Accountants for contractors might be interested to learn more about the recently published accounts of former PM Tony Blair.

Once he left his job as Prime Minister in June 2007, Blair adopted an opaque business structure, channelling millions through a complex network of companies. The net result of this tangled web was that it looks like he paid only a fraction of the tax he should have done.

Tony Blair managed the majority of his business affairs through Windrush Venture, a management services company. Last year the company posted income of £12 million and expenses of £10.9 million. Blair paid corporation tax on the £1.1 million profit at the rate of 28%.

However, questions have been raised about the sheer size of the administrative expenses. After paying for salaries, rent and office equipment and furniture, almost £8 million remains unexplained.

Blair set up his corporate structure as a limited partnership and he is keeping this as a tightly guarded secret. Nobody knows how much money is contained in the LP. But why is he operating a totally secretive organisation?

Tony Blair has exploited legal loopholes to ensure the limited partnership does not need to file public accounts. The Windrush accounts, on the other hand, are prepared according to accounting and regulatory guidelines, and audited by KPMG.

Conservative MPs recently supported calls for a new tax avoidance rule, and Ed Milliband, the Labour leader, is calling for responsible capitalism. Under his current accounting regime, it doesn’t look like Mr Blair would fit into the category of responsible capitalist!

© 2012 All rights reserved. Reproduction in whole or in part without permission is prohibited.

Image: Hide and Seek by F. C. Photography

The National Audit Office has praised HMRC for persuading people to file their tax returns online, but says it is not clear whether the system provides value for money.

The NAO says that more than 11.5 million people a year now use online filing. However, some users have complained about access to HMRC’s website at busy times and the Low Incomes Tax Reform Group is calling on the Revenue to offer other alternatives to people who do not have Internet access.

Online filing has reduced processing costs, as well as postal, stationery and storage costs. Cumulative savings by the end of this financial year are expected to be £220 million and the drive to persuade people to file online is on time and within budget.

However, the NAO says HMRC is not able to draw a comparison between the costs of paper and online filing. It is therefore impossible to conclude that the benefits of online filing are being maximised and the system has been successful in delivering value for money.

Robin Williamson from the LITRG said that it should not be made mandatory to use the Internet to conduct dealings with HMRC and robust, well-advertised options must be made available to people who cannot transact online.

It’s both reasonable and sensible to encourage businesses to use digital channels to communicate with the Revenue but the government department should not forget that some individuals do not have access to the Internet or the capability to cope with online filing, he added.

Some professional organisations have also questioned whether it is cost effective to file corporation tax and VAT returns online.

© 2011 All rights reserved. Reproduction in whole or in part without permission is prohibited.

Image: On by Guillermо

Regular readers will know I have never had a lot of respect for the average agency, thinking that most of them exhibit a degree of professional casualness totally at odds with their advertising. Today, for example, I got another email offering me work as a support technician in the Midlands at a whole £20k a year. Be still my beating heart.

But this week, one of them has managed to surpass even that fairly mediocre level of success.

Someone in Hays thought it a good idea to remind the people contracting through them to RBS to complete their timesheets prior to the bank holiday weekend. So they sent out an email, with, for some reason, an attachment. Followed very quickly – but not quickly enough, needless to say – by a recall of the email.

Why? Because the attachment contained a list of 3000 contractors, their day rate, the day rate to Hays and a few other interesting details. It seems that some of these contractors are on really quite juicy rates. Oops…

OK, so perhaps that’s the rate for a senior HR manager in charge of a multi-million pound restructuring programme, but needless to say the ignorati rapidly jumped on the bandwagon, demonstrating a total lack of knowledge of several fairly key areas.. The meeja started it, shouting about excess salaries for temporary staff. A spokesman from Unite – who, let us not forget, are representing workers and so might be expected to have at least a working understanding of the labour market – started banging on about “overpaid contractors” taking work from “permanent staff”. Assorted comments in a range of newspapers picked up the baton. A shadow Treasury Minister came out with the same line. OK, so he’s a politician of course, so we shoudn’t expect too much wisdom perhaps.

