Avoid the ‘new account’ fraudsters

In November 2008 the Business and Enterprise Committee made up of a number of MPs, published a report about Companies House.

Like many people, the MPs were taken aback to find that data filed there by companies, accountants etc was not checked and validated. A strong recommendation was made that Companies House should take urgent steps to explain to the public that it cannot guarantee the accuracy of the information it holds.

They stated “It is understandable- but wrong- that some users of its services assume that, because CH is an agency of government,its data can be relied upon to be authoritative- it cannot”.

Unfortunately fraudsters and criminals are well aware of the lack of validation at Companies House. They can easily file fictitious balance sheets,directorships, and registered office changes in order to fool the public and unsuspecting suppliers. Some credit agencies such as D&B, Experian and Graydon do run checks for fraud or unusual records at Companies house, but most other credit agencies don’t. Many just take Companies House data in good faith and add a credit rating to it.

You cannot rely upon this !!

Do your own background checks, have they got a website? Is the company mentioned on other peoples websites? Can you speak to a reliable reference who has dealt with the company?

Second Offshore Disclosure facility

On 20 November 2008 HM Revenue & Customs confirmed that it is to launch a second campaign in 2009 to collect unpaid tax in offshore accounts. The Offshore Disclosure Facility (ODF) will target account holders with money in building societies and any of the 300 UK-based banks that have offshore operations. Last year’s similar campaign focused solely on customers of the five largest high-street banks. According to an HMRC spokesman,

“The intention of the new facility will be to provide an opportunity for account holders to inform us of their own accord of any unpaid tax or duties and to settle their debts in a similar way to the original offshore disclosure facility.”

Taxpayers affected will face threat of prosecution and higher fines if they do not come forward. It is likely that fines may be capped at 20 to 30% of the tax due to encourage people to come forward. They were capped at 10% under the previous ODF. However, HMRC stressed the campaign will not be a tax “amnesty” as all unpaid tax and interest will have to be paid in full.

The Revenue will write to the 300 banks and building societies requesting names and addresses of all their UK resident customers with offshore accounts. It will then write to customers requesting any unpaid tax. The first ODF identified some 400,000 accounts as suspicious. It raised £450 million from 45,000 people but a further 50,000 are still being investigated and some may soon be prosecuted.

“HMRC has made follow-up checks of the disclosures made and has started a programme of checks on those who did not take the opportunity to come forward,” the Revenue spokesman said. “In the most serious cases, we are carrying out criminal investigations and we will bring some prosecutions before the courts.”

Fuel Rates (pence per mile)

From 1 January 2009 HMRC have issued revised fuel rates for car users.

These rates apply when:

employees are reimbursed for business travel in their company cars; or
employers require that employees repay the fuel element of private motoring.
The rates can also be applied to calculate the deemed VAT input tax (included in the fuel element), in mileage rates paid to employees for the business use of their own cars.

The new rates per mile are:

1400cc or less: Petrol 10p, Diesel 11p, LPG 7p.

1401cc to 2000cc: Petrol 12p, Diesel 11p, LPG 9p.

Over 2000cc: Petrol 17p, Diesel 14p, LPG 12p.

Selling property abroad

Sterling has depreciated considerably against the Euro in the last year. Whilst this is of great interest to other Euro zone residents, who can buy property in the UK at much lower Euro cost, the opposite applies to UK residents who have purchased property elsewhere in the Euro zone.

For instance a property in Spain costing 1.5m Euros purchased early 2007 would have required an investment of £1m sterling.

A similar property may currently be worth 1.1m Euros. This is a loss on your investment of 400,000 Euros. Common sense might argue that if you disposed of the property now, you would merely multiply the loss by the exchange rate prevailing when the sale completed? Unfortunately this is not the case!

Capital gains tax legislation dictates that you compare the sterling value of the purchase at the date of purchase, with the sterling value of the disposal at the date of disposal. In our example a property disposal today of 1.1m Euros converts to say £1.1m sterling.

Despite the property dropping dramatically in price – you have made a taxable gain of almost £100,000.

Fine you may say but what if you want to reinvest the proceeds in another property in the Euro zone? The sterling gain of £100,000 will cost you possibly £18,000 in UK taxes; that’s £18,000 less to invest!

So be wary. A loss on sale in a local currency can produce unwelcome tax liabilities when converted to sterling.

