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Tax, recession and Virginia Ironside

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At first sight the picture of the tax adviser as agony aunt might appear unusual. However, we earn our keep by identifying our clients’ problems and then offering solutions. In this connection, it is interesting to ponder the main issues that are keeping them awake as the economy slithers between a double and a triple dip recession writes Margaret Connolly, Partner and Head of Taxation at Reeves.

Some of our clients’ particular bugbears are as follows: -

  • Slow payment from bigger customers, which in turn causes difficulties in meeting the demands of HM Revenue & Customs (HMRC).
  • The scarcity of bank finance.
  • An inability to compete with multi-nationals who are perceived to treat tax as an optional extra.
  • Finding high quality staff and retaining those that they have.
  • The ruinous cost of fuel.

Our first response to this list is a frank admission; we don’t have a magic wand. There are points listed above upon which we have little to offer. For example, we recognise that the penal tax rates levied are a major factor in the price of fuel, but short of prospecting for oil we are not quite sure what to suggest.

Similarly, we alone cannot counter the deficiencies of Project Merlin and the Funding for Lending scheme; however, we can certainly assist with the preparation of a thorough business plan which may help to unlock the combination safe of bank finance.

Elsewhere we have more positive suggestions to make. It may be that when confronted with the spectre of slow payment, a carrot and stick approach is appropriate. Settlement discounts could be offered for prompt payment, whilst statutory interest could be levied on the tardy.

It may be true that the aggressive tax reduction schemes of the large multi-nationals are not open to the owner managed business. This is probably no bad thing – remember, our objective is to ensure that our clients’ get a good nights sleep; this is unlikely to be achieved if they are continually waking in cold sweat at the thought of a looming HMRC enquiry.

It is however, quite possible to be both compliant and tax efficient. This is nowhere better illustrated than in the case of the Enterprise Management Incentive (EMI) share scheme. The EMI scheme is the most generous of the HMRC approved share schemes, and potentially provides an excellent means by which smaller companies can tax efficiently incentivise their key staff.

Tax does have to be taxing (the clue you see is in the name), but good tax advice can make a real contribution to keeping your business away from the corporate problem pages.

For further information, please contact Margaret Connolly on 01227 768231 or by emailing margaret.connolly@reeves.co
 




Author:Reeves

Source:http://www.reeves.co