Chip and Pin from Paypal

For years, major high street stores have been able to accept credit card payments. Unfortunately, some smaller businesses have not been able to justify the costs (eg terminal rental fees, telephone landline rental) associated with such payment methods, resulting in a loss of sales. Additionally, some smaller businesses are finding it difficult to be ‘accepted’ by the Merchant companies due to poor credit ratings, or a transaction volume that is too low . Accepting card payments appears to have been an exclusive club – until now.

Paypal is launching Paypal Here, which will be available to selected UK businesses over the coming months before becoming generally available in the summer. Paypal Here will allow any business to accept Paypal, credit and debit card payments simply and securely on the go.

The business will download the PayPal Here app, and sign up for the device right there. There’s no contract or ongoing fees, just the initial purchase price and a “small” fee for each transaction. The device is then paired with your smartphone using bluetooth technology to accept secure payments anytime, anywhere you trade, whether at a market stall, shop, restaurants, taxi or even in the customer’s home. As well as taking card and PayPal payments, the system allows you to send invoices and receipts wherever you do business.

The system has already been tested by a business in Londons Borough Market and they reported that it was great for business – cash is king in the market, and often customers would run out of money and sales would be lost. Giving the option of payment by card resulted in additional sales that would otherwise have been lost.

In theory this seems a great idea. Paypal Here may be able to break the stranglehold that the large merchant service companies have on this market. Many customers will already have experience with Paypal, being the preferred payment choice with ebay and other online enterprises that have chosen not to go down the merchant services route. The main issues for small businesses will probably be the ‘one-off’ cost of the terminal and the ‘small’ (details yet to be released) transaction fees.  One thing is for sure – the business will need to keep their mobile phone full of charge!!!

Paypal is also pioneering payment via ’check-in’ – a quick tap in a mobile phone app to check in and pay a local business. This opens up so many possibilities for making life quicker and easier: for example, ordering your drink or lunch ready for collection, beating the queue.

Anyone interested in finding out more about PayPal Here can register their interest and get all the facts here.

High Income Child Benefit Tax Charge

On 7th January 2013 Child Benefit  became yet another means-tested benefit in an effort to save the Treasury an estimated £1.5 billion in the next year. If you or your partner have an annual income (including rental income, benefits in kind, dividends, and interest) exceeding £50,000 then you will be affected and it will cost you.

The tax charge will be 1% of the total child benefit received for every £100 of income over £50,000 and will be applied to the higher earner, irrespective of whether or not they are the person to whom the benefit is paid. For anyone earning over £60,000 the whole amount received will be repayable, and they should seriously consider ‘opting-out’.

If you earn more than £50,000 and receive child benefit you will need to complete a self assessment tax return each year.  If you already are required to complete a self assessment tax return then it is a simply a case of a couple of additional entries. However, if you are currently not in self assessment then you need to register with H M Revenue & Customs – failure to do so may result in penalties.

You can opt in or opt out of receiving child benefit at any time so it is worth checking regularly whether or not it is beneficial to do so. For example if you earn more than £60,000 and are not normally required to complete a self assessment tax return then the sensible option would be to opt out since the whole of the benefit received would ultimately be repayable. Additionally, those earning slightly below £60,000 may still prefer to opt-out as they may not consider the cost and inconvenience of completing a self assessment tax return is worth the financial benefit.

The HM Revenue & Customs website has further guidance on the matter at http://www.hmrc.gov.uk/childbenefitcharge/index.htm

If you are subject to the High Income Child Benefit charge then there are various options of how to pay – you can have a lump sum payment through self assessment payable on 31st January following the end of the tax year, or you can have it taken via your PAYE tax code. Either way you still need to complete a Self Assessment tax return, which involves collating information from various sources (P60s, interest certificates, dividend vouchers). All of this could prove daunting to someone who has never needed to complete a return previously. DEB Chartered Accountants would be happy to shoulder this administrative burden for you. We can also review whether or not it is beneficial for you to opt out of receiving the Child Benefit, and also discuss with you the options available for mitigating the effects of the tax charge. Please do not hesitate to contact us to see how we can be of assistance.

