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The Conservatives have announced this week that they forecast that the number of companies going under in 2009 is set to increase dramatically due to economic conditions.

But there is actually another reason too. Government policy itself which will no doubt also prove to be an OWN GOAL for the Government coffers.

Late filing penalties for accounts to Companies House are set to increase by not far off 400% from 1 February 2009 as follows:

What are the new late filing penalties?
The new table of penalties is a follows: *

In addition where there was a failure to comply with filing requirements in relation to the previous financial year (and that the previous financial year had begun on or after 6th April 2008), the penalty will be double that shown in the table.

When do these new penalties apply?
The new penalties will apply from 1st February 2009.

How will I know when a penalty is levied?
If accounts are delivered late, an invoice is issued automatically to your registered office address.

Do the penalties apply to flat management and dormant companies?
Yes

How can I avoid penalties?
Read the filing reminders that Companies House send to your registered office address.

for more information see http://www.companieshouse.co.uk/companiesAct/ca_lateFilingPenalties.shtml 

So for a company with no assets struggling to cope with the economic climate already and no or dwindling assets having trouble paying the accountant and your staff what option are you left with? Then you are facing a £375 to £1,500 from Companies House (plus also a late filing penalty from HMRC to boot by then)?

"Wind the company up" will be the decision of a larger proportion of directors.

So what you might say?

Will HMRC recover any Corporation Tax not paid?

PAYE not paid?

Most unlikely.

Plus increased benefit payments to those made unemployed in the process?

The cost to the taxpayer's purse generally could be far more than the heavy fines now coming in.

So well done Alistair Darling if this turns out to be a massive OWN GOAL don't say you were not told?

Perhaps a bit more common sense instead of the seemingly constant sledge hammer to crack a nut approach by Government might just do the trick...

Me thinks the Conservative estimate is going to be well under estimated too.

On a seperate note I might not be an economist but if I had money I could afford to lend to you would I lend it to your for no or little return?

0% interest rates coming?

Now if you were a risky borrower would I lend it to you for a "low" return?

As a borrower if I cannot afford to borrow funds and in return give the lender a return on their "investment" should I be borrowing at all?

If we did not have the economy built on a stack of playing cards before (which we did in my opinion) then we certainly do now thanks to ever more mad Government Policy.

what has actually now happened is that all the people with savings that have been prudent and saved for the rainy day are now lending out their savings via the banks for very little return on their investment while the borrowers many of whom have substantially over borrowed in the last few years to live for today are now being "rewarded" by low interest on their debts.

This all seems totally upside down to me.

In reallity a few bankers will get very rich in the middle and taxpayers will have to no doubt pump more and more money into the banks some of which wil go to help the bankers get richer.

So Mr Darling if you actually truthfuly want to do something worthwile for the country please come to your senses and actually concentrate your efforts on something that might actually do some good rather than more and more harm to the economy.

Three years ago I was saying to colleagues there was going to be the biggest downturn on record a massive correction. Only to be told I was mad. "Low interest rates", "Low unemployment" and various other head in the sand comments I got back time an again. "It simpy is not going to happen" was the response of almost every businessman or accountant I spoke to.

I said at the time house prices were going to drop 20% to 30% and that was then. But then I thought the economy would slowly (five years or so) get back to near what it was. Now I think the policy of low interest rates will mean we drop further and stay lower for a lot longer (5 to 10 years) and the recovery will be much slower.

Reason? With no interest there is no growth. With increased interest rates it will simply knock back any recovery made up to that point.

Some businesses will recover quicker. But many will recover very slowly if they ever do.

It seems rather crazy to me that the Bank of England annouced today that they under estimated just how bad it was going to get. What? Who on earth is in charge at the Bank of England.

However the press are very much largely to blame for the current mess and some journalists have been very reckless in order to get readers and viewers with dramatic statements ahead of any problems. That's fine journalists are journalists after all not many people actually believe what they read in the papers anyway it is all very questionable for motives of the article in more ways than one.

But what we need is actually some clear leadership. Someone genuinely interested in our society and it financial and social make up. Someone will dare a say...

Lets just say Beckham is said to have a Golden Pair...

There is as yet no one in any Political Party I can see who has the right credentials although Vince Cable of the Liberal Democrats has spoken a lot of sence in the last six months.

However it is very unliklely in all reality he will ever get a change to flex his muscles....

Boy of boy. A country being run and likely to continue to be run (either way) by a bunch of five years olds... 

