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Archives for 2011
PAYE Tax Penalties for Doing Nothing!
GYM tips (Grasping Your Money)
How is the already stretched business owner supposed to run a profitable business if they keep tripping over stumbling blocks they don’t see coming?
For those accountants here, this is old news, but for those of you who are busy running your businesses and have no time to become experts on taxes and fines – Beware!
In recent weeks I have had a couple of conversations with recent start ups business owners trying to understand why they have been charged a fine by HMRC.
One was for not paying tax when they had no employees and were not yet trading and the other was running payroll but were not liable for payroll taxes for a particular month.
Let me deal with the first one:
Company one, received a letter informing them that they would face penalties for not filing a P35 (Annual Year End Return for Employers) by the deadline for the last tax year.
This particular organisation only started trading during the new tax year so did not think about last year at all. Their first reaction was that it must be incorrect.
However when I asked them to show me their New Employer Letter, it showed that they had been registered as an employer the previous year.
Regardless of whether you have had employees, were or were not trading; HMRC does not know this and penalise you, not just for non-payment but for non-information. As a new employer there is a chance you can appeal to the better nature of the tax man who may well take into account that you are a start-up with no history of defaulting, but this is not guaranteed.
In the second instance:
If may be you either have not processed payroll in a particular week, month or quarter. Alternatively there may be no payroll taxes due, if your salaries are under the tax threshold for that period.
You were always required to inform the tax office if nothing was due. In the days of the Employer Payment Booklet, you would have filled in one of the payslips showing Zero payments due and posted it to HMRC.
However, in the past if you did not do this, there were good odds that there would have been no problem; as it would all be reconciled at the end of the year when you filed your P35.
With the movement toward doing PAYE all electronically, you are now expected to let them know each month or payroll period or again face penalties.
Those who have never done it or want to know how, here is the link http://www.hmrc.gov.uk/payinghmrc/paye-nil.htm
Traditionally it has been easy to manipulate PAYE returns as long as by the end of the tax year the Annual Return was completed and any outstanding payments received.
In the same way companies are feeling the pinch and need to ensure they collect money quicker, the tax office is no different.
Don’t give money you don’t have to:
- Payroll is a tax minefield, if you going to run your own system ensure you understand what you are doing. Being able to enter details into a software package is not enough. The software cannot compensate for lack of understanding
- Keep track of timings and deadlines. Not paying on time is not the only transgression that the tax man will punish you for, they hate not knowing.
- Even when your records are correct it is still not unusual to receive reminders and penalties and the dreaded request for a visit. Have the information and ammunition to dispute unfair or incorrect demands.
- A letter from HMRC is not the end of the world, take advice if worried, get it dealt with before they chase you again.
- Shore up your systems and knowledge to avoid having them on your case again unnecessarily.
Am I Being Unreasonable?
Like so many people in business, trying to juggle all the balls of life is a constant battle. I thought when my children started further education they would need me less, but not so.
I still have that ” I have not spent much time with them” voice in my head even though grunting has become their preferred means of communication.
Well just to further drive myself crazy I now have the added pressure of planning a wedding from start to finish within the next three months.
Now as someone, who unlike so many of my female friends, had not been planning their wedding since they were five, the ridiculously short length of time is not the only challenge.
I was not doing so bad until it came to organising the wedding cake. When husband to be asked if it mattered what the cake tasted like, I knew I was on my own.
I made some enquiries and one of the suppliers called me back.
She did a great selling job, and in the spirit of comraderie I gave her loads of information, in fact some rally strong buying signals buying signals so she would know how to service me.
I explained time was of the essence and that while there is a budget, it is more important for me to be able to tick things off my list and I did not have much time to shop around as my diary was busy up until Christmas.
We agreed she would come to me on an agreed date with samples.
She asked about table decorations and it turned out some items in her standard package were already provided by the venue. I let her know this. However I said if she could put together something a little different I would be happy to look at it.
Now this where I need to know if I am being picky.
A week before our meeting I emailed her to confirm. Now I would normally do that with my supplier head on not as the customer, but with a week to go before our meeting, I still did not know what time she would be able to get to me.
She is some distance from me – but not the venue – and I begun to suspect that she only realised that after committing herself.
She had emailed me pictures and other info but not a time.
Second point of irritation: the quote for the table decorations still included the items provided by the venue for free. “Were you not listening?”
Then the next day I get an email asking if I could go there instead; to which I replied I couldn’t so would have to get back to her.
