Another "borderline insane" plan from HMRC

It appears that HMRC has hatched yet another plan to frustrate us: Mr Taxman is looking to sell off our anonymised tax data to private firms. Hot on the heels of the now delayed plans for an NHS database that would place all our medical files online, HMRC seems to have surpassed even itself this time round.

A HMRC spokesman has said that they would only “share data where this would generate clear public benefits, and where there are robust safeguards in place.” It goes on in a similar fashion, stating that anyone accessing data would be subject to the same “confidentiality” provisions as HMRC staff, including a “criminal sanction” for unlawful disclosure of taxpayer information. If given the go-ahead, the plan would allow HMRC to release the data to third parties including companies, researchers and public bodies.

I agree totally with former Conservative minister David Davis who has labelled the plans “borderline insane.” They are really another example of HMRC ineptitude; but, worse still, they are right up there with the shelved plans to put our medical data online. The Care.data initiative is currently suspended after fears were raised as to exactly what information would remain anonymous.

While HMRC has said it is committed to confidentiality, I am more than a little sceptical. It defies logic that we would remove any restraints at a time when data can be collected in huge amounts and can travel round the globe in a matter of milliseconds. One would have hoped that HMRC would have learned that trying to sneak plans like this under the radar is not the way to build trust or develop good policy. The officials who drew this up clearly have no idea of the risks to data in an electronic age. What’s more, HMRC records are woefully inaccurate, so is the data they provide going to be of any real use?

The sale of tax data would have to be subject to the high level of rigour and scrutiny that are simply not the hallmarks of how HMRC has tended to operate. There is no logic in flogging highly confidential information; and it has the potential to pose a major threat to the confidentiality of our nation’s tax affairs. Why isn’t Mr Taxman seeking to put his own house in order first before playing fast and loose with extremely confidential data? It really does beggar belief; and I truly hope that these plans are consigned to the scrap heap as soon as possible.

The Companies House 'omni-shambles'

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

At a time when small and medium sized businesses (SMEs) are still struggling to make ends meet, I could not believe my ears when I learned that Companies House and HMRC are complicit in allowing debt-ridden companies to avoid their creditors.

Companies House are automatically striking off companies that haven’t filed their accounts or annual returns despite objections from creditors. In the past this was swayed by objections from HMRC - who are often amongst those creditors - but they no longer seem to be objecting if the amounts owed to them are small.

Quite rightly, Companies House is asking creditors to show that they have a valid debt and that it has been chased, but there comes a point when it’s not economically viable for small businesses to carry on pouring good money after bad! It doesn't mean that the debt is any less valid! Their only hope then is that someone else stumps up the money to take the company through proper insolvency proceedings. But alas, Companies House doesn't see it that way and actively strike companies off for pure administrative non-compliance.

Whilst I normally have sympathy with HMRC, in these situations, it’s often HMRC that gets hit hardest. HMRC loses the tax/VAT/PAYE from the business that has gone bust AND the creditors get a bad debt write off claim too - so HRMC loses out twice over! So why aren’t they objecting to Companies House and stopping them from allowing the offending Directors to walk away from their responsibilities, often scot free?

SMEs are the life-blood of our nation’s economy, after all, and it serves no one any good at all to be forced under - except the real tax evaders, that is!

Too often Directors stick their heads in the sand and hope things will go away whilst taking others down with them. The Government needs to insist that to get rid of a company either the Directors have to confirm that the company has satisfied all its creditors or that a proper insolvency process is gone through. Small businesses don’t have the financial or time resources to do this for themselves, so for once the Government needs to stop treating them as unpaid tax collectors and policemen and help them to get paid for the work they’ve done in good faith.

Keep our vital rural services local!

The vital importance of thriving villages cannot be underestimated. Not only should our villages and market towns look picturesque but they should also be able to provide services to their residents. They should not fall to the level of pretty ‘window dressing’ for the tourist trade. However important tourism is to these local economies, it would be a travesty and a scandal if people struggled to work and live there!

The Post Office, in particular, provides a place for people to pay their bills, collect benefits, get their car taxed and buy stamps locally. Sadly, the number of branches has dwindled from about 25,000 in the mid-1960s to around 11,500 today, according to figures from the Post Office. Although so much can be done online nowadays, this doesn’t replace the community spirit that local businesses can provide and you can’t get the emergency pint of milk and a loaf of bread online!

I am delighted to have helped a local businessman buy secure a Post Office licence in a small West Yorkshire village. The successful acquisition has rescued the village Post Office from closure – more about this success story very soon!

Older people, more often than not, have to rely on other dwindling local services, and our vanishing rural bus routes too. They are, quite literally, a life-line for our elderly population. Anyone of a certain age will remember with fondness days gone by when one could count on being able to buy groceries, sort out finances, pick up parcels, send letters to friends and relatives overseas or even buy a local paper without having to drive to a soulless shopping centre miles away.

