HM Revenue & Customs. A source of frustration for many sole traders and companies up and down the land.
But a news story I stumbled across this week reminded me of how important it is that anyone operating in business informs the UK’s tax authority about any changes to their business operations.When starting out in business, there’s an awful lot of paperwork, compliance and rules and regs to be aware of. And as a business sets up, develops and grows, the demands of those requirements rarely change.
The UK has a robust regulatory landscape. Some think it’s heavy-handed (I think it is a little bit), places undue pressure on small firms, and should be radically streamlined. Others think it upholds good professional standards.
I know all too well the problems associated with business compliance because I have first-hand experience of it. And I know how easy it can be to take one’s eye of the ball.
Here’s the gist of the tale I read about:
A company is facing a £10,000 fine for not informing the taxman it had changed its name.
The penalty was imposed after the business changed from a partnership to a limited company – so adding a ‘ltd’ to its name – without informing HMRC. It still retained the same VAT number and the revenue did not lose out on tax payments.
It all hinges on the Finance Act 1985 and the VAT Act 1994, under which companies are required to inform HMRC of such changes.
Initially, the firm was hit with a fine in excess of £30,000, but this was reduced by work by accountants and the forum of Private Business, which brought the case to light this week.
What may surprise many here is that the change to the company’s name was particularly minor as it went from a partnership to a limited company and therefore added ltd to the end of its name.
This did not affect the tax number of the amount paid to HMRC. But the move was still in breach of compliance requirements.
While the possible penalty may seem harsh – it is important to stress the company in question is credited with an “exemplary record” of VAT payments and submitting tax returns on time – and the change to the company’s name relatively minor, this tale is a warning to us all about keeping on top of compliance.
Posted by The Secret Businessman