It might be a bit extreme to request the sacking of Gordon Brown and Alistair Darling but I have really come to the conclusion that these two are a pair of aliens from a different planet to the rest of us and they would possibly serve the alien's better than they do the UK (either way it would not be our problem).

After the mess and u-turns about the abolishion of business taper relief to introducing lifetime allowance entreprenuers relief...

Followed quickly by the abolishion of the 10% rate of income tax the then having to increase personal allowance...

And now a temporary rate of VAT of 15% what a total joke, frankly this Chancellor (and his boss Gordon) could not organise a P*ss up in a brewery.

Why?

They are careers politicians dealing with career Civil Servants who all live in ivory houses detached completely from the ordinary businessman and businesswoman. They have safe jobs, silver lined pensions and no training or background in normal life as a worker or business person in this country. They are not accountable except by you or my vote (which they decide when we get to express!).

Who has to sort out the very sudden mess of adjusting software (from what I can tell today this is causing a massive headache for pretty much most small businesses to administer) to cope with both rates and what's more they will have to cope in a years time with adjusting it back again all be it to the rumoured 18.5% VAT (or higher)? Well it is not Gordon Brown or HM Revenue and Customs. It is you and I the business people. Another business admin headache to deal with while TRYING to stay profitable. Thanks Gordon.

What on earth will the rate have to be in a years time to pay back all the debt this rate reduction and no doubt any rate increase will last longer than the 2.5% drop did. Personally I won't be suprised if the Government have to increase the VAT rate to 19% or even 20% to claw back the deficite.

So why not just leave it at 17.5% which it has been at for years? Frankly because Alistair Darling loves tinkering to try and make it look like he knows what he is doing when really he has not a clue (as demonstrated by the recent numberous u-turns).

Who will be on the frontline telling their customers "we are sorry to have to increase our prices" in a years time due to the increased rate of VAT. Will it be Gordon or Alistair no again it will be you and me giving out the bad news to customers.

If this VAT reduction is not simply a shot in the dark from a totally blind Government then frankly I cannot think of anything else to describe it.   

I just wish politicians lived in a real world or had lived in the real world for a long time before entering politics and spent a reasonable time in the area of politics in which they actually "serve" i.e. economy, business, housing, NHS, education. Detacted is an understatement.

There is no clear leadership, only short term headline seeking politics now. No clear strategies, just jumping from one problem to the next firefighting.

Start getting ready to explain to your clients and customers why in a years time and then over the next few years you are having to increase your charges and prices to cover the increased tax looming in just one years time (if not sooner).

See what that does to inflation!

What bright spark came up with the idea of reducing VAT for one year.. bigger companies might well profit for it, smaller companies will lose any benefit in increased costs and disruption and at the end of the day all consumers will be paying back the Governments borrowed money to fund the reduced VAT for many years to come in higher taxes to come in a year's time or so.

I gennunely think that almost everything this Government has done in the last three to four years particularly has bankrupted this country.

If your young son had got himself into a bit too much debt being foolish you would tell him to get out of debt asap and learn your  lesson for a more prosperous and happy future not weighed down in a sea of debt. That's not what this government wants it's "children" or citizens and businesses to do.... no no no the message is loud and clear "Get the banks lending again no matter what the cost we must get people borrowing again". "More debt thats what we need think Alistair Darling and Gordon Brown".

Debt debt debt and spend spend spend...

It is simply amazing.

Just be warned if you borrow short term at 2%, 3% , 4% or even 5% or 5% with fast falling interest rates that loan might well still be round your neck when the interest rate cycle demands interest rates again quite possibly at least twice the rate you originally borrowed the money at. Make sure you can afford the interest rate rises which are bound to come again at some point.

Here is my prediction. The next recession will certainly not be in 15 years time (i.e. similar to the gap between this recession and the last one). It will be within 5 years of so of the "end" of this one when interest rates and taxes all have to come up again which will take more money out of peoples pockets (inflation) again.

We are also now entering a period of greater instablilty as we did'nt try riding it out but instead tinkered with interest rates, banks, taxes and VAT. That period of instablity will going to see much more volatile ups and downs over the next 15 years in my opinion simply because government has no clear long term strategy and economic plan.

Want another example of why this Government has not got a clue what it is doing? What about the news the the "income splitting rules" are to be "shelved" for the time being. No dount as HMRC and the Government know full well that the proposals were very unfair and yet another example of a sledge hammer to crack a nut? Of course that's why they have been shelved Government are fully aware the rules would have been unfair. So why "shelve" them for the time being only? Why not just admit you are wrong and scrap them. It is no different to the u-turn on taper relief and the 10% tax band and other examples.

