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Do I need to do a tax return?
If any of the following apply then, YES, you need to do a tax return:
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You’re self-employed
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You’re a company director, minister, Lloyd’s name or member
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Your annual income is £100,000 or more
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You have income from savings, investment or property (unless collected via PAYE)
- £10,000 or more from taxed savings and investments
- £2,500 or more from untaxed savings and investments
- £10,000 or more from property (before deducting allowable expenses)
- £2,500 or more from property (after deducting allowable expenses)
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You need to claim expenses or reliefs
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You or your partner receive Child Benefit and your income is over £50,000
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You’re 65 and receive a reduced age-related allowance
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You get income from overseas
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You have income from trusts, settlements and estates
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You have Capital Gains Tax to pay
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You’ve lived or worked abroad or aren’t domiciled in the UK
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You’re a trustee
For full details of who needs to do a tax return follow this link http://www.hmrc.gov.uk/sa/need-tax-return.htm
For details of how to register go to http://www.hmrc.gov.uk/sa/register.htm
I know that sometimes people simply don’t realise that they need to do a return, for example a newly appointed Director or someone receiving Dividends. HMRC often don’t know if you should be doing a return (if they think you should be they will contact you), so it is up to you to make sure you file a return and disclose your income to HMRC if any of the above apply.
If you think you have an excuse, think again!
http://stevejbicknell.com/2012/10/15/reasons-excuses-for-filing-your-self-assessment-return-late/
As you will see your chances of HMRC accepting your excuse are slim.
Employment Expenses – Use Form P87
As an employee you can claim tax relief for expenses incurred in doing your job (if not fully reimbursed by your employer), for example business mileage, cycling on business, hotels, meals, business phone calls, in fact anything as long as its business related
If your claim is less than £2500 you can make your claim using Form P87 without the need to do self assessment.
http://stevejbicknell.com/2011/12/20/how-to-claim-tax-relief-for-employment-expenses/
So having workout you need to do a return. and having registered online, and filed your first return with HMRC, what if you later find you have make a mistake, what can you do?
If you make a mistake on your tax return you’ve normally got 12 months from 31 January after the end of the tax year to correct it. This is called an ‘amendment’. For example, for the 2011-12 return you have until 31 January 2014 to make an amendment.
http://www.hmrc.gov.uk/sa/correct-repay.htm
What if you don’t file in time?
The penalties for late Self Assessment returns are:
- an initial £100 fixed penalty, which applies even if there is no tax to pay, or if the tax due is paid on time;
- after three months, additional daily penalties of £10 per day, up to a maximum of £900;
- after six months, a further penalty of 5 per cent of the tax due or £300, whichever is greater; and
- after 12 months, another 5 per cent or £300 charge, whichever is greater.
There are also additional penalties for paying late of 5 per cent of the tax unpaid at: 30 days; six months; and 12 months.
What if you don’t have all the answers, can you put in provisional figures?
There are occasions on which some information cannot be finalised within the formal self assessment time limits despite the taxpayer’s best efforts to do so. In such cases the taxpayer should include a ‘best estimate’ of the information in the tax return and, if appropriate, a corresponding provisional figure of the tax due. The provisional figures should be clearly identified as such in the tax return. A tax return containing a provisional figure should only be submitted once it is clear that a more accurate figure will not be available before the filing date.
http://www.hmrc.gov.uk/manuals/salfmanual/salf206.htm
steve@bicknells.net
15 ways to improve profitability
Profit is vital to every business, what is the point of being in business if you don’t make a profit?
