Wednesday, 21 January 2009

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!

Monday, 12 January 2009

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!

Monday, 5 January 2009

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) if you need clarification. Good luck!

Jon Stow