Business battle-Axe recounts "painful" experiences dealing with HM Revenue & Customs

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

 

It is not often that the Battle-Axe’s rolling pin spins on its own without human input, but we have had three incidents this week alone, that have had it dancing a veritable tarantella – and, surprise, surprise, they all involve HMRC!

Over the last few months dealing with HMRC has become steadily more and more painful, but the events of the last seven days have left me horrified at the sort of service and behaviour that they clearly think is acceptable.

Case number 1 concerns a small employer. They took on a new employee part way through the 2014/15 tax year.  Because of the salary/bonus the employee had received from his previous employer, and the way the PAYE system works, in certain months of his old employment higher rate tax had been deducted from his salary. 

Now, across the year as a whole his package (including the new employer’s wages) was below the higher rate threshold.  So, the employee was rightfully entitled to a refund of the excess higher rate tax, which was paid back to him via payroll.

Now, if this had been a bigger employer the employee’s refund would probably just have reduced the amount of PAYE to be paid at the year end with no big issue. However, because the business was very small, the refund was actually more than the PAYE due to be paid.

But that’s no big hassle, HMRC just reimburse the employer right?

Well, that’s the concept and we would normally have expected this to happen within a couple of weeks of tax year end payroll returns going to HMRC – so, sometime in April or May.  We’re now in August and, despite our active chasing, still no refund.  This week we rang again (and after being on hold for 47 minutes) were informed that the repayment would be made in, wait for it, February 2016!  Errrr…that’s the employee’s money that the new employer has already repaid (as required) and which HMRC are not entitled to (and actually never have been) being held back for no reason.

This means our client is going to be waiting to get back money that was deducted in relation to a period when the employee was working for someone else for well in excess of 12 months.

In a similar vein, another client had what turns out to be the misfortune to have a key employee go on maternity leave.  That’s OK as the reimbursement of statutory maternity pay (SMP) is done by reducing the PAYE payable each month.  But again, the SMP was more than the PAYE due so the extra SMP payment needed to be reimbursed by HMRC.  Believe it or not, this time, the estimated payment date is March 2016.  So here, the employer has lost a key member of staff in a small business for at least nine months, putting added strain onto the business, and has to wait well over a year to be repaid the SMP that they have paid out on behalf of the Government. 

In both cases, the amounts involved would be enough to put some small employers into the bankruptcy courts!  Of which more in a little while. And remember, the Government is currently talking about pushing big businesses to play fair and pay small businesses more rapidly.  Pots and kettles comes to mind…..

Now the pièce de résistance: HMRC’s debt collection system!  We’ve long suspected that HMRC have a random number generator that they use to create documents to send to similarly randomly selected companies or individuals. Fortunately, we do monthly book keeping for the third client in this sorry list, so we know that they have paid everything that is due to HMRC.  Unsurprisingly therefore, this business owner was horrified to be asked to pay £1,700-plus of arrears.  HMRC has confirmed that the overall liability agrees with ours, and the debt collection team can’t explain why or how the claimed arrears have arisen.  Better still the online portal that we use to check HMRC balances gives a totally different figure to the amount they’re attempting to collect.  When pushed to explain this apparent discrepancy, an HMRC employee actually admitted that “this happens all the time, it would appear that our systems don’t work” – talk about stating the obvious!  But at least we now know what dear old ERNIE is doing in its spare time when not picking numbers for the Premium Bonds.

While I would like to think that my clients have just been unlucky, this pattern of HMRC errors (almost always seemingly going in HMRC’s favour if we didn’t pick them up) is growing all the time. Exercising my democratic right I have made my views very clear to the client’s local MPs and to David Gauke - the Minister responsible for HMRC. 

Sometimes that institution seems to forget that it is part of Government and therefore exists for the people of this country – not against us!

If you are having similar issues, I would urge you to contact your MP and let them know what has happened. Do feel free to copy the BattleAxe in as we want to monitor both the issues and HMRC’s overall performance. Maybe when they get sack loads of mail and their e-mail boxes are bursting at the seams, they might take things serious. 

Oh yes, to bring this sorry tale to and end and very sad to say, we also have seen cases where HMRC has actually petitioned for the winding up of a business based on blatantly wrong information from their systems!

