Small businesses hit hardest by VAT cut

In an effort to grab the headlines with the latest VAT cuts, the Chancellor has simply repeated the same mistake made by his predecessor. Only this time the impact will be noticed much faster, will backfire like the 10p tax rate cut, and will hit small businesses hardest, warn specialists at the Tax Advice Network. 

With retailers already slashing sales prices to 20-30% lower than before the recession, the impact of a cut in VAT from 17.5% to 15% will only have a marginal impact, and only serve to impact business productivity further as time and effort will have to be diverted to producing new price labels, catalogues, websites and promotional literature, according to Mark Lee, Chairman of The Tax Advice Network, who believes that the move is yet another futile attempt to stimulate spending without realising the knock-on effect on businesses.

“There are two things the Chancellor seems to have forgotten”, says Lee. “Firstly there is no obligation to pass on the VAT cut. Most traders will pocket the difference as the time and effort required to update information is enormous. But most importantly, the real negative impact will be felt by small business owners, who will have to divert their attention from generating additional profits whether they pass on the cut or not. And those who do change prices, even at the tills, will spend much more than the £90 cost included in the official ‘Impact assessment’.

“They will continue to be unpaid tax collectors for HMRC – collecting VAT from customers and paying this over, net of the VAT on their business expenses. They simply don’t have the time to get to grips with the added burden of working through the new obligations and may be unable to afford to pay for the necessary specialist tax help required to get it right”, adds Lee, who believes that the worst is still to come when the tax cuts come to an end next year.

“Get ready for next year’s VAT Nightmare before Christmas when everyone HAS to implement changes to reflect the increase in VAT from 1 January 2010. No one will want to absorb the cost of the increased VAT charge.  I’ll bet you now that there will be significant relaxations announced next year, when the full impact of the administrative burden on small businesses has been fully appreciated”, says Lee. 

The Tax Advice Network is UK’s first independent specialist tax advice network. For more information visit www.TaxAdviceNetwork.co.uk

ENDS

Income tax cuts won’t help the self-employed

For Immediate Release
The Tax Advice Network
12/11/08
London, UK

Whilst talk of income tax cuts may seem a welcome solution to the current economic crisis, they would do nothing to help the immediate plight of the 3.8 million self employed workers, who won’t see any benefit until January 2010, according to experts at The Tax Advice Network.

Mark Lee, former ICAEW Tax Faculty Chairman and Chairman of The Tax Advice Network reveals that as self-employed workers will not be submitting their current accounts until after March 2009, any income tax cuts will only affect the income tax payable in January 2010. And any cuts that take effect from April 2009 will affect income on which the tax is not due for payment until January 2011.  This is in stark contrast to employees who benefit from tax cuts in their wages and salaries throughout the year.

“Self-employed really people are getting forgotten in all this talk about tax cuts as no one is suggesting anything that will provide any immediate benefits for them.”, says Lee.
Conservative leader David Cameron has proposed tax cuts worth £2,500 per person, per year, to be given to employers who hire new workers who have been unemployed for three months or more, but Lee argues that even this would provide no relief for sole traders who have no need for employees.

Lee also believes that the proposed deferment of VAT payments by six months for small businesses is likely to cause more harm than good as a delay in payment means that the VAT money is more likely to be spent elsewhere, especially during times when cashflow is tight. “When it falls due the taxman will have no sympathy with traders who have failed to generate the money required to settle their VAT liabilities”, says Lee.

“The only way that self-employed people will see an immediate impact is through changes in the tax credits system, however this relies on people qualifying, registering and actually claiming tax credits in the first place”, adds Lee. “Sadly the system is not fit for purpose and claims can only be backdated by 3 months so many people lose out as they did not anticipate their income falling to a level that would qualify for tax credits.”

The Tax Advice Network is UK’s first independent specialist tax advice network. For more information visit http://www.TaxAdviceNetwork.co.uk <http://www.TaxAdviceNetwork.co.uk&gt;

ENDS

Tax Advice Network reveals truth about 31st October tax deadline

Don’t Panic, is the message from the Tax Advice Network for non-partnership businesses struggling to meet the HMRC’s 31^st October deadline for paper tax returns. The independent specialist tax advice network has revealed that as long as you settle any tax payable by 31^st January 2009, you are unlikely to incur a late penalty charge.

According to the Tax Advice Network chairman and former ICAEW Tax Faculty Chairman Mark Lee, many people still aren’t absolutely clear at what point HRMC’s computer systems will start issuing £100 penalty notices for paper based tax returns filed late (e.g. in November, December and January). In theory, HRMC would need to process rebates on all £100 penalty charges issued during this three month period if the full tax was paid by 31^st January 2009.

“Despite contradictory messages given out in recent weeks HMRC have now confirmed that no penalty for the late filing of a paper return will be generated by HMRC systems until after 31^st January 2009.  Thus, whilst people shouldn’t ignore the deadline simply because there is no effective penalty (as long as they pay all of the tax they owe by 31^st January 2009), if there is some reason why you cannot file your paper return as intended by 31^st October for whatever reason, you need not panic”, explains Lee. “HMRC’s recent messages have focused on whether taxpayers will have a ‘reasonable excuse’ for late filed returns. In practice this will be academic as long as all outstanding tax is paid by 31 January”.

