to Lewis Carroll.

Tax tips hot off the press

Subsistence for sole traders and partnerships

HM Revenue & Customs have for many years allowed sole traders and people trading in partnership to claim reasonable subsistence costs on business trips involving overnight stays away from home, though they have generally resisted allowing costs of meals away from home or office on day trips, relying on case law which states that one eats to live, not to work. Claims to deduct the cost of lunch and other snacks on day trips have thus been refused.

Of course employees have generally been allowed to reclaim such subsistence costs without being taxed on them and many sole traders may well have slipped through claims for their obviously healthy lunches in blissful ignorance of a strict interpretation of the law

Anyway, HMRC is proposing to allow for all sole traders etc. reasonable day trip subsistence costs in the course of business, such as the motorway burger, and are enshrining what has sometimes been allowed on a concessionary basis (where a daily trip might have been outside the normal pattern of travel) into legislation and altering their own guidance manual for their staff. What costs are “reasonable” is not exactly defined – it could even be £30 which might be about the going rate for a motorway lunch - but you still have to keep your receipts!

UK based US taxpayers

Most US taxpayers receiving non-UK income or gains between April 6, 2008 and December 31, 2008 will now owe both US and UK tax on the same worldwide income. (The UK significantly changed the rules for resident ‘non-domiciled taxpayers’ from April 6, 2008.) US tax specialists are suggesting that in most cases the simplest way of avoiding this ‘double-charge’ is to ‘pre-pay’ additional UK tax by December 31, 2008 so that they can set the UK tax paid against the US tax liability for 2008. This is fine in theory, but UK tax due for 2008-09 is not actually payable until 31st January 2010. Therefore HMRC’s system will want to repay any tax that it perceives as “overpaid” prior to that date, and certainly would not allocate to UK tax until that tax became due. US taxpayers are likely to have a lot of headaches over this one, telling HMRC to keep money on the account.



Residence issue

There was a somewhat surprising High Court judgement finding that a South African commercial pilot based in South Africa but with a UK property he used for overnight stays should be treated as resident in the UK (as well as being resident in South Africa). The pilot in question flew long haul for British Airways. It has long been accepted that a person may be resident in more than one country for tax purposes (in which case where both countries would seek to tax a person there are “tie-breaking rules) but the particular surprise here was that it was found that the pilot’s presence in UK was found to be “not merely transitory” because he had a permanent contract to fly out of Heathrow.

I will not go into too much technical detail, and there may well be an appeal, but this does indicate that the long arm of HMRC is extending ever further, and those of you who spend most of their time outside the UK need to be aware that it is important to update your professional adviser on your movements, particularly if you visit the UK frequently for work purposes.


Certificates of Tax Deposit

If you do anticipate having to pay large amounts of UK tax in the future and have put aside funds for this purpose, it is worth mentioning that HMRC pay quite generous rates of interest up to the due date for payment of the tax, possibly better than the high street banks. You could say they are as safe as the Bank of England, though that may not be as safe as it was, and HMRC does its general banking through Alliance & Leicester these days. However, being serious, and if you have to pay tax at some point CTDs are well worth considering.


Bank and personal guarantees

There was a case recently which might become very important in the light of the current economic climate. A director had given a personal guarantee for a company in which he was a 5% shareholder, and then a month after he left, the company collapsed and the guarantee was called in. He tried to set his loss against his employment income, but this was not allowed because the expense was not incurred in the course of his employment – he had left. This was rather unfortunate. There is a capital gains loss he can now claim, but without capital gains profits to set this against he is very severely out of pocket. I suppose that if you have given a guarantee you should hang on in the business until after it is called in – not always practical or even legal in some circumstances as it is unlawful for a company to continue to trade whilst insolvent.

In this case, an appeal is unlikely to be successful.


Demibourne – “self-employed” deemed an employee

HMRC has issued new guidance on procedure where a self-employed person is found in reality to be employed. There is now a power to set the tax paid by the person when supposing he or she was self-employed against the PAYE tax for which the employer becomes due for the same period. Of course the employer will still be liable for significant extra National insurance Contributions and interest and penalties as appropriate, but previously income could have been actually taxed twice over in such circumstances. The new guidance is here. (Click!)





Filing online

For those of you whose tax returns are still outstanding you have to file online by 31st January 2009 your 2007-08 Tax Return. If you do not have a professional adviser (why not?) remember that there was complete chaos at the end of January 2008 with the Revenue’s server failing completely. It would therefore be wise not to leave your returns until the last minute. If you do have a professional adviser then make sure all your papers and records have been provided if not by yesterday then at least within the next week. Remember that no return preparer can make any guarantees to submit returns timeously as we get close to the deadline.