Tag Archive | "administration"

How many contractor accountants went into liquidation in final quarter of 2011?

The latest company liquidation figures published by the Insolvency Service have been released.

The fourth quarter of 2011 saw a 14% increase in the number of compulsory company liquidations. 4,260 companies went into liquidation in the final quarter; 1,389 of those were compulsory. 191 companies took advantage of voluntary arrangements, 234 called in the receivers and 658 went into administration. Creditors voluntary liquidations stood at 2,871 – a quarter on quarter decrease of 5.1%, but an increase of 3.4% on the comparable quarter of 2010.

Frances Coulson, the president of R3, said time to pay arrangements from the Revenue and low interest rates have created zombie companies that are just managing to keep their heads above water. Some of these companies will eventually sink, she predicted.

She went on to say that current insolvency figures are down on previous recessions and the latest data could represent the “calm before the storm”. In order for an economic recovery to take place, some businesses must fail so that viable ones can thrive.

R3 research shows that 29% of SMEs are experiencing decreased sales volumes and will need additional support this year.

Andrew Dixon from Bibby Financial Services blamed the increase in insolvencies on the lack of available funding. Less than 33% of small business applied for funding from external sources last year, and only 4% took advantage of government run initiatives such as the Enterprise Finance Guarantee of the Business Growth Fund.

He said the latest insolvency figures show that small businesses need more effective support. Businesses are now turning to asset based funding such as invoice finance in a bid to improve their cashflow, because they do not know where else to turn.

He added that government agencies and the financial services industry should work together to develop greater awareness of the funding options available to UK businesses.

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Company insolvencies increase but personal ones decrease

The number of companies going insolvent is on the increase, something that could potentially also harm the fortunes of accountants for contractors.

Latest government statistics show a 0.1% quarter-on-quarter increase to 4,242 company insolvencies in the third quarter of this year. Whilst this increase is marginal, it is 6.5% up on the corresponding period last year when only 3,974 firms were declared insolvent.

206 firms applied for Company Voluntary Arrangements in Q3, compared to 187 in the second quarter. In the third quarter of 2010, only 159 companies chose to go down this route. Voluntary liquidations also recorded a 3.1% quarter-on-quarter increase.

Although the number of companies going into administration decreased by 22 on a quarter to quarter basis, 673 represents a rise of 31 on 2010’s Q3 figure.

Whilst company insolvencies are increasing, the number of personal insolvencies continues to decline.

In the third quarter of 2010, there were 33,935 personal insolvencies. Last quarter the figure had dropped to 30,219. Over the same period, there has also been a 31% decrease in bankruptcies.

The number of people taking out individual Voluntary Arrangements was up to 13,048, a quarter-on-quarter increase of 905.

The number of Debt Relief Orders reached an all time high of 7,257 in Q3. This represented a 7.6% increase on Q2 for the method that was introduced in April 2010.

Debt Relief Orders are for people with debts of less than £15,000 and assets of no more than £300. The Insolvency Service changed the rules this year for DROs, IVAs and bankruptcies to exclude pension pots when calculating an individual’s assets.

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

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Common Consolidated Tax Base would slightly reduce UK GDP

The European Commission wants to reduce significantly the burden of administration, legal uncertainties and compliance costs that face EU businesses and online accountants at present.

It has now published proposals to calculate the tax base of all the 27 member countries under a common system.

The Common Consolidated Tax Base would provide companies with a ‘one stop shop’ system when it comes to filing tax returns. The system would also enable organisations to consolidate all profits and losses incurred across the European Union. EU states would still retain the right to set their own tax rates.

Under the current system, companies trading across borders could be dealing with 27 different rules for tax calculations, including a complex way of working out the taxation on intra-group transactions.

The commissioner for taxation, customs, anti-fraud and audit, Algirdas Šemeta, said the CCTB will make doing business with the EU cheaper, easier and convenient. It will also benefit SMEs that want to expand outwith their domestic market. The proposal will benefit business and improve the EU’s global competitiveness.

However, research conducted by the Oxford University Centre for Business Taxation has found that the UK’s GDP would fall by 0.05% if these plans are implemented.

The ICAEW has said that the idea of a consolidated tax base if good and will make it easier to trade, minimise disputes and reduce compliance costs. But the new system will run alongside the old model and therefore administrative burdens will be increased. The Institute is therefore calling for the scheme to be voluntary.

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

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Are contractor accountants’ clients going bust?

Administrations dropped by 24% in the final quarter of 2010 compared to Q4 the year before, according to research conducted by Baker Tilly.

London and the South East of England saw a drop in corporate insolvencies of 37%, whilst in the rest of England, the drop averaged out at 14%. However, the South West of England did not fare so well. In the fourth quarter of 2009, the region recorded 29 insolvencies, but in the corresponding period last year, the figure had increase by 31%, to 38.

RSM Tenon believes that we will see corporate insolvencies increasing this year. Carl Jackson who heads the recovery team at RSM Tenon said that the 2010 figures did not give a true picture of UK businesses because the insolvency level in 2009 was abnormally high.

He also said that this year would be difficult for businesses and the UK is now facing the serious risk of a double dip recession. Several businesses are already on a knife edge and if the Bank of England’s MPC bows to pressure and increases interest rates more businesses will fold.

Sectors such as retail and hospitality, which depend on discretionary spend, will continue to struggle due to increasing inflation and the VAT rise, he added.

