Watch out for the tax snoopers!

Without wishing to sound overly paranoid, we all know that ‘Big Brother’ is watching us. While we’re not yet monitored night and day as in George Orwell’s dystopian vision, there are few places we can go where we’re not caught on CCTV. Google Maps allows the curious at one end of the country to check out where we live and what car we drive.

The online world provides snooping possibilities for anyone intent on gathering information about us. People now commonly share things about themselves via social media that they would not have dreamed of divulging a decade ago. With these snippets of information, the snooper can build up an extraordinarily detailed picture of our lifestyles, where we live and work and what we get up to in our free time. And knowing how inaccurate HMRC records are I fear that people will be harassed without due cause!

So, what is HMRC doing to monitor us? It used to be the case that a local tax inspector would, if they had suspicions, spy on homeowners and trawl through the local media searching for information about lifestyles inconsistent with declared income. Now, sophisticated computer systems are employed to stay one step ahead, which is, in many ways, no bad thing, provided that we know how our data is being used, and why. There are inherent dangers in untrammelled snooping powers, not to mention clashes with legislation designed to protect our civil liberties.

Images, news stories, planning information and social media are all easily accessible, but Her Majesty’s Revenue and Customs also has more sophisticated tools at its disposal. Perhaps the most sophisticated weapon in HMRC’s armoury is something called ‘Connect’. This massive computer database contains over a billion records including taxpayer records, information from third parties and the Internet. It includes interest on bank accounts, business ownership details and information from overseas tax authorities. It has successfully revealed information on undisclosed overseas income, undisclosed literary income and assets omitted from IHT returns. Since being set up in 2010, it has so far yielded over £2bn in additional tax and is now in the process of being upgraded. One of the areas to be upgraded is HMRC’s ‘web robot’ software which trawls the Internet for information on taxpayers. Of course, anyone can support the taxman’s attempts to claw back undeclared income. My uneasiness stems from a suspicion that HMRC’s tax investigation activities are only the start of a more sophisticated and shadowy ‘Snooper’s Charter’, which may prove to be more ‘1984’ than 2014.

It's time to read late payers the riot act!

As you know from last month’s column, I’m four-square behind government plans to ‘name and shame’ persistent late payers. It’s a disgrace that companies can get away with paying weeks and even months late without being subject to any serious penalty. News that the government-backed Prompt Payment scheme appears to have failed is the latest blow to businesses that are, in many cases, being forced under – or very close to the wall - by their debtors.

A YouGov survey says that as many as 85% of small and medium have recently experienced late payment problems. These cases highlight the very real plight of business owners who are struggling with cash flow problems. I would certainly boycott businesses that are listed on a ‘name and shame’ register!

We commissioned a poll to find out how many business owners would consider boycotting a business listed on a late payers’ ‘wall of shame’. I can now reveal that a whopping 70% of people would consider giving such businesses the cold shoulder. The research conducted by Dipsticks Research asked a sample of 300 people the question: “Would you consider boycotting a large business that fails to promptly pay its suppliers which are small businesses?” Thirty three per cent of respondents would definitely consider a boycott, while a further 40.9% say they would possibly consider it.

I’m delighted that the majority would consider a boycott. Far too many clients come to me while wrestling with cash flow problems that are causing major problems for the effective functioning of their businesses. Too many late payers are bigger businesses that do not understand the very real problems that can cause businesses to go under.

It’s time that bigger businesses in particular are named and shamed. Setting realistic payment terms can be a good first option for many businesses. I’d also recommend reducing credit terms from 60 days to seven days. If all else fails, and you feel you can burn your bridges with the client, then think about charging interest for every day of late payment. A letter from your accountant or solicitor can also be a huge help in prompting payment. These options are really only for times where you find yourself drinking in the last chance saloon, however.

A boycott, either government backed, or supported by people - or small business - power, can still be the best way forward!

Cash flow is life blood of small business and they must be helped to get paid!

The Business Battle-axe, Amanda Vigar of Darlington accountants V&A Vigar & Co (Darlington), is backing government plans to ‘name and shame’ persistent late payers, following news that a scheme to ensure small companies get paid on time is not working.

A YouGov survey says that as many as 85% of small and medium have recently experienced late payment problems. The Government is currently considering a range of measures to compel companies to pay on time and will even name and shame those who fail to do so to highlight bad records of payment.

