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FD's Diary - Turning on the charm

29th Jul 2005
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The FD has unleashed his secret weapon on recalcitrant debtors

July 29 ' Cash remains an issue. It seems that summer holidays are the excuse for non payment from smaller customers (which means most, in our case).

We've got heavy with a few but in the case of some larger balances we've also unleashed our secret weapon. This is in fact a combination of #4 (who's back from university at the moment) and AJ. They're both good on the phone (it seems inbuilt in young women in a way which the male will never master) and so have both been on credit control duties. In addition, for larger balances which are proving difficult they've also been told they can arrange to collect a cheque. Sometimes this is by getting a maintenance person to call in. But if it's really big enough and not absurdly far, I'm letting one of them go. So far this has got in several quite useful older balances which had been creeping up in size. I think they just charm the cheques out of the bottom drawers of accountants desks where they have been sitting signed and unposted for weeks.

Of course, the next step is to prevent the problem recurring. On maintenance deals this is simple. We're saying if we have to take such measures that the future supply of services is dependent upon a direct debit mandate being signed. We've lost a couple of jobs as a result, but most cough up when one of AJ or #4 turn on the charm.

* * *

July 26 ' I've got to say I had an unexpected bonus on the VAT visit. The Inspector turned out to be pregnant. Why's that an advantage? Simply because she's due on almost exactly the same day as my wife and as a result much time was spent in discussing such issues (to the chagrin of the rest of the office ' all of whom are bored stiff with my impending fatherhood stories).

Having established this rapport, things went well from then on. The disclosure on mobile phones was another good thing, I think. It proved we were trying to get things right and there was no suggestion of a penalty as a result. Instead we showed her all the evidence we had and after discussion she actually thought we were being slightly too harsh on the VAT on the rental which we had apportioned. She let us claim all that, so we agreed a slightly lower ratio of disallowed input for the future.

Some of the other things that came up were fairly predictable. VAT had been claimed in error on one of my expense claims in Belgium last year. It was insignificant, and she ignored it, but it shows how easy it is to make a mistake. VAT on petrol was looked at and discussed with regard to vans as well, but she seemed unsure of here ground here and has not said she will seek to make an adjustment. I have a feeling now I think about it that she might have a right to though. I have just done an adjustment on cars in the declarations. Is that enough when there is private usage of vans?

She did check trade stats, but not for long. Ours aren't difficult! And she did a turnover reconciliation, only to find ours on file was more accurate.

In fact it seemed by this stage she was firstly getting tired (another advantage of having a pregnant inspector) and secondly getting to think that we'd tried our best. So apart from the phone VAT and some minor quibbles to sort out on pro forma invoices which have been filed instead of the real thing before my time ' and on which I am certain we can get proper copies as we still buy from the companies involved on an occasional basis ' she went away happy, as far as I could tell.

Perhaps I worried too much. But I'm inclined to think it was worth getting myself well prepared for this. I can be fairly sure our system is in pretty good nick now, although I am still a little worried about diesel on the vans where a private benefit is declared. Can she come back and get me on this?

* * *

July 21 ' There are days when the internet is just the most valuable thing. Today is one of them. Having the Test score continually updated on my screen has provided a day of highs and lows, so far. No doubt there will be more to come.

* * *

July 19 ' I always feel things should let up a bit around now. I guess it's that mid July end of school year feeling. They haven't though. It's been 110%.

Still spending time thinking about VAT ' probably because it's my first inspection here. I'm amused by all those comments about VAT on the purchase ledger more than six months old. I debit note anyone we're in dispute with after three months and keep an accrual for any liability we accept at that time. I've always found this a quite effective way of telling them their claim needs to be reviewed if they want payment to be made, and I'd recommend it as a result. Send a covering note or copy of any emails outlining the dispute at the same time to the accounts department at the supplier (most of whom will have no clue there's a problem going on) and I find this shuts up the belligerent phone calls, which has to be worth it.

So, no issue there. But I'll be pleased when next Monday is done, which is the date now agreed upon.

Of, and we have decided to own up on the mobile phone VAT, in advance. I sent a letter of explanation today saying this had come to our attention and following advice received we've reviewed things and have a formula for the future. With a bit of effort I managed to bring the liability down a bit and still make it seem fair ' the sample AJ used was a bit biased to some heavy private users as it turned out.

