Author Archives: Peggy Nightingale

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If Rip Van Winkle had just come out of his slumbers this week, he would indeed find the world a strange place. A great deal has happened in twenty years and he would be left in wonderment as to an interest rate of 0.25% (it was 7% twenty years ago when he fell asleep), the fact that 37% of the population is deemed to be a majority (no wonder the pass rate for maths GCSE is only 18% these days) which has sent our politicians on a mission to negotiate our way out of the European Union and the school bully is now in charge of the country with the world’s largest economy…. amongst other things.

If Oliver Hardy were still around, he would be saying “Another fine mess you have gotten us into” to his old buddy Stan Laurel, with great regularity.

Faced with a world with such uncertainty, the economy is continuing following the wise maxim “Keep calm and carry on”, as quite frankly there isn’t very much else anyone else can do.

It seems likely that uncertainties and imponderables will become the way of life with the world now such a fast moving place.

As practitioners, we are dealing with a period of unprecedented change with accounting software capable of great things and causing a revolution in the way we do things with HMRC determined to bring in MTD (does “D” stand for digital, daunting, dangerous, difficult, diabolical, dreadful or doable?) at an early date. Many countries are already far in advance of the UK in terms of digital reporting capabilities. A client of mine who installs coffee machines advised me that in Lithuania such machines are already linked directly to the Revenue authorities who then know the turnover generated by each machine on a real time basis.

I am lucky enough to live on the South Coast and had the opportunity to go to The Festival of Speed earlier in the summer. I was asking a representative of one of the leading motor manufacturers when we would all be travelling around in driver-less cars. He advised that he thought the technology was already there but that the public is not yet ready for it.

This seems to be much the case with MTD. We are informing our clients as early as possible about what is coming and their reaction usually is along the lines of “How will that help?” or “What is the point of that?” or “Why do we have to report more regularly?”. Some people, probably more than do so currently, will take it upon themselves to file information directly with HMRC who will then be swamped with a colossal amount of information that they will not be able to assimilate. This is from the organisation whose own algorithms don’t work for over fifty cases of income and so certain taxpayers are going to have to file manually because of these failings.

We have tax policies where it takes the government at least ten years to realise that what they have proposed does not work or give the desired result, i.e. the recent hike in the percentage of VAT flat rate scheme, the comments that tax motivated incorporations are to be discouraged (Why then Gordon Brown did you bring the 0% corporation tax rate in the noughties so that every gardener, window cleaner who was well advised formed a company to save tax?) and the ability to sell your business to your own company, claim 10% capital gain on it on the transfer and then claim corporation tax relief at 20% on the amortisation whilst possibly protecting yourself from higher rate tax by drawing down on your director’s loan account for a number of years.

All of the above have benefitted no end of clients not to mention ourselves to some extent through sheer inadvertence by Government failing to understand the legislation they have put in place.

Our UK200 CEO Declan Swan tweeted on 22 August, while reflecting on Making Tax Digital, “HMRC really needs to listen to the chartered accountancy professionals and SMEs.”

How true Declan and I suppose we can take some small comfort that continued lobbying has brought some small concessions regarding MTD.

However, the implementation of dividend tax with effect from 6 April 2016 again shows how Government needs our help.  Having benefitted from receiving nearly all of my income by means of dividends for a number of years, I have no particular complaint at the introduction per se of the dividend tax at 7.5%.

However, my blood boils at the higher dividend rate of 32.5%.

This now means that any successful business that is incorporated whose director wishes to benefit from his success by drawing an income in excess of £45,000 now is effectively paying tax at an excess of 52% when the corporation tax rate and the dividend tax are taken into account.

Salaried persons on multi-million pound salaries pay at a combined rate of tax and national insurance at 47%.

I used to think when I was young and naive (some thirty years ago) that Government was well aware of the advantages business owners enjoyed by taking dividends as a kind of reward for setting up businesses, creating employment and other taxes.  Naïve barely covers it!  HMRC, Government and worst of all their advisers in HM Treasury really have no understanding of the reality.  Are we really going to be encouraged to create success and wealth when even at a relatively modest level of income, particularly for London , we pay at a greater rate than others who may have little or no responsibility other than to themselves when receiving their salaries?

I wrote to my local MP, who shall remain nameless, to point out this inequality (please bear in mind that I am fully aware that the taxation system has always created inequalities but the last electoral campaign was fought on the basis of fairness in the tax system and the need to encourage small business).

