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Friday, 28 May 2010

Portsmouth City CVA (company voluntary arrangement) is published today

See the link above or below to download the PDF file for the Administrators proposals for a CVA for Portsmouth City Football Club

Don't understand Administration? or CVA? Click the links for more details.

Go here if you want a quick flowchart of the administration followed by CVA process.

Thursday, 27 May 2010

Portsmouth City Company Voluntary Arrangement; CVA plus Hive Across?

In an interesting article in the Accountancy Age the CVA for Portsmouth is being described as unprecedented.

Lets wait and read the proposal before passing comment. It appears to be a hive out of the business with newco effectively paying CVA creditors. KSA has been using this process for some years!

See our guide page here.......

Wednesday, 26 May 2010

Have you had a 7 day warning letter from HMRC?

“We had a time to pay deal with HMRC, we have failed to keep up with payments. What happens now?

According to our contacts, seven day warning letters are popping up everywhere from HMRC.

When a company has had a time to pay deal with HMRC and has been unable to keep up the payments, we are finding that HMRC collectors are now getting tough.

If you have had a warning letter what does it mean? They can threaten

County Court Judgment, Distraint, Bailiff visits or even threaten to isssue a winding up petition

Click link below if your company has had a 7 day warning letter, for our new guide.

We have had a 7 day warning letter

In the notes attached to the letter HMRC suggests that the company
considers a CVA as a solution. Clearly, this indicates that HMRC wants struggling businesses to recover. So talk to the KSA CVA experts now.

Tuesday, 25 May 2010

Texts: the new way to contact business people

I notice that NatWest and other banks are advertising that they will issue updates on accounts or mortgage applications on text messages, so the big banks seem to think texting is ok for business purposes.

I have just read a marketing blurb about the use of texting, it points out that everyone reads their mobile texts but not necessarily all of their emails. So expect a lot more use of texts in business!

We are also getting long marketing voicemails and direct mobile calls from the likes of Chris Cardell (a marketing "guru") and one indeed from Bob Geldof this week. When you hear his unmistakable voice you have to listen, because initially it seems so much like a normal call. "Wow Bob called me direct"

Digital marketing is going to move to mobile devices very aggressively in the next few months. I wonder how impatient I will get with spam type phone and text messages?!

On a serious note it looks a very powerful technique, how to keep a professional marketing image and protect your brand is a serious hurdle to overcome though.

Monday, 24 May 2010

The Voluntary Arrangement Service - Pragmatic Deal Makers for CVA's

The hyperlink above is a useful link to the Combined Voluntary Arrangement Service website:

Please read that site to answer the question:

"Why would HMRC allow a CVA to repay only part of the debt we owe for PAYE and VAT?"

I hear this question every day from accountants and directors when we suggest CVA is a great tool, to restructure HMRC and trade creditors' debts. Most say well the tax collector won't do any more deals with us....but CVAS can!

The answer is contained in the final sentence on this web page, produced by HMRC:

Collect all you can by being cost-effective and commercial.

Tuesday, 18 May 2010

Inflation Shocker! Or is it a Shock?

CPI hits 3.7%, but wait RPI (retail price inflation) is over 5% now

The Times Online reports "Retail price inflation — which is more commonly used in wage negotiations with employers — rose to 5.3 per cent, the highest year-on-year increase since July 1991. The RPI figure compared with 4.4 per cent in March and City expectations of 4.9 per cent".

Call me ecomically stupid, but pumping £200bn of new money into the economy and keeping artifically low interest rates of 0.5% must have some effect on inflation?

So with the RPI at 5.3% and expectations of public sector wage freezes (at best) when will the strikes start in the UK?

Monday, 17 May 2010

Threat to Time to Pay? Jon Moulton Calls For Scheme To be Unwound

More anecdotoal stories on the time to pay scheme or Business Payment Support Service that helps cash strapped comapnies strecth their tax payments. This time in the Mail On Sunday Business section on 16th May.

