August 2007 Newsletter

Interest rate rises - businesses feel the heat

With five interest rate rises over the past year, small businesses up and down the country are feeling the heat.

But with many owners bogged down in everyday issues such as managing staff or winning new clients, there is a risk that they may not realise how serious the financial situation of the company is until it is too late. 

Have a forecast, particularly regarding cash flow. When times are tough, the old adage that ’turnover is vanity, profit is sanity, but cash flow is reality‘ becomes very important. If things are tight, do a weekly or even daily receipts and payments forecast as well as the integrated profit and loss, balance sheet and cash flow (financial) forecast. It‘s so important to look ahead so that critical large payments such as VAT and PAYE are made on time.

If you need help in preparing a cash flow forecast or in managing the finances in your business generally contact Prime on 0121 711 2468 in Solihull or 024 7622 0208 in Coventry.

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Delays in VAT registration

According to HMRC’s website it is currently taking an average of 38 days to process new VAT registration applications. The reason given for the delay is that HMRC have to carry out anti fraud checks in some cases and this leads to significant delays.

The additional checks are being carried out in response to ‘carousel’ or ‘Missing Trader’ fraud. The fraud occurs through contrived transaction chains involving supplies of high value goods. The tax loss occurs when the VAT charged by the supplier is not paid to HMRC but can be reclaimed by the recipient.

The current VAT registration threshold is turnover of £64,000. If your business is approaching this annual threshold or is likely to make supplies of £64,000 in the next month please do get in touch – speak to Sarah Nickols in Prime Coventry on 024 7655 4310 or Jan Hornby in Prime Solihull on 0121 711 2468.

Internet Link: HMRC advice on registration

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First sight of Sage 50 Accounts 2008

From 1 August, Sage started taking orders for Sage 50 2008, a newly branded application that takes over from Line 50. Deliveries will start towards the end of the month.

The annual upgrade has become a feature of the small business accounting software world, but apart from the name change, Sage 50 is more about incremental enhancements and functional additions rather than a major technology overhaul.

In an online preview with AccountingWEB, the Sage research & development chief Stuart Lynn highlighted three key areas in the new product:

• built-in integration with the online Sage Payment Services environment, which grew from the company's acquisition of Protx last year
• new VAT reporting and online filing features; including support for the reverse charge regime introduced to combat carousel fraud.
• a new Drill Down module that lets users navigate back to transactional data from Sage 50 reports.

If you are thinking of upgrading call Colette White at Prime in Coventry on 024 7622 0208 or Naomi Hobday at Prime in Solihull on 0121 711 2468.

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Buy-to-let landlords "...face tax shock"

You may have recently read articles in the newspapers claiming that the Revenue are proposing to clamp-down on some 80,000 buy-to-let landlords who may have claimed too much tax relief or failed to declare the amount of rent they receive from their property, or capital gains on the sale of their property. The articles claim that many buy-to-let landlords have overstated their mortgage interest on their Tax Returns, where those Returns have been filed.

Is this really a clamp-down by the Revenue as part of their recent attempts to increase the tax-take? The Revenue’s response on their website on 31 May was to say they are “not planning a tax crackdown in the way implied in the media reports” but they are “planning to take a concerted approach to helping landlords of all descriptions (not just in the buy-to-let market) to understand and comply with their tax obligations in what they recognise to be a complex area.”

Whilst it is true that everyone letting a property has to pay tax on the rental income, you can offset a number of the costs involved. If you seek our professional assistance you will be advised on exactly which costs can be claimed against the rental income, so as to avoid any future problems with the Revenue. We will also advise you on the question of capital gains tax main residence relief’s and other valuable tax relief’s which may be relevant when you come to sell your buy-to-let, or your second property. Both areas are complicated, which is why it is advisable to seek professional guidance before submitting any Tax Return.

Call Sarah Nickols at Prime Coventry on 024 7655 4310 or Jan Hornby at Prime Solihull on 0121 711 2468 for advice on how you can minimise your tax liability on your buy-to-let portfolio.

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Preserving the inheritance

Inheritance tax (IHT) has some unique features. It is easy to collect because the authorities meet with least resistance but, conversely, it is relatively easy for wealthy taxpayers to at least minimise it, if not avoid it altogether, and consequently IHT is sometimes referred to as a voluntary tax.

Nonetheless, planning to minimise IHT is something that many put off until it is too late yet early attention to this tax is almost always worthwhile.

Currently the threshold for IHT is £300,000 (this is sometimes called the nil rate band) and, even if your assets are worth less than this, you should consider making a Will so that you choose who gets your assets after your death.

Read the complete Inheritance Tax Planning Advice article here, or call Laurence Moore on 024 7622 0208 to arrange to speak with a qualified financial adviser about your IHT tax planning needs.

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Refund of voluntary NICs

As previously reported in enews in some limited circumstances individuals who have paid voluntary national insurance contributions (NICs) may be entitled to a refund. HMRC have now issued further guidance on the refund of voluntary NICs, following the Paymaster General’s announcement on 16 January 2007.

When the Pensions Bill becomes law, the number of qualifying years needed to qualify for a full basic State Pension will be reduced, from 39 years for women and 44 years for men, to 30 years for those reaching State Pension age on or after 6 April 2010.

The Paymaster General issued a statement on 16 January 2007 concerning refunds of voluntary NICs. HMRC have now provided more details about the administrative arrangements for making refunds following this statement.

HMRC will make refunds to people who apply for a refund and satisfy the following conditions:-

• reach State Pension age on or after 6 April 2010;
• paid voluntary contributions on or after 25 May 2006 (the date the Pension White Paper was published) but before the Pensions Bill receives Royal Assent (expected to happen in Summer 2007); and
• were not aware of the changes when they paid. This means that at the time they paid they had not received information from HMRC about the changes.

Internet Link: HMRC NIC advice

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HSE reveals myths

The Health and Safety Executive (HSE) publish a series of myths of the month for businesses. The myth for July, which businesses need to be aware of, is that all office equipment must be tested annually by a qualified electrician. The HSE states that in reality employers are required to assess risks and take appropriate action.

In order to satisfy this requirement equipment could be checked visually by a competent employee for obvious signs of damage. The employee does not need to be a qualified electrician.

Internet Link: HSE myths

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Business disruption - postal dispute

HMRC have announced that VAT returns and payments that were delayed by postal disputes will be viewed sympathetically. There will be no liability to a surcharge where the postal strike has caused a delay in the returns or payment being received.

The postal workers union, the Communication Workers Union (CWU), are planning more postal disputes. To keep abreast of planned disruptions use the link below.

Internet Links: HMRC guidance and CWU website

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Disclaimer
This newsletter is published for the information of clients and other recipients of our email newsletters. It provides only an overview of the regulations in force at the date of publication, and no action should be taken without consulting the detailed legislation or seeking professional advice. Therefore no responsibility for loss occasioned by any person acting or refraining from action as a result of the material contained in this newsletter can be accepted by the firm.