due diligence

Disaster Recovery Planning

Watching the events in the US over the last few days got me thinking about disaster recovery planning.  To some degree all businesses need to have some formal procedures in place in the event the unforeseen occurs. Businesses must have an adequate recovery plan in order to ensure the continued survival of the company for the owners, staff and customers.

Here's a checklist

Be prepared

First and foremost have adequate insurance; it doesn’t take much to review it with your broker.

Put together a list of key stakeholders with contact details that can be accessed. We all have smartphones so create a directory. Better still use dropbox where key staff can access the information.

Complete regular back-ups in the cloud; and check they work

Response

It’s difficult to plan a response if one can’t design endless scenarios. It’s probably not a useful exercise anyway.

The ability to respond has two elements: short-term and long term.  Look at the situation and decide what can be done to minimise the damage immediately and what resources are needed, available and within your means.

Recovery

This is the longer term response, getting the business back to the position it was prior to the event.

Often when short-term and long-term objectives are mixed chaos ensues.

Mitigation and prevention

In an ideal world this should be the first priority but life’s not like that and generally under Health and Safety rules most of this should have been covered, no matter what industry.

A few weeks back I wrote about Dashboard Reporting and qualitative research. If you know there is a Hurricane Sandy on the way don’t ignore it

A final thought, there are always annual events, some good and some not so. Just because a particular situation hasn’t occurred before doesn’t mean the resources are not available. There is always help at hand.

Tax Penalities

It has been said there are two things we can’t avoid, death and taxes. There is now a third to add: interest and surcharges when making late submissions of returns to the taxman. The idea of the taxman charging for late returns is a fairly new concept.

“ICTA88/S203 (9) provides that interest on late paid PAYE is not deductible in computing income, profits or losses for any tax purpose. Sub-paragraph 4B of paragraph 6 of Schedule 1 Social Security Contributions and Benefits Act 1992 has the same rule for interest on late paid Class 1, Class 1A and Class 1B NIC”.

In the good old days the taxman didn’t enforce this, he was just happy to get what was due. If it was late or extremely late, they rarely imposed fines or surcharges.

Then government cut-backs started to take hold in 2008 and HMRC like all government departments had its budgets cut. Somebody had a eureka moment and came up with the idea to use the legislation and started issuing penalty notices.

I remember attending a HMRC seminar back in 2010. The tax inspector giving the presentation was up-front about the new strategy of income generation.

Since then the tax office has been cranking up its strategy. It started by issuing late fines of £100, in the early days if appealed they would often be rescinded. Today if a tax return is filed late or not paid on time, a fine is issued includes surcharges or interest and often both as a matter of course. These fines apply to both individuals and businesses and for all forms of tax.

Ignorance of the rules is not a defendable response. Look at the increase in the number of people having to complete self-assessments. Everybody needs to be vigilant, any change in circumstances should be reviewed from a tax perspective - perhaps have that phone call with the tax office.

Appealing is not always straightforward nor does it automatically have the desired effect of HMRC reversing its position.

We have had two successful appeals recently. The first was for a self-assessment fine of £1,200. The other was for Class 2 NIC demand. This was rather nasty where the debt recovery department wanted six years of payments amounting to almost £700 we negotiated a settlement of £120.

So what can you expect to pay if you’re late?

It depends on the type of tax due, but expect to pay at least 3% interest whereas if you are eligible, HMRC pays interest of 0.5% (tax free!!!)

You can also look forward to receiving penalties which vary depending on the severity; suffice to say it’s expensive.

On a separate blog there is a list of these penalties. If you’re late with any tax returns from 1 April 2010, penalties will apply to the following taxes and duties:

  • Betting and Gaming Duties
  • Capital Gains Tax
  • the Construction Industry Scheme
  • Corporation Tax
  • Environmental taxes
  • Excise Duties
  • Income Tax
  • Inheritance Tax
  • Insurance Premium Tax
  • National Insurance Contributions
  • PAYE
  • Petroleum Revenue Tax
  • Stamp Duties
  • VAT

A couple of final points, if you have a tax bill and are not in a position to pay, HMRC can be accommodating. We have assisted many clients over the years and can speak on your behalf.

Any fines or interest imposed are deemed to be non-deductible for the purposes of completing any tax return.