Newsletter - January 2008

In this edition:

• Small businesses ‘hit hardest' by rising fuel costs
• Britons struggling to manage their finances this New Year
• Small firms urged to evaluate energy bills
• Submit tax returns early to avoid potential ‘ chaos'
• Businesses in ‘complete confusion' over capital gains uncertainty
• Government unveils plans to increase HMRC powers
• Businesses call on Chancellor to abolish fuel tax increase
• Government urged to reconsider new rules on ‘income shifting'
• New website to help UK businesses compete for Olympic contracts
• Darling confirms capital gains tax reforms
• Businesses to receive apprenticeship boost
• Online tax return filing ‘safe and secure' insists HMRC

Small businesses ‘hit hardest' by rising fuel costs

With the price of petrol at a record high, the Federation of Small Businesses (FSB) is warning that small enterprises could ‘bear the brunt' of escalating fuel costs.

Motorists in Oxfordshire are amongst those forced to pay some of the highest prices in the country. The average price of unleaded petrol here is now 103.4p per litre, while the cost of diesel has reached an average of 108.6p per litre.

Barry Wheatley, FSB chairman for the region, said: ‘Diesel prices are cutting into the margins of businesses and I can see that some firms will really be struggling in the next few months.

‘It's an enormous jump on price in just a matter of weeks. If fuel prices stay the same some smaller businesses will think it is not worth the struggle to carry on.'

Despite the unrest felt by both businesses and private motorists, petrol blockades that took place towards the end of last year failed to make a substantial impact.

Industry experts are now warning that small firms across the country may be forced out of business if the upward pricing trend continues.

If you are concerned about the possible effect on your business's cash flow, please do not hesitate to contact us .

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Britons struggling to manage their finances this New Year

Many people are grappling to stay on top of their finances this New Year after overspending at Christmas, a new poll has revealed.

More than 5,000 visitors to the Jobcentre Plus website were questioned on their financial circumstances, with over half of participants (55%) declaring that they spend more than they can afford over the festive period.

Insufficient financial planning was exposed as a contributing factor in people's growing New Year debt. Research shows that the 45% minority who do plan ahead stand a better chance of staying out of the red than those who fail to complete this task.

The survey also revealed that people in London and the East Midlands are the most successful at planning their finances, whilst those in the North East are least likely to make financial projections.

Speaking in light of the results Susan Clark, a personal adviser at Jobcentre Plus, said: ‘Struggling to pay the bills after Christmas is a situation that many people find themselves in and it can be very stressful.

‘Short-term fixes provide temporary relief but getting a job is the best way to improve your financial situation in the long-term.'

We can help plan your finances for 2008 – please contact us for more information.

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Small firms urged to evaluate energy bills

The Forum of Private Business (FPB) is encouraging small firms to consider switching to an alternative gas and electric supplier in response to last week's increase in energy prices.

By shopping around for their utility provider businesses could make valuable savings on their energy bills, the FPB suggests. It is estimated that small enterprises are collectively paying millions more for their gas and electric than they need to.

Utility Options' managing director Colin Beake said this overpayment occurs ‘because electricity and gas supply is always on tap, and so most [people] make the excuse that they are too busy to get to grips with the problem and push the action needed to the bottom of the pile.'

A survey carried out by energywatch last year revealed that small firms are unimpressed with the service they receive from the UK 's main electricity providers.

Infrequent meter reading, inaccurate billing, a lack of information, slow responses to complaints, pressure from suppliers and staff inexperience were among the frustrations listed by smaller firms.

Meanwhile, Chancellor Alistair Darling asked to meet with the energy regulator, Ofgem , earlier this week to discuss NPower's hike in gas and electricity prices.

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Submit tax returns early to avoid potential ‘ chaos'

As tax workers prepare to vote on whether to take strike action ahead of the self-assessment tax return deadline, the Forum of Private Business (FPB) is advising small business owners to submit their returns in plenty of time.

Following the outcome of a ballot scheduled for 23 January, around 77,000 HM Revenue and Customs (HMRC) officials may walk out in a row over pay, office closures, job cuts and privatisation.

Despite the possible strike and consequential disruption, small enterprises that fail to return their self-assessment forms on time will still incur a £100 fine.

‘Tax returns for self-assessment schemes for the year to 5 April 2007 need to be in by 31 January 2008 in order to avoid penalties,' said Philip Moody, the FPB's senior member services representative.

‘We are advising our members to prepare their tax returns as early as possible this year so that, if any difficulties are experienced, there is time to sort them out before the deadline.'