Amanda Vigar, managing partner at V&A Vigar, said: “It is extremely worrying that the government-backed Prompt Payment scheme appears to have failed. Although there are rules in place that compel bigger companies to pay more quickly, smaller firms are reluctant to use them for fear of losing their client.”

Amanda Vigar, who has a regular blog at http://businessbattle-axe.blogspot.co.uk/, says that “Small businesses are the life blood of our economy and cash flow is the livelihood of small businesses.” The Government has announced that it is planning to consult small and medium sized businesses later this year on the way forward for the late payment problem.

“The idea that persistent late payers can be named and shamed to increase transparency and to force them to pay up on time is an excellent one. It could not come too soon, in my opinion. Late payment causes so many problems for small businesses and can literally mean the difference between paying and not paying staff. For even smaller companies, it can sometimes mean the difference between continuing in business and going under.

“The problem is that big companies find every excuse to delay payment saying they have long authorisation processes and that it's missed deadlines. Basically, they can say anything to get around not paying!”

Amanda added: “In the meantime, there are several things that smaller businesses can do to get paid on time.”

These include:

•           Check payment runs - find out when customers make payment runs and what the cut off is.

•           Set credit terms – Small companies should set short terms - seven days not 60 days. You should have a clear collection policy in place outlining credit terms, how you will collect money and any overdue payments.

•           Make invoices clear – having a good system in place to record invoices is key. There are many software packages available so you can also track payments. Remember also that, the last time a company can object to an invoice they receive is on the day they receive it. After that time, they cannot quibble and dispute it.

•           Follow customer instructions – large companies in particular often have strict systems for paying. Maybe they want a special invoice number – so make one for them. Also ensure that it’s consistent throughout your communications to avoid confusion.

•           Follow up promptly – Make sure you have a consistent collection procedure and always follow up as promptly as possible. Keep a close eye on patterns in which clients generally pay; and ask yourself whether this fits in with your billing cycle? If the client does not pay ten days after the invoice is due, send them a ten-day letter re-iterating the fact that the invoice is due and (politely!) asking for payment.

•           Finally, always be polite – Shouting threats is not going to do you, or your business, any favours.

Are you being served?

By Amanda Vigar, Managing Partner, V&A Bell Brown LLP

I have since May this year been ‘Judge’ of my very own West Yorkshire Business Jury (www.businessjury.co.uk), which, as I’m sure you can imagine, has been great fun! The jury is a bit like a peoples’ panel, but for business, and is made up of twelve entrepreneurs who are polled on a quarterly basis for their opinions on a topical subject. We’ve had two judgements so far: a ruling that the high street is dead, but not beyond resurrection, and that standards of customer service are in meltdown.

Given that the jurors are intelligent people who care about the communities they live in, they offered solutions. The first was to encourage more artisan and boutique type outlets to tempt people away from their keyboards and to enliven our dying high streets.

You may have read about my ruling on the ‘falling standards of customer service’ in The Examiner earlier this month. The majority verdict was that standards of customer service are in freefall. Dire levels of customer care have, for some time, been a real bug bear for me.

Unlike a typical Judge, I am also a member of the West Yorkshire Business Jury, so I can both comment and give a verdict! Not only are standards slipping, they are close to being non-existent. You only have to walk into practically any shop on any high street to be met by grim-faced shop assistants who wouldn’t know proper customer service if it hit them in the face. Nowadays (and sorry for sounding like an old so-and-so!) customers are invariably treated to a grunt and a look of complete and utter disinterest when being served.

For too long, the poor customer - and it is all too often the older generations who pick up on poor customer service, arguably because they’ve been used to better – has been on the receiving end of bad service. As a nation, no wonder we are increasingly staying put in the comfort of our own homes to indulge our shopping habit online.

So, what can be done aside from avoiding the high street altogether?

One of our business jurors, Dot Goodhall, President of the Huddersfield-based neurological charity The Nerve Centre, says: “The retail sector in particular should really be looking at initiating a root and branch audit of their customer service procedures. Customer service assistants are the public face of a business, so it is vital that the friendliest and most polite attitude is presented.”

'No to business bashing!' says Business Battle-axe

Amanda Vigar, Managing Partner of accountants V&A Group, which has offices in Holmfirth, Darlington and Peterborough, has welcomed Prime Minister David Cameron’s clarion support for entrepreneurs in his Conference Speech.