However, Lee warns that this does not apply to partnerships, who DO need to ensure their returns are submitted by the 31^st October deadline.

“The £100 penalty has always applied to the partnership and to each of the partners if the partnership return is filed late. And it’s not rebated to nil, highlighting the importance of the 31^st October deadline for professional firms that do not file their own partnership returns online”, warns Lee.

“It’s also worth remembering that the enquiry window now closes 12 months after a tax return is filed so ‘late’ filed paper based tax returns simply extends the time period during which HMRC can open an enquiry into that return”, adds Lee.

 

The Tax Advice Network is the UK’s first independent specialist tax advice network. For more information or advice on tax related issues visit www.TaxAdviceNetwork.co.uk

ENDS

Notes to Editor

The Tax Advice Network contains a free to use (currently) online search facility that helps you find the specialist tax adviser that you need. Much more than a simple directory it is a 21st century approach to business services and a trailblazer in the accountancy and tax world.

The UK’s first independent network of tax advisers was the brainchild of Mark Lee, a former Chairman of the ICAEW Tax Faculty. He has ambitious plans for the network drawing on his many years of experience in the profession and his involvement in both offline and online membership communities.

The Network provides accountants and other regulated advisers with the ability to choose who provides them and their clients with specialist tax support.

Tax specialist members expect to enhance their businesses through the benefits they gain within the network. These include the additional exposure they get to their target audience and from being part of a supportive community of tax advisers.

Membership of the Network is limited to tax specialists who are able to satisfy our membership criteria and are willing to make a commitment to the Network and the members thereof.

For more information visit http://www.taxadvicenetwork.co.uk.

For press enquiries please contact;

Mark Lee 07769 692 890

Or

Jenna Gould PR Consultant

Tel: 01603 283 503 Mobile: 07958 263 708

Email: jenna@mediajems.co.uk

Press Release: Top tax man reveals frustrations with the tax system as main reason he no longer gives tax advice

Mark Lee, a past Chairman of the ICAEW Tax Faculty has revealed that his frustrations with the tax system led him to move away from giving tax advice two years ago, despite having reached the top of his profession.

In an extended ‘Comment’ article in the current issue of Taxation magazine, Lee, who is a Fellow of both of the Institute of Chartered Accountants and of the Chartered Institute of Taxation, explains that his frustrations were a direct consequence of three key developments in the tax system, some of which Lee felt were in danger of bringing tax law into disrepute.

“The ever increasing complexity of our tax system has caused inequalities and inconsistencies and this is not helped by the ‘doublespeak’ of politicians and civil servants with regards to our tax system. Combine this with the prospect of increased powers for HMRC without adequate safeguards for taxpayers and things become very worrying indeed” says Lee.

But despite his reservations about giving tax advice directly, Lee still retains a passion for supporting other accountancy professionals and last year, at the age of 50, he founded the UK’s first independent specialist tax advice community – the Tax Advice Network. In just over six months the Tax Advice Network has grown to over 1,000 accountants and other registered users, who regularly use the network to source quality and up to date tax advice from tax specialists across the country.

Taxation magazine editor Mike Truman commended Lee for his contribution by saying  “Mark is probably one of the few people who can write about this from the inside, because he is no longer giving advice, yet is still closely involved with the tax scene.”

The Tax Advice Network is the UK’s first independent network of tax specialists. For more information visit www.TaxAdviceNetwork.co.uk

Editors Notes

1 – Taxation magazine, published by LexisNexis, was founded in 1927 and is the leading authority on tax law, practice and administration in the UK. The current issue appears on Thursday 3 July.  Full copies of the 2,800 word article are available on request (see below).

 2 – Mark Lee has been a tax partner at both BDO Stoy Hayward and at Horwath Clark Whitehill. He remains chairman of the Personal tax and finance committee of the ICAEW and vice chairman of the London Society of Chartered Accountants tax committee. He is a well regarded speaker and a respected commentator on the tax scene.

3 – The Tax Advice Network is a free to use online search facility that helps you find the specialist tax adviser that you need.

It is the UK’s first independent network of tax advisers and was the brainchild of Mark Lee, a former Chairman of the ICAEW Tax Faculty. He has ambitious plans for the network drawing on his many years of experience in the profession and his involvement in both offline and online membership communities.

The Network provides accountants and other regulated advisers with the ability to choose who provides them and their clients with specialist tax support.

Our tax specialist members expect to enhance their businesses through the benefits they gain within the network. These include the additional exposure they get to their target audience and from being part of a supportive community of tax advisers.

Membership of the Network is limited to tax specialists who are able to satisfy our membership criteria and are willing to make a commitment to the Network and the members thereof.

For press enquiries please contact:

Mark Lee, Chairman of the Tax Advice Network

Tel: 07769 692 890  Email: Mark.Lee@TaxAdviceNetwork.co.uk

Jenna Gould, PR consultant

Tel: 01603 283 503    Mobile: 07958 283 708   Email: jenna@mediajems.co.uk