North-West businesses the worst late payment culprits

Data released by global information company, Experian, reveals some interesting regional late payment trends, with businesses in the North West of the country taking twice as long to settle outstanding invoices as those in the South West.

Larger businesses the worst late payers

The latest data shows that the number of days businesses take to pay their bills has increased across the board over the the past quarter, as the economy enters another 'testing' phase.

For all sizes of company, from one man bands to multinationals, the average business settles invoice an incredible 26.13 days beyond the agreed terms. This is a marked increase compared to 22.65 days during Quarter 3 2010.

The larger the business, the later payments tend to be made. The average 1-2 man band settles invoices 20.56 days beyond terms, whereas businesses with over 500 employees take almost 35 days.

Big regional differences in payment times

The late payment problem, already one of the biggest threats to small business survival, is much worse in some regions of the country than others.

By far the worst region for late payment is the North West, which records an average 36.72 days to settle an invoice beyond the original terms. This region also has the second highest insolvency rate in the UK.

By comparison, businesses in the South West take a mere 18.18 days to pay, with the South East and Northern Ireland following close behind - on 20.83 and 20.05 respectively.

London is the second latest paying region, at 28.69 days beyond terms.

Simpler reporting for smaller businesses could be on the cards

The Government has published a discussion paper on proposals to simplify the financial and company reporting requirements of micro businesses.

The paper, 'Simpler Reporting for Smaller Businesses’, was published last week by the Department for Business, Innovation and Skills (BIS) and the Financial Reporting Council (FRC). It sets out ideas to reduce the amount of reporting micro-entities would be required to undertake.

It is thought that up to 5 million businesses could save a considerably sum as a result of simplifying their accounting obligations, as their accountancy fees would drop significantly.

The proposals include easing the current reporting requirements so that the smallest companies would only need to file a simplified Trading Statement (in place of the current P&L account), a simplified Statement of Position and a simplified Annual Return.

The paper also proposes developing an integrated software package to help small businesses prepare financial information. This could allow managers to gain a better understanding of the trends in their businesses’ performance and help them plan for the future.

According to the Competitiveness Council, a 'micro-entity' is defined as a company with a turnover of less than €500,000 (£440,000), with net assets of less than €250,000 (£220,000) and employing fewer than 10 people.

This definition covers around 60% of all limited companies registered at Companies House, and 3.5m unincorporated business, so these changes could have quite a big impact on the administrative burden carried by the nation's enterprises.

Edward Davey, the minister responsible for Corporate Governance, said:

“Reducing unnecessary regulatory burdens on the smallest businesses can give them the freedom to innovate and grow - which ultimately benefits the entire economy and is absolutely central to the Coalition’s vision for Britain. A new deregulation from EU rules targeted at micro businesses means we now have a chance to deliver these benefits.

“The financial reporting regime must also serve the users of the information published by companies – whether they are customers, banks or government agencies. So we look forward to receiving responses to our proposals from a broad range of interested parties in the coming months”.

The paper has been released as an evidence-gathering exercise, and to stimulate discussion. Written responses to the proposals must be provided by the end of October 2011.

Small Business.

Accountant urges small businesses to watch out for incorrect HMRC P35 fines  

An accountancy firm has warned the nation's four million SMEs to be wary of a large batch of inaccurate fines which have been issued by HMRC over the past few months in relation to the employer annual returns which have been submitted late.

North West accountants Mitchell Charles worth made the warning following the recent case of Hok Ltd v HMR&C, which saw the firm’s £400 fine for failing to file a P35 reduced to £100, because the penalty was not sent out until four months after the error was made.

A number of industry commentators have gone so far as to suggest that HMRC have deliberately delayed informing taxpayers that their P35's are late, as a tax-raising exercise.

Joanne Nieman, payroll manager at the firm, said a raft of companies have been hit by similar fines over the last month.

She is now urging any firm worried or concerned about fines related to the late filing of Employers Annual Return (P35) forms to contact a payroll specialist immediately.

“The fine structure has seen businesses being charged per month after missing the tax return deadline. But critically many of these firms weren’t informed until several months down the line. It is a ludicrous scenario because many businesses would have remedied the situation much earlier had they been made aware.”

"Many firms have taken the matter to tribunals and have been successful in getting these fines waived through formal appeals.

“Many new cases came to light in recent weeks when the HMRC issued penalty notices for late P35s. This led accountants and lawyers to warn company owners to check their post.”

Penalty Notice system is flawed

Mrs Nieman said HMRC designed the timetable for issuing penalties to allow a reasonable period for employers to give notice if they have no return to make.

She added: “There are real problems with this penalty notice system. A number of first tier tax tribunal judges have criticised HMRC for not issuing penalties earlier. We would advise anyone who feels a fine issued against them is unfair or excessive to seek help and challenge the appeal.”

Interestingly, Mitchell Charlesworth says that a number of its clients have received penalties for non-submission of their P35 forms, despite submitting 'nil returns' via the HMRC website.

The firm said that even though submission receipts were emailed to firms, nil return submissions had not been recorded.

Many other small business accountants we are aware of have reported similar issues with their own clients over the past few weeks.