HMRC has published new guidance on the new penalty provisions that will apply from April 2008.

HMRC states that it has designed the new penalties so that:

• If people take reasonable care when completing their returns they will not be penalised.
• If they do not take reasonable care errors will be penalised, and the penalties will be higher if the error is deliberate.
• Disclosing errors before HMRC find them will substantially reduce any penalty due.

The new penalties initially apply to VAT, PAYE, National Insurance, Capital Gains Tax, Income Tax, Corporation Tax and the Construction Industry Scheme.

Further information can be found at:
http://www.hmrc.gov.uk/about/new-penalties/penalties-leaflet.pdf
http://www.hmrc.gov.uk/about/new-penalties/faqs.htm  

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Now that the dust has settled over the pre-budget report, it is an ideal time to consider the implication it will have on company sales in the SME market.

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Companies pay corporation tax at 20% on the first £300,000, right? Wrong! A company pays at 20% of the first £300,000 divided equally between it and its associates.

Companies are associated where:

·         one of the companies has control of the other, or

·         both of the companies are under the control of the same person(s).

A person controls a company if he is entitled to >50% of:

·         the share capital, or votes;

·         the distributions to shareholders;

·         the assets on winding up (this includes loan creditors).

The problem is that when looking at control you have to take account of a person’s associates. These are:

·         spouse (includes separated, but not divorced) and civil partner

·         parents, grand parents and remoter forebear

·         brother or sister, including half siblings (but not step, aunts, uncles or cousins)

·         partner (as in a business partnership)

·         settlements and will trust associates; - trustees are associated where the individual, or any living or dead relative is or was the settler; and where the individual is interested in a settlement, then beneficiaries, remainder men and trustees are associates.

Under self-assessment it is your responsibility to make sure your company pays the right amount of tax.

So – are you sure you know all your company’s associates?

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The staged introduction of Companies Act 2006, has already made interesting reading. It appears as though the ASB are taking a more ‘practical’ view on company statute and are making some impressive ‘common-sense’ amendments to an outdated CA85.

The next stage, is anticipated to be rolled out for implementation from 6th April 2008. The major developments worthy of mention are

• Private companys are no longer required to have company secretaries.
  
  
• There is a shorter filing period as mentioned in a previous blog (private companies have 9 months).
  
  
• There are no longer any medium sized group exemptions (ie all non-small groups will need to consolidate).
  
  
• The turnover exemption for medium sized companies has also been abolished.
  
  Watch this space for more updates and news, alternatively contact us directly…
  
  Related Links
  
  BERR:
  http://www.berr.gov.uk/bbf/co-act-2006/index.html
  ICAEW:
  http://www.icaew.com/index.cfm?route=145195
  

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In a recent article by Mike O’Brien, the current Minister for Pensions Reform, on the Department for Work and Pensions’ website, some further details on the proposed changes to pensions in 2012 were outlined.

Essentially the Government’s view is that people are not saving enough for when they retire.

To tackle the problem of under-saving, from 2012, millions of people will be

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It is typical for businesses to sell for a multiple of profits. At the early stages of a deal a buyer will rely on the seller to provide a profit figure. It is up to the seller to decide on a multiple and I will talk about how to approach this decision in another posting.

A large amount of judgement will go into the identification of the profit figure by the seller. The most important factor is

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I do not normally talk about economic matters on this blog, but the Sub-prime problems in the US could have an implication on the SME transactions market.

I will try to describe the problem in layman's terms (i.e. those that I can understand!!)

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You will recall that currently the transfer pricing regulations apply mainly to large businesses (more than 250 employees and either turnover >in excess of euro 50m or assets in excess of euro 43m) on a UK to UK as well as UK to overseas basis.HMRC retain the right to challenge transactions in medium sized business but not small ones (small being less than 50 employees and either turnover or assets less than euro 10 million).

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