No time to do your book-keeping ?

Preparing book-keeping for your business is extremely important. Not only is it required to comply with the law, it is also a valuable means of keeping track of the progress of your business. Furthermore, in the event of an HMRC enquiry good book-keeping can represent your best line of defence.

Despite its importance very few people actually enjoy doing book-keeping. For many people, the prospect of working hard during the day to earn a crust then coming home to start the book-keeping is very unappealing, particularly if this impinges on valuable social and family time. For this reason, many business owners are recruiting the services of book-keepers to allow them to focus their energy on the activities that generate income or simply to allow them to enjoy more of their social time without worrying about having to ‘do the books’. Unfortunately, good book-keepers can be difficult to find, and poor book-keepers can create more problems than they solve.

At DEB Chartered Accountants we have recognised the needs of our clients and developed systems and technologies to provide the book-keeping support that they need. In addition to preparing simple but effective book-keeping we are able to take things further to produce in-depth management information for those business-owners who need to understand the financial performance in more detail to assist them in making crucial business decisions.

If you are in struggling with your book-keeping or simply fancy off-loading the burden and would like to find out more about the services DEB can offer, please contact us for a free informal meeting.

How unfair can HMRC get?

Real Time information (RTI) will soon be upon us.  As a consequence of this a monthly (or in some cases, weekly) feed of information will tell HMRC what every business owes them in respect of PAYE and National Insurance.  It is evident from the latest initiative to name and shame non-payers on their website, that HMRC is pursuing a policy of bullying small businesses into ensuring it gets paid in preference to essential suppliers and employees.  Armed with the new information from RTI, it appears likely that its’ aggressive debt collection will be on the increase.

Under RTI there will no longer be an option of benefiting from an ‘interest-free loan’ by delaying the payment of PAYE and National Insurance.  HMRC will quite rightly insist that any money owed should be paid on time. However, many companies do not owe money to HMRC each month, and instead it is the other way round, with HMRC owing money back to the business. This situation arises regularly with companies operating within the Construction Industry Scheme if the tax deducted at source exceeds the amount they deduct under PAYE or from their own subcontractors. Under RTI, HMRC will know each month how much they owe back to such businesses and it would seem only fair in these situations that HMRC repay the amount due to companies each month, just as they would expect companies owing them money to pay it to them. Double standards apply however. Whilst HMRC demands money owed be paid monthly, they will not repay money due back to companies on a monthly basis and any overpayments have to be carried forward and claimed at the end of the tax year.  HMRC then makes it extremely difficult for companies to claim back the annual amount of overpayment demanding that they provide bank statements showing the receipt of the money, and the vouchers that support the tax deductions.  These claims often take so long to process that companies cannot pay their Corporation Tax liabilities as a result of HMRC having not issued the PAYE refund to them.

We consider this double standard to be plain wrong.  What is just and fair to HMRC should also be just and fair to UK businesses, but it appears unlikely that this will change anytime soon.  In light of this, the only way to avoid potentially serious cash flow problems is for businesses that are subject to CIS deductions to arrange for payments to be made gross to prevent tax being deducted at source.  If you wish to discuss these issues and how to obtain gross payment status, please do not hesitate to contact us at DEB Chartered Accountants.

Are you thinking of buying a new car ?

If you are thinking about treating yourself to a new car in the near future there are a few things regarding the tax treatment of cars that are about to change from 1st April 2013 that you should be aware of.