So here are my tips on how to improve your profitability:
- Weed out loss making products, clients and departments – concentrate on high margin products and services
- Reduce Employment Costs – use Freelancers instead of Permanent Employees where appropriate
- Use Virtual Communication Technology – meetings can be held over the internet with Skype or other systems, it will cut traveling time and costs
- Use Social Media and Networking – marketing can be costly and the results can be hard to measure, use your contacts to generate leads and sales and always ask for referrals
- Increase Productivity – eliminate wasteful and unnecessary processes, I was told it used to take 17 people in the NHS to change a light bulb on a hospital ward (requisitions, approvals, payments, changing the bulb…) the solution to cut wasted processes was to keep a stock of bulbs on the ward
- Negotiate with suppliers – always look at ways to reduce cost including using alternative suppliers
- Understand your clients requirements – the client knows what he wants and what represents value, if you deliver value you will get more business
- Seek add on sales – what other products or services might be useful to your existing clients
- Keep an eye on your competitors – competitor analysis will enable you to understand differences in price, distribution, market and demand
- Find New Markets – use market research to expand into new areas
- Decrease Overheads – analyse all of your overheads including Rent, Rates, Utilities – could you sub-let part or your premises or reduce waste
- Reduce Stock Levels – can you turnover your stock more quickly or buy to order
- Improve your Cash Cycle – reduce slow payment by debtors, invoice promptly and settle disputes quickly
- Invest in Technology – automate processes with ERP systems
- Use Key Performance Indicators – KPI’s help you achieve your goals
steve@bicknells.net
Can I prepare Abbreviated Accounts?
There are 3 sizes of companies to consider when preparing your accounts; small, medium or large. There are thresholds for turnover, balance sheet total (meaning the total of the fixed and current assets) and the average number of employees, which determine whether your company is small or medium-sized. Any companies that do not meet the criteria for small or medium are large companies and will have to prepare and submit full accounts.
A small company can prepare and submit accounts according to special provisions in the Companies Act 2006 and the relevant regulations. This means that they can choose to disclose less information than medium-sized and large companies.
The Thresholds are:
| Test | Small Company | Small Group | Medium Company | Audit Exempt |
| Sales must be below | £6.5 million | £6.5m net or £7.8m gross | £25.9 million | £6.5 million |
| Balance Sheet Total | £3.26 million | £3.26m net or £3.9m gross | £12.9 million | £3.26 million |
| Average no. of employees | 50 | 50 | 250 | 50 |
A small company must meet at least two of the conditions above.
Generally, small company accounts prepared for members include:
- a profit and loss account
- a full balance sheet, signed by a director on behalf of the board and the printed name of that director
- notes to the accounts
- group accounts (if a small parent company chooses to prepare them)
And they should be accompanied by:
- a directors’ report that shows the signature of a secretary or director and their printed name
- an auditors report that includes the printed name of the registered auditor (unless the company qualifies for exemption from audit and takes advantage of that exemption)
For financial years ending on or after 1 October 2012 a small company only needs to qualify as small to be exempt from Audit.
Even if a small company meets these criteria, it must still have its accounts audited if a member or members holding at least 10% of the nominal value of issued share capital or holding 10% of any class of shares demands it; or – in the case of a company limited by guarantee – 10% of its members in number.
A medium company must meet at least two of the conditions above for medium companies.
Medium-sized accounts must include:
- a profit and loss account
- a balance sheet, showing the printed name and signature of a director
- notes to the accounts
- group accounts (if appropriate)
And should be accompanied by:
- a directors’ report including a business review showing the printed name of the approving secretary or director
- an auditor’s report that includes the name of the registered auditor unless the company is exempt from audit
Medium-sized companies may omit certain information from the business review in their directors’ report (that is, analysis using key performance indicators so far as they relate to non-financial information). Also a medium-sized company which is part of an ineligible group can still take advantage of the exemption from disclosing non-financial key performance indicators in the business review.
Medium-sized companies preparing Companies Act accounts may omit disclosure with respect to compliance with accounting standards and related party transactions from the accounts they send to their members.
Abbreviated accounts of a medium-sized company must include:
- the abbreviated profit and loss account (this must be full if preparing IAS accounts)
- the full balance sheet showing the printed name and signature of a director
- a special auditor’s report showing the printed name of the registered auditor
- the directors’ report showing the printed name of the approving secretary or director
- notes to the accounts
What is a dormant company?
A company is dormant if it has had no ‘significant accounting transactions’ during the accounting period. A significant accounting transaction is one which the company should enter in its accounting records.
When determining whether a company is dormant you can disregard the following transactions:
- payment for shares taken by subscribers to the memorandum of association
- fees paid to the Registrar of Companies for a change of company name, the re-registration of a company and filing annual returns
- payment of a civil penalty for late filing of accounts
How long do I normally have to file my accounts?
