Welcome to the early autumn issue of our newsletter which features a number of current topics which may affect you, notably the HMRC’s blunder over PAYE codes. CKLG’s raison d’etre is to guide you through these potential minefields and if you have any concerns on any aspect of your financial life please email us at help@cklg.co.uk or call 01223 810100.

• PAYE coding errors
• Are you planning ahead for the VAT change?
• Warning of HMRC phone call scam
• There's more than one way to finance a business . . .
• Tax Notes

PAYE Coding Errors

The revelation that the beleaguered HMRC has erred widely and in great numbers over tax codes has been one of the key features of the summer news.

Be assured that, when appointed as your agent, we check your PAYE codes as a matter of course but if you think you have the wrong code applied to your current income we can check this for you.

If you have any concerns at all please let us know so we can either put your mind at rest or sort it out with HMRC for you.

Are you planning ahead for the VAT change?

The increase in the VAT rate to 20% will be implemented on 4 January 2011. When the Chancellor announced the increase back in June, the six months’ advance warning was welcome, especially to small businesses who are likely to feel the impact the most. With three months already gone, now is a good time to take stock and make the most of the opportunity to prepare for the change. Moreover, HMRC is likely to take the view that you have had plenty of advance warning and may show little leniency if errors are made.

A recent YouGov survey found that almost a third of small businesses feel that the VAT increase will affect them adversely, and nearly a fifth are planning wage freezes or even cuts to compensate. Businesses will remember the last time a change was made to the VAT rate. It is estimated that apart from the disruption caused by tying up key resources, implementing the change cost small businesses up to £1,500 in bureaucracy alone.

Many small businesses have not been able to raise their prices for some time now, but their suppliers have been raising theirs, and the VAT hike is not going to help the situation. Moreover, with some competitors likely to try to absorb the VAT increase to avoid having to pass it onto their customers, the pressure to remain competitive could increase considerably in the New Year.

This would be a good time, therefore, for all businesses, and especially for retailers, to undertake a general review of their costs and pricing strategies.

Some businesses might be tempted to avoid some of the impact by pre-invoicing at the lower 17.5% rate but care must be taken here not to contravene the anti-forestalling regulations and incur penalties. There are also other potential pitfalls in areas such as recurring invoices and debit and credit notes that could incur penalties.

Businesses directly or indirectly involved in importing will need to review import VAT deferment levels, and might seek advice on whether a switch to Simplified Import VAT accounting is appropriate.

Businesses on the flat rate scheme should note that revised higher rates will generally be introduced at the same time, which will have an impact on cashflow.

All in all it seems a little advance planning and professional advice at this stage could well save time and avoid problems further down the road. If you would like help preparing for the VAT change, do contact us sooner rather than later.

Warning of HMRC phone call scam

HMRC are warning taxpayers to be vigilant following reports that thieves are making phone calls pretending to be the taxman. Be sure to check the authenticity of any calls relating to your tax affairs.

There’s more than one way to finance a business . . .

Judging by the size of the profits recently posted by some of the UK’s largest banks, they have weathered the economic downturn rather well. But they still seem reluctant to share their largesse with smaller businesses, for whom bank financing is still relatively hard to come by, and often expensive.

As a consequence many smaller businesses are turning to alternative sources of funding, particularly invoice financing. More and more enterprises seeking to free up cash and working capital, or to raise funds for expansion are making use of this option.

The irony is, of course, that they can secure such financing only if they are generating healthy invoices, and so the increased use of this type of financing is an indication that the businesses concerned remain viable. Which makes the banks’ reluctance to lend to them all the more perplexing!

In any event these developments show there is always more than one way to finance a business – and who knows, perhaps in the future we might look back and think that the banks did small businesses a favour at this time by forcing them to diversify their funding strategies.

If you would like advice on raising finance for your business, we would be happy to help.

Tax Notes

Employer CD-ROM

If you use the Employer CD-ROM to run your payroll you need to install the September 2010 update through the HMRC website. To avoid all this hassle ask us to run your payroll for you.

Update for Employer’s CD-ROM can be found at http://www.hmrc.gov.uk/employers/cdrom/

Paying PAYE

If you pay your PAYE electronically allow at least three working days for the payment to reach the HMRC bank account, as HMRC cannot accept payments through the faster payment service (FPS).

If you setup a direct debit to pay your PAYE be sure to quote the correct payment reference. The 13-character reference number is case-sensitive, and any mistake may lead to your PAYE payment being rejected or getting completely lost in the HMRC computer.

For details visit http://www.hmrc.gov.uk/payinghmrc/paye.htm

For help and advice on any topic covered in this newsletter, or indeed any aspect of your corporate or business life, please call us on 01223 810100 or email help@cklg.co.uk