My points were clearly beyond the understanding of my local MP who referred the matter to the Treasury, who responded as follows, “Owners of companies, like your constituent (i.e., me) will benefit from a range of measures announced in the Budget 2016 in particular further reduction of the corporation tax rate to 17% from 2020 will benefit over a million companies.  Indeed, this reduction comes in addition to the 6% reduction on corporation tax that many company owners will have benefitted from since 2010.”

Does this gentleman of the Treasury not understand that small business owners have not received a 6% reduction in corporation tax?  Furthermore that the corporation tax and higher rate dividend tax are connected?  Clearly not.

So, not only should we follow up Declan’s comments to HMRC but we certainly should more to protect the future of small businesses in this country and to encourage entrepreneurship and success.



David Macdonald

September 2017




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Maybe Temporarily Deferred?

After the announcement of the snap election, the Finance Bill was heavily pared down.  Among the casualties were the clauses that would implement Making Tax Digital.

At first glance, the removal of the MTD legislation from the draft Finance Bill looks like an excellent idea: possibly even recognition by the Government that such a significant change really can’t be rushed if it is to proceed sensibly.

However, I wouldn’t read too much into it.  After all, the draft legislation simply enabled the Treasury to produce regulations about how MTD should be implemented.  Those regulations are the meat of the MTD rules, and they almost certainly already exist in unpublished draft form.  They can be re-introduced perfectly easily in a post-election Finance Bill with no effect at all on the MTD timetable – and it appears that this is the Government’s intention.

It is clear that the Government and HMRC are committed to MTD, and of course they are quite right that there are significant advantages to be gained in the information-sharing arena.  The burdens that the proposed reporting obligations would impose are another matter, of course, but shouldn’t be allowed to obscure the potential benefits.

Should the Conservative Government not be re-elected, of course, then things might be different.  However, Jeremy Corbyn announced recently (and after the Bill was filleted) that he would extend the limit for exemption from the quarterly reporting aspects of MTD to the VAT threshold, bringing a large number of small businesses out of it.  This suggests he is still committed to MTD in general.

Incidentally, raising the exemption from £10,000 is something that is officially still under consideration by HMRC, and the VAT threshold has been suggested many times.  However, my reading of recent HMRC comments (up until they went into election purdah) suggests that they’re not fans of the idea.  Those smaller businesses are the very ones most likely to be making the sort of mistakes that MTD is intended to prevent, so I suspect HMRC would see this as being too much of a hollowing-out of the regime.

My feeling is therefore that taxpayers and their agents should assume that MTD is going ahead on track.  If the reporting requirements are to be reconsidered, or even just deferred, then that would be very welcome; but the issues raised by MTD are as valid and relevant as they ever were, and should still be addressed.

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65% of SME Businesses Not Ready for Tax Digitalisation

The Martlet Partnership LLP is a member of the UK200Group (, the UK’s leading membership association of independent chartered accountancy and law firms, which has published the results of a survey showing that 65% of its members’ SME business clients do not currently use software to manage their accounts.  These businesses will be forced to adapt significantly in order to use software to comply with HMRC’s ‘Making Tax Digital’ project, which aims to see businesses reporting tax digitally by 2018.

The UK200Group is in a unique position to collect this data, with a nationwide membership of over 150 accountancy and law firm offices, who service a total of around 150,000 SME clients.

The findings of the UK200Group’s survey are as follows:

Bookkeeping method: Shoebox Manual records Computer (ie spreadsheets) Software
Percentage of firms surveyed: 16 23 27 35

Of the businesses surveyed by the UK200Group’s members, only 35% already use software, such as Sage, Xero or Kashflow.  Although they are not yet reporting tax quarterly – as they will have to do by 2018 – the transition should not be too expensive or time-consuming for these businesses.

A further 27% use computers for their bookkeeping, but will need to change their systems.  This may mean retraining staff, but not to the extent of the 23% who are used to manual record-keeping, who will need to train a member of staff to input data into a new software system.

However, the greatest shock will come to the 16% of business owners who use the ‘shoebox method’ – they do nothing to record business transactions and their accountant fills in the detail prior to their tax return each year.

The ‘shoebox method’ users will have to learn how to keep records, invest in software and then spend time inputting the data they collect into the software.

Making Tax Digital represents the single most significant change to the UK’s system of taxation in recent times, and many smaller business clients are simply not ready for it.

The change to quarterly reporting will require all businesses to change their habits, but over half of the firms surveyed are also going to have to change the systems they use to record data.