Basically governement does not like small businesses and loves to squeeze the last breath from every small business in one whay or other. Have many politians or HMRC staff actually tried being in business and surviving from week to week, year to year? Not on your life...

....... That would be way to difficult! They can't even succeed on the easy side never mind in the real world!

As you can probably tell I feel somewhat frustrated at both the Government and HMRC at present. Something tells me I am only going to feel more and more frustrated with Government and HMRC as time goes on not less frustrated...

I am currently sat on hold in a telephone abyss at present so thought would post the latest gem from HMRC.

Like many taxpayers I often wonder where my tax paid goes (frankly into a Civil Servant monetary abyss is the answer ...)

Lovely letter today from HM Revenue & Customs where most tas districts seem to have heavy backlogs of post and delays are increasing...

To

My Firm

Dated 16 July 2008

Dear Sirs,

NAME OF CLIENT...

Thank you for your letter of 17 June 2008.

Your letter has been sent to a more experienced officer to review. I will let you know the result as soon as I receive a reply.

To help us improve customer service please quote our reference number and provide a daytime telephone number in any correspondence.

Yours faithfully,

Mr J Dogsbody

Assistant Officer.

This letter is about the third or forth in recent weeks almost identical. They do cuase a lot of laughter in the office due to the sheer shock that HMRC would write such as letter and I think it would be a fair comment to say as fair amount of anger too. Why anger?

CHEATING THE POST TRY TARGET 

Is this letter a way of meeting post tray targets or rather CHEATING them? Bit of a coincidence that these type of replies seem a desperate attempt not to exceed a MONTH target as HMRC replies are nornally a day or so less than a month from the date of our letter. Or is that a bit cynical?

LACK OF DUE CARE AND ATTENTION TO INCOMING POST ON ARRIVAL

Why did it take a whole month to realise the post was with the wrong member of staff? What lack of management set up a post in system like this in the first place?

LACK OF BASIC TAX SKILLS BY HMRC STAFF

All our letter did was send in EIS certificates in support of the tax return entries already made and submitted, which HMRC have reversed with no letter or explanation? Not exactly a highly techincal letter !

On a less cynical note just maybe HMRC could be trying to be polite. After 20 years of dealing with HMRC on a daily basis I have ruled that out as an option frankly.

Why do I criticise HMRC alot in my posts? What other way is there of getting the message across of the waste of time, money and resources that is now at rediculous levels in HMRC and the Government generally and at my expense as a taxpayer in the UK?

I could perhaps send the following reply but as HMRC but as I doubt HMRC would get the point it would be a double waste of my time. Anyway posting it hear gets the message to a wider audience. 

REPLY

To HMRC Bootle 

Date 22 July 2008 (or perhaps I should wait till 15th August?)

Dear Sirs

CLIENT NAME

Thank you for your letter of 16 July 2008 in response to our letter of 17 June 2008.

You letter has been "sent" to the next floor down as they deal with letters that might be a waste of time and resources. They will sit on the your letter for a month and will let us know how to reply to your letter and whether it is a waste of time to reply to. When we have the result of their review we will let you know the result. 

To help us improve customer service, please quote our reference number and also provide us with a daytime telephone number that is not constantly engaged in any correspondence.

Yours faitfully,

Mr A Frustrated

Tax Adviser

Will this post change anything.....

13 May 2008 saw a massive U-turn by a government riddled with poorly informed, poorly qualified and frankly at times mad politians.

The 13 May statement should have been headed “WE NEED YOUR VOTES”…

I usually try and keep posts balanced but today I simply have to say just what I think as the shear incompetence on the part of the Government.

Following swiftly on the u-turn only months ago to correct a crazy policy abolishing business taper relief comes another massive u-turn on the abolition of the 10 pence tax band. Frankly this all comes from a totally incompetent Chancellor and Prime Minister (and ex Chancellor) who with all the u-turns and poorly drafted tax legislation seem to be totally confused by the tax laws that they have themselves been passing as law for the last ten years and have now simply lost their way completely in the haze (like many many members of the public and no doubt not a few accountants and tax advisers too).

Added to the fact that HMRC and many other Government departs appear to be losing sensitive data on an alarmingly regular basis and one which applied to a public sector business would probably see the directors in jail and the company publically humiliated – it seems that the Government and Government Departments and sectors are free to mess up over and over and cannot even see the egg on their faces until a heap of eggs has crash landed.

I think what irritates me most is that politians currently making tax law clearly have not a clue what to do and are just tinkering with an already massively complex system for what purpose?Umm scratching my head here a minute trying to give Alistair Darling and Gordon Brown at least some positive comment....

