Tom is an ex HMRC employee who now offers a consultancy service. He wrote the articles to highlight the ways that people inevitably leave a trail when trying to avoid declaring income.

The first article deals with general methods used to select taxpayers for enquiry, whilst the second article deals more specifically with undeclared income from property lets. If you haven’t already done so, we recommend you read the articles.

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As a concession HMRC are allowing pubs, hotels and other establishments which are open at midnight to continue accounting for VAT at the 15% rate until 6.00am on New Year’s day.

If you need more information on the changes, contact us.

The Flat Rate Scheme is supposed to be revenue neutral. Essentially winners and losers should cancel each other out. It was felt that for some trades the rates were a little generous so the opportunity will be taken to bring those in line.

For cash businesses, such as shops, the Flat Rate Scheme will remain pretty straightforward but for businesses which issue invoices and operate the Flat Rate scheme life could be a little more complicated, particularly if they also use cash accounting for VAT.

We aren’t great fans of the Flat Rate Scheme. It was helpful when most businesses used a book to record their transactions but bookkeeping software makes it so much easier to calculate VAT and there isn’t often any substantial advantage in using the Flat Rate Scheme.

Users have to make a choice of continuing with Office Accounting and hoping that Mamut support will be sufficient for their needs or switching to some other software. There’s a lot out there, ranging from “cloud” applications such as KashFlow, Liquid Accounts, Liberty Accounts, FreeAgent etc to more traditional software such as Quickbooks and Sage.

Maybe the demise of MOA is the time to properly and fully review your bookkeeping needs and requirements. We have experience of many of the offerings either directly or via clients which use them and can help you arrive at an informed choice. Why not contact us?

Emphasis is very much on business records. HMRC now have the power to enter premises and inspect records if “the inspection is reasonably required for the purpose of checking that person’s tax position.” That pretty well means that they can turn up if they want to and insist on seeing your records which includes invoices, bills, bank statements etc.

HMRC have said that all such compliance checks will be undertaken for a reason – so, if they appear on your doorstep, they think they have a reason to be there.  They have a right to inspect records, which you must show them, but you do not have to answer any questions.  If they do turn up, let them in, be polite – and ring your accountant straightaway.

Often accountants do not even know what transactions are taking place until well after the event. In view of the new powers, it is prudent to keep your accountant informed of anything you are considering doing which is even slightly out of the ordinary. We also suggest that you undertake a review of current practices to make them fully compliant.

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Hourly rates have other traps for the unwary. If the accountant is working on an hourly rate, is there any incentive to do the work quickly? If a mistake is made and has to be put right, the client is being charged an hourly rate so the cost of correcting the mistake can be passed on to the client – and this does happen. Most people wouldn’t accept an hourly rate quote from a builder or plumber without knowing how many hours to expect. Why should accountants be different?

Many, but not all, accountants do have a policy of only charging for the time which a job should have taken. They review each piece of work and, if it has taken longer than it should, possibly because of having to correct a mistake, only charge for the time the job should have taken. This does not apply to all accountants. I have come across situations where a client has pointed out mistakes to an accountant and then received a bill for “amending the accounts”.

In my opinion it is generally better to try to arrive at a price before starting the work. This is difficult with new clients because there is no previous knowledge of working with their records and, for a brand new business, no real information to go on, other than previous experience. We can be pretty definite about some types of work, such as payroll, and for other work we will give as accurate an estimate as possible, usually within a range. The principle we use is that, we will stay within the range unless there is something very different to what we expected and then we will discuss this with clients before proceeding. In about 95% of cases we are well within the indicated range. Once we have the first year’s work under our belts, we can be much more accurate in our pricing.

This method of estimating jobs allows clients to budget properly and, because we also offer a direct debit facility, spreads the cost, so no big bills.

Potential clients sometimes ask for a price based on the turnover of a business. This isn’t really relevant. A company can have a £million+ turnover derived from just a few transactions and keep immaculate records. They will be charged less than a company turning over £20,000 with a lot of transactions and poor records. The better the records you keep, the lower the cost is likely to be.

You should advise the Valuation Office Agency (VOA) of any inaccuracies before 30 November 2009.

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