Q: My company is experiencing some cashflow problems and a friend suggested I should consider a CVA? What is a CVA?
A: When a company is in financial trouble there seems to be a main direction that directors turn to; liquidation. However depending on the circumstances there are a few business rescue alternatives that may suit the situation better.
The CVA (creditors’ voluntary arrangement) option provides a realistic alternative to liquidation for an insolvent company. This process gives directors an option of trading out of a difficult period to help with future profitability.
Below there are 8 key facts that all directors should know about the CVA option:
- There is no mandatory repayment time frame or repayment amount
- Following successful completion of the CVA the balance of debt not repaid through the CVA is written off
- The company remains under the control of the directors
- HM Revenue & Customs has a very high success rate for CVA acceptances
- A company needs only 75% of creditors’ to agree for a CVA to be approved
- The company is allowed to continue trading throughout a CVA
- To get the creditors’ approval you must show them how a CVA is more beneficial to them then the alternatives
- There is less focus on directors during a CVA and no investigations are made or submitted to the Insolvency Service
Category: Corporation Tax
Should the business pay us rent?
Q: My wife and I own a commercial property personally, but our company operates from it. Is there any tax advantage in the company paying us rent?
A: Your suggestion has good and bad points to consider. On the plus side, the rent payments are tax deductible for the company, so it will serve to reduce the company’s tax liability. The rent is taxable in the hands of your wife and you, but shouldn’t attract National Insurance.
However, you are likely to forego some of your Entrepreneur’s Relief on the sale of the property. Entrepreneur’s Relief reduces the rate of Capital Gains Tax payable from 28% to just 10% on gains arising on the sale of business assets- provided certain criteria are met.
You must also consider whether there will be any VAT implications of charging a rent.
Category: Tax Planning
What happens if I pay my corporation tax late?
Q: I paid my company’s corporation tax late because of cashflow problems. Will I be charged interest and penalties?
A: Interest will indeed be charged from the due date, to the date HM Revenue & Customs received their payment from you at their official ‘Late payment interest rate’. However, there are no late payment penalties for corporation tax at the moment.
Please note, this only applies to the payment of your company’s outstanding corporation tax. So if you also filed the company’s corporation return late, then HMRC will charge you late filing penalties.
Category: Corporation Tax
Company cashflow problems
Q: I am a director of a small company and it is having quite serious cashflow problems. What should I do?
A: The best thing a director can do when they feel their company is not trading as successfully as it should is to seek professional help as soon as possible.
As a director it is your job to seek help if you notice your company is in trouble and if this trouble will affect the creditors and the funds.
If you are aware that your company is struggling but continue to trade without seeking helpful advice then, amongst other misdemeanours, you can be seen to be wrongfully trading your company. Under S.214 of The Insolvency Act 1986 it states that they can hold the director personally liable to make a contribution to the company’s assets in order to minimise the loss to the company’s creditors. Put simply, this means your own personal assets such as your home could be seized in order to repay the company's debts.
The best course of action for you to take is to seek advice early on as there could be company rescue options available to keep the company trading and avoid you breaching your responsibilities as a director.
Category: Corporation Tax
What happens when the P46 goes?
Q: I have been trying to keep abreast of all the changes being introduced as part of RTI. But I noticed the P46 for starters will go. How will employers now collect the relevant information from their new employees
A: Under Real Time Information (RTI), employers will send HMRC information about employees' pay when- or before payments are made. This should mean more employees will pay the right amount of tax and National Insurance in the tax year.
Under RTI, when a new employee starts then forms P45 or P46 will no longer be sent to HM Revenue & Customs (HMRC). However, the details will still need to be collected, but they will automatically be reported to HMRC online in the weekly or monthly Full Payment Submissions (FPS) submitted via your payroll software.
RTI is being introduced in April 2013 and will mark the biggest change to payroll since the 1940s.
Category: Payroll
RTI- what are the rules with regards to penalties?
Q: I have been trying to keep abreast of all the changes being introduced as part of RTI, but I am really struggling to understand the penalty regime. Can you explain it to me please?
A: Under Real Time Information (RTI), employers will send HMRC information about employees' pay when- or before payments are made. This should mean more employees will pay the right amount of tax and National Insurance in the tax year.
Unless you are already operating RTI as part of HM Revenue & Customs’ (HMRC) pilot, the rules can be summarised as follows:
2012/13
|
2013/14
|
2014/15
| |
|---|---|---|---|
| Missing payment penalties No payment to HMRC is made |
Yes
|
Yes
|
Yes
|
| Underpayment penalties A payment is made, but it is less than the liability due |
No
|
Yes
|
Yes
|
| In-year late filing penalties For late in-year submissions |
No
|
No
|
Yes
|
| Year end late filing penalties For late year end Full Payment Submissions |
Yes
|
Yes
|
Yes
|
| Inaccuracy penalties - for inaccuracies specifically with a year end period |
Yes
|
Yes
|
Yes
|
| Inaccuracy penalties - for inaccuracies specifically within an in-year FPS |
No
|
Maybe
|
To be confirmed
|
Please be aware that HMRC have u-turned on or amended some of their proposals, so the above rules are subject to change.
Category: Payroll
