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System reforms can solve the problem of tax avoidance

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Based on what a group of business leaders have discussed in a recent gathering, a comprehensive reform in the tax system is the most effective solution to the problem of tax avoidance.

According to a recently conducted comprehensive study on tax avoidance, the Institute of Directors (IoD) has signified its advocacy for the redesign of the entire tax system in order to remove the current artificial boundaries between things that are considered as close commercial substitutes.

The employers’ organisation has been insisting that a swift action on the problem is absolutely needed what with taxpayers getting more and more creative with regards to finding ways around the anti-avoidance legislation and the Government formulating an increasingly complex legislation as a response to these methods.

According to Richard Baron, IoD’s Head of Taxation, “Reforming the tax system would obviously not be an easy task. It would mean some drastic changes. However, the task may still be worth undertaking as the current approach is leading to an impossibly complex and confusing tax system.”

The IoD report emphasises the kind of moral ambiguity that is associated with the commission of tax avoidance. The report also acknowledges the arguments that are forwarded against avoidance like competition distortion (this is when a person who performs extensive tax avoidance pays less taxes than a person who does not). But even though it may be true that a business can present more avoidance opportunities compared to others the real fault still lies with the tax system.

Flat tax pushed by small businesses

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A large majority of entrepreneurs are calling for single flat rate to replace Britain’s tax regime, which business owners said is outdated.

According to a study done by business advisor Tenon, seventy-five per cent of company directors said that they back the adoption of a single flat tax in the UK as a replacement to the incumbent system and its many fees.

Only 18 per cent of business owners said that they were happy with what the government is offering, while more than seven in 10 felt that it has become too complicated.

Company formation and business solutions experts said that the numbers indicate an overwhelming call for change and should be seriously looked into by the government.

Start-ups firms now have easier access to loans

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Many start-up businesses will now have an easier time getting access to finance as changes to a government loan scheme has resulted in the expansion of the eligibility although the access to young businesses have been limited.

Based on the new rules, applicants to the Department of Trade and Industry’s Small Firms Loan Guarantee may now qualify for a loan with an annual turnover of up to £5.6m.

But the new rules will also limit the funding to businesses under five years old as a way of boosting the growth rate of start-up businesses and young firms.

Company formation and business solutions experts welcome the new rules saying that it will surely boost the number of individuals who might want to go into business on their own.

BPG gives advisory on cheque issuance

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For start-up entrepreneurs who have recently formed their companies and are busy operating the financial aspect of their businesses , among others, some important financial factors can inadvertently be forgotten.

More than half of the UK’s small businesses have gone through the trouble of a bounced cheque in the last twelve months, and this has prompted the Better Payment Practice Group (BPG) to issue a new advisory for the said businesses.

Even though cheque payments as a general business practice has been decreasing among UK traders and consumers, they still remain the preferred payment method among some micro-businesses and online freelance professionals.

The advisory from the BPG is aimed at informing entrepreneurs about the three-day clearing system that does not include Saturdays, Sundays, and Bank Holidays. Online traders are also advised that they should not accept cheques or banker’s drafts unless they know and trust the issuer of the cheque.

These and other information has been posted in the BPG’s section on how to avoid cheque fraud. The section also has advise on issuing cheques and receiving them.

One example of the group’s reminders is the fact that cheques can be returned to an entrepreneur after five days if it is discovered to be fraudulent, with the expectation that the business would fit the bill for the lost funds.

Also, a section on Cheque Guarantee Services clarifies that entrepreneurs who have received a returned cheque after it has been approved by a collection and cheque guarantee services company will be reimbursed by the said company.

Record number of businesses going bankrupt

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The number of businesses that have gone bankrupt has risen to its highest levels since bankruptcy records began in the 1960s, according to recently released Government figures.

Based on the numbers, more than 12,000 people in England and Wales have declared bankruptcy during the three months to the end of September. This is almost a third than numbers posted during the same period of the previous year, according to the Department of Trade and Industry.
Additionally, the number of people who are taking out Individual Voluntary Arrangements (IVA) nearly doubled to 5,500. Under the IVA, interest on credit is frozen in exchange for a set amount that will be repaid every month.

According to Richard Hawes, reorganisation & recovery partner at Grant Thornton’s Cardiff office “the staggering increases in the number of people overwhelmed by financial difficulty is indisputably a direct consequence of consumer debt levels. The high street might be complaining of falling consumer spending levels but debt levels are still rising for plenty of people out there. In the past 12 months over 64,000 have become insolvent in the UK equivalent to around 1 in every 690 adults. Of these, some 3,000 are believed to be from Wales.”

According to experts the general prediction is that these bankruptcy figures are going to get worse across the UK.

Company formation and business solutions experts are saying though that entrepreneurs should not be discouraged by these figures and should still strive to achieve their dreams of setting up their own business.