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Carillion Collapse and Credit Control – what can we learn?
Paula Veysey Smith • 22 January 2018
Carillion Collapse and Credit Control – what can we learn?
The collapse of Carillion last week was not only a huge blow to the economy but also proved to be devastating to many small businesses. It’s like a stone being thrown into a water; there is a large plop as it lands but then the ripples go out so that in the end all the water is disrupted! Yes, the indications were there that this business was indeed in trouble but how many of those small businesses that had credit lines with Carillion noticed; not many considering the reports in the news.
What, as small businesses can we do to protect ourselves from such a situation? Whether we deal with large business or have a significant smaller client, the threat of a bad debt is always present, and it only takes one to seriously jeopardise the stability of any company. Credit Control is very much a skill of its own and M:Power Accounting has had years of experience in this field. Over the next two weeks I’m going to give you some pointers on how you can reduce the threat of bad debt. In this article we’ll look at what you can do to protect yourself and then next week we’ll explore the actions necessary when it looks like it’s going wrong.
Here are my five pointers for effect credit control:
- Make sure you check out the businesses you deal with. It doesn’t need to be an expensive credit check. Read the press, locally or nationally, use the Companies House free web-check, ask around and also check out their website. There will often be clues if a company is facing difficulty and with a little research you will be able to uncover these.
- Get the company details recorded correctly. Company name, registration number, address etc. If you need to chase a debt through the courts it is imperative that you have correctly invoiced the company and any error will make it difficult to purse a potential debt through the courts.
- Build a relationship with the client. This can be directly with the owner, or in the case of larger organisations, a significant employee. I’ve always worked hard to make friends with the accounts administrators, they may not be able to approve a payment but often the Director who can will listen to their input. Make sure you know what authority the person has; if they can approve payments or will be able to elevate you invoice to the decision maker they are worth making friends with.
- Always send statements monthly. With modern software this task only takes minutes but can be very effective. Also, if you have to elevate to a legal claim evidence that you’ve properly pursued your debt is very influential. It’s no good leaving it for three months and then just issuing court proceedings.
- Always have a note on your invoice regarding your policy on payment.
Two notes I would add to invoices are – “Any disputes regarding this invoice need to be raised within 5 working days”
You can change the timescale to suit your business but the important issue here is that it means that they can’t dispute the invoice when you chase it in a months time, a classic way for a client to avoid payment.
“We reserve the right to charge interest on any outstanding amounts at the rate of 8% above bank base rate per annum under the Late Payment of Commercial Debts (Interest) Act 1998. Such interest will begin to accrue from 30 days of this invoice. We also reserve the right to seek compensation for any debt recovery costs incurred if this invoice is not paid to terms”
Again, write the terms to suit your business but by including this term you can charge interest on overdue debt and is often enough to put potential bad payers off.
By taking these actions you are basically creating a culture that expects payment. Clients that know they can skip your payment and get away with it will do so; if they understand that you don’t tolerate non payment you find that your payment goes up to the top of the list!
Next week I’ll give you some hints on what to do when you are concerned that one of your clients can’t pay.
What are these jumbles of letters and numbers? When you start a new job, receive a pension, or change employment, you’ll likely notice a tax code on your payslip. Although, to many, this code looks like a random combination of letters and numbers it is actually the crucial piece of information that determines how much tax is deducted from your income. Understanding your tax code will empower you to check that you’re paying the correct amount of tax and, if necessary, correct the code with HMRC. What is a Tax Code? A tax code is used by your employer or pension provider to calculate how much income tax to deduct from your pay or pension. It’s based on your Personal Allowance (the amount you can earn tax-free each year) and any other factors that affect your tax situation, such as additional income or benefits. For the 2024/25 tax year, the standard Personal Allowance is £12,570 and will remain at this level for the 2025/6 tax year. This means most people can earn up to this amount without paying income tax. Common UK Tax Codes and Their Meanings Common codes can be broken down into three main categories: Standard Tax Codes 1257L: This is the most common tax code for people with one job or pension. It reflects the standard Personal Allowance of £12,570. BR: Stands for Basic Rate (20%). This code is used when all your income from this employment or pension is taxed at the basic rate, usually because you have more than one job or pension and the Personal Allowance has already been used up. D0: This means all your income is taxed at the higher rate (40%). D1: This code applies when all your income is taxed at the additional rate (45%). 