James Mason from accountants Fifth Element talks straight about business

What’s Hot
Fifth Element, March 2012, and this is the news…

If a week is a long time in politics; then 24 hours in the life of an economy is an eternity. In one day alone last week we saw petrol hit a record high, Halifax raise the UK cost of mortgages (others will follow) and Moody’s downgrade Greece. The Post Office announced that stamps are going up (again) and Spain and Italy both missed their deficit targets. Germany’s retail sales fell by 1.6 per cent and the Greens announced that council tax is going up in Brighton and Hove. On top of all that a leading charity then says that it’s the public’s ‘poor numeracy skills’ that are ‘blighting the economy’. In my view it don’t take no maths degree to know that increasing the cost of everything while giving back very little ends up as a minus in the pockets of the majority. Until the politicians sort it all out, here’s some oil on troubled waters.

This is hot
Business Records Check
HMRC’s BRC is officially on hold (see Latest Homes column 15 November 2011 or my blog 06 November 2011). We only had two clients subject to one of HMRC’s ‘little visits’ and both had no issues but this is still a good move towards less HMRC interference. The accountancy profession is currently fighting a good case as to what constitutes ‘poor record keeping’ so when the dust settles, probably sometime next year, you can expect an easier time of it. Your accountant will be monitoring things for you but at the very least the taxman is now being forced to issue proper guidelines as to what he considers ‘acceptable’ records.

VAT Flat Rate Scheme
Most people in business are aware of the VAT Flat Rate Scheme but just in case it’s new to anyone, HMRC released the scheme to help small businesses with the administration of accounting for VAT. The scheme allows you to charge your customers VAT at the full rate but pay a lesser amount to the taxman. In exchange you have to give up your right to reclaim VAT on purchases. The taxman says it’s broadly cost neutral but in practice it can save you thousands of pounds. Businesses with turnovers less than £150k can join, but have to leave if turnover exceeds £230k. Check with your accountant to see if this is for you.

This is not
Paper VAT Returns
Time is up for submitting paper VAT returns. Returns must be submitted online for VAT periods ending after 1 April 2012. The only exceptions are businesses going through insolvency or those run by persons whose religious beliefs prohibit the use of computers. Amish Mennonite communities aside, register online now if you haven’t already.

Tax Investigations
The taxman is taking a harsher line in cases of fraud. He says people who underpay tax fall into two categories: those who make mistakes and those who commit fraud. Worryingly, he says there’s no middle ground. If he suspects unfair and deliberate avoidance he’ll issue a COP 9. If you receive a COP 9 don’t ignore it. Contact your accountant immediately.

One last thing
Whether getting rid of the 50p tax rate tomorrow would be good for the economy or not is a complex issue to which, in my opinion, no one really knows the answer. So to settle the debate I decided to flip a coin. I took a 50p from my pocket, flipped it and dropped it. It rolled away and fell down a drain. Now there’s a good omen if ever I saw one.

Fifth Element is a local Brighton-based accountancy practice offering expertise in all aspects of Accounts Preparation, VAT, Taxation, CIS, PAYE, Tax Planning, HMRC Issues and Business Development.