Nope cannot think of any...

VOTES?

Umm yep that seems to be the only thing on their minds. Just how shallow can it get from here until General Election day. It beggars belief...

TRUST? Well I actually voted for labour when Tony Blair got in but after the last five to seven years but sadly this Government has lost all credibility. It largely started with the lies over the war with Iraq and all those weapons of mass destruction which was a large part of Mr Blair’s downfall but it has simply got worse and worse. Also sadly yet another massive sign of financial madness from Government policies is still to come in the next two to five years e.g. record levels of house repossessions for starters – as we have only seen the beginning on that score.

As for drafting Tax Law as a Chartered Tax Adviser I cannot help but say what I think and that is that this Government has put the writing on the wall for all to see. “Not a clue”

Do Politians on their high wages, expense claims and allowances and gold edged pensions give a damn? Not really that much is pretty obvious… They are simply trying to look after number one is what it seems to me and will do whatever it takes to do just that.

If they started caring about the citizens of this country then just maybe we might see sense from them.

Well here it is plain and simple the text of HMRC's press release today being Gordon Brown's PLEADING for your votes..... 13 May 2008 Chancellor’s Announcement

Helping low-income customers affected by the changes to the personal tax system announced at Budget 2007

It felt like needed to make a post on the Blog today at close of play perhaps I am thinking of it as a bit of therapy...

It fact it now feels like I am in one of those American soaps where the embattled person needs to see their therapist... what is being a tax adviser doing to me! 

Having qualified as a Chartered Tax Adviser in 1990 and dealt with a wide variety of tax issues and situations at all levels I like to think I am reasonably capable at my job. In fact I have always said I love my job and sad as it might seem I "do" (just about at times) still love my job...The only part of my job I hate is dealing with HM Revenue & Customs or indeed the ever increasing level unclear poorly drafted and often unfair or unreasonable tax legislation.

In trying to resolve a dispute today between advise HMRC had given a client I had a joyful call to Mr Taxman at CIS Helpline (he would only give me his first name despite wanting my full name nice touch I have to say, why was he trying to hide?). Part way through the call he refused to speak on "speaky phone" as a partner was also involved in the call, as he was well aware from the beginning (two off us talking) so we had to take the call of speaker phone and relay Chinese whispers for the rest of the call (pathetic frankly). And he refused to give his surname, clearly understanding a formal written complaint was to be shortly winging its way in, then on supposedly transferring me to his supervisor he simply cut us off.

Was a surprised... Surprised would be the wrong world this is what you expect from HMRC routinely, but I never cease to be amazed at just how, rude, unhelpful and simply useless HMRC Revenue & Customs staff are. There is a systematic total lack of respect for taxpayers, accountants and members of the public at HMRC from the top management right down to the lowest level of assistant.

I would hasten to add this is not EVERY member of HMRC's staff is like this, in fact it is a breath of fresh air when you actually speak to someone who is helpful and polite although this is increasing rare.  If you are really really lucky you will very occasionally come across one with a sense of humor but they are am endangered species being hunted down by their managers it seems…

HMRC have told a Limited company client that has purchased two buildings to convert into flats that they are deemed to be a "developer" and therefore have to be registered under the CIS scheme.  HMRC did not dispute that the client is not deemed to be a contractor on level of construction type expenditure grounds which is well below the limits so in order to be able to tell the client, and indeed the main building contractors accountants (a multi million £ company) why exactly HMRC were “right” and that our client should be registered for CIS as the property owner, as they were saying, I asked for the legislation or public guidance that I could then pass on to the client and the builders accountant to show HMRC's opinion was correct.

Response. "It is in our internal guidance".

OK I reply "which part of the internal manuals which I can pass on the builders and my client".

The reply "it is not in any publicly available guidance.".

"What about statute" I reply.

"It is not in statute either" comes Mr HMRC's reply.

Bearing in mind this is the specialist CIS unit I am speaking to at HMRC I reply "so what you are saying here is that this is unpublished HMRC opinion, on which there is no guidance or statute how am I supposed to advise my client professionally and properly?"

Bearing in mind the call took around 1 hour 20 minutes of which around 50 minutes was spent on hold the answer came ...

"Get your client to call us here at the CIS unit and we will tell them over the phone..".

The fundamental point here is that Government and HMRC management fail to see this is exactly why there are so many rogue ORC's (Officers of Revenue & Customs).

So basically HMRC can make the rules up as they go along...