The time normally allowed for delivering accounts to Companies House is:
- 9 months from the accounting reference date for a private company
- 6 months from the accounting reference date for a public company
You can submit the following accounts online:
- dormant company accounts
- small full audit exempt accounts
- small audit exempt abbreviated accounts
Failure to deliver accounts on time is a criminal offence.
Further information available from Companies House
steve@bicknells.net
What can you include in a PAYE Settlement Agreement (PSA P626)?
PAYE Settlement Agreements (PSA’s) are requested by Employers and subject to agreement with HMRC. Under this agreement the employer will be responsible for accounting for any tax and national insurance liabilities arising. Any items covered by a PSA will not need to be shown on forms P35 and P11D at the end of the tax year.
Applications for PSA’s should be made before 6th July 2013 if you want to use them for the tax year ended 5th April 2013, once approved by HMRC payment of the Tax and NI is due by the 19th October (payments by cheque) or 22nd October (payments online).
The tax due is grossed-up at the employee’s marginal rate. For example, £5,000 of benefits provided to higher rate taxpayers (40 per cent) would be grossed-up as follows:
Benefits of £5,000 x 40 per cent = £2,000 tax
Grossed-up tax = £2,000 x 100/100-40 = £3,333.33
Benefits plus grossed-up tax = £8,333.33 x 13.8 per cent Class 1B = £1,149.99
Total due to be paid £3,333.33 tax plus £1,149.99 Class 1B = £4,483.32
Minor Benefits
- incentive awards
- reimbursement of late night taxi fares outside s248 ITEPA 2003
- personal incidental expenses in excess of the statutory daily limit
- present for an employee in hospital
- staff entertainment, for example a ticket for Wimbledon
- use of a pool car where the conditions for tax exemption are not satisfied
- subscriptions to gyms, sports clubs etc
- telephone bills
- gift vouchers and small gifts
Irregular Expenses
HMRC (PSA 1070) examples (not exhaustive) of what may constitute an irregular item.
- relocation expenses where the amounts concerned exceed the £8000 tax exempt threshold (Section 287 ITEPA 2003)
- occasional attendance at an overseas conference where not all the expenses qualify for relief
- expenses of a spouse occasionally accompanying an employee abroad
- occasional use of a company holiday flat
- one off gifts which are not minor.
Impracticable Items
HMRC (PSA 1080) examples (not exhaustive) of what may constitute an impracticable item
- free chiropody care
- hairdressing services
- Christmas parties and similar entertainment provided by the employer which do not already qualify for relief
- cost of shared taxis home which do not satisfy s248 ITEPA 2003
- shared cars.
Gov.uk has guidance on How to get a PSA
steve@bicknells.net
10 reasons why UK Micro Businesses are taking off
New analysis from Direct Line for Business (DL4B), based on data from the Office for National Statistics (ONS), reveals that just over half of all UK small firms are run from the home of the business owner.
The findings show that there are currently 2.5 million home-based business owners in the UK, representing just over half (52%) of the total number of UK SMEs. These home-based business owners now account for 8% of the UK’s total workforce.
The largest concentration of all is in Herefordshire – where 27% of the county’s 92,000 total workforce is a home-based business owner. Pembrokeshire is second with 23% and Eastbourne is third with 20%.
Men are more than twice as likely as women to run their own business from home, with 1.7 million male home business owners across the country, compared to around 818,000 female home business owners.
http://www.itdonut.co.uk/news/it/most-small-firms-are-now-home-based-businesses
Small businesses are a vital part of the UK economy.
Marketing Donut reported this week that a study of UK small businesses has shown a rise in the number of people setting up micro businesses and hiring people for part-time work.
The study by Freelancer.co.uk assessed 300,000 businesses over the past 12 months and it concludes that an entrepreneurial boom is taking place in the UK, with significant numbers of people starting up new ventures across the country.
According to the study, Brighton and Newcastle have seen the highest growth in the number of new micro businesses being launched (up by 24%), followed closely by Manchester and Southampton with 23% growth. London has seen 21% growth, Edinburgh and Liverpool 20%, Birmingham 19% and Sheffield 8%.