None of which mentions my real problem of the moment ' which is slow payment. Others seem to be letting up even if we are not.

* * *

July 13 - Spent yesterday afternoon sitting on an industry committee. Ops thought it good we get involved in this and then gave the job to me.

I'm not a good committee man. I know there are those who are, but I think they are unlikely to be in engaged in smaller business. It's alien to us.

The thought occurred to me though as I was suffering the progress of the agenda in the afternoon heat that if only we were better at committees smaller business would be better represented in the political and business hierarchies to the benefit of us all.

The trouble was I really couldn't see myself volunteering to take on the task.

* * *

July 12 - AJ has done some work on the VAT on our mobile phones. And it's quite possible to come up with an argument that we've been claiming over £1,000 a year in respect of private calls.

How far back can they go? Any suggestions? And should I table this when they arrive, or even beforehand?

Or do I gamble given we didn't ever realise this was an issue?

* * *

July 8 ' A good course.

It's encouraging in some ways when you don't learn much. Most of the PAYE stuff actually focused on the risk of paying sub contractors who aren't any such thing really, but we pretty much avoid that, I think, although I have decided to tighten one or two things. For example, I'm going to ask subcontractors to prove they're insured in the future. I thought that was a good tip as real evidence of being in self employment.

The VAT stuff was very focussed on groups and issues related to them, and I think they missed the point for a lot of us who were attending. But, I got a question in. The speaker thought Customs were keen on the data sections right now; making sure all trade and other declarations were right. That's an interesting point. I might have a look to make sure I'm really confident in that area before they come.

The afternoon was actually more useful. Lots of stuff about Companies House, credit checking, and doing minutes etc to keep your own backside is covered but also to prove key decisions for things like Revenue enquiries. I was quite impressed by the practicality of that ' especially as a pile of sample minutes were supplied on CD. Nothing like a freebie to send the audience home happy!

CPD can be worth it, after all.

* * *

July 7 ' CPE day. Off to a tax course run by the auditors (and others, I think) for their clients.

I like the look of their approach. A morning of tax focussed on the real things I have to worry about, such as PAYE, P11Ds and VAT. The afternoon is company stuff, including company secretarial.

They may be ambitious, but I'm hoping for a chance to discuss the VAT visit for a start.

* * *

July 6 ' Everyone else seems to be offering their computer tips right now, so I will as well.

I was out much of yesterday at meetings and so returned straight home to work. Within minutes my machine said it was closing down a 'common user' program. Then it wouldn't email. So, I rebooted (first lesson of all IT problems, learnt a long time ago). Within 30 seconds of reboot and the receipt of 2 mails the problem recurred.

So I repeated the exercise. And it happened again. So I told Microsoft about it. I only do this occasionally, but usually get something worthwhile back.

This time they said it was a fault in Norton that they could not correct. Ask Norton, they said. I did, and got no useful guidance from their website at all. But a Google search suggested that the CCAP.exe file that drives this program is a regular source of problems and the only way to overcome the problem is to unload Norton and try again.

Now, by chance I'd read a few weeks ago in a reputable magazine that both McAfee and Norton were so clunky these days they were bound to cause problems and a serious recommendation was given to Trend PC Cillin because it used much less space. Since I was having to uninstall I downloaded the free trial version of PC Cillin before I began to do so, and then started to install it. I was now coming on for 2 hours into this process.

Having got the download I logged off the Net, and began to load PC Cillin. This required Norton to be uninstalled. It said it would do that and seemed to do so.

All seemed fine. Reboot, and guess, what, having spent not very long configuring PC Cillin (which is a dream after the nightmare of Norton's interface) nothing happened. No mail would go.

So I tried PC Cillin help ' but that's a problem with a trial copy at nearly 9 at night now. So instead I searched again. And I found that you shouldn't rely on Norton to uninstall. The fact that its own uninstaller screens say it has gone does not mean that's the case.

I went to control panel and found the programmes remained. So I removed everything Norton. Then guess what? PC Cillin worked. Well, so far. In fcat, the machine is much quicker in some ways.

And I can get mail again. This isn't the first time I've had problems with Norton. This little episode took over 4 hours to deal with. Since PC Cillin is cheaper and well supported I'm sticking with it unless anyone tells me I've made a serious mistake. Now I'm going to check what we do on a company wide basis.