Now I may not be Kim Kardasian I know, but for some reason it annoyed me to the point that I made an appointment with another supplier. They offered to meet with me early on a Saturday so that I could “get on with the day”
Generally I take things in my stride, it takes a lot to bother me so I am surprised at my own lack of patience with the situation. It is not as if she was rude or anything.
I have told myself that it is due to a lack of customer service; but there is another possibility altogether – could it be I am turning into a bridezilla?
Having more than one source of income
While getting ready this week, John Cleese appeared on the tv doing a stand up comedy routine.
It seemed odd to me, so I turned up the volume to hear him end with the punchline “I needed the money”.
The clip was actually part of an interview in which he explained that he was no longer being offered as many acting parts and he decided to find an alternative way of earning an income. (I am paraphrasing; I can’t remember the exact words). So he wrote material for a series of Stand Up shows, and the inevitable DVD.
Taking into consideration he has also fairly recently been through a tough divorce that really hit him in the pocket; it got me thinking.
Here is a man who has achieved the type of success most business people can only dream about achieving in their own industries. The belief being that once they get there they will be set for life. Yet at the time in most peoples’ life when they are looking at the retirement or enjoying the fruits of their many years of labour; he is in the position where he is not as secure as he thought he would be and is having to shift gears.
Thankfully he is so established and respected enough in his industry he can turn to another revenue stream that is totally within his area of expertise, rather than looking outside, as so many business people do and end up no better off.
John Cleese has always had a number of products he could bring to market. His acting, writing, videos, to name a few. Consequently when one dropped off and he was facing trying times, he could pull on the others.
How many business people who if faced with the same scenario in their life could genuinely say they would be able to bounce back in the same way?
If demand for their main product or service were to decline, or circumstances depleted ready cash, what do they have in place to reduce the risk of financial meltdown?
If you question your accountant you won’t be sent to the gallows
Remembering you’re the boss
A client of mine referred one of their business associates to me recently who was in the same business as them and was having no luck finding the right bookkeeper for their business.
Even the one employed by their accountant had not worked out. I had to conclude that this business was either very demanding and difficult to please or they were just not getting their needs met.
Even during the initial conversation on the telephone I could sense the desperation to get themselves sorted as they had no idea where they were financially other than what they saw in the bank.
I visited them at their premises and it is a lovely little business, offering a prestige service that has been held back by uncertainty and the director feeling overwhelmed.
The first thing the director did was get their accountant on the telephone to discuss what he believed they needed. As it turned out he felt they should have a part time bookkeeper that worked from their premises a few days a week.
I explained that my business was an outsource service and on site bookkeeping was a different type of service altogether but I was happy to have an informal chat about their situation, maybe I could give them some pointers they could use in the meantime.
As the discussion progressed, it turned out that they personally did not want to use up precious desk space, as office space was tight. The software they had was inadequate and they preferred to spend the money on software specific to the operations side of the business. Not to mention that they had never received regular updates on their financial situation. In addition they had a VAT Return due and they had no idea whether it had been done and if they were supposed to pay anything to the VAT man.
I was then introduced to the lady who ran the office and as we talked I knew they needed a service like mine and so did she. But even as they asked me when could I start sorting them out, charges, etc I could sniff the sense of disloyalty in the air brought on by doing something opposite to the instructions of their accountant.
It is amazing how we make crucial, often life changing decisions in our businesses all the time, but can be so susceptible to the opinions of others just because we believe we are out of our depth in an area.
As with any service or advice from professionals, listen to what they have to offer, respect their experience and then make your own decision. Ultimately all roads will lead back to you no matter what anybody else says.
If you are uncomfortable with a situation or do not think it is really meeting your needs; feel free to express it, you are the boss, you are the client.
We in professional services are sometimes so convinced of our expertise in an area that it can be easy to lose sight of the simple task of making a client happy and assume that a client does not know what is best. In fairness to the accountant I think he believed it was what they wanted because they had never expressed anything else. All it took was a conversation where they felt free to express themselves and a wealth of information came out.
Your accountant has much to offer, not just in compliance, but in expertise and guidance. And if you get a really good one they are worth their weight in gold as business advisors.
But remember you are an entrepreneur and while you may not be a tax expert, you are the expert when it comes to your business, trust yourself.
Have any of you found yourself feeling like the child in your business when dealing with professionals and consultants, how did you handle it?
