The Fizz! Blog

A semi-serious proposition

Sometimes we think it would be good if there were business networking meetings where participants had to make the accounts of their business available for everyone else to look at.

We regularly download accounts from Companies House to do background research on companies that want to do business with us, or who we've talked to at a networking event of some sort.  Even if they're just the abbreviated accounts that most small companies put on the public record, they can still be revealing.  Often we find that a rosy picture painted by a director is somewhat unrealistic.  Your eagerness to do business with someone is going to be affected - or at least it should be - if their company is £50k in the red, or just hopelessly behind in its preparation of accounts and returns.  If you run a company and we talk to you for more than a couple of minutes, we'll almost certainly download your last accounts and have a look at them, so there isn't any point telling us things that are immediately undermined by the evidence of the public record.

But most people aren't going to check out people's accounts, they'll often just accept the assurances of a director or salesperson at face value.  So I wonder if there would be any demand for a group where full disclosure of accounts is a prerequisite for participation.  Perhaps people just aren't interested in knowing more about who they're doing business with.  But maybe enough are interested that it could have some potential.

And, of course, if you're thinking of doing business with us - download our accounts!

www.fizzhq.com

Fizz Accounting Budget News

After every Budget, we circulate a (hopefully fairly concise) summary of the key SME points to our clients and contacts (if you fall into either category and you're not on the mailing list, let us know!).  This is what we sent this month:

As usual, here's a whistlestop tour of the bits of this week's budget that we think are of most significance to small and medium sized businesses and their owners.  As ever, most changes had been announced well in advance, so there's no real news on tax thresholds or Income Tax and National Insurance rates, and our advice to those of you trying to extract funds from a limited company as tax-efficiently as possible remains unchanged.

As ever, we're not going to list every single thing that was announced; you may well have had several emails doing that already.  If there's anything you've heard about that may affect you that we've not mentioned here, do give Jane or me a call.

Mileage Rates

Since the dawn of time (well, 2002), employers have been able to pay their employees and directors 40p a mile for the first 10,000 miles driven in their own car for business purposes in a tax year, and 25p a mile thereafter, tax-free.  They can pay more if they want, but the excess will just be taxable income for the employee.  Those rates can also be used by sole traders and partnerships with relatively low turnovers to work out the deduction they claim on their tax returns for motoring costs.  After 9 years of continually increasing motoring costs, the 40p is going up to 45p from 6 April.  Every little helps, I guess!

As an aside - and this has nothing to do with the budget, it's just something that's come up a few times recently - that rate doesn't dictate what a business can charge its customers for mileage.  If you recharge mileage to your clients, there's no reason you can't charge them more than 45p if that's what your contract with them says, or if they're happy with a greater rate that better reflects the actual cost of motoring.  45p is the limit on what a director/employee can be paid tax-free by their employer, it's got nothing to do with how much their employer can charge on to the end client.  That's a separate matter.  Equally, if your company does charge its customers more than 45p a mile, you can still only reclaim a maximum of 45p a mile from your company tax-free.

Corporation Tax

Ignore the headlines about an extra cut in corporation tax; that's for big companies.  There's no extra cut for small companies.  Their rate was due to decrease from 21% to 20% on 1 April, and that remains the case.

VAT Registration Threshold

If you're keeping an eye on this, it's gone up from £70,000 to £73,000.

Research & Development Tax Credits

R&D tax credits are very unusual, in that they enable companies to get tax relief for amounts that they haven't even spent.  Their rate is going up, so that for every £1 you spend on qualifying R&D, you can knock £2 off your profits before working out your tax bill.  And the rate is then going to go up again, so that you'll be able to knock £2.25 off your taxable profits for every £1 you spend.

The definition of R&D is fairly tightly drawn, and just doing something that's new to you isn't enough - you need to "achieve an advance in overall knowledge or capability in a field of science or technology through the resolution of scientific or technological uncertainty".  But for those companies that can argue that's what they've done, this is potentially a tax incentive of great value.

Small Business Rates Relief

Some small business occupying premises are presently benefiting from a holiday from paying business rates.  That holiday was due to last until October this year, but it's now been extended until October 2011.

