Subsistence payments for employees travelling abroad

HMRC has published an updated list of worldwide subsistence rates for expenses payments that can be made to employees travelling abroad, without deduction of tax.

The list provides benchmark rates when paying accommodation and subsistence expenses; for example for lunch in Rome. These amounts can be paid without the requirement for the employee to produce receipts and do not have to be recorded on forms P11D.

Note that these tax free rates are in addition to the incidental overnight expenses of up to £10 that can be paid to employees who are abroad overnight.

The above is to simplify administration for employers but they will need to ensure that they have their own systems in place to manage and control this type of expenditure.

For further information/advice on this topic please visit www.wardwilliams.co.uk

HMRC Business records checks scheme expanded

HMRC have extended their controversial programme of checking the business records of small and medium-sized enterprises (SMEs).

Initially, HMRC will levy a penalty only in the most extreme cases of poor record-keeping. The department intend to issue penalties of up to £3,000 for serious inadequacies in the longer-term.

Up to 12,000 checks will be completed by the end of the current financial year; 20,000 are provisionally planned for 2012/13.

Please do not hesitate to contact our Business Services Department if you have any concerns about this HMRC initiative or require a comprehensive review of your business records.

For further information/advice on this topic please visit http://www.wardwilliams.co.uk/

SME Finance - Don't ask and you don't get

According to the recently released SME Finance Monitor, only two thirds of small firms (those with fewer than 10 employees) are getting the finance they need, leaving a third being turned down when they apply for loans.

However, the news for small firms is worse than this statistic suggests, as half surveyed said they wouldn’t even apply for a loan in the first place.  Well why? This is because they believe they will simply be turned down in any case.

Old style branch banking has disappeared and this has not helped together with a widespread distrust of the larger banking institutions.

How do these firms survive meanwhile? Are they relying on other sources of finance, including factoring and leasing? – plus extended payment terms too – of course they are.

The downside – watch out these SMEs may be using your credit line as a bank!

For further information/advice on this topic please visit www.wardwilliams.co.uk

HMRC and Mortgage Lenders Work Together

The new scheme to combat mortgage application fraud was launched on 1 September 2011. The mortgage verification scheme has been developed by HMRC, the Council of Mortgage Lenders and the Building Societies Association.

Mortgage lenders will only use the scheme where they suspect mortgage fraud, following their own checks. Where they have inadequate evidence of declared income and suspect fraud, mortgage lenders will send HMRC information from the mortgage application using a secure electronic platform. HMRC will cross check the income details declared to lenders against information provided in income tax and employment returns. It will then advise lenders whether or not the details match. Lenders will use this information in making their lending decisions.

Not surprisingly HMRC will use this information within their own risk assessment process to identify undeclared income. Any mortgage lender can use the scheme at a cost of £14+VAT per case.

Nobody should object to the principles of preventing both mortgage fraud and undeclared taxable income. However no doubt the system will be abused by both the mortgage lender and HMRC, the question will be how far this abuse goes. At minimal cost the mortgage lender has access to confidential information in respect of the taxpayer and HMRC has access to information in a format that was never intended to be submitted to HMRC. We all know how much of a hash both these organisations can make in interpreting legitimate information provided to them. Time will tell.

For further information/advice on this topic please visit www.wardwilliams.co.uk

Credit Risk Part 3 of 3: Internal Risk Data

In the current economic climate, managing a credit rating and obtaining finance is more important and difficult than ever. It is vital that companies are provided with the right information from the market and credit rating agencies, to ensure their credit and risk evaluation shows them in the best light.

Part 3 of 3 Internal risk data (part 1 managing risk information, part 2 external risk data)

Internal risk information usually falls into 3 categories: strategic, financial and operational. Users of company risk information will be looking for, and expecting to find information under these headings, so make it easy for them by proving the information in this way:

Strategic
Risk assessors will be looking to see that the company strategy is well thought out, researched, tested and revised inline with real world developments and expected future events.  With this in mind; provide a commentary on changes to previous strategy or expected future changes and the reasons for this, explain how risk factors are being monitored and managed.

Some of the basic points to cover are:

• Market position of key products
• Ability to differentiate from competitors; maintaining a competitive advantage
• Product life cycle and distribution patterns
• Sourcing of key materials/ skills
• Ownership of IP and copyright benefits
• Trade or pricing regulation and litigation risk, changes in legislation or regulation
• Reliance/dependence on specific customers, suppliers or markets
• Outline of your current strategy, approach to risk management and business continuity plans

Financial
Start with a brief outline of the management and legal structure, major shareholders and stakeholders and the business plan. There should be a clear link between the company strategy and the business plan, if not, this should be explained. If specific developments or risks have been identified, model their effects, applying various scenarios to demonstrate how the situation would be managed to ensure compliance with loan covenants or other limiting factors, always include cash flows in this analysis.

In terms of figures, financial forecasts and company accounts will cover most expected data but cash flow will be of most interest to a risk assessor, so explain the key drivers and ratios including gearing and trend analysis.  Strip out any unusual cash flows such as share buybacks or exceptional transactions, explaining what you have done and why. Discuss the balance sheet, commenting on liquidity and like cash flow, strip out or highlight any distorting transactions. It may also be relevant to comment on the following: Contingent liabilities, pensions, onerous contracts or large capital projects as well as commentary on current finance including possibility of renewals or additional draw downs.

Operational
This is all about management, who they are, their track record and approach to risk. How have management reacted to previous unexpected developments? Have the changes made by management had an impact? If there are developments that may be seen to affect the company, it is probably wise to contact any parties that may be concerned by the news, be it creditors, banks or investors. Proactively advising of changes and what actions are being taken will be met with less scepticism. If there are concerns about releasing commercially sensitive information it is possible to put confidentiality agreements in place.

For further information on this topic please visit www.wardwilliams.co.uk or email enquiries@wardwilliams.co.uk

Ward Williams participates in ICAEW’s Business Advice Service!

Ward Williams Chartered Accountants have signed up to participate in the ICAEW Business Advice Service (known as BAS).

ICAEW firms who participate in the Business Advice Service are able to offer SMEs and start-ups an initial meeting at no charge to discuss their business needs. After the initial meeting, SME can decide whether to continue. Under the ICAEW Business Advice Service, it would be made clear that no financial commitment is made by the SME in the first instance. ICAEW believes this will encourage SMEs and start-ups to seek support from ICAEW Chartered Accountants rather than resorting to unqualified alternatives.

Firms participating in the service are identified on icaewfirms.co.uk with the 'BAS' symbol (above). This allows users of the site to easily identify which firms are participating in the service.

ICAEW is launching a campaign about its new Business Advice Service to promote the use of ICAEW Chartered Accountants to businesses

Please visit http://www.wardwilliams.co.uk/ for more information.