Welcome to the February 2011 Newsletter from Connolly Accountants Ltd

The Prime Minister David Cameron has this month unveiled a series of measures designed to help businesses gain access to thousands of potentially lucrative public sector contracts. The changes are supposed to improve the bidding process by removing 'excessive bureaucracy and petty regulation'.

Meanwhile, HMRC looks set to tighten its grip on offshore tax evaders, with the introduction of new penalties for individuals who fail to declare income or gains hidden abroad. Under the new system, higher penalties - up to 200% of the tax owed - will be levied on those who keep their money in countries which do not automatically share tax information with the UK.


Small firms given help to compete for public contracts

The Prime Minister David Cameron has outlined a series of reforms aimed at helping small and medium-sized businesses compete for public sector contracts.

Under the new system, entrepreneurs will be able to pitch directly to Whitehall buyers as part of the Government's efforts to make public procurement more accessible to smaller firms.

The requirement for businesses to complete a pre-qualification questionnaire (PQQ) before bidding for contracts worth less than £100,000 will also be abolished - a move welcomed by many business groups.

In addition, Mr Cameron announced the launch of a new website which enables firms to search for public sector contracts worth more than £10,000. A similar type of website already exists in Scotland and is reported to be a success, with around 50,000 members registered to the site.

'Too many contracts are signed off behind closed doors with little or no public scrutiny. That can be good for the contractors who can charge over the odds without being properly challenged but it is not good for the taxpayer who is being short changed and denied value for money,' commented the Prime Minister.

The Federation of Small Businesses (FSB), which has been campaigning for the Government to remove the red tape surrounding public procurement, hailed the decision a 'victory' for small enterprises.

'The FSB is pleased that the Government has recognised that these barriers exist and has committed to making the process simpler,' it said in a press release. 'The initiatives, such as the reform of the PQQ process and more transparency through a new contracts website, as well as providing a dedicated voice for small firms' views to be heard, will mean more small businesses having the potential to access work'.

However Susan Anderson, CBI director for public services, said the plan 'could be much more radical by opening up all government contracts and public services to a range of innovative and expert providers.'

The Institute of Directors (IoD) added that the changes were 'long overdue', but it questioned whether the move would deliver real change. 'It remains to be seen whether today's changes will benefit small businesses or whether risk-averse bureaucrats will soldier on with safe choices of big brands,' said the IoD's Alexander Ehmann.

We can advise on a range of issues affecting your business - please contact us for advice.


New penalties for offshore tax evasion

Changes to the penalty regime for tackling offshore tax evasion are set to come into force later this year, HM Revenue and Customs (HMRC) has confirmed.

From 6 April 2011 new penalties will apply to income tax and capital gains tax. They will be linked to the tax transparency of the territory in which the income or gain arises. Where it is harder for HMRC to get information from another country, the penalties for failing to declare income or gains arising in that country will be higher.

Under the new system there will be three new levels of penalty:

  • where the income or gain arises in a territory in 'category 1', the penalty rate will be the same as under existing legislation
  • where the income or gain arises in a territory in 'category 2', the penalty rate will be 1.5 times that in existing legislation - up to 150% of tax
  • where the income or gain arises in a territory in 'category 3', the penalty rate will be double that in existing legislation - up to 200% of tax

Details of which territories are in 'category 1' and 'category 3' can be found at www.hmrc.gov.uk/news/territories-category.htm. All other territories (except the UK) are in 'category 2'.

If a person can demonstrate that they have taken reasonable care to get their tax right, they may escape a penalty. Similarly, HMRC may not apply a penalty where an individual has a reasonable excuse for a failure to notify taxable income. Where penalties are due, HMRC can reduce them depending on how helpful the individual is in assisting it to establish the correct amount of tax due.

Commenting on the changes, David Gauke, Exchequer Secretary to the Treasury, said: 'The game is up for those going offshore to evade tax. With the risk of a penalty worth up to 200% of the tax evaded, they have a great incentive to get their tax affairs in order.

'We have given HMRC an extra £900m to tackle tax cheats because we are prepared to act against the minority who refuse to pay what they owe.'

The first Self Assessment returns affected will be for the 2011/12 tax year, with paper returns due to be filed by 31 October 2012, and electronic returns by 31 January 2013.

More information on the increased penalties for offshore non-compliance can be found at www.hmrc.gov.uk/news/offshore-penalties.htm.


ESSENTIAL TAX DATES AND DEADLINES

23 March: George Osborne will present the 2011 Budget.

31 March: End of Corporation Tax financial year.

End of CT61 quarterly period.

Filing date for Corporation Tax Return Form CT600 for period ended 31 March 2010.

For more information on key tax dates and deadlines, visit our 2010/11 Tax Calendar.


QUOTE OF THE MONTH

'I want to hear about your brightest and best ideas, because next month's Budget will be all about growth. In particular I want to know what businesses, large and small, want from me.'

Chancellor George Osborne seeks suggestions for the upcoming Budget on 23 March.


WEBSITE OF THE MONTH

www.contractsfinder.co.uk

New website which allows businesses to access public sector contracts.


ON OUR WEBSITE

Essential information for business owners

For advice on all aspects of owning and running a business, visit our business guides.

The latest tax information

View the 2010/11 tax rates and allowances, plus a host of other tax information here.

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Record number of tax returns filed online
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