Do SMEs get a fair deal from banks?

The banking sector has often been accused of favouring big business over small and medium sized businesses (SMEs.) It certainly seems that way. From speaking to SMEs on a daily basis, it appears that high street banks still say an emphatic ‘no’ to smaller businesses seeking finance to grow, or even to renew broken or out-dated equipment.  

While we know that banks have been badly affected by the tumultuous recessionary years, they do seem to forget one fundamental fact: SMEs are the very lifeblood of our economy. Now it seems that high street banks may be hindering smaller businesses from gaining access to finance from alternative providers and forcing them to take out business accounts to get a loan. Delays in financing may put the company under undue financial pressure and lead them to taking out more expensive borrowing than necessary.  This may simply because they need to replace vital equipment and don't have time to go through all the hoops that the banks want them to!

More diversity and competition in the banking sector is vitally important if we are going to have a lasting recovery built on business investment and exports.

A new survey, commissioned by Chancellor George Osborne, will reveal that smaller companies still feel that they are being shut out by the banks when it comes to lending. The survey, undertaken by the British Chambers of Commerce (BCC) and the Federation of Small Businesses (FSB), will rank the different banks based on how well they are meeting the needs of small companies.

It’s good news that the Government is backing a new and independent website called Business Banking Insight (BBI) which is designed to give clarity around the services smaller businesses receive from their banks. The website will identify how SMEs rate their banks based on performance, service and business understanding. The review was launched in November, under the remit of identifying the best SME bank in the UK, as well as providing data to allow SMEs to find the bank most suitable for them. It feels like this is too little too late, however, as SMEs are looking at getting back on track right now for recovery.

We ask our twelve SME business owners in the next Business Jury (www.businessjury.co.uk) whether SMEs are really getting a fair deal from banks.

Another potential HMRC omnishambles?

Barely a week goes by without HM Revenue and Customs getting us into another fine mess; or a potential one. I could hardly believe my ears, when I heard that Mr Taxman may soon have the power to seize money from bank accounts. HMRC wants the power to take money from any account – including ISAs and incredibly also joint accounts – if it believes that someone owes taxes or money is owed as a result of tax credit overpayments.

This strikes me as yet another barmy plan by Mr Taxman designed to frustrate and to charge us tax that we may not even owe. Also, what happens if the account is a joint one and an innocent party is penalised? Many couples do not even know what their other half is contributing to the account or may not even be aware that he/she is being chased for tax.

Even the Treasury select committee has attacked the plan: “This policy is highly dependent on HMRC’s ability to accurately determine which taxpayers owe money and what amounts they owe – an ability not always demonstrated in the past. Incorrectly collecting money will result in serious detriment to taxpayers.” I couldn’t have put it better myself. It all feels rather like HMRC in asking for this power is trying to set itself up as some sort of state-sponsored pay day lender. Currently only by securing a court order can HMRC seize tax owed from bank accounts. These new plans will almost certainly result in error and potential fraud.

HMRC insists it will not take any money unless the person has at least £5000 left across all their bank accounts, including ISAs, after the debt has been paid. It will not create or increase overdrafts – that is the plan anyway. Innocent victims of the policy could include pensioners who put money into a joint account, managed by younger relatives. If their younger relative owes taxes, the money could be seized, even though it belongs to the elderly person.

Around 17,000 people a year will be affected by the plans which will apply to anyone who owes more than £1000 and has at least £5000 left across all bank accounts – including ISAs. HMRC plans to only target those who have long-term debts and have received at least four demands for payment. The plans are currently going through a consultation phase and, if approved, will be implemented in 2015/16.

This tactic should absolutely be the option of last resort and should only happen after a court order has been secured to prevent any ‘omnishamble’ type mishaps. HMRC should look at instituting a more rigorous incremental system of fines, seek a court order for recovery and, if all else fails, sell on the debt to a reputable business debt collection agency – but only once steps 1 and 2 have been followed.

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.