Sage Blog

Jon Martingale, Sage Accountants' Division

From 1 June, HMRC has been trialling a ‘single compliance process’ for enquiries across a range of taxes. Most people will not be aware of what ‘single compliance process’ is, so firstly, let me explain what this process is and what it could mean.

The single compliance process is a framework within which HMRC will undertake the majority of future enquiries. The framework uses five process stages (planning, contact, process, resolution and closing) common to most enquiries. Any enquiry will have a set level of intensity dependent on the risks identified. The level of intensity will determine how long the enquiry will last, ranging from 1.5 to 8 days.

The trial will run for 6 months in the following locations:

• Reading/Slough
• Newcastle
• Warrington
• York
• Exeter
• London Euston
• Southampton
• Cardiff
• Belfast
• Edinburgh
• Dundee

During the trial period, the business records of up to 1,200 small and medium businesses will be checked during meetings on business premises. If the trial is successful, the new process will be rolled out nationally from January 2012.

The new process and checks will help HMRC identify mistakes in paperwork and records. If any errors or high risks are detected as part of a check, this will lead to a tax investigation and a fine of up to £3000. If an investigation is undertaken, HMRC will check all areas of compliance – e.g. VAT, income tax, corporation tax and PAYE – as they will work on an assumption that if an error has been made in one area, then errors are likely to have been made in other areas.

HMRC claim that analysis has highlighted how poor record-keeping can lead to underpayment of tax. Once the process is rolled out, up to 50,000 SMEs will be checked each year and HMRC expects to collect an additional £150m a year in tax.

VAT registration

In addition, HMRC have also recently announced a summer campaign on VAT registration. Businesses with an annual turnover at, or close to, the VAT threshold of £73,000 will be checked for VAT registration. It will be important to ensure that businesses who have reached the threshold are VAT registered before any amnesty runs out.

How can Sage accountants help their clients?

It is important that all businesses maintain accurate and complete records moving forward. Sage offers a range of solutions to assist; including Sage 50 Accounts and Sage 50 Payroll, as well as our latest online accounting software – Sage One

Sage One Accounts is an online accounting service for small business owners who want greater control of their finances, but don’t have an accounting background or time for software training. Sage One can automatically calculate VAT based on the information entered by the user, and once it has worked this out will automatically submit the VAT return online in a few clicks. This will allow VAT returns to be submitted to HMRC accurately, efficiently and on time. This can be demonstrated easily to a tax investigator at any PC with an internet connection.

Sage one also offers an ‘Accountant Edition’ to make the process of accountants working with clients seamless and effortless. Accountants simply connect with their clients and access live financial information immediately. This means that the accountant can offer advice and guidance to clients to ensure that they are prepared for any HMRC checks.

Sage One Accountants Edition is available for free to all Sage Accountants Club members*, and you can sign up for a free trial or webex session by visiting www.sageone.com

Jon Martingale, Sage Product Manager

*Standard access fee for Sage One Accountant Edition is £250 per annum. Sage Accountants’ Club members who subscribe to Sage One by purchasing credits for Sage One Cashbook or Sage One Accounts get access for free.

We knew it was going to be bad.

But as the first official breakdown into what the Government owes is published, the UK’s debt crisis appears to be much worse than anyone thought.

Steve Porter, Sage Accountants Division

New figures confirm that Britain is now in the red to the tune of £4 trillion – a hefty £65,000 per person. And experts say that as analysts continue to pore over the country’s post-election finances, the figure could rise even further.

So how does it all add up? And where do we go from here?

According to research from the Office of National Statistics (ONS), the amount owed is double that previously predicted by analysts – including the Centre for Economics and Business Research.

ONS experts say our borrowing is now so huge it would take each of the UK’s 62 million residents five years to pay off their share.

Their report, published last month, attempts to present a comprehensive review of our debt by adopting an approach pioneered by former Prime Minister, Margaret Thatcher.

Thatcher advised assessing spending and debt in the same way that households calculate what they can and can’t afford.

Round up of our financial health

The ONS says their survey represents the first realistic round up of our financial health since the election and looks at amounts spent on public sector and state pensions, bank bailouts and costs incurred by Labour’s Private Finance Initiative.

The figures are truly mind-boggling. The report calculates there is now a net public sector debt of £1.08 trillion but values state assets – including the worth of every school, hospital, office, council house, railway, ship, aircraft, vehicles and land – at £1.4 trillion.