Enterprise Investment Scheme

This is a scheme that enables you to get tax relief when investing money in a small business.  In most cases, though, you only qualify when you're investing in someone else's business, so it's not a tool that you can use to generate tax savings on funding your own business.  However, it is a scheme that is often of benefit to business angels and the like when investing in startups.  In any case, the amount that you can invest and the tax relief for doing so are both going up.  The main thing is to just be generally aware that the EIS exists if you're looking at potential investment opportunities.

Enterprise Zones

These are zones where a) significant reductions in business rates will be available to businesses moving in or starting up, and b) planning restrictions for those business will be relaxed.  Reasonably, nowhere round here has been blessed with such status.  The zones are Birmingham and Solihull; Leeds City Region; Sheffield City Region; Liverpool City Region; Greater Manchester; West of England; Tees Valley; North Eastern; the Black Country; Derby, Derbyshire, Nottingham and Nottinghamshire; and somewhere in London.

Alcohol

Finally, ignore what the Chancellor said about "no additional taxes" on beer.  That's technically accurate, but misleading.  He should have said "no additional taxes apart from the 7.2% increase already planned".  But in the immediate aftermath of his speech the BBC reported "No increase in tax on beer", so his sophistry worked.

We hope this has been useful - it is by no means an exhaustive summary, but we think it covers most of the key points for SMEs.

www.fizzhq.com

Budget spin on beer

In his budget speech, George Osborne announced that there would be no additional tax on beer.  That's technically true - there will be no tax rise apart from the ones that were already scheduled.  As Pete Brown points out (and if you're interested in beer and the pub trade, his blog should be one you check out regularly) we'll still have a 7.2% increase in duty, because the coalition is sticking with the duty escalator put in place by the last government.

Still, that's they way it goes in politics - say things that are technically true but utterly misleading, in the knowledge that most people won't notice until it's old news.

www.fizzhq.com

Small company accounts must remain available to the public

One of the benefits of trading via a limited company is that, if things go wrong, then - assuming you've done nothing wrong or reckless personally - you can walk away from any liabilities that your company can't pay.  The price that you've always had to pay for that privilege is that you have to file documents including annual accounts at Companies House, so that the public can see (in pretty general terms) who is behind the business and how it's doing financially.  If you want to keep that information private, that's absolutely fine - you just don't form a company.  You remain as a sole trader or partnership, and in return for the privacy you consequently accept a greater degree of personal risk if things go wrong.

The idea has now been proposed of exempting small companies from making accounts available at Companies House at all.  So, the shareholders would still have the benefit of being able to walk away if things go wrong, but the public would have no right to see who was behind a business or how it was doing.

That would be grossly unreasonable.  Whenever someone wants to pitch something to us or otherwise do business with us, or when we meet people at networking or other events, we'll routinely download their accounts from Companies House.  And the information this turns up can often be really interesting and relevant.  It's not unusual to find businesses telling the public one story about their prosperity when the accounts tell a very different story.  And sometimes we find that companies are hopelessly in arrears with their own accounts and compliance - which should give pause for thought to anyone thinking of doing business with them.

Take that facility away, and the business is getting the benefits of limited liability without fulfilling their part of the bargain.  However much money that saves, it isn't fair on the public or on other businesses.

www.fizzhq.com

Tax "amnesty" for plumbers - and others?

Periodically, HMRC targets a particular trade or profession and gives them an opportunity to come clean about undeclared income and underpaid tax.  It's not actually an amnesty - the tax is still payable in full, it's just that penalties are reduced - but that's often how it's described.

Last year, there was a pretty strong rumour that the next amnesty would be for gas fitters, presumably because HMRC could get pretty reliable evidence of work done via safety certificates and the like, and compare that to declared income.  HMRC denied this was the case, but yesterday announced the Plumbers' Tax Safe Plan (PTSP), which applies to "people who work (or worked) in the plumbing, heating or gas installation trades".  Evidently they must have had a change of heart!

In any case, this is likely to be the best opportunity for such trades to come clean about underpaid tax and make a fresh start.  It might also be a good opportunity for other people too.  According to HMRC:

If you are not a plumber, you may still find that the forms cover everything you need to tell HMRC. If that is the case, you can still use PTSP forms... Customers who voluntarily come forward and put right their tax position can expect very similar terms to those on offer through PTSP.

So, there's no guarantee of leniency, but it's strongly suggested.  For many non-plumbers who want to come clean, PTSP may well be their best route.  31 May is the deadline for owning up.

www.fizzhq.com