0T: Used when your Personal Allowance has been used up, and all your income is taxable. Although similar to BR this code applies to all tax rates (20%, 40% & 45%). Emergency Tax Codes The term ‘Emergency Tax Code’ is often misunderstood. This code is most often used when HMRC does not have the information to calculate the correct tax code for an individual and should be corrected when the information does become available. Usually the code 1257L W1/ M1 is used which means that the Personal Allowance is being applied. The main difference is that tax is calculated on a weekly (W1) or monthly (M1) basis rather than cumulatively. You would most usually see this if you’ve started a new job and your previous tax details are not yet available 0T W1/M1 is another emergency tax code but this means that no Personal Allowance is being applied, leading to higher tax deductions. Worldwide and Non-Resident Tax Codes NT: No tax is deducted from your income. This is usually for non-UK residents or people with special tax arrangements. K: This code is used when untaxed income (e.g., state benefits or company benefits) exceeds your Personal Allowance, meaning additional tax is due. If your tax code begins with an S then it is a Scottish code and similarly if it is a Welsh code it will begin with a C . Other Special Tax Codes There are a number of letters that may also be applied to a tax code: T: Used when HMRC needs to review your tax code (e.g., for complex tax situations or multiple income sources). Y: For people born before 6 April 1938 who qualify for a higher Personal Allowance. L: Indicates entitlement to the basic Personal Allowance. M: Given to someone receiving the Marriage Allowance from their spouse. N: Given to someone transferring part of their Personal Allowance to their spouse. How to Check and Change Your Tax Code Your tax code will appear on your payslip, P60, or P45. If you think your tax code is incorrect, you can: Check Online: Log into your personal tax account on the HMRC website . Contact HMRC: Call HMRC to request a review or correction. Seek Professional Advice: If you’re unsure, a tax advisor can help you navigate your tax situation. Why Understanding Your Tax Code Matters Getting your tax code right is essential to ensure you’re not overpaying or underpaying tax. An incorrect tax code could lead to an unexpected tax bill or a delay in receiving a refund. By understanding your tax code, you can take control of your finances and avoid unnecessary stress. Need Help with Your Tax Code or Finances? Tax codes can be confusing, especially if you have multiple income sources or complex financial arrangements. At MPower Accounting, we’re here to help! Our team of experts can guide you through your tax obligations, ensure your tax code is correct, and help you maximise your income. Contact MPower Accounting today for personalised advice and support. Let us take the stress out of tax so you can focus on what matters most. Sources: HMRC (HM Revenue & Customs): Tax Codes Overview: HMRC Tax Codes Guide Personal Allowance and Tax Codes: HMRC Personal Allowance Emergency Tax Codes: HMRC Emergency Tax Marriage Allowance: HMRC Marriage Allowance K Tax Code: HMRC K Code Non-Resident and NT Code: HMRC Non-Resident Tax Scottish Government: Scottish Tax Codes and Rates: Scottish Income Tax S Prefix Tax Codes: Scottish Tax Codes Welsh Government: Welsh Tax Codes and Rates: Welsh Income Tax C Prefix Tax Codes: Welsh Tax Codes General Tax Information: Understanding Tax Codes: Money Advice Service - Tax Codes Tax Codes for Multiple Jobs: HMRC Multiple Jobs
The Bank of England has halved its growth forecast for 2025 as it reduced interest rates to their lowest level in over 18 months. The UK economy is now expected to grow by 0.75% in 2025, down from the previous estimate of 1.5%. Despite this downgrade, Bank of England Governor Andrew Bailey expects a "pick-up" in growth, though he emphasised the need for gradual and careful rate cuts due to economic uncertainties. The latest interest rate cut—from 4.75% to 4.5%—signals the Bank’s continued efforts to stimulate economic activity while managing inflation risks. What This Means for Small Businesses in the UK For small businesses, the interest rate cut and lower growth forecast have both benefits and challenges: Positive Impacts Lower Borrowing Costs: Businesses relying on loans, credit, or overdrafts may see slightly reduced repayment costs. This could help with cash flow and investment decisions. Potential Increase in Consumer Spending: Lower interest rates might encourage consumer borrowing and spending, benefiting sectors like retail, hospitality, and services. Reduced Mortgage Payments for Business Owners: Many small business owners with tracker or variable-rate mortgages could see a slight drop in their monthly payments, potentially freeing up more funds. Negative Impacts Slow Economic Growth (0.75% instead of 1.5%): Businesses might experience reduced demand and slower revenue growth due to weaker economic conditions. Rising Employment Costs from April 2025: The increase in employers' National Insurance contributions could make hiring more expensive, discouraging expansion and investment. Inflation Expected to Rise (3.7%): Higher energy and water bills will increase business operating costs, especially for energy-intensive industries. Lower Confidence & Uncertainty: Businesses may hesitate to invest or expand due to economic instability. The Mortgage Impact: Who Benefits? Tracker Mortgage Holders: Around 629,000 homeowners with tracker mortgages will see an estimated £29 reduction in monthly payments. Standard Variable Rate (SVR) Holders: Nearly 700,000 people on SVRs must wait to see if their lenders adjust rates accordingly. Fixed-Rate Mortgage Holders: No immediate change, but they may find better deals when renewing. Savers: Those relying on savings for income, such as retirees, may see lower returns on savings accounts. What Next? The Government’s Response Prime Minister Sir Keir Starmer emphasised the need to "turn the economy around" with a focus on infrastructure, planning, and nuclear energy. However, businesses remain concerned about higher employment costs and stagnant growth. Chancellor Rachel Reeves has introduced measures to stimulate the economy, but critics argue that the employer National Insurance hike will increase costs for businesses, making it harder to invest or hire staff. Shadow Chancellor Mel Stride warned that while rate cuts are good news for families and businesses, the government’s "disastrous Budget" could limit further rate cuts this year. Take Control of Your Finances with MPower Accounting With rising business costs, inflation concerns, and economic uncertainty, small businesses need strategic financial planning now more than ever. Mpower Accounting specialises in helping small businesses across London, Kent, and Sussex navigate financial challenges. Whether you need help managing rising payroll costs, improving cash flow, or planning for tax efficiency, Mpower Accounting has you covered. How MPower Accounting Can Help Your Business Optimise payroll & plan for the National Insurance hike Improve cash flow management to navigate economic shifts Access expert financial advice to make smarter business decisions Prepare for tax changes & ensure compliance Book a consultation today and get expert support tailored to your business! Stay ahead of economic changes with the right accounting partner. Photo by Tim Mossholder on Unsplash