To solve this ridiculous situation I don’t know what my weapon of choice should be –what’s your vote: my rolling pin or a magic wand?

ENDS

National Living – Wasted?

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


The number crunchers at Battle-Axe HQ have been running their slide-rules over Budget 2015 version 2.0 and the sound of tutting and sighing has been getting louder as each day has passed.

Like the proverbial magician, the Chancellor kept his biggest rabbit until the end of the Budget speech – the National Living Wage or “NLW”. That has grabbed a lot of headlines but its implications, along with other elements of the Budget (announced or hidden away in the small print) tell a different and, for me slightly concerning story.

Firstly, the NLW is neither national in its impact nor is it the Living Wage. In November 2014, the Living Wage Foundation calculated the required hourly rate to be £7.85 outside of London. Setting aside the slightly dodgy maths in their calculation, that’s rather more than George’s NLW which, when introduced next year, will be set at £7.20. That’s clearly rather less - and significantly less than the Living Wage in London, which is currently £9.15 - a rate that the NLW won’t even reach by 2020.

Secondly, it will only apply to those over the age of 25. There’s a political prize to be won by getting down youth unemployment, but this is a problem waiting to happen! When staff hit around 24 year and 9 months old will their employers start looking to get rid of them to take on youngsters who will cost 21% less?

The affordability point is critical for smaller and medium sized businesses where there isn’t the extra margin, even taking into account the drop in Corporation Tax rates, to cover the extra cost.

Add to this, that the Chancellor has effectively put NICs onto their dividends reducing what they have to live on. Big business gets as tax cut but smaller businesses are, to all intents and purposes, getting a tax hike. That’s businesses that last year accounted for 25 million jobs – just under 50% of all UK employment!

No doubt the Government will point to things like the increase in the Annual Investment Allowance from £25,000 to £200,000. Great, but for most of those 5.2 million small businesses they can only dream of spending £25k a year on new kit. Even if they could find a bank willing to lend them the money!

No-one likes the idea of people living in poverty, but my team is concerned that the National Living Wage won’t have the effect that everyone hopes for. Increased costs will have to get passed on to the end consumer. So the cost of living for all (including those on NLW) will go up. In turn, that, of course, means we need a further hike in the NLW to make up for it which will push up prices….. You see where we’re heading here?

Even the Government accepts that the NLW will cost around 60,000 jobs. But we suspect that’s only existing jobs and doesn’t take any account of the roles that SMEs were looking to create, but now either won’t be able to (not all jobs can be done by youngsters!).

So, the National Living Wage needs more refinement, more consideration and more consultation on how to get it to really work. If not, the UK will end up missing a major opportunity to update, upgrade and accelerate both the whole country’s economy and the current recovery.

When all the best laid (succession) plans go wrong!

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

When Jeremy Clarkson was unceremoniously removed from Top Gear, who thought that Chris Evans would be leading a completely new team of presenters?

It will be interesting to see just what impact Chris has. having, apparently, only agreed to take it on if he is allow a free hand on forming its future. Mind you, is he just the first in through a rotating door trying to get things back on track (like the football managers that now seem to leave before they’ve even started) or will he become the saviour of Top Gear?

In recent years, in the business world, we’ve seen the likes of M&S struggle to find the right new leadership to pull their businesses round after they have lost their way. Each time, there was hope that it would all come good, the flame flickers for a while (think Stuart Rose and Per Una) and yet now M&S seems again to be a bit of a lost soul on the high street.On the other hand, when Apple lost Steve Jobs, the naysayers predicted the end of Apple and yet in the few short years since his untimely death the value of the company has more than doubled under his hand-picked management succession team.

Looking at all the business succession activities, there are no hard and fast rules on what will work. But one thing for sure is: if you don’t plan ahead for the future management of your business it is bound to fail especially if the exit of a key member of senior management is unplanned! That means having more than just a plan A too.

One of the first questions I ask both a business owner or someone looking to start-up is “what is your exit plan?” Most people just look at me blankly because they haven’t even thought about exit! Yet, without a plan they have no idea how to shape their business in the next 5, 10 or 25 years. People who do keep that end goal in sight at all times are much more likely to succeed.