The research also shows that there have been positive knock-on effects for freelance workers in business support sectors, such as website design. It found there has been a 19% increase in the number of micro businesses commissioning new ecommerce websites.
In addition, orders for shopping carts to be installed on new small business websites are up 18%, email marketing is up 20%, graphic design is up 12% and logo design is up 6%.
So why are micro businesses taking off:
- You can start off working at home
- Your start up costs are low
- You can do it part time when it suits you
- With wages frozen and costs rising it can provide a useful additional income
- Its easy to be price competitive with low overheads
- The Internet makes it easy to sell your goods and services
- Your social capital can be used to generate sales ie use your contacts and connections
- There could tax advantages – employees generally pay more tax than sole traders
- Some clients prefer the personal touch
- It could be start of something big
steve@bicknells.net
10 things your Finance Director should be doing….
SME’s often mis-understand the purpose of a Finance Director and the value they can bring to a business.
The job of a finance director is not just about producing regular accounts: they can help your company with strategy and development. If you want a small, stable business, then you can settle for a risk-averse book-keeper. But a good FD is key if you are growing your business because FDs develop future financial forecasts and push business growth. [Smarta]
So what should your Finance Director be doing for your business…..
- The FD should be able to look into to future to see what the future financial needs of the business will be
- He/She should negotiate funding facilities to ensure the business can manage its cash flow needs
- The FD should be able to foresee the future tax consequences and risks of decisions
- He/She should help the business to achieve the best possible credit scores
- Identify ways to reduce costs and improve profitability
- Understand the business owners objective and focus the business on achieving those objectives
- Ensure financial and regulatory compliance
- Ensure accurate and timely reporting of management information
- Evaluate growth opportunities
- Apply corporate governance
steve@bicknells.net
20 ways to improve cash flow
Cash is vital to you and your business, lack of cash kills businesses.
So how can you improve cash flow:
- Prepare a detailed cash flow forecast, schedule your direct debits and standing orders, knowing how much cash you need and when will help you focus on where the cash will come from
- Invoice your clients as soon as you can, often small businesses invoice late and this just lengthens the time it will take to collect payment
- Get stage payments on large contracts
- Negotiate payment terms with your suppliers, try to at least match the client payment terms with the supplier terms
- If you are able to spread payments do it, for example, most insurance companies will offer you that chance to spread the payments over 10 months
- Adopt ‘just in time’ for stock items, don’t carry more stock than you need to
- Pay sales commissions only after the client has paid
- Change weekly payrolls to monthly where possible
- Sell assets you don’t need
- Sell obsolete and slow moving stock
- Consider paying mileage allowances rather than owning company cars
- Chase your debts
- Get a good credit rating as it will help you negotiate better supplier terms
- File your accounts and tax returns on time to avoid penalties
- Credit check your clients and agree terms based on their credit history and rating
- Diversify to smooth out seasonal trends
- Control your costs and reduce them where possible
- Make cash collection a KPI for your business
- Finance your fixed asset purchases
- Use Invoice Finance if your clients demand long terms
steve@bicknells.net
3 ways to comply with Employer Auto Enrolment Obligations
Auto Enrolment has arrived and there is a lot to do……
The Pension Regulator website will help you create a stage by stage plan working back from the date when you need to start (staging date), it is a useful planning tool http://www.thepensionsregulator.gov.uk/employers/planning-for-automatic-enrolment.aspx
Most schemes will be set up with one of the following providers:
NEST – National Employment Savings Trust – NEST was originally created by the government – limited help for employers
The Peoples Pension – B&CE – B&CE is well known in the Construction world, they have online tools to help you
Now: Pensions – ATP (Denmark) – 45 year experience in pensions and many awards
You could use another provider and you should take independent expert advise, never give pension or investment advice unless you are qualified to do so.
If you are asked for advice remember to say ‘I know nothing’
But as an employer you do need to select a pension scheme for Auto Enrolment.
