The Fizz! Blog

Some tax simplification it would be great to see in the Budget

Most people think the highest rate of tax in the UK is 50%.  It isn't.  It's 60% (*).  When someone's income exceeds £100,000, they lose £1 of their tax-free personal allowance for every £2 they earn.  The practical effect is that for every £1 they earn, they get to keep 40p (38p if you take NI into account as well).  That rate persists until their income reaches £114,950, at which point it reverts to 40% again, until the £150,000 mark is reached.

It's a completely ludicrous situation, to the point that people often don't believe you when you tell them about it.  Income tax is 0%, then 20%, then 40%, then 60%, then back down to 40% for a bit, then back up to 50%.  Why on earth would you have that pattern?  Essentially it's because the last Chancellor correctly judged that gradual withdrawal of the personal allowance was a good way of collecting some extra tax without people really understanding what was going on.

It would be really, really sensible to ditch this loss of the personal allowance.  It would make things so much easier for the affected taxpayers (admittedly a very small minority) to understand, it would be a significant effort to make the tax system more straightforward and easy to understand, and it would just be nice if something so perverse could be ditched.  Will it happen?  I hope it might.  Cutting the 50% tax rate would be politically explosive and easy for the opposition to attack.  Reversing the loss of the personal allowance was deliberately introduced by the last government to be obscure and difficult to understand, and consequently is much harder for them to attack now, remaining similarly obscure and difficult to understand.  On the other hand, its obscurity means that there may be no plaudits for ditching it, so perhaps the loss of revenue won't be judged worth the upheavel.  We will see.

www.fizzhq.com

* Actually, marginal rates can be higher when someone is earning more but losing tax credits as a consequence, but that's a subject for a different blog...

Some better fraudsters

Last night we got a slightly more convincing bogus email than the last couple of feeble attempts:

"Hi

I have tried calling but got no answer. Can you give me a call.

Thanks

Paul Worthing
07031952616"

Googling the phone number immediately revealed it to be a con, but it was at least convincing enough for us to check.  The moral of the story - if you're trying to scam British people then if you get your email written by someone who speaks English as a first language then that's a good start.

www.fizzhq.com

Are Sage really this hard up?

Last July we bought a copy of Sage 15.  We needed it because of the clients we have using it.  Sage is OK, as accounting software goes.  It is the epitome of adequacy.  It does double entry bookkeeping accurately.  If anyone tells you it's rubbish, they're wrong.  It is acceptable.

We then got an unsolicited invoice from Sage for a 12 month SageCover support contract, which we didn't want.  We told them that, and received a letter saying they were sorry we had cancelled our SageCover (not true, by the way, we had never wanted it to begin with) and asking us to reconsider.  In any case, it would appear that they had acknowledged our desire not to pay them for SageCover.  Fine, not a problem.

To my surprise, 14 months on (not 12 months, note) we've received a new invoice for 12 months SageCover until September 2011.  Obviously we're not going to pay it - though we still have the hassle of telling them to cancel it - but I imagine plenty of businesses would.  It's the equivalent of the bogus data protection, domain name or web directory invoices that are sent out by unscrupulous businesses to companies in the hope of payment being received out of inattention or confusion.

Rather than unticking the box on their database saying "customer has SageCover" (which should never have been ticked in the first place), instead they seem to have ticked a box saying "customer doesn't want SageCover, but in 14 months let's try sending them another unsolicited invoice for £40 + VAT on the offchance that they pay it by mistake.  Don't send it in 12 months, that would be idiotic, they'll be expecting it then.  Send it in 14 months, they'll have dropped their guard.  It's worth a go".

It's an odd sort of way for a reputable (which they generally are, whatever the Sage-haters say), listed company to conduct its business.  Are they really that desperate for revenue that they'll just send out speculative invoices on the hope that some will be paid?

www.fizzhq.com

The second least convincing Phishing email ever

Our email account remains up and running, so BB Sangma has yet to carry out last week's threats.

Today's attempt:

My Dear,

Can you confirm if you are still using this email address?.
 
There is information I think might interest you. First kindly confirm if you are the owner of this email address.

I am Mr. Nana  Bruku, I work with Barclays Bank. I do not know if I am talking to the right person, Already I have your name and email address in our file in the office, but somehow I am not comfortable and too sure that I am communicating with the right owner of this email. As soon as you confirm, I will furnish you with the information that I have for you.

