Bribery Act Sentencing a Real Deterrent

Earlier this year, we brought you the news that the new Bribery Act came into force on July 1st. Now we are able to report on the sentencing of the first case brought to the courts under the new Act.

On 18 November 2011, Munir Patel, a clerk at a magistrates’ court, received a 3 year prison sentence after pleading guilty to receiving a bribe of £500 in exchange for removing motoring offences from official records. He also received a concurrent 6 year sentence for misconduct in public office, since he had previously committed a number of similar offences that netted him in the region of £2,000. This was before he was filmed in a newspaper investigation pocketing the cash received from a motorist on 1 August 2010, after which he was prosecuted.

Will There be a Trend Towards Harsher Sentencing?

The sentence was something of a shock to the legal community since there have been earlier trials relating to bribery by international business people and overseas government officials where the sums of money involved have been significantly higher and the sentences much less severe. Speculation ranges from whether this was a response to calls for harsher punishment under the reformed legislation, to whether it was about a need to protect the English criminal justice system. Most arguments favour the former, and lead us to believe this sentence is meant to act as a deterrent to anyone considering any form of bribery.

The Onus on Business Chiefs

A business owner or director now has a responsibility to prevent bribery offences being committed in the name of the business. It is not enough to be squeaky clean yourself. If a member of your staff takes or accepts a bribe in the course of their work, perhaps to be awarded a contract, or to select a specific supplier, you could be prosecuted.

So what steps can you take to prevent this happening? It is important to have a written anti-bribery policy and procedures which are communicated to everyone. The procedures should include logging reports of any incidents that might be construed as attempted bribery by outsiders, or internal disciplinary activities to prevent bribery.

Some members of staff may be ignorant or unclear about what constitutes bribery, so training sessions to get the message across and reinforce it could be a good idea, and should also be noted on your log. If the worst were to happen, and someone from your organisation was prosecuted, you would at least have documented proof of your own anti-bribery activities.

A Taxing Christmas?

At this time of year, along with many other longstanding traditions, business owners like to reward their loyal staff with gifts, bonuses and parties. But don't forget that the tax man is also rubbing his hands together in anticipation of extra income for the Revenue. There are some rules to be aware of if you don't want to have extra tax or NI liabilities for the company or your staff.

Taxing Gifts

Small seasonal gifts can be treated as trivial for tax purposes. If you hand out a few Christmas turkeys or boxes of chocolates to members of staff, they won't incur a benefit in kind tax charge. But if you made your gift an expensive Christmas hamper or bottle of vintage champagne, it won't be seen as trivial, and the employee could be taxed on it.

Taxing Bonuses

You can't avoid the tax due on a Christmas bonus. It is of course included in annual income and therefore taxable at whatever bracket is appropriate for the individual. And whether 80% or 60% or 50% of it becomes disposable income, it's sure to be welcome. Of course, it will also have an impact on levels of national insurance for both the individual and the company, so that must also be included in the bonus budget.

Taxing Christmas Parties

The tax rules about annual functions cover the Christmas party. If Christmas is the only time you have a staff get-together, as long as your costs do not exceed £150 per head, no additional taxes will be charged.

Everything you spend, including VAT, on venue, food, drink, entertainment, and transport or accommodation, must be taken into account as a benefit for the staff member. If the total divided by the number of staff attendees works out at more than £150, unless you have a PAYE Settlement Agreement with the Revenue, your payroll operatives have to include it as a benefit in kind for tax purposes. For any employee whose earnings come to £8,500 or more in the year, or for any directors, your company must pay additional National Insurance as well.

If you also treated your staff to a summer barbecue and/or any other annual functions, and the amount per head of all the functions added together exceeds £150, the rules become quite complicated. If this is the case, you may need some expert advice on what tax is due.

Ask your outsourced bookkeepers to help you make sure you comply with the rules. With the current special scrutiny by HMRC on small businesses, it's important to get your tax affairs right this Christmas.

Unfair VAT Relief to Change

How many small businesses can afford to send their low value goods to the Channel Islands for storing, packaging and resending out to customers in the UK? All to avoid having to add VAT to the purchase – a significant competitive advantage.

Large organisations have been doing it for years through the Low Value Consignment Relief (LVCR) arrangement whereby goods with a value of below £18, and more recently, £15, from outside the EU are VAT free. But from 1 April, 2012, this VAT relief from the Channel Islands will cease, as announced by the Chancellor in his 2011 Autumn Statement.

Bad News for Some

It's bad news for the major retailers who have been taking advantage of it. There will be no advantage for them of sending their goods out to the Channel Islands any more, and they will certainly be making other arrangements. So it's also bad news for island workers in the fulfilment industry, the ones who facilitate the logistics of this kind of order fulfilment. They will not be needed any longer. Others who are likely to suffer are island residents who will probably face higher postage costs and possibly air travel costs as the volumes of post and transport requirements reduce. And it's bad news for the consumers who have been buying these goods without having to pay VAT on top.

Good News for Others

Perhaps it's good news for you. It's certainly good news for smaller operators for whom the cost of making such arrangements would outweigh any benefits from the LVCR. They have been making reduced profit margins because of having to compete with the lower prices of goods with no VAT added. They see this new legislation as levelling the playing field and making the competition fairer.

It is also good news for the Treasury which stands to gain in the region of £100 million or more in additional tax revenues.

Is it Legal?

Since VAT is an EU law requirement in member countries, it has been argued that this proposed change is a breach of fiscal neutrality. A prominent tax accountant believes that the change should not be implemented without gaining permission from the European Commission for a deviation from the EU law. It could therefore be challenged. If you sell low value goods to consumers, ask your outsourced bookkeepers to keep an eye on the situation, and set a price review date for the next financial year.