It is estimated that around 150,000 self-assessment returns were received in the 24 hours prior to last year's deadline, whilst the HMRC website processed around 100 forms every minute.

We can help prepare your self-assessment tax returns – please contact us for more information.

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Businesses in ‘complete confusion' over capital gains uncertainty

The director general of the Confederation of British Industry (CBI) has publicly criticised the Chancellor's failure to clarify possible changes to capital gains tax (CGT).

Speaking to the BBC, Richard Lambert said many UK entrepreneurs were considering selling firms as a result of the ongoing uncertainty over CGT, and described the industry as being in a ‘state of complete confusion.'

Chancellor Alistair Darling was due to make a statement on the controversial tax reforms within three weeks of the CBI conference last November. The Treasury later revealed this would be delayed until early in the New Year.

The 18% flat rate is due to come into effect in April, yet the Chancellor has yet to is sue a statement clarifying the situation.

According to the CBI chief, business owners are finding it difficult to make judgments on the future of their investments as a result of the Treasury's silence.

Entrepreneurs ‘are beginning to take decisions that have nothing to do with business or economic common sense. They are doing it because they don't know what their tax liabilities are going to be,' said Mr Lambert.

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Government unveils plans to increase HMRC powers

As part of its plans for modernisation, HM Revenue and Customs (HMRC) has unveiled new measures that will increase its powers and clarify the rights and responsibilities of taxpayers.

Last week HMRC announced that it intends to develop a Taxpayers' Charter that will summarise rules for taxpayers in a single ‘accessible' document.

The Revenue has also published three consultation documents, the first of which proposes granting HMRC additional powers to collect tax debts. The second document outlines a new framework for HMRC to carry out compliance checks, and the third paper sets out plans to extend the Finance Act 2007.

Commenting on the proposed reforms, financial secretary to the Treasury, Jane Kennedy, said:

‘The further powers consultations are […] another step towards a modern framework of law and practice for both HMRC powers and taxpayers safeguards, which will ultimately provide greater consistency across taxes and make HMRC more efficient and effective.

‘I look forward to businesses, the professions and their representatives continuing to work with HMRC on these proposals.'

The deadline for submitting comments on the three consultation documents is 6 March 2008.

The draft legislation can be viewed at: www.hmrc.gov.uk/consultations/index.htm

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Businesses call on Chancellor to abolish fuel tax increase

The Government has come under pressure to abandon its plans to increase fuel tax after receiving a letter of protest signed by more than 700 businesses from across the UK .

Fuel duty is scheduled to rise by 2p per litre from April this year; an increase that experts say will cost the haulage industry around £170 million.

Those in the transport sector say they are now struggling to compete with their European rivals as a result of the rising cost of fuel in Britain .

The letter, addressed to Chancellor Alistair Darling, claims that smaller hauliers are ‘likely to be the worst hit as they will find it difficult to pass on the extra cost to customers.'

‘The logistics industry is critical to the UK economy yet the tax system is making British hauliers uncompetitive,' the letter said.

‘As an immediate measure we urge you to scrap the 2p increase scheduled for this April.'

Despite pressure from the business community, the Treasury has shown no signs of retreating on its controversial tax rise.

The proposed increase will send ‘the right environmental signals in [the] fight against climate change, while continuing to fund vital public services,' a spokesperson for the Treasury said.

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Government urged to reconsider new rules on ‘income shifting'

Prime Minister Gordon Brown is facing pressure from the business community this week as a petition calling on him to re-examine proposed new rules on ‘income shifting' gathers pace.

The Forum of Private Business (FPB) has now pledged its support to the campaign, claiming that the revised legislation will create a ‘new tax burden for many smaller businesses' and may add further complications to the self-assessment process.

The petition, which was drawn up by the Professional Contractors Group, has now acquired some 3,000 signatures.

In 2007 the House of Lords ruled in favour of the family-run IT business Arctic Systems, when it confirmed that the process of ‘income shifting ,' which involves dividing income as dividends between family employees to reduce tax bills, was lawful.

Following the ruling the Government announced its intention to tighten the legislation to prevent people splitting their income in what it perceived to be an ‘unfair manner.'

‘Mr Brown has ignored the UK 's highest court, which sent a clear message that ‘income shifting' is an established, accepted arrangement,' said the FPB's policy representative, Matt Goodman.

‘Yet again, the Government – which in the past had approved the practice – is insisting this is a loophole and piling yet another tax burden on smaller businesses.'

The proposed legislation will obstruct any tax advantage gained as a result of income splitting from April this year.

If you are concerned about your business's tax liabilities, please contact us for assistance.