The problem could be further compounded by HMRC’s tougher stance on the deferment of taxes. Last year the Revenue turned down 5.8% of Time to Pay arrangements, compared to 2.7% in 2009. The Time to Pay scheme was a lifeline for many companies who struggled during the global downturn but with the banks still not lending, if HMRC really is clamping down, the future looks bleak for firms with financial difficulties.

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

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Online accountants can save costs by making use of the cloud

From a cost perspective, it’s definitely becoming easier for online accountants to start up their own business.

The cost of online technology has tumbled dramatically since the Cloud came onto the scene and this has led to a reduction in business IT overheads.

Joe Drumgoole, an Irish Cloud entrepreneur, recently explained to a group of accountants that the Cloud has led us to an almost asset-free business. It now costs next to nothing to set up a company infrastructure. Office applications such as DropBox, Gmail and Google apps, and online accounting packages like AccountsIQ, have revolutionised the business world.

When considering the cost of buying off-the-shelf software applications, accountants also need to take license and maintenance fees into consideration. Customised Cloud software offerings aim to provide SMEs with an alternative to the traditional packages that not only reduce costs but also cut maintenance.

Contractor accountants could find themselves in for a busy year as more and more companies look to outsource some accounting functions. The Admiral Group provides outsourced IT support services to SMEs and they predict outsourcing will witness rapid growth this year as companies try to reduce their administrative costs.

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

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£100 billion is washed down the drain each year in red tape

Basic administrative tasks relating to bookkeeping, invoicing and billing and filling out timesheets take the average worker in the UK 37 days every year, according to Keboko, the cloud service provider.

The cost of all this red tape amounts to more than £100 billion and could encourage freelancers to get help from a contractor accountant in a bid to reduce the amount of time they spend carrying out administrative duties.

Charlie Cowan, the CEO of Keboko, commented that companies should be trying to rebuild after the recession but instead many workers are finding it hard to do this as they are bogged down with tasks such as data input and updating reports. UK businesses are basically throwing the money spent on these tasks down the drain.

The burden of dealing with the taxman is also costing businesses dear, the IoD reported earlier this week. The Institute surveyed its members and discovered that there is still considerable room for reform to reduce the administrative burden surrounding taxes. The survey also discovered that 30% of businessmen would actually advise someone not to start up their own business because of the weight of the tax burden.

An overwhelming number of directors want to see the regulations concerning PAYE and National Insurance simplified. Business people sometimes struggle to understand the tax rules and have difficulty finding out the correct information when they contact HMRC. Only 15% of respondents said it was easy to get the right information when they called the HMRC helpline while a third said it was very or fairly difficult.

HMRC’s website does not fair any better either. 16% said they could find the information they needed easily but again 33% struggled to find what they needed to know.

Since the PAYE coding errors earlier this year, businesses have found it increasingly difficult to get through to the Revenue’s helpline. 37% of the directors who did manage it feel that the majority of HMRC officials have a poor understanding of the nature of their business.

Half of the directors surveyed said they want the OTS to simplify the PAYE and NI system and 28% said the taxation of employee benefits was the area most in need of simplification.

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

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Coalition should rethink the new compulsory pension scheme

The FSB thinks that micro firms should not need to comply with the government’s new pension scheme that comes into effect in 2012.

Under the new plans, all businesses need to enrol their employees in a pension scheme automatically but this would cause an undue burden on firms with 10 staff members or less, according to the Federation.

The FSB also believes that the government set up pension schemes do not meet the requirements of SMEs and that the time and money spent on their administration would be damaging.

Mike Cherry from the FSB said that whilst they welcomed plans that encourage people to save for the future, the new automatic payroll pension scheme will cause administrative headaches for smaller businesses.

To back up their comments, the FSB conducted research that revealed that 70% of business owners are not confident about selecting a pension plan for their employees due to its complexity. To solve this problem, the FSB suggests that a default scheme is set up and anyone who is currently not in a pension scheme should be enrolled.

The REC, on the other hand, is concerned about the auto-enrolment issues for recruitment agencies using temporary workers. The Confederation would like there to be a six month qualifying period before a worker is enrolled into a pension scheme. They point out that the bureaucracy involved in setting up a new scheme for a worker who is only temping for a few weeks will not be off-set by savings benefits.

The REC intends to work with the coalition to make sure the pension reforms will work for everybody concerned.

In addition to the qualifying period, the REC is calling for an option that allows workers to opt out of the scheme before enrolment and the maintenance of the National Employment Savings Trust which all employers can access.

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

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80% of SMEs say the burden of taxation is too great

SMEs and online accountants are spending a disproportionate amount of time on administration and tax compliance, according to the CIOT.

Andrew Hubbard, the Institute’s immediate past president, said that the new tax changes that occur every year have created a lot of anomalies in the system and it is now very unstable.

He believes that the government should create stability so that people setting up a small business know exactly which tax path they will be following for the next 5 years.

A recent survey carried out by specialist insurer found that 80% of SMEs and limited company contractors feel that the burden if taxation is their major worry.

Last week, George Osborne and David Gauke officially set up the OTS to look into the simplification of the current tax regime. Michael Jack will chair the new body and he already stated his view that entrepreneurs should never feel deterred because the tax system is too complex.

John Whiting from the CIOT will act as the interim tax director for the OTS and he reiterates Jack’s view saying that whilst it is probably impossible to have a truly simple taxation system, working towards a simpler one will help everybody.

Jack and Whiting will be helped by external tax and legal experts who will focus on individual complex areas and provide additional advice to the Office of Tax Simplification over the coming months.

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

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