Amanda Vigar, the Business Battle-axe (http://businessbattle-axe.blogspot.co.uk/), said: “Business bashing has become all too normal a game for some members of our political elite. Increasing taxation is not the way forward nor is wrapping our businesses up in increasing levels of regulation or bureaucracy, which is coming in ever greater bucket loads from the Brussels gravy train!

“Small and medium sized businesses are the very life-blood of our economy and creating the environment, or the ‘land of opportunity’ as Cameron has put it, to support them, is absolutely vital to our recovery. Profit, job and wealth creation and tax cuts are not elitist words but are crucial to our economy. Businesses employ people, put wages in peoples’ pockets and help us to buy things, which all gets the economy moving again! To punish businesses by raising taxation and stifling them with more bureaucracy, particularly at a time of fragile recovery, is total and utter madness!”

Amanda added: “The Coalition is not perfect and still has a way to go before getting the economy firmly back on the right track, but at least there is a mood of positivity when it comes to backing and not blasting business!”

Big fanfare but "shares for rights" is a dog's dinner of a policy!

By Amanda Vigar, Managing Partner, V&A Bell Brown LLP

There was a lot of brouhaha in the spring about ‘shares for rights’ recommendations by a lesser-known ‘governmental advisor’ called Adrian Beecroft. Those proposals, widely derided at the time, have this month snuck into law.

The general idea is that Shares for rights would offer business start-ups some degree of deregulation. In return for losing certain rights and protections, including unfair dismissal, statutory redundancy pay and the right to request flexible working, employees are offered shares worth between £2,000 and £50,000.

It all seems fine and dandy in principal but how many start-ups are able conjure up shares to the tune of several thousand pounds at the very least? How big a slice of their business would they need to give away to make this even possible? 

Imagine the bureaucracy! It seems almost as if a new admin post will have to be created simply to deal with all the extra work. It all seems a bit like a modern-day serf’s contract and a questionable way to ‘bribe’ workers into keeping quiet if they have a grievance. 

Unsurprisingly, small businesses have showed a considerable lack of enthusiasm. A consultation by the business department showed the policy had full support of fewer than five out of 209 businesses asked to respond. Only a “very small number” said they were interested in taking it up. 

I can’t remember the last time there was such a scheme where there are so many unanswered questions. What happens when the share price plummets as well as rises? What happens when an employee has a genuine grievance? Are disgruntled employees able to go to the European Court of Human Rights to plead their case? I bet they are! 

Now that is has been implemented (as of September 1st) how many employees are likely to go for it? The idea is of course to foster more of a stake in a business, with all the productivity and motivational gains that should result. However that’s in an ideal world and we are most certainly not living in a perfect world. In fact, I can’t help asking if the people who dreamt up this scheme have ever lived in the ‘real’ world! 

Unfortunately, as a nation, we are not born entrepreneurs. Mr or Mrs Average will not take the inherent risk of giving up something tangible in the form of rights for something more uncertain in the form of shares. Only time will tell if this new scheme is the expensive white elephant I expect it is!

Now students bear the brunt of nonsensical HMRC rules

By Amanda Vigar, Managing Partner, V&A Bell Brown LLP

It really does beggar belief that already hard-up students are now in the firing line of yet another HMRC mess. It is summer time and thousands of young people up and down our land are earning a little extra to tide them through their next academic year. The earnings will help pay for mounting tuition costs, books and other course-related material, board and lodging and other ‘essential’ student living expenses…

Now, these hard-working students are faced with the nightmare of having to claim back income tax taken from their wages. They will no longer be able to fill in a simple form to exempt them before their money is taken, but will have to ‘apply’ to HMRC to have their money refunded. Previously, the P38 (S) form, now scrapped, prevented 20% income tax being deducted automatically each month from students, most of whom will earn less than the annual tax-free personal allowance of £9,440. This means anyone earning more than one 12th of the annual allowance each month - or £786 – could well be subject to tax at source.

These new rules are utter madness and will cause much unnecessary worry and hardship among our young people. It’s yet another example of HMRC bureaucracy left to run riot where people are being asked to fill in yet more forms to claim money back that is rightfully theirs. I am already seeing cases where students, who are not the wealthiest section of society by any means, are facing increased financial pressure due to the time it takes to claim their money back.

It is unfortunate to say the least that these measures have been introduced at all. Students now more than ever need to plan ahead when taking occasional work over the summer and budget for not receiving all of their wages for quite some time.

