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Are you registered for Data Protection? Maybe you should be?

Dated: Thursday, Nov 19th, 2009

Many small businesses will have failed to recognise that they have a legal obligation in relation to Data Protection.

All businesses are legally obliged to protect any personal information they hold, and may be required to register with the Information Commissioner?s Office (?ICO?). As you may know, the Data Protection Act (?DPA?) requires all organisations which handle personal information to comply with a number of important principles regarding privacy and disclosure. The eight principals are that this personal information should be:

- Fairly and lawfully processed
- Processed for limited purposes
- Adequate, relevant and not excessive
- Accurate and up to date
- Not kept for longer than is necessary
- Processed in line with your rights
- Secure
- Not transferred to other countries without adequate protection

The Act also provides individuals with important rights, including the right to find out what personal information is held on computer and most paper records. Failure to comply with the DPA allows the ICO to either:

- serve enforcement notices and "stop now" orders where there has been a breach of the Act; or
- prosecute those who commit criminal offences under the Act.

If you have any questions or would like an outline of the requirements, you should head to the ICO website www.ico.gov.uk, or seek professional assistance if that gives you insufficient information. I am obviously registered, so I may be able to help to some extent - feel free to give me a call too.

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VAT - online requirement soon!

Dated: Monday, Nov 16th, 2009

Most advisers and businesses know that VAT will be moving to a mandatory online filing requirement from April 2010. All businesses with turnover of ?100,000 or more will be required to file and pay VAT by electronic methods from April, as will businesses which register for VAT from 1 April 2010, irrespective of size.

The Regulations which underpin mandatory online filing for VAT, together with related explanatory notes, can be found on HMRC?s website.

The Regulations set out that a specified person will be required to make returns electronically, except for a person who is a practising member of a religious society or order whose beliefs are incompatible with the use of electronic communications, and persons to whom an insolvency procedure has been applied at the time when he would be notified of the requirement to file online.

The measurement of turnover for the purpose of designating someone as a specified person will be made on 31 December 2009, so all businesses with annual turnover of ?100,000 as at that date will be included in the requirement to file online, whether or not their turnover subsequently falls below that amount.

Failure to meet the new filing requirements can result in a penalty. The penalties for failure to comply with the Regulations will apply to returns made for periods ending on or after 31 March 2011, thus allowing businesses a period of a year to adjust before the penalties for failing to file online are imposed. Of course default surcharge may also be due if a return is filed late, but the new penalties apply only to a failure to make a return by the specified method. The penalties increase according to the VAT exclusive turnover of the person failing to make the return by the required method, and are :

Turnover ?100,000 and under - ?100
Turnover ?100,001 to ?5,600,000 - ?200
Turnover ?5,600,001 to ?22,800,000 - ?300, and
Turnover ?22,800,001 and above - ?400

The new Regulations also specify that the due date for the return may be varied if the return is required to be submitted electronically, including a right to vary the due date if no payment is due. However, a payment return must also be paid electronically for the extended due date to apply ? businesses which are normally repayment traders which very occasionally submit a return for payment should therefore ensure that they have set up a direct debit authority or other automated payment facility to avoid being caught out.

HMRC has also issued a reminder of the VAT Online services events which will provide support to those who want to know more about VAT Online. These will be held as follows :

Cardiff 26 November 2009
Belfast 2 December 2009
London 8 and 9 December 2009

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A new penalty regime!

Dated: Tuesday, Mar 17th, 2009

A new penalty regime has applied from April 2009, replacing and expanding the previous regime. There are generous new provisions allowing for zero penalties in certain circumstances - to encourage compliance - but these are counter-balanced by much heftier, statutory penalties otherwise. The new regime focuses on the behaviour of the taxpayer which led to the inaccuracy.

The first piece of good news is the new concept that when taxpayers take ?reasonable care?, they will never be subject to a penalty in relation to errors and omissions which result in an underpayment of tax. The definition of ?reasonable care? is obviously vital in this context and it varies according to the circumstances. What is reasonable care for an individual will not be the same as for a multinational corporation; similarly what is reasonable care for a simple or routine transaction will not be the same as for a complex one, or one involving huge sums of money. Reasonable care is proportionate.

To be immune from penalties, the taxpayer has to take reasonable care even when they have appointed an accountant ? keeping reasonable records, making sure to supply full and accurate information for the accountant to work with, implementing any professional advice given exactly as set out and checking the accountant?s work to the best of their ability and competence ? this means reviewing whether all the information supplied is reflected in the result produced and that this result seems at least reasonable. If all these conditions are met, there will never be a penalty.