Quote from article below:

"Venture capitalist Jon Moulton of Better Capital said Time To Pay amounted to companies being 'bailed out with taxpayers' money'.

'There are tens of thousands of companies that are either totally unviable or being propped up to help manage the employment statistics,' he said.

The rate of company failures was at an 'unhealthy' 20-year low and 'this is due partly to low interest rates and companies owing billions of pounds in unpaid taxes,' he added. 'There are 800,000 people working in companies that are being propped up by overdue tax. The taxpayer is paying and some of those companies ought to be culled.'"

So that's quite clear then Jon? Lets get culling the weak to restructure the economy.

Friday, 14 May 2010

Puttin on the Ritz

Had the pleasure of meeting a client in this bastion of the establishment yesterday.

A diet coke in the Rivoli bar, not afternoon tea unfortunately.

Having been in the bar for around 90 second a waiter handed me a tie, seems you can't sit in their bar without a jacket and tie even in 2010!

Wednesday, 12 May 2010

Owe more than £1m in PAYE/VAT? Expect an Independent Business Review

This is a really interesting discussion page on HMRC's web site.

If a company owes more than £1m in tax arrears then the HMRC stance in future MAY be to demand that an IBR (Independent Business Review) be carried out.

The IBR process is being discussed and no final policy decision made, the debate is wide ranging, but highlights the key issues. Who does the IBR? Who instructs or engages the IBR team and pays for it? What happens if the IBR is wrong? Will there be a panel system of insolvency firms?

The debate will rumble on and we await a policy decision.

In some ways we at KSA are doing this type of work already, we often provide highly detailed forecasts and SOFA's (statement of affairs) to our clients in advance of a final decision being taken on the options like CVA (company voluntary arrangement), administration or refinancing.

Sometimes, this work allows the board to make well educated decisions to restructure without insolvency techniques.

One of our clients, a south east based environmental services company, is a good example. HSBC had been approached for a new EFG (Enterprise Finance Guarantee) loan, the company had arrears of taxes and one of the conditions of the EFG loan system is that it must not be used for payment of such tax arrears.

An investor was willing to invest to "re-balance" the balance sheet and improve cashflow. However, he was unwilling to invest blind. HMRC was in the process of issuing a winding up petition.
KSA prepared a modelling pack and statement of affairs for the company and the investor. We also modelled various versions for CVA, Administration etc. We negotiated a holding position with HMRC to ensure that no action was taken. This satisfied the investor and he duly made the investment taking a 30% stake. In time the EFG loan was made and the business, which has sales of c£10m, has grown quite well.

If things change then we have already, prepared the ground for a CVA.

Tuesday, 11 May 2010

Taxman gets tough on time to pay deals

As reported in many papers yesterday and our Blog, the Freedom of Information query, posted by a company called Syscap, revealed that HMRC rejected 11% of all time to pay deals in Q1 of 2010.

This is more than double the 5.3% of rejections in Q1 of 2009, when the scheme was just getting into its stride.

Whilst a striking headline the numbers are possibly misleading, as we don't know how many applications there were in each period.

The message seems to be clear though. HMRC is tightening the noose on Time to Pay deals

  • HMRC has introduced tough new penalties for late payment of PAYE (see this blog)
  • If a company owes over £1m in taxes and asks for time to pay, HMRC may now require independent business reviews costing tens of thousands (from April 2010)
  • More and more applications are being rejected
  • Interest is applied to delayed payments
  • HMRC can send in bailiffs and issue County Court Judgments and Winding Up Petitions
As we keep saying CVA or company voluntary arrangement will avoid all of this risk and get a composition with creditors in place that
  • Reduces amounts due to be paid to creditors
  • Provides breathing space to restructure
  • Kills off employment contracts and allows fast cost reduction
  • phased repayment of creditors over up to 5 years not 6months
  • No need for Independent Business Review
  • Supported by almost all banks
  • Generally will stop winding up petitions by HMRC
KSA expects to see the HMRC getting tougher as time goes by, once the new Government is finally in place we expect further petitions and increase in the use of CCJ's and Bailiffs.

