By Mike Southon
FT Columnist

Normally, I set aside Saturdays as relaxation and family time. This week, I wasted several hours becoming increasingly frustrated and angry while trying to inform Her Majesty’s Revenue and Customs (HMRC) that I did not owe them any money.

I have been running a VAT-registered limited company for twenty years. Its only income derives from my activities as a professional speaker. Every quarter I prepare and submit my VAT returns online, which are later checked by a part-time finance professional before a qualified accountant submits my business and personal accounts.

I have no employees. I pay myself dividends when the company can afford them and these are declared on my personal tax return. But every year I receive a request from HMRC to submit National Insurance and PAYE returns. The advice from my finance professional this year was again to ignore the request, as nothing was due.

On Saturday, I received a threatening letter from an unnamed Officer of Revenue and Customs at the Orwellian ‘Debt Management & Banking, HMRC Small Debt Collection’ with no contact details other than ‘please visit website’.

It threatened me with ” …the seizure and sales of your goods at public auction…or you could be taken to court and made bankrupt” if I did not comply with their demand for information. It quoted a reference and provided a web address, which they advised I should visit “urgently” to inform them that I did not owe them any money.

If you have ever had to deal with HMRC you will not be surprised to learn that the reference number on the letter was in the wrong format, the web link was broken and HMRC also needed my Employer’s PAYE Reference number before I was able to tell them that no payment was due.

I eventually worked out how to do all this, but not before a wasted morning being referred back and forth between different and frustrating menu-driven help lines at HMRC. Everyone I spoke to explained politely that they were unable to help me personally as they had not sent out the offending letter.

This pointless bureaucracy and incompetence is sadly standard practice for HMRC, as any small business owner will tell you. My usual advice to entrepreneurs is to hire a part-time finance professional to deal with all this nonsense as soon as you can afford one.

Much of my current activity involves encouraging people to come off benefits and become self-employed. There is no bigger disincentive for them to become a legitimate business and start paying tax than the terrifying prospect of trying to engage with HMRC.

Instead, I propose an alternative simple and easily manageable system, effectively bypassing HMRC, specifically designed to help people become economically engaged for the first time.

As soon as a new venture starts generating cash, entrepreneurs should be encouraged to open a credit-only, charge-free bank account, which offers instant banking facilities, such as a debit card.

They should then be incentivised to start inputting their business accounts on-line using one of the many cloud-based solutions offered by third party suppliers. A small fixed fee would be charged if they prefer this work done by a professional.

Finally, those who run cash-positive businesses with no full-time employees operating below the VAT registration threshold should be granted full tax exemption, once their on-line accounts are checked by a finance professional certified by a trade body such as the ACCA.

If government really wants to encourage more micro-businesses, then it should focus its activity on rescuing entrepreneurs from the clutches of HMRC. Then we can all enjoy our Saturdays at home.

Originally published in The Financial Times: Copyright ©Mike Southon 2011. All Rights Reserved. Not to be reproduced without permission in writing. Mike Southon- Co-author of The Beermat Entrepreneur & Business Speaker-

Mike is one of the world’s top business speakers, a Fellow of The Professional Speakers Association. Mike is a Visiting Fellow in Innovation and Entrepreneurship at London South Bank University. He has made frequent appearances on television and radio, has a monthly sales column in Real Business magazine and is a regular commentator in the Financial Times.

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