Financial Monitor (June 2009)
Payment of Dividends to Directors
It is tax efficient for director/shareholders of limited companies to pay themselves a small salary and take a larger amount by way of dividend.
This causes no problems whilst the company is profitable and there are reserves available; but when a business is affected by the economic downturn and losses exhaust any reserves then a payment of dividends is illegal.
In an insolvency situation such illegal dividends are regarded as an asset and it is the liquidators’ duty to recover these illegal payments from the directors/shareholders.
If there is any doubt about the availability of distributable reserves, clients should stop drawing dividends immediately and rejoin the PAYE payroll scheme.
How to Survive the Credit Squeeze
1. Put cashflow and financing on the agenda for every management meeting.
2. Regularly update cash flow forecasts.
3. If there is a conflict between profitability and cashflow – take the cashflow option.
4. If you have a term loan or overdraft be aware of any covenants and constantly monitor how close you are to breaching them.
5. Prepare thoroughly if a review is coming up on any of your financing facilities.
6. If limits might be threatened “think the unthinkable” regarding the sale of assets.
7. Talk to your financiers before you get into difficulties. Otherwise you devalue future forecasts.
8. Make sure that all types and sources of finance have been fully considered.
9. Invest time talking to new sources of finance. You might need them if your current providers prove difficult.
10. If you are “cash rich” draw up a list of ways you could use surplus cash for the longer term benefit of the business.
Penalty Warnings
Anyone running a company needs to be aware that the penalties for not filing the Statutory Accounts at Companies House on time have increased significantly. Private company and Limited Liability Partnership accounts filed up to a month late will now attract a penalty of £150: this rises to £375 for accounts filed up to three months late; to £750 for accounts filed up to six months late; and to £1,500 for accounts filed more than six months late.
Secondly, all employers should note that penalties will now be charged wherever a Revenue Inspector discovers that employees have been paid less than the minimum wage (hitherto, penalties have only been charged when an employer failed to comply with an enforcement notice, issued after an underpayment was discovered). The penalty is calculated as half the underpayment identified, subject to a minimum penalty of £100 and a maximum of £5,000. There is a 50% reduction if both the arrears of wages and the penalty are paid within 14 days. The penalty will not be a deductible expense for tax purposes. Also, arrears of wages are to be calculated at current NMW rates, not (as hitherto) at the rates in force when the work was done.
Time Limits for Tax Claims and Assessments
A new aligned regime for time limits across all taxes applied from 1 April 2009. This is as follows:
Claims by taxpayers – 4 years
(For income tax, capital gains tax and corporation tax, replacing a time limit of 5 years 10 months or 6 years which previously applied)Ordinary time limit for making assessments - 4 years
(Where the taxpayer has taken reasonable care to submit a correct Return)Discovery assessments - 4 years
Assessments where the taxpayer has failed to take reasonable care - 6 years*
Assessments where the taxpayer has deliberately understated his liability, has failed to notify liability at all, or has not notified his use of a tax avoidance scheme - 20 years
* 4 years for VAT
Give Don’t Bin
An award-winning charity is appealing to businesses to think before it bins goods that can be re-used.
A free and simple-to-use new charity website - www.GivingWorldOnline.com - is bringing businesses with unwanted surpluses together with charitable and non-profit organisations that make use of goods destined for the rubbish dump.
Giving World Online accepts end-of-line goods, samples, odd batches, surplus stock, last season’s ranges, new clothes, toys, toiletries, bedding, stationery, books – anything and everything, basically, that someone, somewhere might be able to put to use.
All the charities registered to the site are checked to make sure they are bona fide. Donors get a personalised record of everything they have donated on the site. They can see the charity that received them, how many people benefited from them, the value and volume of goods, and how much they have diverted from landfill.
Minimum Wage
From 1 October 2009 the national minimum wage will be increased from £5.73 to £5.80 per hour. The Youth Development Rate for those aged 18-22 will be increased from £4.77 to £4.83 per hour and the rate for qualifying 16 and 17 years olds from £3.53 to £3.57.
Redundancy Pay
The maximum week’s wage used in redundancy claims will increase from £350 to £380 on 1 October 2009. If that date falls in the statutory notice period (usually 1 week per year of service up to a maximum of 12) then the higher rate will need to be paid.
Train to Gain – Funding for Training
Local businesses have a great opportunity to take advantage of a 60% contribution towards their training needs through the Sheffield Chamber of Commerce.
The Chamber is an approved provider of the Train to Gain Enhancement Fund which has received £30m for the Yorkshire and Humber region to develop its work force.
Companies who sign up to the Train to Gain Enhancement Fund receive 60% funding towards the overall cost of training, with the remaining 40% paid by the employer.
Up to £20,000 funding is available per business and to make the most of your training budget please do contact the Sheffield Chamber on 0114 201 8893.
New Rate for Business Fuel Provided to Company Car Drivers
HMRC has published revised fuel rates which take effect from 1 July 2009 and relate to the tax free amount payable to company car drivers who purchase their own fuel.
The rates for petrol cars have not changed for engine sizes of 1400cc or less (10p per mile) or 1401-2000cc (12p per mile). For petrol cars over 2000cc the rate has gone up to 18p from 17p. The rates for diesel cars have all gone down by 1p per mile - 1400cc 10p, 1401-2000cc 10p, over 2000cc 13p.
Whilst every care has been taken in the preparation of these notes we can accept no responsibility for errors or omissions contained in them or for any loss arising from their use unless we have been consulted professionally prior to any action being taken.
UHY Wingfield Slater
Wellington House, 39 Wellington Street, Sheffield S1 1XB
Tel: 0114 275 1544 Facsimile: 0114 275 1366 Email: info@uhy-wingfieldslater.com Web Site: www.uhy-wingfieldslater.com
Registered to carry on audit work and regulated for a range of investment business activities by the Institute of Chartered Accountants in England and Wales
A member of the UHY Hacker Young Group of independent UK partnerships. A member of UHY, an international association of independent accounting and consulting firms.
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