Even better, make sure you can have more than one route through to that end – just in case your managing director decides to punch your key customer!

Business Battle-axe pledges to keep watch on the Government

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

Congratulations to Sajid Javid MP on his appointment as Secretary of State for Business, Innovation and Skills and to Damian Hinds MP as Exchequer Secretary.

Both are new to their jobs, so let’s get them started on the right tracks and remind them that the Battle-axe will be watching every move they make. 

Of course, she will also be letting them know (directly) what she thinks of their performance!  One wonders if the rolling pin will get through security at the House of Commons?

Sajid has started by making the right noises.  One of his first pronouncements was to recognise small business (the Government’s beloved SMEs) as the "engine room" of British industry, vowing to get "heavy-handed" regulators off their backs.  

A welcome sentiment, but the proof of the pudding will be in how much he can achieve in the next five years with the dark satanic red-tape mills of the EU still working overtime!  

Sajid needs to be telling Mr Cameron to take a hard line in Europe on the mountains of regulations they produce every year.  Up and down the UK entrepreneurs are swamped with unpaid admin work they do for the government (and Brussels) – you may remember the article about it a few months ago where it was estimated that an average small business spends 22 days a year on it. 

If anything is going to put off people from setting up in business or employing people it's the pain and non-value added admin that goes with it.

As a former banker Sajid should know how the banking system works. I will be expecting him to look at why the banks are still making big noises in public about lending to SMEs then forcing them to jump through so many hoops that they are put off applying for the finance needed to develop their businesses. 

Maybe we should just give up on the banks and ask him to expand the Growth Fund programme that has seen critical expansion money being lent to the life blood of the UK economy. 

How about using the cash from the sale of the taxpayers shares in Lloyds and maybe one day RBS to top up the fund?

Or better still why not give more enhanced reliefs for entrepreneurs investing into the future of their business – not just on exit but up front relief!  After all, they actually keep people in jobs, so the money saved on benefits could be recycled to encourage investment.

Meanwhile Damian claims to have worked in the pub/hotel industry for 18 years so should be well used to the effect of excise duties on drinking behaviour. As a result, it will be interesting to see if the alcohol excise duty is frozen in the forthcoming budget helping to slow the rate of pub closures that we have seen in recent times – often the last community facility in the village.   

Whilst we know this is a Tory cabinet, it’s not just Mr Farage that likes a pint of the real stuff especially from some of Yorkshire’s fabulous local breweries and cider presses!

My policy demands for whoever forms the next government after May 7 2016

With only a matter of days to go to the general election, business owners across the nation will be praying that whoever is in office the morning after the public has spoken will remember they exist.

So, knowing that the various party leaders closely follow the sage pronouncements of the Battle-Axe, here are the key policy demands that my own think tank “The Rolling-Pin Brandishers” have drawn up after consulting those very same business leaders:

An urgent root and branch reworking of the business rates system so that small independent businesses can afford to be on the high street. A good start would be using valuations to reflect current rather than drastically out-dated property values

Introduce within a month a proper Service Level Agreement for HMRC – one with serious teeth so that businesses know when to expect responses and repayments of tax and HMRC has to pay (in cash) for their errors

Invest to bring HMRC systems into the 20th (never mind the 21st) century so that businesses can see their tax positions at any time and where cash has been allocated – with the ability to correct it when HMRC’s have randomly (mis)allocated the payments (yet again)

Removal of a significant amount of the ever-rising mountain of red tape that businesses have to deal with but which adds no real value to anyone and holds back start-ups, growth and employment. That’s without introducing more rules to achieve the reduction, of course

An emergency Budget raising the VAT threshold dramatically so that local plumbers/builders/electricians/carpenters aren’t forced to add 20% to their prices just because they use high value materials – and just think how much less cash-in-hand work there would be

If Government departments insist on online filing, a real push on rolling out high speed broadband to all business premises

A continuation and expansion of the access to funding initiatives we have seen in recent years such as the Regional Growth Funds that have invested almost £3bn pounds to grow British business since they started in 2010.

Whatever colour the Government is after the election, small and medium-sized businesses will continue to be the life blood of the British economy and, as so often in the past, the real root and fount of the innovation and entrepreneurial spirit that makes Britain Great!