There are times when I hate IT and long for the days when an accountant just had to be an accountant. Last night was one of them.

* * *

July 4 ' VAT input apportionment on mobile phones? I'd never have thought of that.

AJ is doing an exercise on this now. I certainly make personal calls on my business mobile. I hope the adjustment doesn't come to much.

Any suggestions about whether I table it upfront when they arrive?

* * *

July 1 - Always a disconcerting date. Half the calendar year done, and here a third of the financial year done. As for the calendar year, it' pretty much downhill till Christmas. For the financial year, we've still got opportunity to make a difference, and this being Friday, which Ops and I reserve for thinking time (even if the staff say it's just Friday lunch in the pub with a bottle of fizzy water) we thought we'd discuss this and took the morning out too.

The plan is becoming clearer. All the tests of our new product show that it works. We can programme this thing to say when it's in trouble and for it to call for assistance. The costs look low enough to justify this in relation to an annual contract if we can halve the number of visits we make. Experience from the test sites over the last few months suggest the number of necessary visits might be only 25% of what we've been doing to date. If we allow for one in three former, even allowing for extra call outs the systems will pay for themselves in a year.

But we have an alternative as well. If we allow for a two year pay back, we'll only halve the number of visits and put the rest of the effort into "added value". I think I mentioned we'd thought about this and asked for feedback a while ago. In practice, we got just about none. But it occurred to us (well, that's Ops and me) that in practice what we need to do is an annual survey of each site as the value added process.

When we get a contract we do a site survey, make recommendations, install kit, seek to convince customers their systems have been improved as a result, and then service it. What we never do, unless asked, is repeat surveys to see if we're still meeting the client's needs.

So, we're going to use some of the free time to ensure that every client has an annual site survey. This is a small audit and report which will tell them if they're still meeting their obligations, what we can do if they're not, and give them a nice certificate of compliance once all is done. Since the guys who do maintenance can all do these site surveys, and do on occasion when we quote for work, there's little retraining required, and the reports should be capable of being heavily database driven.

The extra business we expect to get should cover the "unnecessary" visits, create client contact and maybe increase revenue.

We think it's a plan for the rollout. Anyway, it's good enough for Ops to go off and see if it will work with a couple of our more willing people.

* * *

June ended with the FD facing a VAT inspection.

For previous installments of the FD's Diary, see:
May
April
March
February
January
December
November
October
September
August
July
June
May
April
March
February
January
December
November
October.

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Replies (22)

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By AnonymousUser
26th Jul 2005 12:51

Input VAt on mobile 'phones

I am sure I am not the only regular reader to be irritated by the saga of VAT on mobile 'phones.

I have yet to see anything well-argued to support the contention that the legislation (rather that HMRC diktat) requires restriction of input VAT where company-owned mobiles are used by employees for private calls.

The supply is made to the company not the employees, so there is clearly no private use by the person to whom the supply is made and who pays the cost (ie the company).

The company uses the supply for a legitimate business purpose as part of the employees' remuneration package.

Whence then the input VAT restriction?

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By Richiejjj
18th Jul 2005 15:09

Books
I know what you mean, learning from mistakes is key - or even learning from near misses!

What I want is to learn from other peoples mistakes and experiences.

When you are Number 1 on site, surrounded by activity, it is not always obvious that mistakes are being made - a mistake being any failure to exploit, develop or maximise opportunity.

By purely learning 'on the job' you may feel like you are doing great and limiting errors...but its the missed opportunities that I want to read about.

Key areas covering Accounting, HR, IT, Sales, CRM... and not just theory but practical implementable sound advice.

Not asking much am I!

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By Richiejjj
15th Jul 2005 12:06

Books
This article is an interesting read.


Would anybody have any suggestions from where a relatively new financial controller can get some advice/books/articles on the reality of being the number 1 Finance person of an SME.

Thanks

Richard

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By martincassis
28th Jul 2005 08:59

But where's the legislation?
I think John was asking what the legal justification for this is, rather than the moral justification, which (to me at least) is fairly clear.

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By theaardvark
27th Jul 2005 12:19

non-business use
John,

It would be difficult to argue that an employee using his/her company mobile phone for private chats with his/her friends is use for "a business purpose". The issue may be less clear if he / she is away from home on a business trip. Where there is non-business use an input VAT restriction or an output VAT charge must be made.