The thing is, to a man they were going on about excessive salaries. Nobody can possibly be worth that much (well they can, actually, work out the cost of employment of a permie on an £80k salary plus bonus and package). And what is more, as ony fule kno these aren’t salaries, they’re payments to companies for services rendered. To convert them into salaries, you have to knock off the long list of expenses that contractors have to cover for themselves – employers NICs, holiday pay, sick pay, pensions, expenses, bench time funding, corporation tax and all the rest. And even then you probably haven’t got to a salary since you don’t know how much the contractor is taking back out of his company.

Or perhaps these deluded souls actually think that the fitter from British Gas charging you £80 an hour to fix your boiler is on £166,000 a year salary? I suppose that’s quite likely, given the state of our education system…

The really sad thing is that we have a unique and highly effective contractor workforce in this country. Its end clients – like RBS – recognise its worth and understand the economic realities that make a contractor a very good use of money. One recent client of mine paid £60k for a contractor’s services over several months, but he left them with a £430,000 saving. Which I, and they, think is actually not a bad return.

Good contractors are worth their day rate. Such a shame that people who probably understand that perfectly well prefer to distort reality in the pursuit of cheap, and very hypocritical, political point scoring.

© 2011 All rights reserved. Reproduction in whole or in part without permission is prohibited.

Image: Superman (Christopher Reeve) by MEDIODESCOCIDO

You probably hadn’t noticed but I tend to write quite a lot about the faceless hordes that we affectionately refer to as Hector. Yep, our friend the taxman. Not my favourite person, although, perhaps grudgingly, you have to accept that they are merely doing their job and the real problem is the hopelessly complicated mare’s nest of tax law they are trying to implement. Which is down to a series of inept politicians (isn’t that a tautology?), not least one particularly dim specimen of the breed.

But now it’s getting personal.

I mentioned last week that I’m being chased for a CT bill that was paid, in full and on time. I just checked my online account again and it’s gone up, since they are adding interest to a debt I don’t actually owe. Nor have they responded to my accountant’s attempt’s to find out what’s happening. And the really worrying part is that aspect enquiries are usually triggered by non-payments and poor returns, so not only do they owe me money but I am waiting or another letter where they will offer to look over my records and make sure all is in order.

And then to add insult to injury, I managed to overpay my PAYE last year. Not by any great amount, and I’m still not sure how we managed it – most likely a side effect of restarting a payroll after a 14 month break, not that I really care that much – but the accountant wrote to them to tell them somewhere around last September.

Nothing happened. Gosh…

But today I get a letter from Hector (to be précis, a D. Wrightson) Form P35D, Overpayment Review. Page one is the exact same calculation my accountant sent them last year. Bottom right hand corner is the box “Apparent Overpayment”.

“Apparent”? Are your accounting systems that pitiful that you don’t actually know? Does my accountant telling you the precise amount not indicate that just perhaps it actually is a real honest-to-God overpayment?

Anyway, I have to fill out page 2 of the form. A list of things I may have got wrong. (Hint: none of them). A tick list of which one is actually incorrect. ( Guess what?) And then the last option, “I confirm the return is correct. My explanation is as follows”. Say what? You owe me money, and I have to explain to you why I overpaid you else you won’t give it me back?

And the last sentence is a lulu. Basically “Once I have received your reply, I will make any necessary adjustments and if necessary arrange for any payments to be offset… “

Hey, it is bloody necessary, it’s my money and I don’t want to offset it against anything, I want it back in my bank account where it belongs.

Let’s be clear about this: HMRC is not a service, even at the pitiful level they manage to achieve, it’s a tax collection agency. The only money that is theirs is the amount they are owed. Everything else in excess needs to be paid back, quickly, since it’s not yours and I would rather I got the interest than you. Oh yes, just to add insult to injury, there is no hint of interest being added. Hell no, they only charge that on money they aren’t owed, not on money they do.

Earlier this week a Parliamentary committee had some critical things to say about HMRC’s performance, or rather lack of it. Nice to know they’re keeping up with reality, isn’t it…

© 2011 All rights reserved. Reproduction in whole or in part without permission is prohibited

Image: Why is this being protected in my fire safe? by someToast

You know when you’ve been commuting too long when, without having to think about, you stand on the platform, the train rolls in and you only have to stretch out your hand to open the door. The good thing is that you can get to work with minimal mental effort which, at the time of day I’m usually doing it, is rather a good thing.