Writing Down Allowances
On 1st April 2009 there was a fundamental change relating to the capital allowances that you could claim in respect of cars bought after this date. For cars bought before April 2009 you were entitled to claim a writing-down allowance of 20% of the tax written down value of the car subject to a maximum of £3,000 each year. If the car was subsequently sold for a price below the tax written down value it was permitted to claim the difference as additional capital allowances, referred to as a ‘balancing allowance’.  Under the present capital allowances regime there is no £3,000 restriction but the writing down allowance has been reduced to 18% for cars with CO2 emissions below 160g/km and only 8% for cars with CO2 emissions exceeding 160g/km.  It is no longer possible to obtain a balancing allowance on the disposal of a car unless you are a sole trader or a partner and there is a private use adjustment or your trade has ceased.  If these circumstances do not apply, it is particularly advantageous to opt for a car with CO2 emissions below 160g/km as the 18% writing down allowance ensures significantly greater tax relief on the ownership of a car than that achieved under the 8% rate.  However, from 1st April 2013 this threshold is being significantly reduced from 160g/km to 130g/km and many cars that historically qualified for the 18% writing down allowance will be relegated into the 8% rate.  If you looking to buy a car after 1st April 2013 therefore, it is important that you consider the official manufacturers CO2 emission rating so that you are aware of the level of tax relief it will attract.  If the car you are particularly keen on buying has CO2 emissions which fall into the range 130-160g/km then it may be beneficial to consider purchasing it prior to the end of March 2013 to ensure that it still qualifies for the higher 18% rate of writing down allowance.

Leased Vehicles
If you lease a car there will be a disallowance of 15% of the lease payments for cars with CO2 emissions exceeding 160g/km. Similarly, this threshold is to be reduced to 130g/km for vehicles leased from April 2013.

First Year Allowances on Qualifying Low Emission Cars (Qualecs)
Under the current capital allowances regime you are permitted to claim 100% first year allowances on cars with CO2 emissions that do not exceed 110g/km. This threshold is also being significantly reduced to 95g/km from 1st April 2013 and from this date onwards will only apply to cars bought from new, whereas at present the 100% first year allowance is claimable in respect of second-hand car purchases. Again, if you are looking at purchasing a car with CO2 emissions between 95-110g/km or a second-hand car with CO2 emissions below 95g/km it may be worth considering making the purchase before the end of next month.

Notable Qualecs which will qualify for the 100% first year allowances after 1st April 2013 include the Ford Fiesta 1.6TDCi 95 Edge Econetic, the VW Polo 1.2TDi 75 Bluemotion and the Nissan Micra 1.2 DIG-S Visia. Alternatively, if you are looking for a family car with a bit more ‘oomph’, the Chevrolet Volt 1.4 Range Extender can manage 0-60mph in a respectable 9.0 seconds with an excellent fuel economy of £3 per 100 miles!

Buying a Van Instead?
Before you put down the deposit on your new car it may be worth considering the possibility of getting yourself a van instead. Vans with a payload exceeding one tonne (including double cab pick-ups such as the Nissan Navarra and Mitsubishi Animal) fall under different capital allowances rules to cars and will continue to attract 100% first year allowances irrespective of their CO2 emissions.

If you are contemplating buying a new car and want some advice before you make your decision give us a call at DEB Chartered Accountants.

Real Time Information for PAYE from 6th April 2013

It is fast approaching the time for HMRC’s latest attempt to make life easier for us – or is that easier for them!

From 6th April 2013 all businesses with less than 5000 employees will have to report their weekly or monthly payroll details online to HMRC each pay period.  The preparation of paper documents will no longer be allowed.

With the advent of the new Universal Tax Credit, HMRC wants to have full current information about all employees, even those paid below the National Insurance and tax thresholds, to ensure that the benefits are paid correctly.  They will know whether higher paid employees are eligible to receive family allowance payments.  They will also be in a position to ensure that employers are paying over to them the correct amounts of tax and National Insurance each month as it arises.  We anticipate that they will shortly be expecting to take these payments directly from employers’ bank accounts by direct debit, as they currently do with VAT.  Penalties for late payment already exist, monthly penalties for late submission of the information are probably not far behind.

HMRC suggest that employers should prepare for RTI immediately, so that everything is in place by 6th April 2013.