Year end tax planning

We are approaching the end of another tax year – and an eventful one it has been! This has particular relevance to those who are self employed, either a sole trader or in partnership.

Due to the current economic downturn you may recently have experienced a drop in your profitability, indeed you may be trading at a loss.

If this is the case please read the check list that follows. We can help you to achieve the very best tax result if we are made aware, in good time, of your financial situation. Read the check list and call for a pre year end review.

If you are trading at a loss you may be eligible to carry up to £50,000 of the loss back for an extended period under new rules applying to the current year only. To maximise the losses claimed it may be beneficial to change your accounting date to 31 March 2009, if it is not already this date.

Timing of capital purchases or disposals, either before or after the end of the tax year, can be organised to maximise claims under the new Annual Investment Allowance of £50,000. (You can spend up to this amount each year on plant and equipment and get 100% relief in the year you spend the money)

If your profits have decreased this year, to 31 March 2009, compared to the previous year (31 March 2008), this may reduce the tax payments on account you offer in January and July 2009.
If you are forced to layoff staff and have some flexibility when you make redundancy payments, is this best charged in this current year, or the decision deferred to the next trading year?

What is your bad debt situation. Have you made adequate provision in your accounts. Has any VAT on bad debts over 6 months old been claimed back? Note that if you use Cash Accounting for VAT you only pay VAT added to your invoices when you are paid – so you don’t need to worry about claiming for bad debts.

If you have made a loss in this current year does this affect the tax relief you may have received on pension contributions? Will the tax have to be repaid or contributions recovered?

This is a year when careful consideration of your current trading position is paramount. There is no point in ducking this issue. If you do, you may end up paying more tax than is necessary. Paying less tax, or winning repayments of tax will only be one aspect of your fight to sustain a healthy cash flow – nevertheless it is not one you should ignore.

Making people redundant

Many businesses are being forced to reduce costs, and make employees redundant.  As an employer what are the rules on making people redundant?

The notes that follow highlight a few but not all of the considerations that affect redundancy pay outs:

Q. Do we deduct tax or National Insurance from redundancy payments?
A. No – as long as the amount does not exceed £30,000 and it is a genuine redundancy payment.
Q. Can I make anyone redundant?

A. If the employee is no longer required within the business then yes, but be AWARE that it is possible to unfairly select someone for redundancy, the grounds for unfair selection can be found on the government website here. Also, if there is alternative work within the business this must be offered to the employee before they are made redundant.

You should consult employees individually regardless of the number you plan to make redundant.

If you fail to do so, any subsequent dismissals may be unfair.

For redundancy dismissals, the statutory procedures may form part of the consultation process. However, the procedures only apply in non-collective redundancy situations, ie when you plan to make fewer than 20 employees redundant.

Under the standard procedure, you must write to each employee setting out why you are thinking of making them redundant and inviting them to a meeting to discuss the proposed dismissal. The employee has the right to appeal if you still decide to make them redundant.

If you fail to follow the procedure when it applies, any dismissals you make will be automatically unfair.

Q. Where can I get advice on rights and duties?
A. Try ACAS  www.acas.co.uk and BERR www.berr.gov.uk

Acas Helpline

08457 47 47 47

BERR Redundancy Payments Helpline

0845 145 0004

Q. What happens if I give an employee a company car or other goods in lieu of a redundancy payment?
A. Anything given other than money is converted to a cash equivalent – if the purpose of the transfer of assets is given to compensate an employee for his redundancy this cash equivalent forms part of the £30,000 tax free sum.

Q. What happens if our business cannot afford to pay the statutory redundancy due?
A. If absolutely necessary, the Redundancy Payments Office will make the payments.

Q. If I give a terminal bonus or payment for extra work done leading up to redundancy, is this tax free?
A. No – only genuine payments for redundancy are included in the £30,000 tax free sum.

Q. Which employees qualify for statutory redundancy?
A. To qualify at all, employees must have completed 2 years service since age 18.

Statutory redundancy pay is based on:

  • the employee’s age
  • the employee’s amount of continuous service – up to a maximum of 20 years
  • the employee’s weekly pay – up to a limit of £330 where the employee’s employment ends on or after 1 February 2008 (£350 on or after 1 February 2009)

Currently, the maximum SRP payable is  £10,500 (£9,900for redundancies before 1 February 2009).

There is a calculator to work out the amount due on the business link website here.
If you have concerns about redundancy as an employer or employee we would be happy to discuss the issues with you.