MR PRIME MINISTER (SADLY IT WILL BE): IGNORE US AT YOUR PERIL!

PS – failing any of the above demands, we still concur with the Monster Raving Loony Party’s long-held desire for a Royal Commission into the Hokey Cokey – to see if it really is what it’s all about.

Originally published in the Huddersfield Examiner on April 28th 2015 

Our think tank has thunk!

With only a matter of days to go to the General Election, business owners across the nation will be praying that whoever is in office the morning after the public has spoken will remember they exist. 

So, knowing that the various party leaders closely follow the sage pronouncements of the Battle-Axe, here are the key policy demands that my own think tank “The Rolling-Pin Brandishers” have drawn up after consulting those very same business leaders:

• An urgent root and branch reworking of the business rates system so that small independent businesses can afford to be on the high street.  A good start would be using valuations to reflect current rather than drastically out-dated property values;
• Introduce within a month a proper Service Level Agreement for HMRC – one with serious teeth so that businesses know when to expect responses and repayments of tax and HMRC has to pay (in cash) for their errors;
• Invest to bring HMRC systems into the 20^th (never mind the 21^st) Century so that businesses can see their tax positions at any time and where cash has been allocated –  with the ability to correct it when HMRC’s have randomly (mis)allocated the payments (yet again);
• Removal of a significant amount of the ever-rising mountain of red tape that businesses have to deal with but which adds no real value to anyone and holds back start-ups, growth and employment.  That’s without introducing more rules to achieve the reduction of course;
• An emergency Budget raising the VAT threshold dramatically so that local plumbers / builders /electricians / carpenters aren’t forced to add 20% to their prices just because they use high value materials – and just think how much less cash-in-hand work there would be;
• If Government departments insist on online filing, a real push on rolling out high speed broad to all business premises; and
• A continuation and expansion of the access to funding initiatives we have seen in recent years such as the Regional Growth Funds that have invested almost £3 billion pounds to grow British business since they started in 2010.

Whatever colour the Government is after the Election, small and medium businesses will continue to be the life blood of the British economy and, as so often in the past, the real root and fount of the innovation and entrepreneurial spirit that makes Britain Great!

MR Prime minister (sadly it will be): Ignore us at your peril!

P.S. Failing any of the above demands we still concur with the Monster Raving Loony Party’s long-held desire for a Royal Commission into the Hokey Cokey – to see if it really is what it’s all about.

Budget to build on solid foundations

With just weeks before the General Election, none of us could be entirely sure what the Budget would hold. 

Would our Chancellor (known to those of us in the trade as “Gorgeous George”) be buying votes or would he try not to ruffle any feathers? 

All in all, it appears to be the latter, albeit with a few sweeteners to parents/grandparents of those in their 20s looking to get their offspring out of the family nest and those with savings that generate significant income.

His overall message: “steady as she goes”.  Growth has been steady over the last couple of years and there was certainly nothing in this Budget that will lead to an uncontrollable boom – it was more about building on solid foundations of growth leading to a reduction of the deficit.

My main disappointment is that, despite stressing that he was backing British business, there really wasn’t anything for small business owners to be throwing their hats in the air over. 

The reform of the business rates system has been long rumoured and, whilst I welcome it with open arms, reading between the lines its impact is likely to be limited and definitely not the radical reform that this outdated and fundamentally unbalanced system needs.

My other big concern is that reports of the death of the tax return were, in the words of Mark Twain, greatly exaggerated. 

Whilst I can see that the change will be of benefit to those with relatively simple affairs – say just a salary and savings income that is taxed at source – even they will still need to check the figures carefully to ensure that everything is actually included and is accurate. 

Given the way HMRC’s systems struggle to cope with RTI on payroll, my heart sinks at the mere thought of the errors and omissions we are going to see when they try to deal with the pre-population of tax records from multiple sources. 

For those who are self-employed or have complex tax affairs, my concern is that HMRC will see this as being like PAYE and take a guilty-until-proven-innocent approach with the accompanying administrative burden increasing yet again for those of us running small businesses. 

What price a delay (or six) from the target 2020 launch date?