I am taking this preventive measure because I do not want to talk to the wrong person because of the sensitivity of the information regarding the issue.

Please ensure that you reply this mail as soon as you can please

Mr Nana  Bruku

The least convincing Phishing email ever

I just received this from a gentleman apparently called BB Sangma:

Dear Subscriber

            TERMINATION OF YOUR EMAIL ACCOUNT
We are currently carrying out an upgrade on our system due to the
fact that it has come to our notice that one or more of our subscribers
are introducing a very strong virus into our system and it is affecting
our network.We are trying to find out the specific person.
For this reason all subscribers are to provide their USER NAME AND
PASSWORD for us to verify and have them cleared against this virus.
Failure to comply will lead to the termination of your Account in the
next 48 hours.

Information to send;
EMAIL ADDRESS:
USERNAME:
PASSWORD:

Hoping to serve you better.
Sincerely,

EMAIL SUPPORT

If you fall for that, you deserve everything you get!  Though if you have trouble getting in touch with us by email next week, it will have been genuine.

www.fizzhq.com

Plug pulled on Microsoft Office Accounting

Microsoft have decided to withdraw their accounts package, Microsoft Office Accounting.  It was launched a couple of years ago, and, as I wrote at the time, it appeared likely to cause Sage and QuickBooks some real problems, particularly as the basic version was free.

Well, it didn't work out that way.  Firstly, Microsoft never really seemed to push it too hard.  Although I'm sure it was available, I didn't notice it coming through any of the channels I would have expected to see it.  And, although they launched an accountants' "club" to try and promote the software via firm like Fizz, after initially giving us an MS Office licence as an incentive to join, they just went completely silent.

Secondly, the thing that has actually caused problems is the rise of online accounting services, like our own FizzBooks.  They meant that the market for traditional accounting software has been gradually contracting anyway, so not only did Microsoft not get as big a slice of the pie as they hoped, but the pie was shrinking at the same time.

Fortunately, we've no clients using the package.  For companies that are using it, there should be minimal disruption if they want to continue using it for accounting - ongoing support is being provided, and you often don't need support or upgrades for accounts software anyway - I'm still happily monitoring my personal finances on a copy of Microsoft Money 1999.  For companies using Microsoft Office Accounting for their payroll, there is a problem, as the use of that is just being withdrawn in December, in the middle of the PAYE year.  So users will have to process the remaining three months and the year-end of their payroll some other way.

www.fizzhq.com

Online accounting with Fizz

We've launched a new web-based bookkeeping system, which, here in the office, we're calling FizzBooks. Rather than keeping your accounts on a software package on a PC in your office, you log into our system and create and maintain your accounting records online.

Some of the key benefits:

• You’ll never have to worry again about upgrades to your accounting software. Every time you log on, you’ll be using the latest version.
• If you’re away from the office and your usual PC, you can still access your accounts data. You can enter and review data from any PC with an internet connection.
• If you want your accountants to look at your records, they don’t have to have the same accounting software as you, and you don’t have to email a Sage or QuickBooks backup or a spreadsheet to them. They can just log on and see the same data that you see. If your accountant needs to make amendments to your data, you don’t have to stop your bookkeeping while they’ve got the live data file – they can enter the adjustments online and you can just carry on with your bookkeeping as normal.
• You don’t have to worry about losing your data if your PC dies and it’s not backed up; your data is continually backed up online.
• You can email documents straight from the site to your customers, email regular invoices to customers automatically, be notified by email when an invoice becomes overdue, and perform lots of other tasks more easily than with traditional accounting packages.

There's more on our website here.

www.fizzhq.com

Should you be using accounting software?

One of the things I often have to do is to advise businesses on how to keep their records.  There's no "one size fits all" approach.  Here are some of the things that you should think about when making a decision.

For many businesses, using accounting software is overkill.  In most cases, there are really only two key benefits to accounting software when all's said and done:

1. It makes it easy to track amounts owed to you by customers.
2. It makes it easy to create reports from your accounting data.

Often, neither of those things are a concern.  Many small enterprises only have one or two customers, and might only invoice them once a month.  If that’s the case, the owner is unlikely to have much interest in tracking amounts owed to the business – he or she will always know how much is owed.  Similarly, it’s all very well being able to easily create a profit and loss account for a given period with your accounting software, but if you only raise a single invoice each month and have fairly fixed costs, you may well feel that you know perfectly well how much you’re making.