Self-assessment tax, between navigating tax codes, understanding what to include, allowable expenses, and the deadlines, it’s easy to feel like you’re spinning in circles with no clear direction, a bit like being on a Magic Roundabout! Well with that in mind I’ll hand over to some much loved characters to explain more... On a sunny day in Tax Meadows, Dougal the dog, Florence, Zebedee, and the gang gathered around to talk about a magical thing called Self-Assessment . Boing went Zebedee and said, "Self-Assessment is telling the Tax Gardeners at HMRC about how many seeds you’ve made from the lovely flowers in our magic meadow. If you’ve made more seeds that you planted you have to pay some of them back to them to keep the meadow looking lovely!” Young Florence, who didn’t know much about the Tax Gardeners also asked, "and who has to tell them, don’t they know already?" Zebedee nodded wisely. “If you have a job, your employer will tell them but if you’re like Ermintrude the cow, selling flowers at the market, or Brian the snail, renting out your shell as a holiday home, you need to do tell them about all the income you earn!” Dougal wagged his tail, “When do we have to send it to the Tax Gardeners?” Boing went Zebedee, as he couldn’t contain his excitement at being the Tax Gardeners expert. “You must file by 31st January and pay the seeds you owe them or they might start blowing dandelion fluff everywhere and we don’t want that! “Yes, don’t be late," warned Ermintrude, "or they'll send Soldier Sam with a nasty letter!" Zebedee looked put out that she had butted in and his spring, for once, didn’t boing! Ermintrude continued, pleased to have something better to do than chew the flower in her mouth! “First, there’s the arrival of a £100 fine —a little like an unexpected boing from Zebedee, but far less delightful. This fine appears whether or not you owe any tax. If you dawdle for three months, you’ll meet another twisty challenge. Now it’s £10 per day , up to a maximum of £900, like being chased, if rather slowly, around the roundabout endlessly by Brian. After six months, an extra 5% of tax owed (or £300, whichever is greater) is added to the dandelion mix.” The sun had started to set, Florence smiled and said, "So, Self-Assessment isn’t scary—it’s just about telling the Tax Gardeners the truth and helping the meadow thrive!" "Exactly!" Zebedee laughed. “Be a Brian, start off early, take it slow but steady and you’ll get there in plenty of time. Boing when Zebedee one last time, “Time for bed and tomorrow we’ll work on keeping our meadow blooming!” I hope you enjoyed our visit to the Magic Roundabout, a fun look at Self-assessment tax. If you haven’t been a Brian please do contact us now and we can wave our magic wand to make your self assessment return go away!
The season of peace and goodwill is well and truly upon us! And for many this heralds that most joyous of events, the staff Christmas party!! Apparently the most popular day for this event is the Thursday of the second week of December, who knew? Drinks and meals out are the usual staff treat, some with a twist such as themed events or dance and karaoke nights. Some of my clients have been more adventurous in their offering with my personal favourite being a class in natural life drawing! Fortunately it was a mild December. Whatever the event there are some simple rules that need to be followed to ensure that The Revenue will join in the fun with you. HMRC allows businesses to spend up to £150 per head per year on staff events, including a Christmas party. This allowance is an exemption , not a relief . If you exceed the £150 per head limit, the entire amount becomes taxable, not just the excess . Now to be totally clear, this limit does include VAT and applies to the total cost of the event, including venue hire, food, drinks, entertainment, accommodation, and transport. This £150 per head allowance applies across all staff events in a single tax year and if you hold multiple events, e.g., a summer barbeque and a Christmas party, the combined cost per head must not exceed £150. Finally, any events held do have to be open to all members of staff, whether you like them or not! If you are really generous you may also want to give Christmas gifts to your team. HMRC will allow you to do this without tax or national insurance implications if they can be deemed trivial benefits. To do this they must cost £50 or less and not be part of their contract or a reward scheme. Bottles of wine, boxes of chocolates and in the case of my adventurous client, a set of crayons, are all perfectly acceptable. Do the revenue enter into the Christmas spirit? They do in part but their Secret Santa stocking isn’t overflowing and any gifts they give can be taken back if the rules aren’t followed. To keep Scrooge at bay it is essential to keep accurate records showing that you have understood and properly followed the guidelines. So I hope that whatever Christmas treat you have planned for you and your team it is a fabulous festive celebration. And don’t forget to lift a glass to thank the HMRC for being more Santa’s little elf helpers rather than the full on Scrooge! Wishing you all a Happy Christmas and a very prosperous New Year.
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