While this is unfair to the unlucky 1.4 million – ultimately this is HMRC’s mistake – what it does flag up is a general apathy when it comes to understanding tax. A recent survey conducted by HSBC shows that taxpayers are failing to check their income tax deductions and, in doing so, many are paying too little or too much. More than half of taxpayers do not know their income tax code and a third have never checked their P60.

Personal income tax allowances and current thresholds for different tax bands are also a mystery for the majority of taxpayers – 81% of adults didn’t know at what level of earning 40% tax applied, with more than half believing they had to earn far more than the actual salary threshold.

More than half of UK adults didn’t know the current personal income tax-free allowance (£6,475) and 53% of adults didn’t know that income tax is payable on employee benefits and 30% didn’t know it is payable on pension income.

David Wells, head of pensions, savings and investments at HSBC, said: ‘It is important that people know their tax code and check it with their P60 each tax year. Whether you are in full or part time employment, there is always a chance you have been overpaying in which case you can reclaim the tax. There is equally the possibility that if you have been given the wrong tax code you could be underpaying and could be faced with a large tax bill at the end of the financial year.’

This ‘lumpy’ income pattern can be achieved if you run your own company and take dividends from that company only every other tax year. In practice there are a number of difficulties as follows:

- Your family may need the cash. If income is not taken as dividends, it will need to be extracted in another form.
- If you take a loan from your company this can create tax charges for you and your company.
- If you deliberately deprive yourself of income to increase a Tax Credit award you can be deemed to receive that income in the appropriate tax year.

So please talk to us before varying your income for tax credit purposes.

- Some employers treat the loan of the cycle to employee as part of the employee’s salary and reduce their cash wages proportionately. This is known as a salary sacrifice, and the arrangement must be agreed with the relevant employee in advance. If cycles are only provided to employees under salary sacrifice arrangements the whole cycle to work scheme may lose its tax exemption, as some employees cannot have their cash pay reduced due the National Minimum Wage rate rules.

- It is quite common for the employee to purchase the cycle from the employer at the end of the loan period. However, the Taxman says that where there is an automatic transfer of the cycle to the employee at the end of the loan period, the tax exemption for the cycle to work scheme is also lost.

- The second problem with the transfer of the cycle to the employee is how to establish the market value of the cycle at that time. If the employee pays the employer less than the market value for the cycle the difference is treated as employment income subject to tax and NI. As a top of the range sporting cycle can cost several thousand, the second hand value can be quite significant!

The Tax Office have produced a table to help employers value second hand cycles:http://www.hmrc.gov.uk/manuals/eimanual/EIM21667a.htm

Finally, remember to qualify as a tax free cycle, it should be used mainly by the employee for travelling to work and on work related business, although other personal use is permitted. An expensive touring cycle that is never used for work related journeys will not qualify for the tax exemption.

Abbey Tax, which provides fee protection insurance to firms of accountants, says that the coming months will see an increase in the number of firms being scrutinised by the HMRC.

As part of the government’s move to pay-off the £158 billion budget deficit, these measures are designed to raise some extra funds. Tax inspectors are being asked to bring in as much money as quickly as possible.

With 25 percent of UK SMEs currently exceeding their working capital, according to research from Venture Finance, this couldn’t come at a worse time.

Paul Mason, senior manager at Abbey Tax, says: ‘If you want to claim expenses, make sure you have the receipts to back them up.’

The research, conducted by TNS-BMRB, also showed that 64 percent of large companies felt the red-tape burden had increased over the last 12 months. The report indicated that businesses thought HMRC was becoming less transparent in its decision making and 30 percent of large businesses said the tax system was administered had a negative impact on UK competitiveness.

Commissioned by the HMRC under the previous Labour Government, the results are reflective of feelings towards the tax regime at that time. Since the Coalition came into power, one of George Osborne’s resounding messages has been that ‘Britain is open for business’ – this is in direct response to fears that a complex and prohibitive tax system will hamper Britain’s competitive position and economic growth.

A spokesman for the Treasury said this week: “The Chancellor has said he wants Britain to be open for business and for the private sector to drive the UK’s economic recovery. That is why the June Budget announced a cut in corporation tax for a million businesses, a national insurance holiday for start-ups and a new office of tax simplification to make the UK a more attractive and simpler place to do business.”

Earlier this month the Government announced that from September 1, there would be a one-in one-out system for new regulations which impose costs on business.

The banks are countering this claim by saying that demand from small firms has fallen as SMEs concentrate on paying back existing loans.

The annual survey from the National Association of Commercial Finance Brokers (NAFCB) reveals that in the mid-2000s, nearly £20bn was being borrowed, but this went down to under £7bn and now just over that.

Michael Izza, the chief executive of ICAEW, said: “Before the recession, banks were lending to businesses they probably shouldn’t have been lending to and they were guilty of probably being rather exuberant in their lending. [Now] banks are being a little more choosy about who they lend to. They’re also charging more money, they’re making sure that the lending they do make to businesses, they can make money on. They’ve been getting their balance sheets in order for the last year or so.”

As well as noting a rise in fees, such as those levied for arranging an overdraft, the ICAEW backed up the banks’ assertion about demand, saying many SMEs were concentrating on paying off debts and managing with the money they had.

