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Copyright © Simmers & Co 2006-2008
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This is our News and Topical points page. We have listed topics on this page in the left hand column for ease of navigation. Please
use these links to help you access the points you are interested in.
If you do not see the point you are looking for, we
have some interesting fact-sheets available, on many topics, on our Factsheets
page. You may also find your answer on our Frequently
Asked Questions page. If you need more technical information on tax rates,
please refer to our Tax Rates pages.
For headline news topics choose "Current Business News" opposite
NEWS AND TOPICAL POINTS ANSWERS
Should you have an Audit - or not?
Private
companies with a turnover up to £5.6 million do not need to have an
annual statutory audit.
Initially, this seems like very good news for smaller to medium sized
companies but there may still be advantages to having an independent audit of
company accounts. Some points to consider are:
Audit can provide comfort for shareholders, particularly those who are not
directors.
Providers of finance may take reassurance from an independent check on financial
statements.
Suppliers may need audited figures before providing credit facilities.
Audited accounts may be of assistance if a company is being sold.
Without an audit, companies lose the benefit of an independent check on their
financial strategy. Also, although the audit process is not specifically
designed to identify fraud, there must be an increased risk of fraud going
undetected.
Avoid Spam
Spam is everywhere on the internet and even originates within
offices. The key to minimising the amount of spam you need to sift through is to
have a solution installed to filter your email movements at your email gateway.
This will protect you from spam and also from viruses and worms contained within
emails. You should then ensure that your employees use your company email policy
which should include the following:
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Never make a purchase from an unsolicited email. Apart from
protecting you against fraudulent sales schemes, you email address will not
be known to be active and will not, therefore be added to emailing lists
used by the spammers.
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If you do not recognise the sender of an email message do
not even open it. By deleting it unopened you will be protecting yourself
against viruses or other exploits that could damage your computer.
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Never respond to any spam email or use any of the links in
the message. This even includes replying to "unsubscribe" or
"be removed " from lists.
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Do not use your email software to preview emails received as
this can send messages to the spammer.
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When sending out emails to a number of recipients, use the
blind copy field to conceal their email addresses. This helps protect
against spammers "harvesting" traps.
Business and Fraud
During 2005 fraud cases soared to record levels. These frauds were carried
out by Companies, professional gangs and by individuals at management level.
Employees were guilty of passing information to accomplices on the outside;
managers by paying themselves, or fictitious persons, unauthorised amounts. The
Financial Services section was particularly hit with employees being groomed to
embezzle funds or pass information to criminal colleagues.
Identity fraud levels continue to increase and the most popular of these is
"phishing" scams in which emails are sent disguised as bank accounts
demanding login details. There is no doubt that companies and individuals need
to be more vigilant than ever to avoid these increasingly sophisticated schemes.
Buying to Let
The buying to let scheme within the Housing Market was up until recently very
popular, especially when house prices were rising steeply. However, the bottom is potentially dropping out of the scheme and the
current Tax regime for buying to let housing is quite unhelpful to landlords.
Many landlords do not appreciate that a great number of expenses, incurred as
a matter of course, are not allowable as a charge against their Income Tax
Liabilities on Letting Income. For example, the legal costs and stamp duty on
the purchase of the property are not eligible as a charge against Income Tax.
Similarly, if you spend money refurbishing the premises before you begin
letting, this is not allowable against your Income Tax Liabilities. In both
these cases, Relief is eventually given but only against any Capital Gains Tax
charge on an eventual sale of the property. This could be many years later.
One other point of note in the Letting Scheme is that any Losses incurred
through the Letting business cannot be offset against Income from other sources
but need to be carried forward against future income arising from the property.
This can be a nasty surprise especially if the property cannot be let easily.
When the property is eventually to be sold, the Capital Gains Tax Regime
Reliefs are not very favourable. The property is not considered a business asset
and does not, therefore, attract the lower rate of 10%. Any gain would be
taxable at 18% after deduction of any annual allowance available. It should be noted,
however, that this is relaxed for furnished holiday lets which are
treated as conventional businesses so that losses can be deducted from other
Income and the lower rate of 10% may be relevant to any gain on sale.
One final sting in the tail is that Inheritance Tax is payable in full on
death and there is no Business Property Relief on the Property. This seems very
unfair as the Letting of Investment Property with all the necessity for repairs,
maintenance, etc. is in fact a business.
Should
you buy or let your property
Choosing to buy your business premises is a big decision. Should you buy or
should you rent? There are advantages and disadvantages to both and you should
consider matters carefully. For example, your type of business may need to
change location quickly and easily or the opposite might be true.
The advantages of owning your business premises include the following:
- You own an asset that will potentially increase in value.
- Interest payments are tax deductable.
- Mortgage payments are likely to be cheaper than rental payments.
- There will be little trouble in subletting extra un-needed space.
- It will be easier to budget as you will not have unexpected high rent
increases.
The disadvantages of owning your business premises include the following:
- It is harder to re-locate your business if your business needs demand it.
- You will probably need a higher deposit that you would if renting the
property.
- You will possibly be responsible for more of the costs of upkeep of the
building than you would be if you rented the premises.
- It is usually easier to extricate yourself from a rental agreement than to
sell premises.
Charitable Giving - Tax Efficiently
Providing you are a Tax payer, Tax relief is available for donations to
Charity. The main method nowadays is through the Gift Aid Scheme which replaces
the old Deed of Covenant.
For every £ donated to the Charity under the Scheme the Charity can claim an
additional amount from the Inland Revenue. This is now no minimal level of
donation which requires to be given under this Scheme and the Scheme an apply to
either one off donations or regular amounts of giving.