Now why is that? The answer seems pretty clear to me... Government has now become a leading expert in writing legislation which is poorly drafted, so widely drafted no-one knows the boundaries in which to work, and the rules become ever more complex year on year on year.

So what is needed? A radical shake up at HMRC would not go amiss for starters but it is perhaps time we had a change of Government if for no other reason that complacency and stupidity goes out the window and maybe we get so shred of common sense. This is not a party political statement by the way. With so many career politicians I personally can't see a clear winner on the Common Sense stakes. But after over ten years of madness personally I think it would be just good to have a change. I cannot see it being any worse but I can see it getting even worse if things carry on as is… Hopefully it a fresh approach might just see some levels of reality and humanity returning. Even the Monster Raving Loony Party could frankly do a better job on lots of issues…

Tax has truly gone totally potty… a direct reflection perhaps on the people writing and enforcing the rules…

What do you think? Have your say here and express your opinion...

    http://www.opinionpolls.me.uk/polls/Government/HMRC-performance.asp

Anyone who has had a tax investigation or enquiry will probably be hopping mad about the amount of time it took up and the potential costs involved.

I read a great article in The Sunday Times this week by Nick Morgan a journalist who had a tax enquiry into his own affairs.

You can read about his case on his website www.tax-hell.co.uk it has some very useful information for anyone (including tax professionals) involved with tax investigations and enquiries. 

His case is simply the tip of the iceberg. He is certainly not alone. HMRC however simply do not seem to care. HMRC has little respect for taxpayers and business of the UK.

HMRC also has such a shocking lack of understanding about how businesses work and the level of red tape and regulations they now have to cope with. 

Today I am dealing with a case where HMRC would love to effectively shut a business down simply because they are in the building trade and paid one months PAYE late and paid their Corporation Tax a little late. HMRC will of charged them 8% late payment charge but this is not sufficient compensation for HMRC they would also like to write to all the customers of this business basically saying the company is a bit naughty and therefore we will be withdrawing the gross paying CIS certificate.  I am clearly appealling this one all the way. When HMRC behave so madly you just have to fight them all the way.

As a consequence it is possible that around 50 plus people could be out of a job and a profitable business paying lots of tax will be crushed.  A business that has paid ALL it's tax and on time the vast majority of the time for a good number of years, a regular reasable sized non troublesome "customer" of HMRC. Tax madness and HMRC and the Government gone totally potty.

In another case I am appealing a seperate case where HMRC want over £1000 in fines for late NIL CIS monthly returns. This is simply unreasonable.

The logic of this government and HMRC is simply astounding and beggers belief. It is a tax world gone mad.

When a new member of staff starts at HM Revenue & Customs the first thing they are passed is a stick.

The team leader when asked what this is for then replies. "Look in this job we beat taxpayers with a stick if they make ANY mistakes, no matter how small use the stick and use it well, and don't hesitate to use it".

"But what about helping taxpayers?" asks the new trainee...

"Help... don't be stupid why would we want to waste time doing that. There is more MONEY to be made with the stick and you will get no thanks or praise from me for helping but you will be rewarded for stick useage....the better the beating the better the rewards..."

Although nothing to do with tax while researching a tax issue today and "consent orders" I came the article below. I have to say after pondering on all the legal costs no doubt funded by the taxpayers of this country in full (including a Judicial Review) I wonder if Victims or the families of victims get the same level of legal state backing in pursuing their attackers through the courts?

Surely if you come to an agreement in court after "taking advice from your counsel" costs of subsequently running a Judicial Review are somewhat unreasonable?

If the Jones' in Artic Systems had agreed to pay the £3000 or so wanted by HMRC in court after asking their counsel,  then subsequently changed their minds and appealled the decide (agreed on) I wonder is they would have been given the right of appeal by the courts?

The world and the legal system has gone mad for sure. I wonder how many tens of millions Heather got today, sorry just heard approx £24million, in the divorce courts for four years of marriage? ... thats around £16,000 for every day of marriage, plus all the money she no doubt spent while she was married to Sir Paul, holidays luxuries etc. Not bad going, and at least it was not more which I thought it probably would be so on this occasion the courts have seen a little bit of sense. But then again lots of people warned him before he married her (or at least thought so, as I sure did) "this is not going to end happily, or before very long". The only good thing is that now Heather might well end up meeting a guy after her money  as they say "what goes around comes around"...

Courts just so often seem to be detacted from reality and common sense on a week in week out basis. Too many brandy's possibly. 

I am sure the legal profession are not complaining though whether defence or prosecution.

Another bit of madness found today is here for your delight...

"ASBOs "By Consent"