Then you need to consider how you will comply with your responsibilities and keep records for:
- Contributions
- Opting Out
- Opting In
- Earnings
- Employee Records
- Communication with Employees
Take a look at this video for middleware to get an understanding of how you could manage your compliance requirements
So here are your 3 basic ways to comply:
- Small Employers – you may decide to do it yourself using information on the Pension Regulators website and provider of your choice
- Pension Provider Portals – schemes like the Peoples Pension will have portals and tools to help you manage your auto enrolment pensions but it won’t cater for other benefits and other schemes
- Middleware – like the video above, this gives lots of functionality and will allow you incorporate other schemes and benefits but its not free
You might also find this blog worth reading ‘10 things you need to know about Pension Auto Enrolment’
steve@bicknells.net
Will I be taxed on Christmas gifts recieved at work?
It’s Christmas and even though times are tough, you could still get a gift from your employer or client or supplier, will it come with a tax bill attached?
The answer depends on the value.
HMRC Helpsheet 207 – Non-taxable payments or benefits for employees
The Helpsheet says, certain gifts from third parties are non-taxable if all these conditions are satisfied:
• the gift consists of goods or a voucher or token only capable of being used to obtain goods, and
• the person making the gift is not your employer or a person connected with your employer, and
• the gift is not made either in recognition of the performance of particular services in the course of your employment or in anticipation of particular services which are to be performed, and
• the gift has not been directly or indirectly procured by your employer or by a person connected with your employer, and
• the gift cost the donor £250 or less, and
• the total cost of all gifts made by the same donor to you, or to members of your family or household, during the tax year is £250 or less.
http://www.hmrc.gov.uk/helpsheets/hs207.pdf
An employer may provide employees with a seasonal gift, such as a turkey, an ordinary bottle of wine or a box of chocolates at Christmas. All of these gifts can be treated as trivial benefits. . For an employer with a large number of employees the total cost of providing a gift to each employee may be considerable, but where the gift to each employee is a trivial benefit, this principle applies regardless of the total cost to the employer and the number of employees concerned. If a benefit is trivial it should not be included in a PSA (EIM21861).
http://www.hmrc.gov.uk/manuals/eimanual/EIM21863.htm
Will the employer or supplier or client have to account for VAT?
You do not have to account for VAT on business gifts made to the same person so long as the total cost of all the gifts does not exceed £50, excluding VAT, in any 12-month period. To check this it is acceptable for you to adopt any 12-month period that includes the day on which the gift is made.
But where the following apply:
- the total cost of business gifts given to the same person in any 12-month period exceeds £50
- you were entitled to claim the VAT on the purchase as input tax
you must normally account for output tax on the total cost value of all the gifts. How to work out the cost is explained in Notice 700, ‘The VAT Guide’.
steve@bicknells.net
Will the Christmas Party be tax free?
The answer is probably! maybe?
HMRC have an Exemption (not an allowance) of £150.
If the employer provides two or more annual parties or functions, no charge arises in respect of the party, or parties, for which cost(s) per head do not exceed £150 in aggregate. Where there is more than one annual function potentially within the exemption, we do not expect employers to keep a cumulative record, employee by employee, of functions attended. But for each function the cost per head should be calculated. The cost per head of subsequent functions should be added. If the total cost per head goes over £150 then whichever functions best utilise the £150 are exempt, the others taxable (see examples at EIM21691).
The figure of £150 is not an allowance. For functions that are outside the scope of the exemption (see example at EIM21691) directors and employees, except those in an excluded employment, are chargeable on the full cost per head, not just the excess over £150, in respect of:
- themselves and
- any members of their family and household who attend as guests.
The cost of the function includes VAT and the cost of transport and/or overnight accommodation if these are provided to enable employees to attend. Divide the total cost of each function by the total number of people (including non-employees) who attend in order to arrive at the cost per head.
http://www.hmrc.gov.uk/manuals/eimanual/eim21690.htm
Things to watch out for:
1. The function must be open to all staff, if its just directors, its taxable
2. The cost must not exceed £150 per head, otherwise it will all be taxable http://www.companychristmas.co.uk/news/tax_free_christmas_parties
3. If you have several events during the year you may have to choose which ones qualify if the total exceeds £150
steve@bicknells.net
Business Accountant 