In fact there’s only one thing that is really getting on my wick during the daily commute. A regular army of lycra-clad cyclepaths with silly hats who seem to think any rules of the road, the pavement and basic courtesy simply don’t apply.

I’ve lost count of how many times I’ve had to dodge them in the car coming off pavements or through red lights. Today I had to crash stop because one of them sailed across a zebra crossing; even the dumbest pedestrian has twigged that stopping and looking before stepping off the kerb is a good idea, so why are cyclists immune? Not to mention they aren’t damned pedestrians anyway and cycling across a zebra is actually illegal.

Then once off the train (having first waited for them to negotiate their idiot machines thought the barriers) and on the daily walk across the city centre I routinely get confronted by them ploughing through a busy walkway, heads down, mindless expression behind the obligatory dark glasses, utterly indifferent to any thought of risk analysis. Can’t slow down, got to get there, mustn’t stop, can’t possibly communicate with mere mortals, don’t care about anyone else; I’m a road warrior, me…

Remind you of anyone?

I paid my Corporation Tax bill last month, well ahead of the due date. Thanks to the vagaries of the banking system I couldn’t do it in one transaction (what, you think I’m going to pay extra to send Hector money?) so I sent two BACs transactions to occur one day apart. Same reference number, same destination bank account, accurate to the penny.

I got an acknowledgement for the first one. But not the second. Oh oh…

Then I get a letter. I have an outstanding payment on my Corporation Tax account. You now owe us the balance plus another lump of interest. The accountant has written to them pointing out their error, and enclosing a copy of MyCo’s bank statement clearly showing the payment.

No response. Hector doesn’t do letters, apparently.

So they phoned them up. All that achieves is to elicit a promise to send an internal email to the payments team. Say what? We don’t want payments, we want to you understand that no money is owed so payments have nothing to do with it.

Still no answer.

Next step is to log into the account and see what they think I owe. Got to wait for some more paperwork for that of course, can’t possibly use the credentials I already have to pay my employee taxes and VAT. Or register online, has to be done by post. Well I suppose it keeps a few hundred envelope stuffers off the streets.

Then the accountant tells me that Hector won’t talk to them about my affairs anyway until I fill out a form (one I’ve already done once, by the way) to allow them to do so: notwithstanding the minor detail that the accountant has been dealing with my company’s affairs for around seven years now, as even a cursory glance at their own records would demonstrate.

So I’m not optimistic about a quick resolution to this one. Nor, come to that, the payment of the money (plus interest…) they owe me for overpaid income tax from last year which has also not appeared in MyCo’s bank account.

At least when confronted with a moron on a bike you get some satisfaction by thinking you might just send him on his way wearing it rather than riding it. Sadly, that doesn’t work for taxmen.

© 2011 All rights reserved. Reproduction in whole or in part without permission is prohibited

Image: Hand shake by khalid Albaih

The Institute of Directors has criticised the coalition for failing to reduce the burden of tax on small businesses. Tax – the Weighty Burden, the annual report from the Institute, calculates that the true burden of taxation for SMEs is between 32% and 43%.

This burden is unlikely to reduce even when corporation tax rates decrease in 2014 because employers have to pay additional fuel duty, national insurance and business rates.

The head of taxation at the IoD, Richard Baron, said the burden of taxation is weighing growth down. Although it is not possible to make radical cuts at the moment, the government should already be making plans to reduce the heavy burden of business taxation.

Baron believes corporation tax needs to be lower than originally planned and employers’ NICs should also be reduced.

However, a recent report from the TUC suggests that cutting corporation tax further would have an adverse effect on the economy and job creation.

George Osborne believes that reducing the rate of corporation tax will entice companies to set up in the UK, which will help drive the recovery in the private sector. But Brendan Barber, the TUC chief, says this argument does not stand up.

The rate of corporation tax in the UK is already amongst the lowest in Europe. The OECD average is 26.5%, but in excess of 90% of small businesses in the UK pay 20% and the average for large organisations is 23.2%.

Barber said that we have extremely competitive corporation tax rates already. He went on to point out that some people, including Osborne, have been talking about emulating the aggressive low tax policies of Ireland, but the current economic problems there suggest that this is not a sensible option.

© 2011 All rights reserved. Reproduction in whole or in part without permission is prohibited.