It should also be borne in mind that on top of ring tones, screen savers and premium rate text messages phone companies are looking to let you make purchases of up to £10 in value via your mobile phone.

HMRC are aware of this and are, for once, trying to be ahead of the game by ensuring companies have a policy for identifying non-business use and restricting the VAT appropriately.

Regards

Paul Taylor
VATease - VAT Advice

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By Anonymous
15th Jul 2005 16:49

Books
I'm not that sort of man. I learned what I do on the job and by trying to avoid the mistakes others have made (not always successfully).

But it would be good to see what others come up with.

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By jtomlin2
28th Jul 2005 12:32

Supply made as part of remuneration!
I believe the point John was making (correct me if I am wrong John) is that if the personal calls made on the business mobile are included in the individual's remuneration package then the supply could/should be considered made for the purposes of conducting business as it is part of the expense of employment.

I can understand how this argument falls over if you charge the employee the cost of personal calls as you are then passing the supply on and as such should either apply output tax to the personal calls or exclude the amounts from your input tax calculation.

Having said all of the above I am by no way an expert on these matters this is just my thought process on the subject based on other peoples comments.

Regards,

JamieT

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By listerramjet
29th Jul 2005 09:24

VAT on mobile phones - employee personal use
I'm with John on this one. The supply is to the company and is for business use, regardless of how the phone is actually used. Personal use by employees is subject to the benefit in kind rules.

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By theaardvark
28th Jul 2005 11:13

VATA 1994 s.26
Section 26 of the VATA 1994 dictates what is allowable as input VAT

(1) The amount of input tax for which a taxable person is entitled to credit at the end of any period shall be so much of the input tax for the period (that is input tax on supplies, acquisitions and importations in the period) as is allowable by or under regulations as being attributable to supplies within subsection (2) below.

(2) The supplies within this subsection are the following supplies made or to be made by the taxable person in the course or furtherance of his business—
(a) taxable supplies;
(b) supplies outside the United Kingdom which would be taxable supplies if made in the United Kingdom;
(c) such other supplies outside the United Kingdom and such exempt supplies as the Treasury may by order specify for the purposes of this subsection.

Costs that are not for a business purpose will not be attributable to any of the supplies within (2) and will not therefore be deductible.

Paul Taylor
VATease - VAT Advice

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By AnonymousUser
14th Jul 2005 21:48

Problems with Norton
I always used to like Norton but I too recently loaded Norton on to my PC. SpamKiller certainly killed spam ... it killed email. I had to uninstall it to get email but it didn't uninstall properly and I had so many problems with email afterwards that in the end email only worked properly again after I had reinstalled Windows XP !

Use McAfee anti-virus & firewall and Qurb anti-Spam ... happy with both.

Martin

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Rebecca Benneyworth profile image
By Rebecca Benneyworth
13th Jul 2005 11:42

Three years is correct
The overclaimed input tax can only be recovered (or voluntarily corrected) for a retrospective period of three years.
The basis for the restriction is that the calls are VAT recovered and are made for non business purposes. You either need to make a small charge for private use and account for VAT (output tax) on this, or restrict the input tax recovery. It is normal to agree a flat percentage with HMRC to save all the faffing around working out correct apportionments. Use the exercise as a model and agree a flat restriction and it will be simple from here on, resticting recovery on invoices as they are processed or doing a bulk quarterly journal when the VAT return is prepared.
Good luck with the visit! Have you checked that you have repaid your input tax on unpaid purchase invoices over 6 months old? (perish the thought!) Fairly new thing, but something Customs are likely to check because of it. See Notice 700/18 on bad debts for more information.

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Morph
By kevinringer
13th Jul 2005 13:47

AV
I've used Norton Internet Security at home for years (combined AV, firewall etc), but every version makes the PC slower and slower. When this year's subscription expires I'm going for something else. I've been told F-Secure or ZoneAlarm are the best to go for on a single PC.

At work we have a 10-PC network. We had McAfee which was resource heavy. We now have Computer Associates eTrust which is faster.

We recently bought some new PCs that all came with a free trial of Norton AV. Norton really slowed them down. When the trial expired we installed Computer Associates on them (free download for 12 months) and they worked much faster.

