Are You a Recession Anarchist?

A few words of inspiration from Alan Forrest Smith - A great copywriter and owner of a chain of successful hairdressing salons.

Read on............................................

This is a true story of an entrepreneur hairdresser that beat the last recession!


You know what...?


The bank manager wouldn't lend me a penny despite the fact I had a plan!

Okay it wasn't quite a plan, in fact it was a fill-in-the-blanks 'thing' that I bought from a business consulting company. I simply got it, filled in the blanks and walked into the bank. What else would you expect from a school-drop out with no qualifications?

The guy was an total idiot. He told me how good his son was at fishing and how he had caught one of the biggest Carps in the local Bridge water canal. He then talked to me about how his other son was going to university to advance his teaching career. He told me some others stuff until finally he said to me ...

"what is it you want?" in an elevated, you're not as good as me voice.

I said to him...

"can I have £25,000 please, I have a plan to grow and move my hairdressing salon"

He slowly slid his cheap glasses down his oily nose, looked over the top of them with a slightly frowned look and asked for my business plan.

I nervously handed the plan over to him that I had filled out just hours before over breakfast!

He looked, he asked and he finally said ...

"are you kidding, you'll be B.U.S.T in no time!

And with that response I walked away from my bank feeling totally deflated and beat.

Around 2 hours later I decided to sign for the lease on the new building anyway. I had no cash. I really wanted it. I knew in my heart I could really make it happen.

After just 18 months I had the number one hair and beauty salon in a town saturated with another 35 salons!

And here's a point worth considering ... it was in the thick of the last recession in the UK. I proudly I moved my salon from 250 square feet to 2,000 square feet.

I made it happen.

HOW?

By becoming a recession Anarchist, a dissenter, a rebel, a mutineer, a nonconformist - call it as you want - I simply created my own rules and played by them, not theirs (the media and system)

So let me explain.

I was reading just yesterday in the news paper how one of the UKs biggest stores are now slashing their marketing budget. In fact it gave a huge list of stores doing something very similar.

And that is something most will do during a recession. It's what I call 'subservient-sheep-thinking' or in others words, do-as-your-told, believe what we say, follow and say nothing mindset.

So because the 'system' the media, the shop next door, the financial times, the wall street journal say ...

"tighten your belts, recession is coming" ... THEY DO AS they are told!

And what is really interesting is who gives the reports of coming doom and gloom?

Is it twenty something reporters that have only ever worked in and office and have zero experience in real business?

Is it hardened wall street people that act almost like lemmings in any situation?

Is it a news guy looking for a headline to sell his/her newspaper or magazine?

Is it people that have never in their life taken a risk, run a business, put their life on the line for a business, risked everything to make business work?

The answer is simple most of the people that are feeding you endless crap of approaching apocalyptic downturn have no idea when it comes to being in business so my question is this ...

"why do we hold on to almost everything the report?"

So back to my recession beating salon.
Although we grew a massive amount during this recession we hardly spent a bean on adverting and marketing.

Here's just a few things we did.

~ discovered guerrilla marketing by Jay Conrad Levinson and used almost every page in his book to create zero cost advertising.

~ kept busy and focused on the job in hand.

~ ignored external reports from everyone that had nothing to do with my business about how crazy I was and how it'll fail.

~ never once gave in (although I had moments) until the business was flying.

~ we had a list of at least 5 marketing strategies that cost almost nothing we would carry out 6 days a week!

So here's what I think.

You need to be a media Anarchist, a recession anarchist to survive. Throw away the rule book, create your own success and remember what the guys that give all this news and bad reports usually have zero experience with what you are doing.

I believe 2009 will be one of my best years ever, do you?

It can be.

Take control of your own life. make your own decisions.

Become a...

Recession Anarchist!

I'd love your comment on this.

Go to my blog right now and let me know.

It's here...

www.AlanForrestSmith.com/blog

Don't forget to add your website to the comment. This blog gets a lot of traffic. I'd love to send some your way.

