Even in our quickly-changing marketing place the old business adage that you’re only as good as your deliverables still holds true. Making responsible business decisions often revolves around ensuring that the quality and value of your product or service is better than the rest and some of those decision have a more clearly identifiable link to your deliverable than others. If you run a cafe and your coffee supplier is always late or short on your order, your customers aren’t going to be annoyed with your supplier. They will be annoyed that they can’t rely on you for the cup of coffee they came to you for.  And then they are going to take their business elsewhere. Choosing the right supplier is just as important as choosing the right product/service/utility etc. This might not be a shocking revelation, but since this issue popped up for us today, I thought I’d pass the reminder on. Only work with businesses that offer the same level of quality that you want to offer your clients and customers!

Speaking of cups of coffee, we may be in need of some for the long night ahead of us to make up for our lost day.

We send out a monthly email newsletter with a quick update about what we’re up  to and links to tax articles that are often quite useful. Because we use a lovely online program developed by the ever fantastic 39 Steps, I can track the number of people who open that email and the number that click on the links directed to our tax articles.  Those numbers are historically quite reasonable but I know there is plenty of room for improvement, I just wasn’t entirely sure how.

I signed up for an email marketing webinar that Attacat presented a month or two ago and nervously volunteered our little newsletter to be used as a sample. Kiril and David went over a ton of useful information during the hour long session, and using our sample, I got a few tips about what I could change to increase our click through rate. I have to admit that I have only found time to implement the most basic changes but even still our last newsletter saw a massive increase in both the number of people who opened it as well as those who click on at least one of the links. In fact, we nearly doubled the number of click throughs.

Part of the reason I’m blogging about this is that David and Kiril are the guest speakers at this month’s New Media Breakfast. Based on my experience, I’d highly recommend attending if you’re wanting to launch or improve your email marketing program. I try to get to the New Media Breakfasts whenever I can and often find them inspiring but this month will definitely be a good one.

I’m a huge fan of online accounting systems, such as FreeAgent and Xero. I would not normally admit this but I am also respectful of Sage Line 50 for its robustness, audit trail and also because it speaks the language that I learned in college (debit, credit, trial balance, nominal ledger etc).

One of the biggest advantages of going online is that every single user throughout the world is always using the same version of the software. No need for the user (or more specifically their accountant) to worry about updates, discs sent in the post, slow download speeds, kicking all of the staff off of the server, or being incapable of pressing the right buttons to install the upgrades.

For us as a firm, one of the biggest disadvantages of using an on premise software solution (such as Sage, there are others) is that it really is anyone’s guess which particular version your client is using and whether fixes and updates have been installed by your client prior to sending you a backup.

Here’s an extract from my working day yesterday of how that works in practice.

10:00 – 10:15 Client emails Sage backup so that we can start on the VAT return. I restore this to Sage V17.00 but cannot access the data using the username and password we have on file. I ask the client to change the password on their copy of Sage, run a backup and resend this file to me

10:30 – 10:45 Still cannot open the file using the new password. Sage V17 client manager now telling me to set up a new company. Call to Sage. Speak to support within 2 minutes – an excellent response. They check a few things and advise that the problem is that the client data is on V18, and I am trying to open the file using V17.

11:00 – 11:15 We don’t have V18 installed on our server! I look around the office and on our (neat and tidy) software shelf find FOUR identical unopened disks of V18 client manager which were sent to us in October. Blank looks from the staff as to why we did not think about installing the V18 software.

11:15 – 11:45 I attempt to install the V18 software on our server myself. Normally delegated to the IT support company but the update looks complicated so I want to do it myself. Sage has also introduced a neat Accountants Dataset Manager so we can view all of our clients and see the version of Sage that they are using. Email our IT support company for administrator password and after a couple of goes, I access the server.

11:45 – 12:15 This is getting silly. Sage V18 has been sent on a DVD but the server only has a CD drive! Our very logical IT support chap suggests that I copy the software onto a network drive from a PC that has a DVD drive, and attempt to install the V18 software from there.

12:15 – 12:30 Software copied to network drive and installation of the Accountants Dataset Manager (ADM) commences.

12:30 – 13:00 One part of the installation fails so I have to uninstall the ADM, install Sage V18 separately and then reinstall the ADM. Bingo! I get a message saying that the installation has been successful.

13:00 – 13:30  Pause for coffee. Try to open the clients data using the ADM but this does not work. I load up Sage V18 (looks like there are some nice new features) and try to open the client file. A message pops up saying the equivalent of “Data being restored is on version 18.1.0, program is on version 18.0.6 – you need to install some updates”

13:30 – 14:45 A call to Sage lasting one hour and thirteen minutes. Through to support in around 6 minutes (OK considering it is the first day back after the holidays) and speak to Peter. Install three upgrades which are required to take our V18 up to the required level to read the client data. Open up Sage V18 and am able to read the client data at last! However the ADM is still not working properly so Peter and I attempt to fix that. We try a few things and establish that the problem is caused by us having a Hyphen in the server folder name where we save all of the Sage program data (it is called ‘Sage Accounts – Licences’). I am not making this up, as Sage have it recorded as a known problem! Peter tells me that if I can amend the folder name and remove the hyphen, everything should be OK. Unfortunately the network permissions don’t allow me to do this. I thank Peter for his patience and leave this job for another day.