  •  Software will be needed to process your payroll. Some packages may be free of charge.  If you have software it needs to be updated to a version with RTI functionality. Alternatively you need to find a payroll provider to do the job for you. (DEB Chartered Accountants provide payroll services to many of our clients and would be happy to help if you wish)
  •  Check that your employee data is complete and correct. You will need to check, and if necessary, update the data for all your employees. Name, date of birth, National Insurance number and gender are all crucial.You should also have a complete current address.  This applies to all employees, even temporary, seasonal, casual or irregularly paid employees.The verified data should all be entered on to your system in advance of your first submission.
  •  You should register with HMRC for PAYE online.  They will then provide you with login details and passwords which your new system will require
  •  Collect additional information about your employees.Information will be requested about the number of hours your employee works each week.  If an employee is paid irregularly, say just once annually, you will need to set an irregular payment indicator so that HMRC does not think that the employee has left your employment when they miss a pay cycle.

When the new system starts, you will have to report all payroll information electronically, via your payroll system, at the time of processing each weekly or monthly cycle.  There will be no facility for reporting by email or by filling a from on HMRC’s website.

If you feel that your business requires any assistance with any of the above issues then please do not hesitate to contact us at DEB Chartered Accountants.

 

Social Media, Internet Marketing, and You

With an ever-evolving world and technological landscape, customers are interacting with businesses in ways that they historically did not. Due to the convenience and efficiency of searching for businesses online, it has become the default method for many people. In fact there are businesses that are entirely run on the Internet, meaning customers never come into physical contact with them to make purchases. While this is an extreme, the Internet is a resource that can massively benefit everyone. The fantastic accessibility allows you to tap into the advantages of the Internet easily and cheaply.

So what can the Internet do for you? Depending on the type of business you run the Internet can offer different opportunities. For example a retail business might benefit from offering customers the chance to purchase their goods online, this could lead to improved sales and possibly lower costs if less shop space is required as a result. Something that all businesses can use the Internet for is to raise awareness of their brand and conjure up some goodwill. There are countless ways in which to go about this and the limit really is your imagination. However we do have some tips on how to get started.

Firstly you need a website. Think of it as a small place on the Internet that is dedicated to showing off you and your business. As such it should give a good reflection of you and give potential customers a view of what makes you unique. An important thing to remember is that this may be the only way a customer can get an impression of you so you should strive to make it as favourable as possible. Ensuring a professional appearance by using appropriate page titles, pictures and language is essential.

A large consideration with your website is whether you appear in search engines, as this will dramatically improve the likelihood of new customers finding you. The designers of search engines are constantly changing the way that they work to eliminate people targeting loopholes to get their site noticed. Due to this, it is difficult to offer definitive advice on the matter. However, content that is relevant to the search and is well written will get you noticed, so try to focus on producing quality text that will appeal to customers. Another factor appears to be the amount of links from other sites to yours. Therefore, if someone recommends you on their site, and uses a link, not only will it be extra advertising, but it will also help push you up the search engine rankings!

Social media has become massive. Facebook has recently announced its 1 billionth member, that’s one billion opportunities for your business! Creating accounts for and managing different social media can seem time consuming but we at DEB feel it is a worthwhile activity. There are tools that allow you to manage different social sites at once to streamline the process. Using social media may not instantly get you a sales boost, but it isn’t necessarily about that. It’s about getting your brand known to more than just your current customers. It allows you to build relationships and puts your business in the minds of people that otherwise would not know you existed. Further down the line these people may require goods or services you offer and there is always the chance they will choose you!

There are many ways you can make use of social media, for example if you have a great offer that you need to publicise it could be a free way to get word around, with little effort on your part. Again these pages should appear professional and be a reflection of your business. It’s important to try and strike the right balance between being a trustworthy, reliable business and not being boring. This is something that you will be a better judge of over time and if you are unsure there are lots of companies already using social media to take inspiration from.

At DEB Chartered Accountants we are really trying to make a social media push so please feel free to have a look at our pages if you’d like to see what we are up to:

The Internet is a wonderful tool and there are so many different ways to appeal to customers that it would fill thousands of blog posts to list them all. Obviously one of the ways we want to offer information to people is through this blog, but its just a small part of what is possible. We would love to discuss with you what you are doing with your business to raise awareness so drop us a comment and please subscribe to this blog for regular updates!