Regards,

Alan Forrest Smith

http://www.OrangeBeetle.com
http://www.OrangeBeetleFamily.com
http://www.BecomeaCopywriter.co.uk
http://www.AlanForrestSmith.com/blog
http://www.OrangeBeetle.com/blog
http://www.SalonPunk.com


http://www.tax-sorted.biz

HMRC reported to ASA!

Peter Clare, an ex tax inspector, has lodged an official complaint to the Advertising Standards Authority about HMRC's TV advert featuring Moira Stuart and the Jan 31st Self Assessment deadline.

He is quoted:

"We are told in deadpan tone to complete our tax return AND pay our tax by this date or we will get a £100 fine. This is absolutely not true.

The £100 fine is for not sending in a tax return when requested, and even then this should be rescinded if there is no tax to pay.

It has nothing to do with the tax due, although of course, this has to be paid."

http://www.tax-sorted.biz

Cut The Guff!

I was reading a blog by Emily Coltman today and have just signed up for her "Cut The Guff" ezine. You can read more about this here.

Anyway, M is a big fan of the plain English campaign and I have been a supporter for many years and have helped some accountancy firms retrain their staff and rewrite their standard letters and helped them learn to speak plain English.

I wanted to join the plain English Campaign and be a full member but was really disappointed to find out it would cost me over £1,000 for the benefit! I contacted them and explained my position (small, broke, humble sole trader!) and asked if they could discount the fee but the answer was ..................NO!

Come on guys, can't you see I really want to help? How about a reduced membership fee for us here who are REALLY passionate about plain English and want to spread the word.

January Tax Tips

Happy New Year and Welcome...To January's Tax Tips & News, our newsletter designed to bring you tax tips and news to keep you one step ahead of the taxman.

If you need further assistance just let us know or you can send us a question for our Question and Answer Corner.We are committed to ensuring all our clients don't pay a penny more in tax than is necessary.

Please contact us for advice in your own specific circumstances. We're here to help!

January 2009

Overdrawn Directors Loan Account Issues
Being Taxed on your Keyman Policy?
Tax Help for Losses and Falling Sales
Planning January 31 Tax Payments
Question and Answer Corner
Key Tax Dates for January 2009

Overdrawn Directors Loan Account Issues

If you borrow funds from your own company or get it to pay personal bills on your behalf, there could be additional tax bills for both you and the company unless you repay that money to the company quickly.Personal TaxWhere the amount you owe to the company exceeds £5,000 at any time in the tax year, and you have paid interest at less than the official rate on this loan there will be an income tax charge on you personally.

The official rate has been set at 6.25% since 6 April 2007 in spite of the massive cuts in the Bank of England interest rates since then.Corporate TaxWhere the loan is still outstanding nine months after the company's year end the company has to pay a tax charge equivalent to 25% of the loan, known as a 'section 419' charge. When the loan is eventually cleared this section 419 charge can be reclaimed by the company, but only when its next corporation tax bill is due.

What to do if you do owe your company a significant amount you could either:
1. Use other personal funds to reimburse the amount you owe; or
2. Get the company to pay you a dividend or a bonus that is set again the loan to bring the amount you owe back to zero; or
3. Ask the company to write-off the loan.

Implications
Option 1 creates no further tax charges for you or the company, so it's the best in that respect.
Option 2 generates more tax for you, particularly if you already pay higher rate tax. In that case you will have to pay 25% of the net dividend in tax but you won't have received a cash dividend to give you the funds to pay that tax. The company may have to pay you a higher dividend to give you enough cash to pay the higher rate tax due. The company must deduct PAYE and NICs from any bonus it pays, so can often be more expensive and it must have the cash to pay that tax and NI to the Taxman.
Option 3 the loan write-off, is treated as a distribution by the company at the date of the write-off. This is taxed as a dividend in your hands, complete with the 10% tax credit, but it is not actually a dividend.