Image: Scale-A-Week: 14 March 2010 by puuikibeach

Accountants should be aware that the end of the present tax year is fast approaching and HMRC has reminded the UK small business community that changes to corporation tax are imminent.

As from the start of the new tax year, corporation tax filing and payments will need to be made electronically. Furthermore, all company tax returns for accounting periods that ended after March 2010 will also have to be filed in XBRL or iXBRL format.

Payment of corporation tax will have to be made by Direct Debit, credit or debit card, using either bank transfer or the BillPay service.

An HMRC spokesperson explained that these changes will affect associations, charities, clubs, co-operatives and societies as well as any limited company. Firms will be able to use commercially available software to file or the department’s own CT software aimed at firms with less complex taxation affairs, the Revenue added.

As from April next year, firms will also have to submit their VAT returns online.

Meanwhile, the Institute of Directors is calling on the government to reduce corporation tax until it reaches 15% in 2020. People are starting to think of the UK as a high-tax economy and that will not encourage foreign companies to invest here.

The IoD wants the UK to have the lowest rate of corporation tax throughout the world. It has estimated that this could be achieved at a cost of £9 billion a year, a figure which could be achieved by continuing restraint on public sector growth.

By reducing corporation tax to just 15%, the UK would be sending out the strong message that it is open for business.

© 2010 All rights reserved. Reproduction in whole or in part without permission is prohibited.

Image: Micro Ecosystem by PierrePocs

A number of leading organisations are calling on George Osborne to deliver a budget that supports small businesses such as contractor accountants.

Recent research from BDO found that business leaders in the UK want the coalition to speed up its plans for simplification of the tax system and concentrate on helping entrepreneurs, rather than big multinationals, in the budget.

66% of business leaders think the coalition should accelerate its plan to reform the business taxation system and make it fit the needs of all UK firms.

Respondents to the survey were also asked what measures the chancellor should take to reduce the deficit. 50% favoured more public spending cuts but very few thought the solution was to increase taxes such as income tax or VAT.

However, when the economic situation improves, 41% of business leaders believe a cut in personal taxation should be prioritised. 35% said further measures should be taken to reduce the deficit and only 6% thought a cut in corporation tax was a priority.

Stephen Herring, a senior tax partner at BDO, said the results highlight that there is an urgent need for business tax reforms to drive business growth across all sectors.

The REC has written to George Osborne asking him to make sure the Budget really is a ‘Budget for Jobs’. The letter builds on the themes of the REC manifesto to remove the barriers that are prohibiting growth and deliver opportunities and jobs.

In particular the REC suggests avoiding any increase in business taxes, implementing an NI holiday for SMEs that hire young people and scrapping the National Insurance increase. The Confederation also calls on the government to do all it can to smooth the AWR implementation and promote flexible working.

The ICAEW says the chancellor should concentrate on long-term growth plans rather than quick-fix solutions. In order to achieve this, he should develop a simpler taxation system, a better approach to supporting enterprise and a highly-skilled, socially mobile workforce.

© 2010 All rights reserved. Reproduction in whole or in part without permission is prohibited.

Image: Questioned Proposal by Eleaf

David Cameron has attacked the people he considers to be the enemies of enterprise that are threatening to hold back British businesses.

Speaking at the Conservative spring conference in Cardiff, the PM repeated his commitment to the promotion of economic growth. Cameron said that as well as having a positive social impact, new enterprises are good for the economy. He did however admit that we have our work cut out to encourage people to form a limited company.

For more than 10 years, the enemies of enterprise have taxed, regulated, smothered, crushed and generally got in the way, he said.

George Osborne’s budget later this month will lay out specific measures to help business start-ups. These could include the removal of bureaucracy and the easing of regulations.

Meanwhile, existing companies are confused about the requirements of the new senior accounting officer legislation adding compliance costs to their existing financial burden. However, Deloitte says most are in a good position to comply.

According to Deloitte’s research, 11% of organisations have complete confidence in their compliance, although 69% expect to file an unqualified certificate. The areas that are causing most concern are VAT, PAYE, corporation tax and excise duties.

The new rules mean that senior financial officers now have to certify annually that their company systems are fit for tax reporting purposes. The legislation only affects companies with a turnover in excess of £200 million.