I am judge and juror on the West Yorkshire Business Jury (www.businessjury.co.uk) which periodically asks a dozen local businessmen and women a topical question. One of our most recent verdicts was that the high street needs to adapt or die. One juror, Frances Bennett of geotechnical services company Ashton Bennett, applauded Mary Portas' review for the government which recommended the ideas of the Transition Town movement. The movement champions community-owned bakeries, food-growing projects and even community-owned energy. Let’s apply that brilliant ethos to our villages as well!

It's too early for a rise in the national minimum wage!

I could not believe my ears when recently the Chancellor George Osborne stuck his neck out on the national minimum wage. He called for a hike in the NMW to £7 to compensate low-income workers for the economic crisis. This is all well and good and of course I’d love for everyone to be paid a living wage. But, and it’s a big ‘but’, can I venture to suggest that now is not the time to be saddling small and medium sized businesses (SMEs) with unrealistic additional costs? Of course, it is not the right time when the economy is still in its earliest, most tentative steps on the road to recovery.

I work with scores of SMEs and, on a daily basis, they complain that they feel like the ‘forgotten army’ powering the economy, creating jobs and prosperity but remaining unthanked for that vital job. I agree wholeheartedly with the CBI’s stance on this proposal which postulated that an “unaffordable rise would end up costing jobs” and recommended that the Low Pay Commission should make the final decision. The Commission was set up in the first place to stop such political posturing!

Interestingly, the Chancellor did not suggest a new level for the NMW, but his officials have been studying the implications of an increase from the current level of £6.31 an hour to £7 by 2015.

Even mooting a rise is a dangerous game to be playing at a time when SMEs are only starting to re-gain confidence and start hiring again. The looming threat of a pay hike will not help to stabilise matters but will instead force businesses into a bunker-like mentality. They will, in simple terms, be more inclined to shelve their aspirations or plans to hire and will be more likely to carry on with their existing staff levels.

If the new NMW levels are implemented, it could well mean that businesses may, however reluctantly, choose to shed staff. Now, that would be unforgivable. So, come on Chancellor choose your moments please! A couple more years of growth in the economy will mean that SMEs are more likely to be able to bear an increased wages burden. That would be the ideal time to talk publically about a wages hike.

Smaller businesses should be supported and encouraged to grow whilst still giving lower paid earners more in their pockets. I’d recommend taking more earners out of tax and NIC (particularly employers’). That way, more people will be able to come off benefits – a net saving to UK PLC!

Don't make January a taxing time...

The January bookkeeping blues are looming, as small business owners across the UK are getting their books in order to submit tax returns by January 31. The penalties for late submission and payment are severe, with a fine of £100 levied for being just one day late. Don’t wait until the last moment to submit as well, as the Government Gateway may crumble under the pressure and you may be left fighting against the clock, and lose.

Try to make the practice of ‘keeping good books’ your New Year’s resolution and follow these simple steps to take the pain away:

•             Get a head start with your accounts. HMRC states: “You must keep records of all your business transactions.” Getting into the habit of keeping good bookkeeping records is essential to the smooth running of every business, no matter how big or small. It’ll amaze you to hear how many people have not budgeted for their annual tax payment. Don’t let your tax obligations take you by surprise, but instead budget for the ‘worst’ (or best, as you’ll be operating a more successful business!) case scenario.

•             Do everything you can to take the surprise out of tax planning. Let your accountant and accounting software do the hard work for you. As well as allocating time each week to review and update the books, small business owners should set time aside each week to go through the books and ensure that their accountant is kept in the loop, particularly about any unexpected changes in the business’s fortunes in order to avoid any surprises when tax returns need to be submitted.

You still have time to make this January’s deadline, so here’s what you need to know:

-              You have already missed the October 31st deadline for submitting your tax return by post; you must instead submit your tax return online by January 31st 2014.

The penalties for late returns are pretty steep and the longer you delay, the more you’ll have to pay:

-              One day late: A fixed penalty of £100. This applies even if you have no tax to pay or have paid the tax you owe.

-              Three months late: £10 for each following day – up to 90 days, maximum £900. This is as well as the fixed penalty above.

-              Six months late: £300, or five per cent of the tax due, whichever is the higher. This is as well as the penalties above.

-              12 months late: £300, or five per cent of the tax due, whichever is the higher. In serious cases you may be asked to pay up to 100 per cent of the tax due instead. These are as well as the penalties above.

The last thing anyone would want is to be burning the midnight oil in a frantic rush to get a tax return submitted by the deadline. So, speak to your accountant or bookkeeper to find out how you can help make January a less taxing time.

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!