A Step Too Far By HMRC ?

The Needs of UK Businesses

In the current economic climate, UK businesses need to adapt and change to enable them to cope with the difficulties brought about by the downturn in the economy.  To do this they need the flexibility to engage workers on a sub-contract basis rather than through employment.  The ever-increasing burden of employment legislation imposed over recent years has, for many businesses, made employment both extremely onerous and unattractive and made it difficult for businesses to flex their workforce to cope with the demand from their customers.  Many business-owners are fearful of taking on employees due to the difficulties associated with dismissing them and the threat of punitive tribunals that invariably follow.  As a direct consequence of the employment legislation, employees that are ineffective or not suited to a business’s needs often have to be retained rather than run the risk of legal process that drains businesses of both time and resources that they can ill afford.  In light of this, it is only to be expected that many businesses look to self employed sub-contractors to meet their labour requirements.

HMRC View

H M Revenue & Customs does not appear to like self-employed contractors because the amount of tax revenue that is obtained from them is far less than that derived from employees, and the collection of the tax is more expensive than that collected through the cost-efficient PAYE System.  HMRC would ideally like to have all workers classified as employees and over the years has actively worked to minimise the use of subcontractors, essentially denying businesses a valuable resource to achieve a situation that it considers to be more desirable.

Status enquiries pose a significant threat to businesses that deploy self employed individuals, and every attempt that is made by them to verify that subcontractors are genuinely self-employed is countered by HMRC moving goal posts in order to thwart them.  In the Construction Industry, the extremely onerous Construction Industry Scheme (CIS) has been imposed upon users of sub-contractors that compels them to jump through hoops if they wish to use their services.  This regime is enforced by a disproportionate penalty regime that can potentially cost the unwary thousands of pounds in penalties.  The Construction Industry Scheme appears to have been designed to increase the problems of using subcontractors and to persuade businesses to use employees as an easier alternative.

As a natural consequence of HMRC’s action against subcontractors, many businesses have turned towards subcontractors that are incorporated in order to avoid status disputes.  This has led HMRC to respond by introducing IR35 and legislation aimed at Composite Companies.  Whichever way industry turns HMRC seeks a way to counter it in order to get it’s own way.  In such an adversarial situation it is inevitable that tax strategies aimed at countering HMRC’s views have come to the fore.  HMRC tries to take the moral high ground to decry the evils of “False Self Employment” and the “abuse” of tax legislation to counter their justifiable status claims.  However, the tax avoidance phenomenon is essentially one of HMRC’s own making.  If HMRC does not want UK businesses to use complex arrangements then it should accept the economic reality that businesses do not want, nor can afford, to employ workers as they would like.  If HMRC stopped interfering in how businesses are run, simply to benefit themselves, then business owners could spend less time engaging in tax avoidance strategies and instead focus their efforts on helping to repair the country’s ailing economy.

 DEB Can Help

Whilst HMRC continues it’s efforts to manipulate UK working practices, those businesses that use sub-contractors will be constantly under threat.  Here at DEB Chartered Accountants we are highly experienced in helping businesses find their way through the complex minefields set by HMRC.  We can help you review your employment requirements and formulate the most appropriate way forward, with a view of minimising both the cost and the risk posed by HMRC.

If you feel that your business has status issues or you wish to reduce the cost and risk posed by sub-contract workers, please do not hesitate to contact us.

They Think Mitt’s All Over

This week has seen the climax of the US Presidential election race between the incumbent Democrat President, Barack Obama and the challenging Republican candidate, Mitt Romney. In the lead-up to the result day the polls suggested that it was a close-fought contest with most political commentators predicting that it would go to the wire and very few calling which way it was likely to go. In the end though, Tuesday night saw Obama surpass the 270 points he needed to see him over the finishing line and ensure that he will continue in office for another 4-year term.