So, for businesses like that a simple Excel cashbook can do the trick – it accurately captures details of income and expenditure in a form adequate for year-end accounts (and, if necessary, VAT returns) with minimal effort.

But many businesses are more complex.  For complicated or growing businesses it can be important to track amounts owed by multiple customers, and to report on accounting data to track profitability, solvency and growth.  That means that accounting software is really useful.

Lots of accountants have a favourite accounting package.  Many are fans of Sage.  Many are fans of QuickBooks.  Most of the Sage fans sneer at QuickBooks.  Most of the QuickBooks fans sneer at Sage.  We’re now seeing a big move towards browser-based online accounting systems.  Most of the fans (and providers) of the online accounting systems sneer at both Sage and QuickBooks.

The thing is, for most businesses, any of those systems (and others, like MYOB and Tasbooks) are fine.  They’re good products.  Double entry bookkeeping hasn’t changed for around 600 years, and Sage, QuickBooks or any other similar package is really reliable at doing double entry bookkeeping.  They can all track customers who owe you money.  They can all provide you with a profit and loss account, or a list of your most lucrative customers.  For most businesses, choosing between Sage and QuickBooks is like choosing between a blue pen and a black pen.  They’re both perfectly adequate tools for the job.

For what it’s worth, I like QuickBooks a bit more, as I find the reporting function more flexible and I find it quicker to enter data and correct errors.  And I think it looks a bit nicer.  But if I pick up a new customer who uses Sage, I won’t encourage them to change if they're happy, because Sage is fine too in 90% of cases.

The interesting thing over the next year or two will be the progress of the online, browser-based services.  These have a key benefit: easy sharing of data between a business and their accountant, or between different members of staff at a business.  Rather than being emailed a data file at the year-end or when there’s a problem, I can just log on to my customer’s account to check their data and make adjustments or corrections where necessary.  Where a single company has multiple employees in different locations, or employees who need access to the accounting records but travel a lot, an online system that can be accessed from a PC anywhere – or even a smartphone -  makes a lot of sense.
I think it’s likely that before long we’ll be partnering with an online accounting provider so that we can offer this service to our customers.  Watch this space!

www.fizzhq.com

PAYE chaos for high earners

Accountacy Age comments here on an aspect of the Pre-Budget Report that I hadn't really considered until now.

The idea behind the PAYE system is fairly simple.  Every employee has a tax-free personal allowance for the tax year.  A code is issued to their employer that shows they are entitled to that allowance.  An employee who is paid monthly will be given credit for one-twelfth of the allowance each month.  That means that the right amount of tax is collected by the Exchequer, and the employee's net pay remains stable throughout the year.

The PAYE code can be adjusted to smooth out other tax adjustments too - say, tax due on a company car, or tax relief due on pension contributions, but the principle remains the same.

However, from 2010/11, the personal allowance will be tapered away for those earning more than £100,000.  The exact personal allowance you get will depend upon your exact income for the year.

But people's earnings aren't always predictable.  They change jobs, get bonuses, get and change company cars.  That means that under this new system you often won't actually know what a person's personal allowance should be until after the year has finished!  So it's impossible for the taxman to issue a PAYE coding notice that's accurate.  PAYE is almost bound to get it wrong, and the difference will have to be sorted out via the self-assessment system.  That means a) more paperwork and b) more unexpected tax bills for taxpayers.

But, as I've said so often before, this is what happens when legislation is rushed through - especially by people with little or no experience of the real business world.

www.fizzhq.com

New toy!

I just bought a Fujitsu ScanSnap 510:

It's absolutely brilliant - every office should have one, seriously.  Basically, it scans documents to PDF.  It can do some other things (like scanning to Excel or Word, both of which it does pretty well based on my experimentation so far) but its main use for me is going to be scanning to PDF, as this is a largely paperless office.

Until now, I've been doing that with an old-fashioned flatbed scanner, but that takes ages, particularly with, say, a set of accounts or a tax return.  The ScanSnap has a sheetfeeder that sucks documents in, and scans at 18 pages per minute.  That's right, 18.  Not only that, but it can scan both sides of a sheet simultaneously.  So if the document is double sided it will scan 36 pages a minute!  Unbelievable.

Get one.  Even though it's about £300 plus VAT, it will pay for itself in no time.  If you're fairly paperless at the moment, it will cut down on the time you spend scanning, and if you're not, it will save you loads of time and space if your records are electronic documents rather paper.

www.fizzhq.com