The company cannot claim a deduction against corporation tax for the amount of the loan written-off. The Taxman may also argue that NI contributions are due on the amount of the released loan, as if it was a payment of salary.If you owe your company money please discuss the situation with us as soon as possible as the most tax efficient solution will vary depending on your circumstances.

Being Taxed on your Keyman Policy?

Many small businesses take out keyman policies designed to pay out on the death or incapacity of a key person, such as a lead director. The premiums paid for such policies are only tax allowable as a business expense if all of the following conditions apply:- the purpose of taking out the policy is to cover the drop in profits that would arise from the loss of the key person;- the policy only applies for the time that the employee is useful to the company; and- the policy does not have an investment element such as a surrender value.If the purpose of the policy is to pay off a business loan, like an endowment policy, then that would be a capital related purpose, and the premiums would not be tax allowable. Endowment policies also tend to have an investment element.

Generally where the premiums paid for a keyman policy have been correctly deducted as a business expense, if that policy pays out the proceeds are treated as part of the trading income of the business. The converse also generally applies that if the premiums paid were not tax allowable, the receipts from that policy are not treated as trading income of the business.
Unfortunately there is no law that lays down this clear principle, and there have been several cases that have been decided either way. Even where the premiums have not been deducted from profits, the Taxman may argue that the receipt of the policy allows the business to continue, and the proceeds should be taxed as business profits.Whether there is tax on the receipt may affect the amount you need to be insured for, so please contact us if you need advice on whether the receipt would be taxable.

Tax Help for Losses and Falling Sales

If your sales have dropped and costs have risen, you may be making a loss. This is not a disaster, but you should take action soon to get the best out of the tax system at this difficult time.

VAT
Where your turnover for the last 12 months has dropped below £65,000 you could deregister for VAT. This will not suit all businesses, but if you sell to the public you may gain a competitive advantage by being outside the VAT net.

Loss Claims
Once you have a definite loss figure from your accounts you can set this against your profits for the previous year to generate a tax repayment or tax reduction. If the current loss exceeds the previous year's profits you may be able to carry the excess back a further two years, but this depends on when your loss making period ended. You may need to change your accounting period slightly to accelerate the loss relief available. Ask us to help you get your accounts finalised as soon as possible.

Tax and Pension Credits
If your business is your main source of income, a loss means you may be eligible to receive Tax Credits. Tax credits are particularly valuable for families with children under the age of 16 or who are in full-time education, but single individuals can also claim. Your claim can only be backdated up to three months, so don't delay making your claim. If you are aged 60 or over you may be able to claim Pension Credit. You don't have to be retired to claim this support and it is a much simpler system than Tax Credits.However your trading loss arose, the best policy is to act quickly to reduce the business tax payments and generate tax refunds. The worst thing you can do is put your head in the sand!

Planning January 31 Tax Payments

Remember remember 31 January, because that's when your biggest tax payment is due, particularly if you are self-employed. You will need to pay any balance of tax due for 2007/08 by that date, and at the same time make the first payment on account for the tax due for 2008/09.If your business is not run through a company, your profits are taxed in the tax year in which your accounting period ends.

Say your accounting period ends on 30 June 2008, the profits for that period are taxed in 2008/09, and the first instalment of that tax is due on 31 January 2009. Where this accounting period has produced much lower profits than the previous year, or even a loss, you can elect to reduce your 2008/09 tax payment on account. But please ask us to check your figures first as you will be charged interest on any tax that is later found to be underpaid.It is very important to plan for this big tax payment, and if you think you won't have the funds to pay the full amount due, you should contact the Tax Office as soon as possible.

There is now a new helpline number devoted to these sorts of problems: the Business Payment Support Service on 0845 302 1435, which is open every day from 8am. This service is staffed by tax officers who can arrange to spread your tax payments over a reasonable period. They can also deal with payments of VAT, PAYE, NI and corporation tax.