Obama was the over-whelming favourite when he first came into office 4 years ago (fighting off the challenge of Republican John McCain), but the enthusiasm for his re-election appears to have waned on both sides off the Atlantic following his limited success in remedying America’s internal problems and growing transatlantic tensions relating to the European financial crisis. Despite his apparent failure to live up to his hype over the past 4 years, Obama still seems to have been the over-whelming popular vote outside of America, not least here in the UK.  An online opinion poll hosted by the Sun newspaper revealed a huge majority in Obama’s favour with him picking up 81% of the votes and Prime Minister David Cameron tweeted that he was happy that his ‘friend’ had been re-elected. This appears to follow suit with much of Europe, where, despite a generally right of centre political bias, European leaders appeared to be more than pleased that Obama was to retain the presidency, and opinion polls in Germany and France suggesting that only 5% of those polled were in favour of a Romney victory.

It appears to this ‘fairly neutral’ observer, that the European pro-Obama sentiment stems as much from a suspicion over Mitt Romney’s personality and his credentials to lead the world’s most powerful nation, as it does from confidence in Obama’s political acumen. It seems to be a case of ‘better the Devil you know’ with many people wary of what the more outspoken Romney might do if he were to get into power. He certainly did himself no favours in the popularity stakes during his recent gaffe-ridden European visit when he managed to offend many Britons by suggesting Britain was incapable of organising a successful Olympic Games and similarly upset many Europeans with his ill-advised comments relating to his thoughts on European welfarism.

Only time will tell if Obama’s latest stint will be considered to have been successful by the US public, but from a British perspective we feel his re-election can only be seen as a good thing. Even if Obama isn’t the political saviour that the early ‘Obama-mania’ suggested he might be, at least we know what we are getting with him. A strong alliance between Britain and America must surely be considered by most to be generally desirable, and we can’t help but feel that relations may have taken a significant turn for the worse had the election result gone the other way. Hopefully, we can now look forward to an upturn in the UK economy as financial markets react positively to the news of Obama’s re-election.

General Anti-Abuse Rule

Anti-Abuse vs. Anti-Avoidance
In it’s battle against the increasing resistance of tax payers who face excessive tax burdens, H M Revenue & Customs are exploring the possibilities of introducing legislation which will effectively make them judge and jury over the morality of legitimate tax avoidance arrangements.  Indeed the proposal started it’s existence as an Anti-Avoidance rule, but has seamlessly morphed into Anti-Abuse which they no doubt feel will carry more moral support.

The Tax Burden on Owner Managed Businesses
The increase in the provision of tax strategies is a demon of the Government’s own creating.  Society as a whole agrees that a progressive tax system is fair in a modern society, and those that are more able to pay, do in fact pay more.  This is a concept that most people will agree with.  The problem is, however, this principle has been taken to an extreme.  Currently owner managed businesses face a totally unacceptable burden of tax.  They face tax liabilities wherever they turn.  They pay taxes whilst they are attempting to earn profits. At the end of each year they pay tax on the amount that they have earned.  More tax is payable when they try to extract the profits from their businesses, and then they again face the same battery of taxes on their personal expenditure as they did when they were earning the profits.  If what is left is invested, then tax is payable on the proceeds of sale of those investments, and should they manage to accumulate assets during their lifetime, then the Government is there waiting with their hand out for their share of the estate.

Tax Collection and Penalties
In addition to the ever-increasing burden of taxation, businesses face the equally increasing burden of doing the work of H M Revenue & Custom for them.  More and more of the tasks of collecting tax are being imposed upon businesses, and an incredible burden of penalties exists to punish those that do not do their duty in the way that they dictate.  We have one client who, as a result of personal tragedy in his life, failed to do returns that he needed to do, and, as a consequence was hit with over £19,000 in penalties.  This was a one-man band business that was not making huge profits but simply trying to earn a living.  Surely this cannot be seen as being right?

Redefining the World
HMRC wants the business world to be what they deem it to be so that they can increase the revenue that they can collect.  They are constantly trying to move the goal posts in an attempt to redefine self employed sub-contractors as employees.  The existence of sub-contract businesses is an economic reality that is required by our economy as a whole.  HMRC do not want to accept this reality and are constantly trying to outlaw such arrangements simply because their take is greater from employees on PAYE.

