The View from No 50
K P Bonney & Co
Chartered Accountants and
Chartered Tax Advisers
Ilkley LS29 6JA
Tel: 01943 870933
Fax: 01943 870925
SMALL COMPANIES, THE SELF EMPLOYED AND THE TAX SYSTEM
The professional bodies have been telling government for years that the tax system is too complicated and that it is stifling small owner managed businesses.
In the pre-budget report in December the Chancellor finally responded by issuing a discussion paper under the title “Small companies, the self employed and the tax system”.
The issue of the discussion paper might just represent the Treasury’s recognition that the professional bodies have a point. More cynical observers might think this is just another publicity stunt on the part of the Treasury – they want to be seen to be receptive to input from business without actually committing to doing anything. When we rang the Treasury to enquire about the deadline for contributions they told us there wasn’t one. That perhaps adds weight to the cynics’ view.
Anyway, we shall be contributing to the debate and we encourage all owners of small businesses to do likewise. It is only by making our views known that government might understand just what an intolerable compliance burden small businesses carry.
The discussion paper is available from www.hm-treasury.gov.uk/media/8EB/69/pbr04/small_companies_228.pdf
and contributions should be sent to
Our Advice: Have your say.
31 JANUARY DEADLINE
The end of January is a trying time tax payers and tax practitioners alike. For tax payers who are members of the self assessment club it usually involves paying tax. Painful. For tax practitioners it involves dashing around to meet filing deadlines. Stressful.
It is important to meet the deadline for filing your tax return. If you don’t, you could face a late filing penalty of £100.
It is important to pay any balance of 2003/04 tax. If you don’t, you will be charged interest at the rate of 7.5% pa from 1 February. If you put off payment until after 28 February you will have to pay a surcharge equal to 5% of any unpaid tax.
Organisation is the key.
The sooner you attend to your affairs the more informed you and we are. The more informed we are the greater the likelihood we can help you to reduce your tax bill whilst the opportunity to do so exists.
The sooner you attend to your affairs the sooner you know the amount of your tax payments. This enables you to plan your cash flow.
The Revenue is not a willing ‘lender’. It will allow ‘Time to pay arrangements’ if it can see it will get paid reasonably quickly but otherwise it expects tax payers to borrow or to sell assets in order to clear tax debts.
Our Advice: Get organised. It takes a lot of the pain and stress out of tax.
Tennis star Andre Agassi has scored an important point against the Inland Revenue in the Court of Appeal.
The court ruled that Agassi
should not have to pay tax in the
The Revenue claimed that it was
entitled to tax that part of his sponsorship earnings which accrued whilst he
was working in the
The case was significant because, when all international sports stars and entertainers are taken into account, the tax at stake could run to hundreds of millions.
But it is only advantage Mr Agassi. The Revenue plans to appeal to the House of Lords so it could still be anyone’s game.
VAT REPAYMENT SUPPLEMENT
If you submit a VAT return which shows a repayment owing to you, the law says that if Customs delays making the repayment by 30 days or more you are entitled to a supplement of 5% of the repayment.
Simple enough you might think.
Over the years in which this rule has applied Customs has won and lost a number of cases involving claims for repayment supplement. The Treasury’s response to each defeat has been to introduce amending secondary legislation to make the law apply as Customs wants it to apply.
The result is that it is now virtually impossible to qualify for repayment supplement unless Customs makes a mistake.
Earlier this year Customs took 45 days to make a large VAT repayment claim to one of our clients. Under the spirit of the original legislation our client would have qualified for supplement. But no. The secondary legislation conspires to remove 22 days from the reckoning with the result that Customs delayed by only 23 days.
Here are some examples of the way the system works for Customs and against the taxpayer.
Customs can make reasonable inquiries into a repayment claim. Whilst it is making these inquiries the delay clock is stopped. The clock actually stops when they first consider it necessary to make an inquiry and when they inform the taxpayer of that fact. The inquiry need not be directed towards the taxpayer; it could be directed towards anybody. Once an inquiry has started, the means adopted by Customs to carry it out cannot be questioned, even before a VAT tribunal. It could be that Customs eventually decides not to pursue the inquiry. During all this time the delay clock is stopped.
Customs has a practice of telephoning the taxpayer to warn him that an inquiry is being made. This tactic serves Customs well because it stops the clock at the earliest opportunity. Often the taxpayer will not be able to answer or even understand the nature of their questions asked over the phone. Experience shows it can take Customs seven days to commit their inquiries to writing. But they are not concerned about this delay because the fact they have made the phone call means the clock has stopped.
The delay clock only starts to tick again once Customs receives a full reply to its questions. Customs has an internal mail system. Although a letter posted first class may reach them on the next working day they do not treat it as received until it goes through their internal system and reaches the responsible officer. This could be several days later.
The delay clock stops ticking again when Customs authorises the making of the repayment. Of course it could be another three days after that before the taxpayer actually receives the money in his bank account but once again those days do not count.
Customs knows the rules of the game and it exploits them to the full.
More recently we were interested to read the case of Lookers Ellesmere Port Ltd. Here Customs opened with the usual telephone contact but the company’s managing director was away and so two messages were left on his voicemail. It was only when a third call was made that an arrangement was made for a review. The tribunal took the view that the mere leaving of a message was not sufficient to stop the delay clock. In the absence of the responsible person Customs should use letter, fax or email to communicate the urgency of the situation. For that reason the days spent seeking to make contact were taken out of the days to be ignored for the 30 day period. Accordingly Customs was late in making the repayment and had to pay the 5% supplement.
No doubt the Treasury will respond with a further amendment to the law.
The teacher stood in front of her new class and asked each child their name and what their dads did.
The first child said “My name’s Jenny and my dad’s a mechanic.”
The second child said “My name’s Sammy and my dad’s a bus driver.”
The third child said “My name’s Johnny and my dad’s a nude dancer.”
The teacher gasped but moved on.
Later she went up to the child in the playground and asked “Is that true about your dad dancing naked?”
“Nah!” said Johnny, “he actually plays for Leeds United but I was too embarrassed to say so.”
Copyright Ó K P Bonney & Co LLP 2005. All rights reserved. No part of this publication may be produced, stored in a retrieval system, or transmitted in any form or by any means, electronic mechanical, photocopying, recording or otherwise without prior written permission of the publishers. Disclaimer The publishers have taken all due care in the preparation of this publication. No responsibility for loss occasioned to any person acting or refraining from action as a result of any material in this publication can be accepted by the authors or the publishers.
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