Analysts added the large amounts spent on pensions – there is some dispute about these but the ONS estimates the public sector pot is £1.2 trillion and the state pot £1.35 trillion – to the additional costs taxpayers must cover, including £40billion for decommissioning old nuclear power stations and £500billion for contingencies.

Another £1trillion to £1.5trillion was spent on banking bailouts and take-overs, setting the total debt at around £4 trillion.

More bad news to come?

ONS chief economist Joe Grice said that the estimates were ‘important steps to help assessment of the public finances and their sustainability.’ But others have warned that there could be more bad news to come.

Mike Denham from the TaxPayers’ Alliance warned that the amount could double as the true cost of helping the banks is revealed and our pensionable population increases.

As he says: “Once you take account of the full extent of state pension liabilities and other costs associated with an ageing population it may be that the real liability could be double even these figures.”

For now, the Treasury’s response has been to establish an Office for Budget Responsibility and a Public Service Pension Commission to look into spending and sustainability respectively – amid fears about cuts and freezes.

Managing public finances

But professional bodies like the Institute of Chartered Accountants in England and Wales (ICAEW) say more wide-scale action is needed to address the problem and are calling for an overhaul of the way public finances are managed.

Chief executive, Michael Izza, explains: “While there are important debates to be had about specific spending cuts, I believe that meaningful reform is necessary to underpin sustainable public finances over the long term and create a culture of fiscal responsibility.”

As he says, there is still a lot of number crunching to be done but finding meaningful, permanent solutions to our debt problem is a challenge we all face.

Thinking business

At Sage our aim is to do our bit in terms of helping sustain a slow but steady recovery. We pride ourselves on our mantra of ‘thinking business’, and this includes an understanding of how important is to keep a track of the financial health of your company. We know the value of financial control and visibility, and this is something that we try and weave into everything we do – whether as part of our software solutions or the advice we offer via our wide-reaching support network.

Business advice and Accountants

Coming specifically from Sage Accountants’ Division, we’re also aware of the key role that accountants can play here – in terms of providing the right software and support to businesses. After all, in our last Pulse survey we saw that small and medium-sized companies now see accountants as their first port of call for business advice.

We’re all in it together, and the time and cost savings that we can produce from our continued close relationships – understanding the needs of a business or practice and offering the most efficient solutions or guidance – mean that we can all play our own part in edging towards economic recovery.

Steve Porter, Sage Accountants’ Division

We all know how crucial credit can be. Yet in these uncertain economic times, guaranteeing access to lending is becoming more difficult than ever.

Despite being recognised as a vital survival tool for small and medium-sized businesses – and a necessary strategy for the UK’s long-term recovery – many are still struggling to secure the credit they need.

Steve Porter, Sage Accountants' Division

A more cautionary approach to approving funds has been seen across the board with suppliers, trade credit insurers, building societies and banks failing to meet their lending targets this year – all showing a reluctance to extend terms.

A mistrust of traditional business data as a way of measuring risk is recognised as one of the biggest barriers to securing credit and many banks and suppliers are demanding more up-to-date and monthly management accounts as part of any application.

One of our recent Sage Omnibus surveys found that half of accountants polled said they were now being asked to help prepare quarterly or monthly accounts, while another 53 per cent revealed clients were struggling to access credit.

Here at Sage we have been engaging with numerous industry bodies such as the Confederation of British Industry (CBI) – as well as other trade credit insurers and interested parties – to understand the impact on the market and explore ways that we could potentially assist both you and your clients.

Help is at hand

What can SMEs do to help themselves? If they are to secure continued lending, they must be pro-active about their credit profile – looking at ways to offer more real-time accounts and to improve their financial standing.

Accountants’ role is key, and there are credit and analysis tools at hand to help identify new ways to help businesses stay ahead – such as CreditPal (provided by Future Route).

These secure, internet-based facilities help users maintain detailed financial accounts and manage lending needs. For example, CreditPal complements Sage software – such as Sage 50 Accounts and Sage 200 – requiring no extra download or installation, and allows users to review internal finance and automatically generate standardised and validated monthly management accounts.

Accountants can offer such credit and analysis tools as a value-added service, generating data on a client’s behalf, or acting as an advisor to help SMEs access and set up the service in-house.

However these links are made, accountants are able to play an invaluable part in maintaining the steady credit flow all businesses need.

Steve Porter, Marketing Campaign Manager, Sage Accountants’ Division