Fiscal Bullying?
Whilst HMRC fail to collect tax liabilities in terms of billions of pounds from multi-national corporations, with whom they eventually seek to cut  deals, with smaller owner managed businesses their position is much different.  They know that bullying tactics intimidate business owners and they use this fear factor to get their own way.  Businesses are struggling due to an economic crisis (for which the Government themselves have to take their share of blame) and, as a consequence, face difficulties in making ends meet and experience cash flow problems.  Faced with not enough funds to go round, in a fight for survival, businesses have to pay those that are essential to keep their businesses going.  Their employees and key suppliers are the ones that are essential to the survival of a business.  Liabilities to HMRC always need to be paid and most businesses endeavour to pay them.  However, when the chips are down, HMRC do nothing to contribute to the survival of a business, and, as a consequence must come at the bottom of the priority list.  Being fully aware of this, their debt collection arm put undue pressure on small business owners, who they can intimidate.  They threaten to put companies into liquidation if liabilities are not paid, and then act to close them down if they are not paid.

Inevitable Response
In view of the above situation, it is not surprising that an increase in tax avoidance strategies has emerged as a natural reaction of business owners trying to minimise their tax burden to something that they consider to be fairer.  The Institute of Chartered Accountants in England and Wales has issued guidance to all it’s members relating to this issue in an attempt to distance itself from what is conceived by the general public as unacceptable practices.  Whilst they are correctly concerned about the image of it’s members, it is nevertheless struggling in this regard as any self respecting pro-active accountant simply has to make it’s clients aware of the availability of such strategies.

A step too far?
We are already faced with the over powering presence imposed by HMRC.  They have the power to change the rules if there is anything that they disagree with.  However, giving them the power to define what is an acceptable use of those rules, and what is not, is a step too far.  They will simply be able to rule against all legitimate attempts by taxpayers to arrange their affairs to their best advantage.  They would become judge and jury on the morality of legitimate tax arrangements.  This is a power that over time they are certain to abuse.

They say it is wrong for the tax rules to be used in a way that was not intended by Parliament when they conceived them.  This did not stop them using legislation established in the 1940’s to combat issues of separate assessment of husband and wives, that was established decades later, when they pursued the Artic Systems Case. In that case the courts thankfully ruled that HMRC were in the wrong.  With a General Anti-Abuse Rule (GAAR) the question exists of whether they would need to take such issues to court in the future.

The majority of taxpayers who are not business owners may have little sympathy with business owners who they conceive as being legitimate targets for HMRC’s attempts to raise tax.  Why should the wealthy not pay the large part of the tax burden?  However, this may well be the thin edge of the wedge, and they would be the first to complain should anything affect their own liability.  Given the power, HMRC will use it, and the danger is that there will be little limit on their power if the GAAR comes into existence.

DEB position
No reputable accountant can easily recommend tax strategies where the ultimate success is uncertain.  Whether a strategy works or not will depend upon whether HMRC takes it into litigation, and subsequently, the decision of the court deliberating upon extremely complex tax issues.  Some will work, whilst weaker strategies will not.  However, we feel that the availability of such strategies is an economic fact of life that all businesses need to be aware of.  The Government have tried to use moral arguments in their defence against schemes, which they probably accept are perfectly legal.  It is up to each taxpayer to make their own decision relating to the morality of their position.  Our role at DEB Chartered Accountants is to discuss with our clients the risks and rewards of involvement in tax strategies, and, for those that wish to proceed further, to ensure that they consider only the strategies offered by reputable and successful providers.

Call to Action
If you are concerned about where such a rule will lead you need to raise this issue with your MP.  If a GAAR is introduced then no doubt the tax strategy industry will react accordingly.  If you wish to discuss tax strategies in a balance way, please contact us at DEB Chartered Accountants.  We have developed a unique program called Stratego to help clients position themselves in this regard and we should be more than delighted to help you consider this very complex issue.  Be wary of providers offering you returns that are simply too good to be true.  You never know – they may just be that.