If HMRC remains committed to having businesses report and pay their tax digitally by 2018, small businesses have only a short period of time to update their systems.

While there will be a chance for accountants to check their clients’ tax accounts, the new onus on live-time data input will mean that many SME owners will have to learn, or train a member of staff, how to use accounting software to keep HMRC up-to-date.

The UK200Group views Making Tax Digital as the key issue for SMEs in the next few years, and as such has set up a Digitalisation Taskforce to ensure that it can assist business owners with the transition to digital tax accounts and reporting.

The concern is that the new pressures on tax reporting will hit small businesses harder than they hit larger businesses, as smaller firms are less likely to have accounting software and an appointed finance director to oversee it.

In November, the UK200Group issued a recommendation document to HMRC, suggesting changes to the current plan for digitalisation.  The conclusion found the following points:

  • The timescale for implementation is too short for full consideration and resolution of the issues.
  • The principle of Self-Assessment, and the HMRC-taxpayer relationship, will be fundamentally changed.
  • HMRC do not seem to understand how accounts are prepared and used by businesses. They seem to regard tax as the primary purpose of accounts, and to seek to alter GAAP for the convenience of HMRC and MTD without regard to the needs of other users of accounts.
  • Taxpayers’ appetite to engage with MTD is small, and the proposals seem to offer few benefits to off-set the costs.
  • Taxpayers’ ability to engage has been overestimated, and the cost and difficulty of overcoming the obstacles has been understated.

Key recommendations from the UK200Group:

 Digital Tax Accounts be set up now, providing:

  • A central place for a taxpayer to see the information HMRC currently possesses about them.
  • A mechanism for providing HMRC with information simply and automatically (reducing the need for phone calls and letters).
  • HMRC should consult on the future design of the tax system. Changes in the rights and responsibilities of various parties, and in particular new obligations on taxpayers, should not be introduced until:
    • That consultation is complete.
    • The necessary technology has been tested over a full compliance cycle (one year of interim reporting plus the end of year procedures).
  • Simplifications of accounting should be optional, for tax purposes only.
  • Clear benefits for taxpayers should be identified, incorporated, and publicised.

In conclusion, businesses using software are almost there, and the only major difference will be quarterly, rather than annual, reporting.  Those using Excel spreadsheets will need to upgrade their systems but already have experience of computer input.  Even if a business is still keeping manual records, that experience of record-keeping will be transferrable, although digitalisation may cause some pain.

For any business owner relying on the ‘shoebox method’, our advice is to take the next step and start using software.  You are going to have to change your reporting style because by 2018 your accountant won’t be able to accept your paper receipts for a tax return.

If you’d like to know more about how tax digitalisation will affect you and your business, speak to one of our advisers on 01903 600 555.

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2016 Adur and Worthing Business Awards

The Martlet Partnership LLP is proud to have sponsored the Adur and Worthing Business Awards. And what a lovely evening.

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Workplace Pension Auto-Enrolment

Did you know that the law states that employees must be able to obtain a Workplace Pension when working for an organisation in the UK?  The first question that needs to be answered is ‘Who is entitled to a Workplace Pension?’

Any employee aged between 22 and the State Pension age, whose income is more than £10,000 a year within the UK, is entitled to a Workplace Pension.  Automatic enrolment began in October 2012, starting with larger employers.  Over a period of six years, medium and small sized employers are joining the automatic enrolment.

When employers enrol on behalf of employees onto a Pension Scheme, the first thing to do is to make sure they send contact information to The Pension Regulator.  These details should be for the most senior person within a company or organisation for example, a Chief Executive Officer or Managing Director.

Step two is to stage a date.  This is when the new automatic enrolment duties come into force for a particular business.  It is dependent on whether enrolment of the staff is necessary in terms of eligibility for a pension and also the number of staff working for the company.  The next Staging Date deadline is Thursday 1 September 2016 and employers are well advised to be prepared ahead of this day.

It is important to make sure that employers do not take action to jeopardise employees from enrolling in the pension scheme.

There are many penalties for those who do not comply with a Workplace Pension.  There is a fixed penalty notice which is set at £400 as well as other penalties that vary in the size of the fine according to the number of employees within an organisation.  These penalties include:

  • An escalating penalty (ranging from £50 to £10,000 per day depending on number of staff)
  • A civil penalty (ranging from £5,000 to £50,000 on an individual or the business itself bases)
  • Prohibited Recruitment Conduct Penalty Notice (ranging from £1,000 to £5,000 depending on number of staff)

The Workplace Pension enrolment requires a significant level of information in order to register employees.  You will have to give:

  • Company/Business name
  • Contact details for the business owner
  • The number of employees and a list of employees with their key information
  • Director identification documents (UK driving licence/UK passport)
  • Planned employee groups and company contributions.