14:45 – 15:00 Five hours after starting, I can review the client data and we can get on with the job of preparing the VAT return.

To be fair to Sage, this is probably a once a year occurrence and the new Accountants Dataset Manager is going to be a real benefit to us so that we can see exactly which version the client data has been provided in (including which updates the client has or has not installed).

Have you had similar issues? Do you think the added benefits of a tradition system like Sage outweigh the convenience of user-friendly online software? Please leave a comment and join in on the discussion. 

A. If permission is granted from the Taxman in advance (called a C16 clearance), the funds the company distributes to the shareholders during the winding-up process will be treated as a capital gain and taxed at 10% where entrepreneurs’ relief applies.

However, the law will change on 1 March 2012. From that date where more than £25,000 is distributed to shareholders in anticipation of the winding-up of the company, the amount of the distributed funds will be treated as income and taxed like dividends. That means entrepreneurs’ relief cannot apply and the rate of tax due on the distribution will leap from 10% to 25% or more. The capital gains treatment can still be achieved if the company is put into formal liquidation, but that is likely to cost £7,000 or more. So if you want to wind-up your company and it holds more than £25,000, get those funds paid out by 1 March 2012.

Q. My energy bills have soared since I started using a room in my home as the base for my company’s business, as I have to have the heating on all the time. I’ve heard that my company can pay up to 1/3 of my gas bills tax-free, is that true?

A. Your company can pay you (as the company’s employee) £3 per week, £156 per year tax free, for working at home and no evidence has to be provided to support that payment.
If you can prove your heating bills increased because you heating the property while working there, when otherwise it would be empty and not heated, then your company can pay that extra heating cost to you tax free. However, if the Taxman asks you will need to provide copies of the gas bills for a period before you worked at home compared to a similar period when you have worked at home, to prove the increase in costs. The Taxman may also want to see a schedule of the days you work at home and days when you work at clients’ premises. This type of claim is referred to as ‘use of home as office’ which can also cover other costs incurred in running your business from home. Contact us for further guidance.

Q. I received a letter yesterday addressed to my new company, asking for a payment of £320 to register the company on the ‘Intercom VAT Registry’. Should I pay this fee? Is it compulsory?

A. Do not make any payment or respond to this letter. It is a known scam. The ‘Intercom VAT Registry’ does not exist and it is not an official EU body as the letter suggests. If you are ever suspicious about letters or emails your business receives, check them against the list of known fraud on the Action Fraud website: http://www.actionfraud.org.uk/. We are more than happy to check any suspicious correspondence you receive, so contact us if you are unsure of the legitimacy of any letters or emails sent to you.

You will no longer be able to pay the VAT due by cheque. You have to pay by electronic means. This includes using a direct debit, bank-transfer such as CHAPS or BACS, a personalised bank giro payment slip paid in at a bank (these need to be ordered in advance), or a debit card or credit card over the internet.

The good news is that Tax Office has now instructed its bank to accept tax payments by the faster payment service. This means the tax or VAT due will take less than a day to clear from your account to the Taxman’s bank account. Before relying on this shorter timescale, check whether your bank account is set-up to use the faster payment service and if any money limits apply. Many bank accounts can only pay out up to £10,000 by electronic payments in one day. If your VAT bill exceeds that cap you may have to spread the payment over several days, or talk to your bank about other transfer methods.

We can file your VAT electronically on your behalf once you have completed the necessary authority forms from HMRC. We will also require all your VAT information in good time before the due date for the VAT return, so we can calculate the VAT due and tell you what to pay to ensure the return and payment is received by HMRC before the deadline.

A summary of the current work of those task forces is listed below, but bear in mind that each task force will move on to a new geographical area once the first area has been investigated.

London Properties

This task force is investigating commercial property deals in Greater London, where the VAT rules may not have been applied correctly. Where they find such a case, the tax officers will review the entire tax compliance of the property owner, across all taxes.

Landlords

HMRC are targeting landlords with three or more let properties in the North West of England and North Wales. Have you or your family correctly declared all of your rental income?

Construction Industry

The targets are self-employed builders (including small companies) in the North West of England and North Wales. The task force is looking for under-declared sales (such as cash jobs) and over-claimed expenses (where there are no supporting invoices). Remember to keep every receipt for purchases and keep a log of all business mileage. We can help you by advising what expenses are allowable to claim against your income.

No Tax Return Submitted

This task force is currently operating in the South East of England, looking for businesses who have not submitted tax returns for corporation tax, VAT, PAYE or income tax.

RTI is a new way of submitting payroll data to the Tax Office. Instead of sending the PAYE information in annually after the end of the tax year, all employers will have to submit the payroll data online on every occasion the payroll is run. This will allow the Taxman to understand who is being paid what amounts, and what PAYE is due, on a real-time basis. The details of employees’ pay will be passed to the Department for Work & Pensions, to allow the amount of Universal Credits (which are replacing Tax Credits from October 2013) paid to workers to be adjusted on a monthly basis.