Despite complaints from some businesses about the banks’ attitude to lending, the ICAEW survey found the percentage of SMEs saying access to capital is a challenge fell to 20%, from 30% at the end of 2009.

Last week, the government set up a task force involving the major banks and key government departments to examine whether banks are making life too tough for SMEs.

According to the 2010 National Management Salary Survey, conducted by the Chartered Management Institute (CMI) and XpertHR, female salaries increased by 2.8 per cent over the last 12 months, compared with 2.3 per cent for men.

While this sounds like good news for women, as the current male salary is currently £10,031 more than that of a female manager, it will take 57 years before their take-home pay is equal to that of their male colleagues. Data collected from 43.312 individuals in 197 organisations reveals that male pay outstrips female salaries by as much as 24 per cent at the most senior level.

Female executives in the IT and pharmaceutical industry experience pay gaps that are higher than any other sectors, at £17,736 and £14,018 respectively.

The research by the CMI also revealed that, over the last 12 months, 4.5 per cent of the female workforce have experience redundancy, compared to just 3 per cent of men. The difficult economic circumstances combined with unsatisfactory remuneration may also have contributed to a dramatic increase in resignations, particularly at director level, where 7.7 per cent of female directors voluntarily left their posts in the last year, compared to just 3.6 per cent of men.

CMI’s head of policy Petra Wilton says: “We want to see government take greater steps to enforce pay equality by monitoring organisations more closely and naming and shaming those who fail to pay male and female staff fairly.

“It’s not just government that needs to act. Competitive businesses need to attract diverse workforces and appeal to the most talented employees. To do this managers and employers need to recruit from a wide talent pool but they cannot expect to attract the UK’s best female talent if they continue to undervalue it.”

The reform will be carried out in stages, so won’t apply to businesses with fewer staff to start with. According to the Federation of Small Businesses (FSB), companies with ten employees or less should always remain exempt as the complicated pension scheme is impractical for these small firms.

Mike Cherry, policy chairman for the FSB, says: “We know that small firms do not feel confident in choosing a pension scheme because of its complicated nature and we are thoroughly disappointed that, five years on from the original proposals, the pensions industry has yet to come up with an efficient system to cater for micro firms.”

The FSB is lobbying the government to make those micro firms exempt from the automatic enrolment scheme and create an improved proposal for this group.

Pension reforms will initially affect employers with over 30,000 staff, which will be forced by law to offer their workers a company pension scheme in 2012. From 2013, companies with more than 350 employees will be obliged to take part and then, from 2014 – 2016, all remaining businesses will be subject to the same rules.

Qualifying companies will see their employees auto-enrolled and can expect to put a minimum 3% of any earnings between £5,035 and £3,540 into each worker’s fund.

To help low to moderate earners and their employees, the government is introducing NEST – National Employment Savings Trust

The Carbon Reduction Commitment (CRC) is requesting that businesses declare their energy usage, with potential charges for every ton of greenhouse gases produced. These payments are expected to average £38,000 a year for medium-sized firms and up to £100,000 for larger organisations. Surveys have shown that thousands of businesses are unaware they are supposed to be taking part, or even that the scheme exists at all.

Under the scheme, any company or public sector organisation that consumes more than 6,000 megawatt hours (MWh) of energy a year – meaning a power bill of about £500,000 – must register its energy use by the end of next month. From April, firms will need to buy permits for each tonne of carbon dioxide emitted. For those using 6,000MWh, that could mean £38,000.

The scheme is intended to create a financial incentive to cut energy use, and those organisations that record the biggest reductions will get bonuses, funded by penalties imposed on those with the worst record.

Of about 4,000 organisations estimated to qualify for the scheme, only 1,229 have registered to date, leaving thousands at risk of fines. Missing the deadline will mean an immediate £5,000 fine and £500 for each day after that, up to a maximum of £45,000.

Another 15,000 smaller organisations are also required to register and could be expected to buy permits in the future. If they miss the September deadline, they face fines of £500.

With a double-dip recession on the cards, these fines will put even more pressure on already stretched businesses.

For more information, visit the Carbon Trusts website

With the five biggest banks making more than £15bn of pre-tax profits for the first half of the year, but showing reduced lending figures, the view of Government is that it’s time they started sharing this around, rather than keeping it to themselves.

According to Sharlene Goff of the Financial Times, the banks have long defended the lack of credit growth as a sign of low demand, rather than problems with supply. They say the money is available but that businesses don’t want it, which is at odds with the way the Government, Bank of England and industry bodies see the situation.

The task force, made of the chief executives of Lloyds Banking Group, Royal Bank of Scotland, Barclays, HSBC, Santander and the Standard Chartered, will assess demand for credit and the scale of challenges for both lenders and businesses.

The issues identified include:
• Loan pricing
• New Basel rules on capital and liquidity
• Looking at options for extending the Government’s Enterprise Finance Guarantee scheme
• The mechanics of a government-sponsored equity fund
• Trade finance

With the taskforce including representatives from the Treasury, Department of Business and the Bank of England, its findings will not rely solely on the banks views. Recommendations will be put forward to the chancellor in early October. The industry also faces scrutiny from the government-appointed Commission on Banking and the Treasury select committee, which is considering whether banks should be broken up and if there is enough competition in the market.