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New website to help UK businesses compete for Olympic contracts

A new website has been launched by the Olympic Delivery Authority (ODA) to help UK businesses compete for contracts ahead of the 2012 Games in London .

The ‘London 2012 Business Network' site is designed to put larger companies already awarded Olympic contracts, in touch with the small and medium-sized suppliers they may need to carry out work for the Games.

Experts say the London Olympics will provide thousands of business opportunities for firms nationwide with tickets, catering, security, construction and transport amongst the services required.

‘The right to host the Games could make this a ‘golden decade' for major events in the UK and, therefore, British business,' said Lord Sebastian Coe, chairman of the organising committee.

Meanwhile, the committee's efforts to include smaller enterprises in the international sporting event have been welcomed by the Federation of Small Businesses (FSB).

Commenting on the launch of the new website, John Wright, FSB national chairman said: ‘We are particularly pleased that large contractors will be compelled to make public, via the network, the sub-contracting opportunities that will be most suited to smaller companies.

‘But this does not guarantee that small businesses outside of large Olympic contractors' existing supply chains will actually get work.'

He added: ‘The ODA has made a good start with the London 2012 Business Network, but we will be keeping a beady eye on the process in the coming months and years to make sure it delivers genuine opportunities for small businesses.'

Small businesses can register to compete for contracts at www.london2012.com/business.

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Darling confirms capital gains tax reforms

Alistair Darling has told MPs that he will make a tax concession worth £200m as part of his strategy to reform capital gains tax (CGT).

The Chancellor confirmed that he will axe taper relief and impose a flat rate of 18%, but announced plans to develop a new ‘entrepreneurs' relief' – a concession the Government hopes will mollify critics from within the business community.

Under the revised rules the 18% flat rate will be reduced to 10% for up to the first £1m of lifetime capital gains made by entrepreneurs and business investors.

This ‘entrepreneurs' relief' will apply when small business owners sell their firms, and will be available to all employees and company directors who invest a ‘material stake' in a qualifying company from 6 April 2008.

‘The UK business environment remains one of the best in the world and I am determined to keep it that way,' said Darling.

However, following the statement Shadow Chancellor George Osborne criticised the Government's ‘dithering' over the issue and claimed that Darling's controversial plans for CGT had been met with ‘the universal opposition of British business.'

If you would like to discuss the implications the new rules may have for your business, please contact us .

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Businesses to receive apprenticeship boost

A wage subsidy programme for small businesses that take on apprentices is to be piloted under new measures published by the Government this week.

The proposed remuneration scheme is designed to encourage small enterprises to offer high quality apprenticeship places and is just one of many proposals outlined in the Government's Apprenticeship Review.

In a bid to broaden the range of apprenticeships available, employers will also be able to award their own accredited qualifications to successful apprentices.

In delivering the outcome of the Review John Denham, Secretary of State for Innovation, Universities and Skills, emphasised that apprenticeships will now be established as key route in the drive to boost the skills of British workers.

Meanwhile, the British Chambers of Commerce (BCC) has cautiously welcomed the provisions outlined in the Review, but warns that more needs to be done to combat Britain 's flagging skills base.

‘Whilst we welcome proposals to expand apprenticeships and to provide support to those businesses who take young people on, the schemes will only succeed if they are rigorous, of a high standard and work for both young apprentice and the employer,' said BCC director general, David Frost.

‘Apprenticeship expansion does not go far enough however. It is an imperative that the Government ensures those currently out of work receive the skills that they need, and that the benefit system is reformed to incentivise people into work.'

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Online tax return filing ‘safe and secure' insists HMRC

HM Revenue and Customs (HMRC) has defended the security of its online filing system following reports that a ‘two-tier' security structure is in place to safeguard the tax returns of the wealthy.

Accusations that a separate filing system is in operation for Members of Parliament, royals and other celebrities were fuelled when Conservative MP, Andrew Robathan , declared he had received a letter from the Revenue saying he could not file his tax return online.

However, in a statement issued this week, HMRC insisted that its online services were ‘secure and safe to use' despite allegations that would suggest otherwise.

‘Some newspapers and broadcast media have claimed that HMRC's online filing systems are not secure because Members of Parliament and a small number of other taxpayers cannot use the Self Assessment service,' the statement read.

It continued: ‘This is completely untrue. A small minority of taxpayers, including MPs, cannot currently use online services because the additional internal safeguards on their records mean that their taxpayer reference numbers are not recognised on the authentication system.

‘This therefore has nothing to do with the security of our online services.'

The last day for filing self assessment tax returns using the online system is 31 January 2008 – returns submitted after this date will result in a £100 fine.

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