To avoid any issues with getting money back, they should make sure they get a P45 when they finish their job. This will show their PAYE code, total earnings and the tax paid. If they do not intend to work for the rest of the tax year, and have stopped working for at least four weeks, they can claim a refund by filling in a P50, available from HMRC's website. If they continue to work part-time for the same employer during term time - say during weekends only - they should be given a P60 at the end of the current tax year.

Hands off our banks all you meddling bureaucrats!

By Amanda Vigar, Managing Partner, V&A Bell Brown LLP

In the air there is a spirit of meddling…I can feel it, I can sniff it out, so watch out all you politico bureaucrats who are considering putting a state straitjacket on our banks! Granted, the big high street names of our banking sector have not behaved in the best possible way, but there is still time to improve, and they are trying; bless them!

In order to counter all the negativity, many leading financiers are giving and engaging in society in a way they have not done for 20 years. They are ramping up their Corporate Social Responsibility schemes with greater and more highly publicised activity in the community, including measures to address ‘financial inclusion’. Other examples of positive community engagement include high profile sport sponsorships from golf to the Premier League, plus other more CSR-led initiatives, including Spaces for Sports. This is a laudable initiative which has won several industry awards.

Yet, still there is a clamour for them to be more regulated, and to what end? Our political masters haven’t exactly covered themselves in glory over managing our economy over the last decade or so! The banks will retreat into their shells, en masse, if they feel persecuted by members of the public and, more seriously, by politicians of every political complexion.

The Vickers Report, which reported in the aftermath of the financial meltdown, said that the banking sector should be regulated to avoid future government bail-outs. The report says nothing about improving bankers’ decision-making, banking supervision, or money and credit policy. What proposals it does make will jeopardise UK banking by reducing its global competitiveness. It will also harm the UK economy by reducing the funds that the banks have available to lend to SMEs and homeowners. Unfortunately, this potentially very damaging report is still under active consideration and there are strong voices in support, particularly from the Left.

It’s simple common sense to insist that we cannot solve the banking crisis by impos-ing more regulation than our competitors overseas. We live in a global, not just a UK, economy! We should not be increasing regulation of our banks if it makes it difficult for them to lend and businesses to grow.

We have to stop vilifying banks and we need to make the moral case for banking and the free market allocation of capital. Our independent financial institutions are an essential part of our free market economy. Their ability to make decisions based on real-life customer-focused facts and figures, rather than a politically driven tick box agenda, is vital to our sustained recovery.

Multi-Nationals Are Not Tax-Avoiding Bogeymen

‘Tax avoiders’ beware – the Government is about to come down on you like a tonne of bricks. Last week’s G8 Summit at Enniskillen outlined measures to tackle the problem of tax avoidance by the ‘bogeymen’ of multi-nationals such as Google, Amazon and Apple.

In recent months, large corporations have come under the media microscope for the way they have – legally - reduced their liabilities. 

It was the thoroughly unhelpful and headline-grabbing posturing in the media that led to calls for a clampdown. Some forward-thinking companies such as Accenture have even moved their HQs from Bermuda to Ireland to show they are paying tax in the EU – just at a much lower rate than in the UK!

The G8 saw the assembled world leaders agree to further transparency on the sharing of tax information. The G8 leaders announced that they will draw up a template for global corporations to report to tax authorities where they make their profits and pay taxes around the world. The new powers will give governments a tool against tax avoidance by multinationals and will be particularly helpful to the governments of developing countries. So far, so fine and dandy; or is it? 

The problem is that these bogeymen in the multi-nationals are protecting their interests in a totally legal and above board way. Greater transparency is one thing, but this will naturally entail more bureaucracy and a further damaging slew of negative headlines.

At a time when the economy continues to be on its uppers, with unemployment standing at 2.51 million (I Googled that!), should we be knocking these companies for protecting their profits?  Don’t forget, those profits are paid as dividends and go to fund our private pension schemes!

Profitable businesses employ people. Large profitable businesses employ A LOT of people. Taking people off the unemployed list doesn’t just give politicians a warm fuzzy feeling when they get to announce improved statistics, it makes a huge difference to peoples’ lives and helps to keep tax down for all of us.

Employed people also spend more in the economy and this helps retailers and their supply chains to thrive. In turn, these retailers employ more people and more money by way of income tax and the VAT on goods sold, which goes into the economy.

Yes, there is a moral argument that companies shouldn’t “get away with it” by paying proportionally less tax than others. However, isn’t it more important to encourage job creation? The social benefits alone, which come from increased employment, are surely evidence that these companies are actually a force for the good and not multi-national bogeymen.