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What are Directors Emoluments?
The reporting requirements are set out in The Large and Medium Sized Companies and Groups (Accounts and Reports) Regulations 2008, obviously emoluments include:
- Salary
- Bonuses
- Compensation for Loss of Office
- Benefits
- Share Options
- Long Term incentives
- Pensions
But it can also include payments made via other companies for ‘Qualifying Services’, these are payments paid in relation to the Directors services as a Director of the reporting company (Section 8, Part4, Paragraph 17).
In many cases this could be obvious for example if the Director used a Personal Service Company (PSC) or if the director invoices the company for management services or for management charges. But often invoices relate to the supply of products and services which don’t fall within qualifying services.
Its worth noting that unquoted companies with less than £200k for Directors Emoluments are not required to report details of the highest paid director.
Its also worth remembering that any related party transactions should be fully disclosed in the related party note, so is further clarification of what should be emoluments needed?
steve@bicknells.net
Free access to accounts filed at Companies House
60% of the 3.5 million companies in the UK now file accounts electronically and you can access those accounts free of charge via http://companies.corefiling.com/search
Paul Driscoll is a Chartered Management Accountant, a director of Central Accounting Limited, Cura Business Consulting Limited, Hudman Limited, and AJ Tensile Fabrications Limited, and is a board level adviser to a variety of other businesses.
Get HMRC to pay you
HMRC will pay you interest
It is not that well-known that HMRC will pay you interest on tax paid early. The interest rate is only 0.5% though, so it isn’t going to change your life.
In the case of Corporation Tax, any payment is due 9 months and a day after your year-end. If you have a business bank account that pays no interest and the cash to pay your tax early you can pay your tax as soon as you have filed your return. After the 9 months is up HMRC will send you the interest calculated.
What spare cash?
See my earlier post on paying your debts first. In the situation where you have cash in the bank that you aren’t putting to good use and no outstanding debts paying your tax liability early will yield a small benefit.
Get your tax return done early
It is difficult to plan your cash flow if you don’t know how much tax you are due to pay. Even if you don’t want to pay your tax early, it is helpful to know how much cash you will need to set aside. The later you leave it to file your tax return the more pressure you can end up putting on your cash flow. More importantly the later you leave it, the more pressure you put on your accountant. Most accountants increase their fees as tax deadlines approach – or to put it another way you are likely to get a discount for starting early!
Don’t be late!
It won’t surprise anyone that HMRC will charge interest on late payments. The interest rate isn’t the measly 0.5% mentioned above but is currently 3%. As Bank of England rate increases – expect this to increase too!
For support and advice on preparing your annual accounts and filing your tax returns contact Alterledger or visit the website alterledger.com.
Importing transactions into your accounts system
I find many businesses I start to work with still manually input their sales and purchase ledger or detailed general journal transactions. With most accounts packages (even the smaller ones) having the ability to import transactions from spreadsheets or directly from another system, there is very little need to spend hours on manual inputting directly into your system.
Some of the reasons/excuses businesses don’t import their transactions:
- No one knows how to do the imports. Once a template has been established, most imports are very simple to do and require minimal training.
- They believe it’s quicker to input directly as they don’t need to look up the accounts seperately. Very simple formulae in a spreadsheet could help with this. It’s easier to see from a spreadsheet whether the totals are correct and reduces the time taken to drill down into multiple screens on each transaction.
- By the time they’ve set up the template, they could’ve input it already. This is usually true of the first time but when staff members get used to processing this way, they are able to get a handle on it’s further potential uses and like anything, the time taken to do this reduces.
There are many reasons why I believe businesses should consider importing their transactions, here are some:
- Most transactions within accounts are repetative on a daily, monthly or quarterly basis. By having import templates ready to edit not only acts as a checklist of which entries are needed but will (after the initial set up) save time and improve accuracy of the data.
- Having information on a spreadsheet allows quicker reviews and clarity on what’s being input without the need to ‘drill down’ into the transactions.
