From Business to Business: The price of endeavour
Alan Walker built up substantial revenue working across Europe and the US as an IT SAP freelancer during the pre-millennium boom years. Whilst he was recently 'on the bench' Alan re-invested some of this money into an IT training business, but progress has been cut short by the Inland Revenue.
A SAP programmer with 20 years of experience, Mr Walker had been self-employed for about 10 years. He had worked in Europe, the UK and the US, returning from America in 1996. From this point onwards, he claims, the Inland Revenue has constantly harassed him, putting the brakes on enterprising side projects.
He explained: "I earned a lot of money from 1996-1998 and paid a lot of tax. Following the advice of my accountants, my company paid for a number of benefits in kind items, which at the time were legitimate but are now no longer allowable without payment of National Insurance.
"When the rules changed regarding these benefits I followed the new rules, but I still had a Revenue investigation lasting over 18-months with no additional tax to pay. There was nothing wrong with my books and I had always adhered to the rules."
The Revenue joined Alan's clients in taking an interest in the car he uses to promote his business
What followed was the ongoing downturn in the freelancing market and a period of sitting on the bench: a situation that was further confounded by the Revenue's decision to re-start their investigation of Walker Phenix Management Ltd., Mr Walker's company, from another angle.
Despite the increase in pressure and the state of the market, Mr Walker launched a training business: Endeavour Training, with a view to employing a full-time trainer. The courses would include lessons in communication skills as well as stress management and assertiveness.
Mr Walker said: "The course material was hammered out with this prospective employee, a venue was found and rates were negotiated. I also amended my existing company web site to detail and advertise the new courses.
"As a result, I landed two clients at the same time 200 miles and over 250 miles from home. Since January, advertising the courses via the site has achieved about £50,000 turnover."
Mr Walker alleges the Revenue was not keen about the publicity he was conducting for his new business and found a new angle in challenging him: the classic car he owned and used in photographs bearing his company name on his web sites.
He explained: "The car hasn't moved since 1997. It has no MOT, no driven miles, it's just an asset on the balance sheet used for advertising at present. If I had a contract near to home, then maybe it could be used as a company car and I could pay appropriately for the miles used, but for now it's just a company asset.
"According to the first agent who called me, it was the image of the car that attracted him in. I have a letter from the same agent, explaining how the image of the car incited him to look at my details which aided me to get my current contract, subsequently taking me 'off the bench' and back into work. This has been worth £36,000 to my company over six months, surely justification in itself for the asset?
"An employee at another company also saw the web site, noticed the car, and remembered it when his company were looking for my particular skills, but 'Hector' wants to disallow the capital allowances from 1997 on this asset and claw back some money from a company on its knees. This is an asset with wheels that isn't moving, so there is no tax coming from it."
The Revenue's stepped-up pressure over the car coinciding with Mr Walker's obligation to tend to a contract 250 miles from his home in North Yorkshire, is proving to be the final straw, both for his freelancing IT business and for the training company.
He continued: "My company is barely surviving at the moment and my cash flow situation is much the same. I have re-mortgaged my home twice in two years, but in an economic downturn the Inland Revenue still needs to find extra money and we are soft targets.
"The Revenue seems to work on the principle that people are afraid to fight for their rights to follow correct accounting practices; inflicting their opinions, jealousy and prejudices to obtain more tax. The incentive system they now operate encourages this process. I pay a lot of money to accountants to explain accounting rules that the inspectors wish to interpret differently to the law. Also, the Inspectors seem not to be up-to-date with current Internet technology and its use by industry for advertising, as my case proves.
"Consequently, the training branch is now on hold and the trainer does not work for me as I don't know if I can afford to move forward. All the material is still in place to start the process as the work we carried out in preparation of courses is not lost, but with the current economic climate, companies are just not spending on training.
"But, still, short-sighted Hector keeps on coming. The words 'blood' and 'stone' come to mind, but the Inspector doesn't want to listen and a Commissioners' hearing is now planned. The inspector actually said in a meeting that he did not consider my website a viable advertising medium. Also, 'the car is not owned by the company,' he said. It is clearly mine in his eyes.
"If Hector wins his case my companies will probably have to close. I may have to sign on the dole if the market doesn't improve and my contracts end. Why did I come back from the United States of America to small-minded inspectors?"