HMRC had assured companies that the sign-off would not lead to increased costs, 50% of respondents claimed the costs had been significant. 13% did admit that the increased cost of compliance has been set off in part by the savings they discovered during the review process.

© 2010 All rights reserved. Reproduction in whole or in part without permission is prohibited.

Image: 115/365 – Evil Twin by B Rosen

Large organisations pay less tax on their earnings percentage wise than anybody else, according to the results of a survey by the Business Taxation centre at Oxford University.

However, their overall tax liability is higher as 81% of all corporation tax is paid by 1% of the largest companies.

A separate survey conducted by PricewaterhouseCoopers found that 11.9% of the government’s tax receipts came from Britain’s largest companies in the year ending 31 March 2010. The total remittance from these companies was £56.8 billion despite the challenging economic climate leading to lower commodity prices and profitability.

The PwC survey was conducted on behalf of the Hundred Group which provides employment for more than 6% of the UK workforce and generates £16.7 billion in employment taxes alone.

Corporation tax makes up 33.7% of the total tax burden for members of the Hundred Group, followed by NICs at 27.4% and local business rates at 20.3%. The major contributors come from the oil and gas sector, banks, retailers and insurance companies.

When it came to salaries in 2010, members of the Hundred Group paid an average of £46,550. This compares very favourably with the UK national average of £25,900.

The vice chairman of the Hundred Group of Finance Directors, Ashley Almanza, said the survey results show that member companies continue to make a substantial contribution to the country’s economy. It is vital for government and business to continue working together to create both investment and employment opportunities and in order to achieve that the tax system must be predictable and internationally competitive, he added.

© 2010 All rights reserved. Reproduction in whole or in part without permission is prohibited.

Image: odd one out again by Nina Matthews Photography

The CBI believes the government needs to reduce corporation tax further than its intended level of 24% if the UK is going to remain competitive.

John Cridland, the director general of the business group, said that tax reform should improve competitiveness and make the UK a more attractive place for investors. Lowering the corporate tax rate will go some way towards encouraging organisations to base their operations in this country but the government also needs to address the tax burden which is making the overall system uncompetitive. Furthermore, the 50% higher income tax rate is seen as a barrier to attracting much needed talent to the UK.

The CBI also has concerns about the proposals for taxing foreign companies that are owned by UK businesses. The anti avoidance measures that have been included in the proposed controlled foreign companies regulations make the regime cumbersome, it says.

Foreign companies perceive HMRC as very aggressive when it comes to CFCs and whilst it is important to keep the UK tax base, any anti-avoidance measures have to be proportionate to risk and aimed at specific abuse. Investment could be deterred if measures are perceived to be too heavy-handed.

The CBI does support the Patent Box to complement the current Research and Development Tax Credit scheme but believes that more thinking is required to make the UK more competitive. The government should also implement measures to incentivise intellectual property development after the research stage but before the patentable product creation stage.

Cridland’s comments were made as part of the Confederation’s submission to the Corporate Tax Reform government consultation.

© 2010 All rights reserved. Reproduction in whole or in part without permission is prohibited.

Image: 85/365 by cinnamon_girl

The European Commission has requested that the UK amends its anti-avoidance and tax evasion measures.

Last week, the EC said that regulations regarding the attribution of gains to non-UK resident firms and the transfer of assets abroad were disproportionate. The Commission added that the UK regulations go beyond those that are reasonably necessary in order to prevent tax avoidance.

David Kilshaw, the chair of KPMG’s private client practice, said this could be a serious threat to the Treasury’s revenue as it concerns a significant amount of tax.

Current provisions allow for HMRC to review offshore structures and tax individuals holding assets in them at the personal tax rate. However, the EC says this is discriminatory as individuals are not liable to pay tax on the assets of a UK based company.

The EC also wants the UK to change the regulations regarding cross border capital gains. At present, if a company that is UK resident acquires a share greater than 10% of a company in another EC state, and that company sells an asset and realises capital gains, the UK company is liable to pay corporation tax on these gains.

Kilshaw also warned that HMRC might start to tax UK companies at a higher rate if it is forced to tax them the same as offshore companies.

If the UK does not comply with the request, the matter may be referred to the European Court of Justice.

© 2010 All rights reserved. Reproduction in whole or in part without permission is prohibited.

Image: high security by mugley