Ensure you’re tax and legally compliant – Part I

Managing your tax and legal responsibilities effectively is a critical skill and one that few SME owners possess. This report explains why getting specialist tax and legal advice is crucial for all SMEs and how doing so can be hugely beneficial for businesses and their owners.  In these articles, we will see:

• The benefits of being tax and legally compliant
• How a part-time CFO will resolve your tax and legal compliance challenges

Complying with tax legislation is “an uphill struggle” for many businesses and results in the wastage of precious management time, according to the CBI.¹

It’s estimated that mid-sized businesses spend 110 hours or nine days a year preparing, filing and paying corporation tax, labour taxes and goods and services tax, says PriceWaterhouseCooper.²

Most companies need to comply with at least eight categories of tax. That doesn’t include the industry-specific taxes (such as those in the construction, waste management, and oil & gas industries) that they must also pay.

“Each tax has its own legislation, associated case law that has built up over years of interpretation, varying thresholds for calculations and qualification of reliefs, and a myriad of payment dates, reporting deadlines and filing requirements,” says the CBI. “It is difficult to comprehend, let alone manage. It takes time and effort to ensure that a business is fully compliant in the taxes it needs to collect on behalf of the government and pay in terms of its liabilities – distracting it from commercial priorities and reducing management capacity for strategic decision-making.”

Mid-size businesses don’t have the resources or expertise that large companies possess to navigate tax rules and legislation, nor do they receive the targeted support that the Government directs at small businesses.

John Cridland, the former CBI Director-General, said: “Medium-sized firms are not able to benefit from the incentives that small firms do and, at the same time, most cannot afford to have an army of tax consultants on speed dial to help them wade through the complexities of the system.”³

It’s no doubt why tax worries so many owners of mid-sized companies. As is the case with most finance-related matters, the anxiety usually stems from not having a strategy in place to deal with the issues which arise.

Medium-sized firms are not able to benefit from the incentives that small firms do and, at the same time, most cannot afford to have an army of tax consultants on speed dial to help them wade through the complexities of the system.

As soon as the business owner accepts that they need a tax specialist as part of their team, the faster they can offload the burden knowing that their back is covered.

In other words, because tax is inherently complicated it really doesn’t make sense for CEOs and business owners to spend their own time trying to understand the detail. Accepting that this is the case and delegating out the responsibility to a capable, experienced part-time CFO removes an immense weight from the shoulders.

When we conduct reviews with our clients, we often discover a deep-seated anxiety about the pitfalls of failing to understand tax issues.

The primary concern is usually the idea that the business may be building up significant arrears of tax, which remain unpaid.

There are often worries about whether or not the accounting system used is recording information in the right way and will reveal significant holes in the event of a tax inspection.

Corporation tax, HST, GST, the implications of capital gains tax vs. income tax, failing to claim tax breaks, employment taxes and understanding R&D credits are common areas of discussion with our clients as is the desire to keep up to date with new legislation.

Most business owners simply want to know that their company (and personal) tax affairs and legal issues are being properly looked after; that they are as tax efficient as they can be and that all statutory requirements are being met. Most companies do a poor job of this because tax is inherently complicated and when things get complicated in business the most common reaction is to move onto something else!

Delegating your tax planning and legal responsibilities to a tax specialist is a must.

Knowing that you are not paying tax you don’t need to be paying and having peace of mind that all your tax deadlines will be met without you having to take on the responsibility personally will allow you to focus on growing the business while we take care of the details.

Come back for part II of our tax compliant article to find out how a part-time CFO can help you navigate the tax season!

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¹ « Stuck In The Middle: Addressing The Tax Burden For Medium-Sized Businesses ». CBI/Grant Thornton, www.cbi.org.uk, www.grant-thornton. co.uk. Juin 2014.
² « UK slips two places down league table of effective tax systems » Nicholson, Kevin, PwC (PriceWaterhouseCooper), www.pwc.com. 21 nov. 2014
³ «Medium-sized businesses need more support to stop them from falling over the tax cliff», Prosser, David, The Independent, Jun 23, 2014, www.independent.co.uk