- Importing saves manual processing time allowing staff to do more value added activities. By having more detailed information in your accounts system it vastly improves the information you’re able to then get out of it for management reporting and budgeting.
- The quality of data will improve as you’re likely to have more fields completed if you import due to the copy/paste function within spreadsheets and having all fields on one line rather than different screens.
- The accuracy of the data improves due to the ability to set up checks within the template file that let you know if something is incorrect. Transposition errors are less likely.
- If you link your accounts system to another database e.g. CRM system or Project Management software, then it can remove duplication of the data entry. A lot of accounts systems now allow you to import or link directly to your banking software which is a huge benefit as often bank reconciliations can be done daily which helps monitor cashflow.
Some examples of what can be set up to import (system dependent) and be of value to your business:
- Detailed payroll journals (by department) – Payroll is often the largest cost to a business yet often the one most overlooked in terms of reporting. You can improve a potentially complicated journal by setting up a template to import to a higher level of detail.
- Bank Statement Imports – By importing your bank statements from the data downloaded from your online banking, you eradicate the all too common transposition errors or possible duplication if you have multiple transactions of the same value. Some accounts software now has the facility of ‘bank feeds’ which imports transactions directly for you on a daily basis e.g. Xero.
- Sales invoicing especially when periodic – For example one of my clients was a group of private schools which had complicated discount structure based on age of each child and sibling discounts. This processing went from several weeks of manual inputting each term (with a high chance of errors and lots of disputes/complaints) down to 3 hours and a far greater level of accuracy. Checks were put in place on the import preparation spreadsheet to ensure that family invoices were grouped together and that all children had been accounted for and the correct discounts applied.
- Prepayments & other month end general ledger journals – Full descriptions on each line with each value seperated and not grouped together. This provides clearer transactional analysis and helps greatly when it comes to budgetting and cashflow forecasting.
- Customer/Supplier Records – updating or adding. If you have a lot of fields to complete often they’re omited with manual entry, by using a spreadsheet to complete the data it is likely to contain more consistent information as you can copy/paste or fill down on certain fields.
- Budgets – Depending on your reporting software, this could streamline your management pack by utilising functionality already available in the system without the needfor further processing in spreadsheets.
If you’re still not convinced of the value to your business by utilising data imports, consider this:
Saving just 1 day of processing time per month for a £25k employee is a saving of approximately £1,580pa* to your business. Use the ‘saved’ time on producing more timely, informative management information and KPIs (which you can now get as the transactional level data is of better quality).
Better business information leads to better business decisions and ultimately to better business profits.
If you’d like to discuss your accounts system and how to better utilise it’s functionality including imports, please contact Kat Hipsey, kat@hipseyconsulting.com
*Taking into account ER NI/Pension.
Why property investors like Micro Entity Accounts
A company meets the qualifying conditions for a micro-entity if it meets at least two out of three of the following thresholds:
- Turnover: Not more than £632,000
- Balance sheet total: Not more than £316,000
- Average number of employees: Not more than 10
There are approximately 1.56 million micro-entities in the UK, as compared with a total number of companies on the UK register of approximately 2.8 million.
Most property businesses will have less than 10 employees and less than £632,000 turnover.
If you are a property investor filing Abbreviated or Full Accounts you have to report property values at their fair value, which means you tell everyone what you think the property is worth. You may not want to do that, especially if you are planning to sell as it tells the potential buyer what you think its worth and that might be an issue in negotiations.
Under the Micro Entity regime you aren’t allowed to use fair value and have to use Historical Cost. Which most Property Investors will prefer.
No notes are required with Micro Entity Accounts and any advances or financial commitments are shown at the foot of the Balance Sheet, often this is simply the value of the Mortgage outstanding.
steve@bicknells.net
The missed opportunity of Self Billing in e commerce
I think e commerce and EDI has focused too much on billing clients and consumers (mainly B2C rather that B2B) and not enough on improving the efficiency of processing supplier invoices.
