The text of the new Directive on Late Payment in Commercial Transactions was approved in October 2010 and was published in the Official Journal of the European Union on February 2011, and came into force on the 16th March 2011. Member states, of which we are one, will have until the 16th March 2013 to implement the Directive in domestic law.

The purpose of the Directive is to encourage prompt payment of invoices as many company’s suffer with cash flow problems relating to late payment for goods and services provided.

The new Directive limits payment terms to 30 days, however if both parties agree this can be extended to 60 days. The payment period can be extended further, beyond  the 60 days, on the proviso that it is “expressly agreed” by the creditor and debtor and that it is not deemed “grossly unfair to the creditor”.

A report published recently in the  EN shows that company failures in the North West incurred a 9.1 per cent increase during the third quarter.

Although the North West has suffered, it has got off relatively lightly as a whole, as business failures throughout the UK rose by 20.3 pre cent year on year to 7,994 in quarter three; the highest figure for more than 12 months.

The South East and London are the worst hit regions in the period, while only the East Midlands bucked the trend showing a small decline in the number of firms going out of business.

HM Revenue and Customs (HMRC) has announced an extension of its Business Records Checks programme.

Business Records Checks were piloted earlier this year in eight key areas, and involve checks on the adequacy of small and medium sized enterprises’ business records.

The pilots found that around 44 per cent of businesses visited had issues with their record keeping, while around 12 per cent of those visited had seriously inadequate records.

HMRC will now be extending this activity from mid September to cover a number of key areas across the UK. As part of this, the number of full time staff employed on the programme will rise from 30 to 120.

The number of investigations launched by the Insolvency Service has fallen nearly 40% – a drop that the agency has blamed on budget cuts of 11%.

The services’s full-year accounts for the 12 months to April 2011 show it’s company investigations unit launched 180 cases in this period, a decrease of 39% from the 295 launched in 2009-2010.

The news follows concerns that a lack of resources will reduce the service’s capacity to investigate rogue company directors.

The accounts state: “This decrease is as a consequence of 11% cuts which reduced the amount available to outsource some investigation work, and the replacing of experienced non permanent workers with permanent staff from other areas of the service last autumn.

HM Revenue and Cutoms has strongly denied claims that the Time to Pay (TTP) scheme is keeping businesses afloat.

Dr Mark Abani, head of debt management and enforcement at HMRC, said the department had not been storing up problems despite signing off “billions” in TTP allowances for UK businesses.

Abani added that HMRC had industrialised it’s responses to TTP in response to the high number of applications it had received since 2008.

Retail is currently in more distress over debt levels and the risk of insolvency than any other sector in the UK, research has found.

Nearly half (41%) of retailers are more likely to be concerned about their debt levels than any other sector, according to research conducted by the Insolvency trade body R3.

The research has also found that 58% of retailers are experiencing  falling profits and 8% consider themselves very likely to enter insolvency in the next year, compared with a cross-sector average of 2%.

Many small and medium sized companies (SMEs) are encountering late payment of debtor ledgers which in today’s financial climate can result in catastrophic repercussions in their own survival.

Recent research has indicated that even the first six months to July as many as 67% of companies have seen an increase in the time it takes their customers to pay outstanding bills.

You may also be encountering some of your larger clients demanding larger terms to pay or they take their business elsewhere, particularly pertinent if you are in a restricted market place.

It has been recorded that privately owned and limited businesses are the types of customers who are taking the longest to pay off their debts with corporates and listed companies not far behind.

Our experience is that many companies are in a catch 22 position, not wanting to pressurise clients to pay as competition in the market place is also great, but if they do not their bankers/borrowers are taking action which can result in administration.

Many directors find this very frustrating, as to extend borrowing results, in many cases, in an increase in interest and the spiral continues to turn.

The quarter on quarter increase in personal insolvency of 1.2 per cent (up from 30,145 to 30,513) is to be expected, given job cuts and compulsory redundancies in both the public and private sector. Thirty per cent of people do not have any savings according to R3’s lastest personal debt snapshot, with many households failing to have a contingency plan for any fall in income or increased outgoings. Therefore, a swift change in circumstance such as losing a job is likely to have pushed many individuals into insolvency. In reality, the statistics may be even higher as this data does not capture the figures for those in informal insolvency procedures such as debt management plans.

The consecutive quarter increase in corporate insolvency of 2.7 per cent (up from 4,121 to 4,233) is unsurprising given the latest GDP figures revealing marginal growth of just 0.2 per cent.

Link to the R3 website

HM Revenue and Customs (HMRC) has issued a reminder on new tax return penalties that come into effect this Autumn.

The changes will affect self assessment returns for 2010/2011, and all future financial years.

The new penalties for late filing of a self assessment return are outlined below:

• An initial £100 fixed penalty, which will now apply even if there is no tax to pay for the year, or if the tax due for the year has already been paid on time;
• After 3 months, additional daily penalties of £10 per day, up to a maximum of £900;
• After 6 months, a further penalty of 5 per cent of the tax due or £300, whichever is greater; and
• After 12 months, another 5 per cent or £300 charge, whichever is greater. In serious cases, the penalty after 12 months can be up to 100 per cent of the tax due.