RTI will be compulsory for all employers and pension providers by October 2013.

Before payroll data can be accepted under the RTI system it must be ‘clean’. That means having an accurate date of birth, full official name (not just initials or nick-name) and correct National Insurance number, for each and every employee. If the data for one of your employees does not agree to that on the Tax Office computer, the submission of the payroll data under RTI may fail, and you may get fined.

It will take some time to check the details of every employee on a large payroll, so it would be best to start this task as soon as possible.

A. No, this is not true. Capital allowances cannot be claimed for equipment or fittings used within residential properties, which the Tax Office refer to as ‘dwelling-houses’. There is an exception for properties that qualify as furnished holiday lettings, when each letting must generally be for short periods of less than 30 days. If you make a capital allowance claim for your rental properties it may be passed by the Tax Office, under their ‘process now, check later’ system. But when the Tax Inspector checks your claim it will be refused, any tax refunded will have to be repaid with interest, and penalties will be charged. This can happen up to 20 years after you submitted the incorrect claim!

Q. My employer has given me a form P11D, which shows that I am taxed on the cost of my smart phone. I thought each employee could have one tax-free mobile phone, so why am I taxed on my only mobile phone?

A.Tax Officials think smart phones are computers rather than phones, so don’t want to apply the ‘one free mobile per employee’ rule, when the mobile phone is a smart phone. However, this can work in your favour if the private use of the smart phone provided by your employer is insignificant. Where any computer equipment is provided to you solely for work purposes, and there is no significant private use, there should be no tax charge. This tax-free treatment doesn’t apply where the contract for the mobile phone is in your own name and not the company’s name. Where the contract is not in the company’s name and your employer pays for your smart phone the cost is taxed as if it was part of your salary. To remedy this, make sure your next smart phone contract is made between your employer and the telephone provider and you are not a party to that contract.

Q. I work as a nurse in a NHS hospital. My professional organisation tells me I can claim tax refunds for the last 6 years, for the cost of the particular shoes and stockings I need to wear for work. Is there a limit on what I can claim?

A. There are set limits for such costs, known as flat rate expenses, which vary according to the taxpayer’s profession and work description. The full list of tax claimable flat rate expenses can be found here:http://www.hmrc.gov.uk/manuals/eimanual/EIM32712.htm. Nurses can claim £100 per year as a flat rate expense against their taxable income for uniforms without any receipts but in addition can claim £12 per year for the cost of shoes and £6 per year for stockings or tights. The £100 figure was £70 per year from 2004/05 to 2007/08. However, you need to make your claim quickly, as the deadline for claims relating to 2005/06 is 31 January 2012. The deadline for 2006/07 is 31 March 2012, and for 2007/08 it’s 5 April 2012. However those deadlines only apply if you were taxed under PAYE, and did not submit a self-assessment tax return for those tax years. If you did submit a self-assessment tax return for the year the claim relates to, your claims period is already limited to 4 years from the end of that tax year. In that case the earliest year you can claim for is 2007/08, and the claim must be received by HMRC by 5 April 2012.

Businesses who occupy small commercial premises receive some generosity with an extension to the business rates relief scheme to 1 April 2013 (already extended for a year to 1 October 2012). Different business rates relief schemes apply in England, Wales and Scotland so ask your local authority what relief applies to your building. Occupiers of larger business premises may be able to defer payment of up to 60% of the increase in business rates for up to two years.

Other key tax announcements for businesses and individuals were:

• New anti-avoidance rules for employer asset backed pension contributions, effective from 29 November 2011.
• State pension age rises to 67, to be phased in over two years from April 2026.
• Freeze in the couple and loan parent elements of working tax credit in 2012/13.
• No increase in child tax credit above the rate of inflation, as had been announced.
• Capital gains exemption to be frozen for 2012/13.
• Research & Development tax credit for larger companies given above the profit line rather than as a tax reduction, to apply from 2013.
• New Seed Enterprise Investment Scheme (SEIS) from April 2012, giving income tax relief of 50% for investments of up to £100,000 in start-up businesses.
• Exemption from CGT when gains realised in 2012/13 are reinvested under SEIS in the same tax year.
• 100% capital allowances in certain new Enterprise Zones, not in all zones.
• Main rate of corporation tax will reduce to 25% from April 2012.
• Air passenger duty to be extended to private jets from 1 April 2013.

Further detail on the new tax rules and rates will be announced on 6 December 2011, so we will cover any significant items for small businesses in our January 2012 newsletter.

The companies within the VAT group don’t have to carry on similar trades, they can operate in quite different business sectors. However, where some companies regularly receive VAT refunds and others pay VAT each quarter, it would not be sensible to put those payment and repayment companies together in one VAT group. Also, once the companies are together in one VAT group the limits for various VAT reliefs, such as cash accounting, error reporting, or partial exemption, apply to the turnover of the whole group.

An LLP can join a VAT group with a company, if both bodies are under common control. This can be useful where an LLP has been used in place of another associated company (an additional associated company may increase the corporation tax rate paid by the main trading company). A general partnership, which is not an LLP, cannot join in a VAT group under any circumstances.