According to research and analysis group, Gartner, typically the cost of processing an invoice in the UK averages between £4 and £25, and in some cases even up to £50, per individual invoice.
You can check the costs for yourself using pay streams calculator.
A typical purchase invoice goes though these stages:
- Its checked against the purchase order
- Its entered as unauthorised to the accounting system
- Its copied and sent to the manager to check the goods were received and were in good order
- The manager signs the invoice off
- Its status is changed to approved or in query
- Queries are sent to the supplier
- Authorised invoices are scheduled for payment
- Payment is made with a remittance advice
- Supplier statements are reconciled to the accounts system
The more suppliers you have and the bigger the volume of either invoices or transactions on invoices, the more complicated and long winded the process becomes.
Although all invoices contain the same basic information they are all formatted and laid out differently.
In some systems invoices are scanned and given a bar code to help index them to accounting system entries.
But it seems to me that many businesses have overlooked what should be a simple solution, Self Billing.
With Self Billing you generate the tax invoice for your supplier and send it to them with the payment.
The following is an extract from HMRC Self-billing:
Putting in place a self-billing arrangement with your suppliers can bring certain advantages for your business:
- it can save time and money – you can send self-billed invoices electronically so long as you can set up suitable systems
- purchase invoices are produced to a standard format, making life easier for your accounts department
- you retain control of how much you’re invoiced for – this can be helpful if your business is responsible for determining the value of the goods or services it receives
- flexibility – you can outsource the production of the self-billing invoices to a third party if you want to
Your suppliers don’t have to be based just in the UK. You can self-bill businesses in other EU countries or in countries outside the EU.
Advantages for suppliers
If you’re a supplier, entering into a self-billing agreement with your customers can be helpful for your business because:
- your customer is responsible for making sure that the VAT details on the invoices are correct
- as part of the agreement with your customer you may be able to specify when you’ll receive payment – this can help with your cash flow
Self billing has been used by the Construction Industry for many years, in fact I created a Self billing system when I worked at Rollalong in 1994, the key issues are:
- Getting suppliers to agree to join the self billing scheme
- Getting approval from HMRC
- Keeping your VAT registration records up to date
But the cost and time savings are significant, the whole process changes and could become:
- Purchase Order Sent
- Goods received and matched my the manager
- Value of Goods received entered to accounting system – this could be automated on matching
- Payment made and remittance changed to Self billing invoice
The number of queries are reduced because you aren’t invoiced for things you haven’t had, there is no need to copy and distribute invoices for sign off as this is replaced with stronger goods inward systems.
Why aren’t more businesses adopting self billing?
steve@bicknells.net
A Trillion Euro’s lost to tax evasion in the EU
A Trillion is a huge amount, its almost too large to imagine.
Here is the latest campaign video
http://ec.europa.eu/avservices/video/player.cfm?ref=I080915
As part of the intensified battle against tax fraud, the Commission launched on 6th February 2014 the process to start negotiations with Russia and Norway on administrative cooperation agreements in the area of Value Added Tax (VAT). The broad goal of these agreements would be to establish a framework of mutual assistance in combatting cross-border VAT fraud and in helping each country recover the VAT it is due. VAT fraud involving third-country operators is particularly a risk in the telecoms and e-services sectors. Given the growth of these sectors, more effective tools to fight such fraud are essential to protect public budgets. Cooperation agreements with the EU’s neighbours and trading partners would improve Member States’ chances of identifying and clamping down on VAT fraud, and would stem the financial losses this causes. The Commission is therefore asking Member States for a mandate to start such negotiations with Russia and Norway, while continuing exploratory talks with a number of other important international partners.
http://ec.europa.eu/taxation_customs/taxation/tax_fraud_evasion/missing-part_en.htm
steve@bicknells.net
RTI Payroll Year End
Thanks to http://www.freedigitalphotos.net
RTI Payroll Year End
Payroll year end under RTI should now be a much more straightforward affair than in pre-RTI times. Our suggested procedure is as follows.