If there is not reasonable care then a penalty of 30% applies, which can still be reduced to zero if a full unprompted disclosure is made by the taxpayer but only to 15% if the disclosure only comes after prompting (e.g. after the opening of an enquiry).

The second piece of good news is the introduction of the concept of suspended penalties (at the Revenue?s discretion) dependent on complying with certain conditions for a period of suspension of up to two years. If these conditions are met then the penalty would be cancelled. Again, this is a move to encourage compliance and will only apply where there is failure to exercise reasonable care.

The more serious cases are ?deliberate understatement? and ?deliberate understatement with concealment?. The penalty for deliberate understatement would be 70% with a maximum reduction to 20% for full unprompted disclosure and 35% for prompted disclosure. Deliberate understatement with concealment would be penalised at 100% with a maximum reduction to 30% for full unprompted disclosure and 50% for prompted disclosure.

The actual reductions applied to the maximum potential reduction will depend on various ?quality factors?. ?Telling? (admitting, disclosing and explaining) can earn up to 30%, ?helping? (in quantifying the amount understated) can earn up to 40% and ?access? (allowing access to records and documents) can earn up to 30%.

For example, if a taxpayer has made a deliberate (but not concealed) understatement which he discloses, but only after a general enquiry opens into his tax return, you can see from the above that he would have a basic statutory penalty of 70% with a maximum reduction to 35% (i.e. a maximum 50% reduction in penalty). If the Revenue consider that he has been cooperative in ?telling?, earning the full 30%, no more than reasonable in ?helping?, earning 20% and not very willing to provide ?access?, earning just 10%, they would apply the total of these quality factors i.e. 60% to the maximum 50% reduction in penalty (60% of 50% is 30%), so they would reduce the penalty by 30% i.e. to 49% of the tax underpaid. You may have to read this example several times to seize the point fully (or you may not get it even then!) but it does actually show that it is more scientific and with less room for manoeuvre on the part of the Revenue than previously.

Clearly it is more important than ever that information submitted to the Revenue is accurate and that submission should be prompt. Information supplied in late January does not imply reasonable care, as it does not give the accountant sufficient time to prepare accurate accounts, returns etc. And it is most important that the taxpayer checks not only the information they supply to the accountant but also the result produced by the accountant. There is usually a 1-2 page summary computation provided with tax returns, which the taxpayer could check to see if it looks correct (or at least reasonable) and complete, and a detailed profit and loss account is always provided with accounts, which should enable similar non-expert checking by the taxpayer.

All taxpayers are expected to keep sufficient records on which to base their return and to ensure that any return prepared is correct. ?Returns? include personal tax returns, corporation tax returns, PAYE returns and VAT returns ? the new regime applies to them all, so now is the time to review the records you produce (and keep) to see whether they are up to scratch. Accountants should similarly be considering these things to maximise the chances of all the reasonable care conditions being met in the case of any enquiry.

Finally, given that the advent of the new system is likely to be followed by an increase in the number of enquiries, now is perhaps also the time to think about taking up some tax enquiry professional fees insurance (see separate News item).

A simplified summary of all this is available on demand as a pdf file or as a printed document for those without Internet access. Please do request one ? they are freely available without charge!

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Company accounts - filing at Companies House - new deadlines & penalties!

Dated: Monday, Mar 16th, 2009

For any accounting periods starting on or after 1 April 2008 the deadline for filing accounts at Companies House has been reduced from 10 months to 9.

And with effect from 1 February 2009, the penalties for late filing have increased:

Up to 1 month late = ?150
1-3 months late = ?375
3-6 months late = ?750
> 6 months late = ?1,500

We have only ever once submitted accounts late (and then largely due to delay on the part of the client - we paid the penalty anyway!) but we need your help to make sure we can continue this by getting everything ready for us as promptly as possible after the year-end. Thank you!

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Health and safety - could you go to prison?

Dated: Monday, Feb 16th, 2009

Health and safety has become something to treat even more seriously since imprisonment recently became a sentencing option for almost all health and safety offences.

The Corporate Manslaughter and Corporate Homicide Act 2007 introduced the offence of corporate manslaughter and the Health and Safety (Offences) Act 2008 increased fines for most health and safety offences and introduced imprisonment as a sentencing option for offences committed by individuals.

Now is therefore the time to check your health and safety management systems and consider your areas of risk.

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Tax enquiry professional fee protection insurance now available!

Dated: Monday, Feb 16th, 2009

SATS has had a policy in place since December 2008 and any client can now join this plan with the first year premiums being on a pro-rata basis. The cost is very reasonable in our view for what is offered. Given the new penalty regime (see separate News item), it is more important than ever to protect yourself against high enquiry fees.

We will remind you of this regularly, so you have not heard the last of it!

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