There were 460 corporate insolvencies in the business services sector in July, as several industries were hit by weakened growth and consumption across the economy.

A report from the credit reference agency Experian, which breaks down the number of corporate failures by sector, shows the services sector endured the highest business insolvencies of any industry during July with 460, while the building and construction sector endured the next highest with 305.

Lawyers have issued warnings over a wave of insolvencies across legal firms and charities, because of government plans to cut legal aid fees by a further 10%.

Fears were sparked by a proposal from the Ministry of Justice (MoJ) to cut costs even further, on top of the previous Labour government’s move to slash legal aid fees by 12.5%.

The MoJ is likely to encounter vast opposition when parliament resumes but on confirming the plans, it said the UK legal system was “the most expensive legal aid system in the world”.

Acquisitions of insolvent businesses in the North West have continued to fall in the first half of 2011, according to research by Experian Corpfin on behalf of the insolvency trade body R3.

The figures show that distressed deals now account for one in ten of all mergers and acquisitions in the region, compared with one in five when activity peaked in late 2009.

During the first half of 2011, 23 out of a total of 226 acquisitions in the North West involved companies acquired out of administration or other formal insolvency procedures. This compares with 32 out of 230 acquisitions during the second half of 2010 and 22 out of 117 in the final quarter of 2009.

Link to full article on Insider Media Limited

Link to R3 website

Corporate insolvencies increased by just over one percent during the second quarter of 2011 to 5,465, compared to the previous three months, as the economy stuttered and sectors including retail suffered.

When this morning’s official statistics from the Insolvency Service are broken down, they show that the number of compulsory and creditors’ voluntary liquidations reached 4,233 in the second quarter.

On a seasonally adjusted basis, these represented a 2.7 percent increase on the previous quarter and a 4.4 percent rise on the same period last year.

The total of 4,233 comprised 1,290 compulsory liquidations, which are up 19.8 percent on the pervious quarter, and 2,943 creditors’ voluntary liquidations, which fell 3.3 percent during the same period.

To read the entire article please follow this link to Insolvency News

A £1bn scheme to encourage businesses to expand has been declared a “total flop” as it emerged it had cost more to run than it delivered in additional growth.

The National Insurance holiday scheme established by the Government last year with the aim of helping create 400,000 new businesses within three years has so far helped only 5,137 companies, according to analysis by Labour.

Ed Balls, the Shadow Chancellor, said the review of the scheme’s work so far showed the added benefit it had provided totalled just £10.3m, £1.7m less than the cost of running the scheme.

This article appeared in The Telegraph 31st July 2011.

Link to full article

Contractors on employment contracts should be asking probing questions of their employer or payroll provider to precisely determine how much they are paid and what for, amid fresh assault on umbrella company payment methods.

Speaking last night, Bauer & Cottrell issued the advice in response to HMRC warning contractors, recruiters and end-clients that some umbrellas are unlawfully offering temporary workers PAYE and National Insurance ‘tax relief’ on every pay day.

According to HM Revenue & Customs, such “pay day by pay day” relief models, never before singled out by HMRC, fail to properly account for the correct income tax, or the correct employers’ and employees’ NI contributions.

Link to full article on Contractor UK

Link to HMRC

The minimum level of debt for a creditor to petition for bankruptcy could rise to £3,000 from £750, under proposals announced by the minister for Insolvency.

Edward Davey unveiled several proposals for consultation, including raising the petition debt levels for creditors, as he responded to the government’s call for evidence for it’s review of personal insolvency.

The minister’s proposals could impose a raft of changes to practices and processes across the personal insolvency profession.

They include creating a protocol setting out what to expect from a debt management plan and enabling the Money Advice Service to perform a central role in the coordination of debt advice. Davey added that the Money Advice Service should research and develop a delivery model for debt advice.

It was reported on the Insolvency News website that the Office of Fair Trading (OFT) has revealed that 43 debt management firms have surrended their consumer credit licences, as it published revised guidance for the sector.

The OFT also confirmed that it has revoked the consumer credit licences of 11 debt management businesses, after discovering several “unacceptable failings” in their business practices.

Fresh details about the extent of malpractice emerged as the OFT published for consultation revised guidance for the debt management industry, following prolonged compliance issues and severe public criticism.

The guidance update comes after a review of the industry by the OFT that uncovered widespread problems with misleading advertising and the quality of debt advice provided in the fee-charging sector.

The Financial Ombudsman Service published it’s latest complaints data today revealing that it received almost 100,000 complaints in the last six months of 2010 and more than half of these were about the UK’s biggest banks.

Find out how your bank rates – link to full Telegraph article

The Federation of Small Businesses has called for a budget that provides economic stability.

Small businesses have come out against the re-localisation of business rates as part of calls to the Treasury to make the March budget “business friendly”.

One in 10 Britons are premanently overdrawn and more than a third have dipped into the red at least once during the past year.

Almost 10% of people admit that their current account is never in the black and 37% of consumers are either always overdrawn or have used their overdraft facility at some point during the past 12 months according to moneysupermarket.com.

link to full article