The Charitable Gift can be made by telephone or over the internet and the
only details which the Charity needs to record are the name and address of the
donor. If the donor is a higher rate Tax payer then additional Tax Relief is
given to the donor under the Scheme.
Do
you understand IR35?
IR35, effective since 2000, is a means to aid the
taxation of contract workers, where the government felt that they
were not paying the correct amount of tax. Broadly speaking, IR35
would cover contractors who operate as self employed but
work for only one organisation. If you fall under IR35 you will be
liable to pay Income Tax and National Insurance after deduction of
business expenses. IR35 will only come into operation if you are
deemed to be "employed" and you would be affected if you
would have been given contracts of employment, had you worked
directly for the organisation concerned, rather than operating
through your own company or partnership.
If you feel you may be caught by these
regulations, it would be a good idea to diversify your work. You
should also seek professional advice from your accountant.
Most contractors who may be caught by this
regulation are worried about being taxed as an employee but
missing out on the perks of being self employed. This would affect
paid holidays and benefits. As an employee their income would have
included these benefits but the self employed rate paid to them
will usually leave a shortfall. The best way to overcome this is
to increase your self employed rate chargeable ( you will need in
the region of 20% to compensate). Also, make sure that you
are claiming all the expenses you can against your income.
Education is
not the way to success
A good education is not necessarily the way to
become a successful entrepreneur, according to a survey of British
business owners. The survey, carried out by the Royal Bank of
Scotland, shows that the average UK small business owner left
school at age 16 and nearly one in five has no educational
qualification. Although only 5% of those interviewed held a
professional qualification, most admitted being driven towards
business success early in life. Almost 84% claimed they worked to
earn money while still at school and most had started earning
money by the age of 13.
The survey claimed that the average
entrepreneur comes from the Midlands of England and runs a
wholesale business with a turnover between £250,000 and
£500,000.
Health and Safety Regulations
Every employer has a legal obligation to ensure that, so far as is
reasonably practical, he protects the health and safety of his employees.
Failure to do so could result in a civil case or criminal prosecution. You
should take account of the following main regulations:
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You must assess the risks to your employees at work.
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You must also assess the risks to persons not employed by
you but who are affected by your actions and conduct.
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The 1992 regulations affect workplace accidents,
ventilation, temperature, lighting, cleaning and workspace
dimensions and conditions.
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Floors and routes should be in good condition, have no
holes, slopes or be uneven or slippery. They should be free
from obstruction.
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Employers should avoid the need for their employees to
undertake any manual handling operations where there is a risk
of injury. If this is unavoidable, a risk assessment must be
carried out.
Your Cleaner is most probably an Employee
Most people pay their Cleaners in cash without realising that they might be
breaking the law and could incur PAYE, Income Tax and National Insurance
Contribution Liabilities going back for 6 years, plus interest and penalties.
This can often amount to a considerable amount of money and many people think
that it is a remote danger. However, increasing Government action against all
forms of benefit fraud are making this a much more likely reality.
Not everyone will be caught but you should think about solutions to this
carefully.
Sources of Business Funding
Although there are many sources of funds available to small businesses, they
all carry different obligations, opportunities and responsibilities. You should
understand the differences so that you can make an informed choice.
Banks
The most common options from your bank will be overdrafts and
loans and they will provide any sum. You need to repay both of
these over a period and pay interest on the amounts borrowed. You
will also, probably, need to put up security to cover the capital
(this could include a personal guarantee from an owner) and show
you can repay both capital and interest.
Hire Purchase and Lease
This type of finance is used mainly to provide funds to buy
assets such as vehicles, computers, machinery etc. The provider
will provide the money to purchase the asset and you will repay
this plus interest. The asset will provide the security for the
borrowing, although you may need to pay a deposit. Title to the
asset remains with the lender until the asset has been paid for.
Invoice Factoring
Those providing this type of finance will give you funds to
cover the period between delivering the goods to your customer,
raising your invoice and receiving payment. Up to 80% of the value
of your invoice can be provided. Invoice Factors can manage your
whole invoice collection process for you, the security being the
full value of invoices raised.
Others
There are many other means of raising finance, such as
Business Angels (individuals who back businesses) and Venture Capital
Firms, who will usually only lend funds in excess of £50,000
although business angels can sometimes invest much lower amounts.
For short term finance credit cards are still useful.
Tax
Investigations
There is no doubt that the number of tax investigations
undertaken by HMRC is increasing and that they are using Risk Assessment to
decide on which taxpayers should be examined. A VAT or Tax inquiry can happen to
anyone as you can be chosen at random and may have done nothing wrong. You are
more likely to have a VAT investigations than a tax inquiry. The process is
extremely stressful, disruptive and it may be costly.
Falling yields from recent investigations have caused the
government to "get tough" and this policy covers everyone, not just
those seeking to evade tax. To maximise the yield of extra tax from inquires,
the Revenue are using Risk Assessment techniques to identify those businesses
most likely to yield the biggest amounts from investigation and the tax
authorities are becoming very proficient in using these techniques. They
claim there is no single factor which will expose a business to investigation
but rather a combination of factors.
European VAT Rates
European standard VAT rates are as follows:
Austria - 20%
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Belgium - 21%
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Denmark - 25%
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Finland - 22%
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France - 19.6%
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Germany - 16%
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Greece - 18%
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Ireland - 21%
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Italy - 20%
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Luxemburg - 15%
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Netherlands - 19%
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Portugal - 19%
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Spain - 16%
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Sweden - 25%
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