Once you have auto-enrolled the appropriate employees in your organisation, a submission of a declaration of compliance to The Pensions Regulator must be undertaken.

Incidentally, auto-enrolment duties to the Workplace Pension do not apply if you are a Sole Trader, with no other staff.

If you would like to know more about how to enrol your staff to a workplace pension scheme, The Martlet Partnership would be more than happy to help. Call us now on 01903 600 555.

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Late Payments: The Difference between Small and Large Firms

Recently, we published an article entitled Late Payments: How to Claim Interest, and we thought it might be appropriate to go into some more detail about situations in which claiming late payment is not the best tactic.

You may be aware of the supplier’s right to claim interest in the case of non-payment from a customer, and the steps of communication that can make this simple right a powerful tool for incentivising timely payment.

However, for larger customers, who don’t tend to have the same issues with cashflow, the motivation for late payment is unlikely to be that they simply don’t have enough money in the bank this month, or that there is a queue of creditors to work through before they can pay your invoice.

Key to managing relationships with larger business customers is understanding how they work.  Big businesses do not generally have to schedule their payments to suppliers to fit in with payments coming in – they won’t be waiting for their customers to pay them before they can address your invoices.  Instead, there is more likely to be a fixed system in place, and your invoice goes through this system before payments come out of the other end.

In this situation, it can be more effective to try to understand the system and work out how to make sure your invoices are dealt with promptly, rather than charging interest to a customer who, due to their size, may be key to your business’s success.  Are your invoices clear?  Are they being sent to the right person within the customer’s company? Crucially, do you have a purchase order reference?

The problem that many smaller business owners have is that a) they often don’t look at the terms of business well enough, and b) they aren’t aware of the importance of getting the right documentation to the right people at the right time.

If you would like to learn more about improving your cashflow, one of The Martlet Partnership’s business advisers would be more than happy to help.  Call now on 01903 600 555.

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Late Payments: How to Claim Interest

For SMEs in all industries, late payments for goods and services can be a real issue.  Cashflow is harder to manage for smaller suppliers, and SME owners can often feel helpless when dealing with larger customers.  A question on the lips of many SMEs we’ve spoken to is “What tools can I leverage to ensure speedy recovery of payments?”

One method by which SMEs can push for payment of invoices is by claiming interest on late payments.  The statutory right to interest and compensation applies to all contracts and, as the interest on payments accumulates, it provides a powerful deterrent to late payment.

The law gives the supplier the right to charge interest at 8% above the Bank of England’s base rate – however, although the Bank of England has recently changed that rate to 0.25%, SMEs can continue to charge at 8% over the old rate of 0.5% until 31 December 2016.  This is because the rates are fixed for six-month periods; the rate on 31 December is valid for the period of 1 January to 30 June, and the rate on 30 June is valid for the period of 1 July to 31 December.

In many cases, the rate of interest dictated by Bank of England base rate plus 8% will be more expensive for a late-paying customer (who is effectively borrowing from you) than overdraft money from the bank.  This incentivises timely payment.

You may think that claiming interest on late payments may seem to be adverse to good customer relationships, but by having a clear system in place, suppliers can actually avoid awkward situations.

Communication with late payers is key, and can be distilled into three steps:

  1. State agreed payment dates on all invoices and your intention to exercise the right to charge interest on late payments.
  1. If the invoice is not paid by the agreed payment date, inform customers of the interest that they are now accruing.
  1. Once the payment has been received, issue a bill to the payer informing them of how the interest was calculated and how much was paid.

This communication is an effective tool for ensuring timely payment with a minimum of friction between supplier and customer, and no undue surprises for the customer.

If you would like to know more about how to deal with late payments, we would be more than happy to help.  Call us now on 01903 600 555.

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Congratulations Chris!

Congratulations to Chris for passing his P3 Business Analysis paper.

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Congratulations Emma!

Congratulations to Emma for passing her ACCA P2 Corporate Reporting exam!

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Congratulations Craig!

Congratulations to our Craig for passing his final exam and becoming a qualified member of the Chartered Association of Certified Accountants.

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Tel.: +44 (0) 1903 600555
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