The trouble is we're all going for faster products, but do they do as good a job?

Don't forget that we should be running more than just AV software - what about anti-spyware and firewalls?

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By sonia jackson
12th Jul 2005 13:11

Time out for VAT
I'm pretty sure that Customs can only go back 3 years.

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By AnonymousUser
13th Jul 2005 10:36

Norton AV & Office speed
Anyone else noticed the effect of the Norton AV Office plug-in?

Over the past few months the speed of Excel has plummeted for my larger workbooks, but take out the office plugin and everything's back to normal.

Perhaps Symantec can tell us why their product interferes so much?

Greg

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By Anonymous
09th Jul 2005 09:06

Anti Virus
In case of doubt, the computer on which I had problems was at home, and not part of the network as such.

Symantec (which is Norton as far as I can tell) is in use at the office and seems to work.

But I've noticed my machine at home is a lot quicker without Norton so I wonder whether there are better options at the office too.

But not McAfee, I'm sure - I've had nightmares with that in the past and hated its interface.

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By AnonymousUser
08th Jul 2005 15:46

Input VAT on mobile phone calls
Re the point about restricting input VAT on mobile phone calls because of non-business use by employees see:

Director gives company mobiles to family

where it has been requested that VAT experts offer their opinions on whether there is any legislative support for HMRC's contention that input VAT should be restricted (eg in VAT Notice 700).

In particular, is there any legislative support for input VAT restriction in situations where the mobile and the cost of all calls are provided by the employer as part of the employee's remuneration package so that the costs are incurred entirely for a business purpose as far as the employer is concerned, irrespective of private use by the employee.

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By k743snx
06th Jul 2005 22:43

PC-Cillin
I'm a recent convert to PC-Cillin (only used at home, BTW). Had Norton Internet Security & SystemWorks - they were playing up & so I used the Norton website for uninstallation guidance. Trying to follow the advice thereon led to a major registry failure & 2 days wasted getting my system back!!

I purchased PC-Cillin & it works like a charm!!


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By David160
06th Jul 2005 20:29

To FD re Anti Virus programmes
What do you think of the free anti virus programmes eg AVG, Bit Defender etc?

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By John Savage
06th Jul 2005 08:54

FD - you may be OK
My understanding of VATmen these days is that they do not raise assessments for underdeclared VAT for amounts of less than £200. Whether this is an official policy or not I cannot say, but when I was a VATman (more years ago than I care to remember these days) the de-minimus level was £50 - and that was official. The argument was that it cost the department more than this to actually process the assessment.

Of course, they will ask you to put a trivial underdeclaration onto the next return, but if this is the only error they have found, I don't, for one moment, expect anyone will check it. The VATman has far bigger 'fish to fry'.

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By Mike Haddock
05th Jul 2005 12:33

Company policy
I had read somewhere that if it is stated company policy that personal calls are not allowed on company mobiles then you should not have any VAT problems. Has anyone else seen this advice anywhere?

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By timbops
05th Jul 2005 12:15

VAT on phone calls
If you have to track VAT on personal calls using office mobiles, is there not also a benefit in kind implication concerning the cost of the call itself? Why are mobiles only targeted? What about personal calls using desk phones?

All this ignores the cost/effort of tracking all this in the first place. Let the VAT-man without sin cast the first stone!

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By AnonymousUser
21st Jul 2005 11:26

Re: VAT Inspection
Working for a group of companies, I have had the pleasure of 2 VAT audits within the last six months.

Please don't worry about it as they are relatively painless. They wish to look over the last 3 accounting years. Therefore, as long as you have kept accurate records which can be viewed easily, then there is little room for discrepancy. The approach of the inspector varies, some are very precise and will look through the accounts in great detail whilst others will simply glance over relatively quickly. It is best to have kept copies of all VAT returns with detailed reports for the inspector to seive through. The main areas that they look through are items where VAT have been claimed under, expenses, entertainment, pr activities, motoring (fuel), subsistence etc. Basically they are seeking any incorrectly claimed VAT. As long as you are helpful and transparent, they will not be heavy handed or over critical. They will advise of any mistakes that you have made and how to account for certain transaction types in the future. They will present a total of claimed VAT to be repaid to C&E and provide explanations for doing so. The key is not to think of them as an Inspector but an advisor.

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