Monday, 10 May 2010

Penalties for late payment of PAYE and NIC

From May 2010 HMRC are implementing new penalties for late payment of periodic PAYE /NIC from businesses. This will include any tax, national insurance contributions, construction industry deductions and student loan deductions which may be due.

It means that businesses delaying payment of the above regularly, may have a penalty to pay if the payments are not made by 19th of the month.

The initial penalty is 1% of the tax and will increase in increments to 4%. There will be a 1 month period of "grace", ie you will be allowed one late month per tax year.

However, for all tax more than 6 months late, a penalty of 5% applies. If the debt remains due after a further 6 months a further 5% penalty may be applied.

This is similar to the VAT Surcharge regime which starts at 2% after the first default in a 12 month period and rises to 15% of VAT due.

NB: These penalties have now started after April 2010 and those with months of arrears will face months of penalties.

For annual payments such as Class 1A NIC the penalty can be applied up to 3 times. Or 15%.

What if the company is involved in the Business Payment Support Service, which agrees deals with companies for Time to Pay Deals? There will be NO PENALTIES if the deal is stuck to.

Reading the HMRC guide, gives a clue to the way to deal with late payment problems compounded by penalties and interest. Amazingly, you can pay the penalty over a Time to Pay deal period!

With an article in the press today (which we will blog later) saying HMRC getting tougher on Time to Pay Deals, this shows another HMRC tightening policy is being applied to companies that pay taxes late.

Sorry to bang on but, using a company voluntary arrangement to delay tax and creditor payments for up to 5 YEARS with no interest and no penalties AND with the ability to discount the debt significantly, is surely a better option than constant Time to Pay Deals that add interest and penalties?

Plus as directors, regularly using TTP's and paying surcharges and penalties may show that the business should be restructured - plus is this heading to wrongful trading? Think of your personal risk too?

Thursday, 6 May 2010

Get out there and VOTE!

Today is the day for those who take part in our democracy to vote. Those who don't intend to vote, why not???

For my part I predict that by tomorrow David Cameron will be Prime Minister and will have a small working majority with say 330 seats. (Having never been a betting man)!

It will be a long and interesting night.

Wednesday, 5 May 2010

Unwinding the Time to Pay Scheme: What Begbies Traynor Really Wants!

From The Mail on Sunday business paper 2nd May 2010

"Meanwhile, Begbies Traynor is preparing a lobbying campaign to warn the winner of the General Election not to devastate small businesses by scrapping the 'time to pay' tax scheme.

Begbies fears that dropping the flexible payments programme, which is used by 216,000 companies, would double the number of corporate bankruptcies overnight.

Executive chairman Nick Hood says the enterprise community is 'seriously worried' about how the initiative could be unwound under the pressure of government spending cuts.

He adds: 'The impact will be devastating if it's not done sensitively. We are calling for a constructive and considered exit.'

'Time to pay' has helped British companies defer £5bn since it was brought in last year. Hood says the aid is essential for small and medium-sized firms struggling to position themselves in preparation for an economic recovery".

So, they DON'T want a fast exit but are they trying to plant the idea that it should be a "constructive and considered exit?" In other words please get rid of this pesky scheme?

Either way, right now it is apparent to KSA that HMRC has backed off winding up companies in the election period.

For example this week we had a client tell us that HMRC Scotland had accepted a time to pay deal for the £24,000 of PAYE owed. HMRC agreed to take £200 per month. You read that right a 10 YEAR deal.

$1m MBA

Entrepreneur with a failed business?

If you have experienced the pain of a business failing recently take heart.

In a few months time you will be back up and running. You should look on the experience as a positive learning process. Whilst it may seem negative at the time - going through an insolvency will give you valuable insight into how things went wrong and you will learn from those errors.

As ever those positive Americans have a saying - going through a business failure is like doing a $1m MBA!
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