1. Last FPS submission will be the last payment date (not necessarily payroll date) on or before 05-Apr-14: for monthly paid this will normally be payroll for the month of Mar-14, but for weekly paid it may be less clear.
If for example your pay week ends on a Friday and is paid Wednesday the following week then week ending Friday 28-Mar-14 will be paid Wednesday 02-Apr-14, and this will be your last payroll for 2013-14 tax year; the week ending Friday 04-Apr-14 will be paid on Wednesday 09-Apr-14 which is in 2014-15 tax year (CAERP: users should check the Company Settings ‘Tax & Payroll details’ tab).
2. Make sure you ‘tick the box’ (CAERP: “This is the final FPS submission of the tax year.“) to indicate that this is your last FPS submission for the tax year, and answer the additional questions.
3. If you have made no employee payments and do not therefore need to make a FPS submission then you will need to make an EPS submission as soon as possible after 05-Apr-14 (CAERP: users will find this at the bottom of the P32 report), and tick both the “No payments were made” box and the “This is the final EPS or FPS submission of the tax year.”
HMRC provide further guidance at http://www.hmrc.gov.uk/payerti/end-of-year/tasks.htm
4. Run your P60 reports and forward to all the individuals who have been employed in the 2013-14 tax year.
5. Update the tax codes for those individuals where notices for 2014-15 have been received from HMRC.
6. Update ‘L’ tax codes by adding 56 so that for example ‘944L’ becomes ‘1000L’.
7. Remove any ‘Week 1’ or ‘Month 1’ indicators (CAERP: untick ‘Wk 1 Mth 1 Basis ‘ in employee records).
HMRC provide further guidance at http://www.hmrc.gov.uk/payerti/payroll/year-start.htm
New for tax year 2014-15
8. From 06-Apr14 you will no longer be able to recover a proportion of SSP paid to employees and the NIC holiday arrangements will come to an end.
9. There is however a new employer’s national insurance ‘Employment Allowance’ whereby eligible employers can reduce their Employer Class 1 NICs bill by up to £2,000 per year. Employers who qualify should submit an EPS as soon as possible after 05-May-14 and tick the ‘Employment Allowance Indicator’ box.
HMRC provide further guidance at http://www.hmrc.gov.uk/news/nic-emp-allowance.htm
10. Perhaps the biggest change for the new tax year is that HMRC will be taking a much harder line on late submission of FPS/ EPS returns with automatic penalties, so please be sure that you make a submission at least monthly, even if only a ‘nil’ EPS return.
Paul Driscoll is a Chartered Management Accountant, a director of Central Accounting Limited, Cura Business Consulting Limited, Hudman Limited, and AJ Tensile Fabrications Limited, and is a board level adviser to a variety of other businesses.
First there was Fair Trade, now there is Fair Tax……
The Fair Trade Mark is now common place on goods we buy ensuring that workers aren’t exploited, but now there is a new mark, the Fair Tax Mark.
The Fair Tax Mark Criteria assess the quality of a business’ publicly available information on key tax and transparency issues. In this context, publicly available information primarily means a full set of accounts available to all via Companies House or the company website. However, it can also include the company website and/or any other freely available printed material.
For every business type, the criteria are divided into two main categories that assess a business on:
-
Transparency
-
Tax rate, disclosure and avoidance
Will your business be applying to use the Fair Tax Mark? would you buy more from a business that uses the Mark?
steve@bicknells.net
Business Disclosure – do it right or risk a penalty
Displaying the right information on the right documents is important, so here is a quick reminder…
The rules for companies are set out in The Companies (Trading Disclosures) Regulations 2008
The key sections is…
6. (1) Every company shall disclose its registered name on—
(a)its business letters, notices and other official publications;
(b)its bills of exchange, promissory notes, endorsements and order forms;
(c)cheques purporting to be signed by or on behalf of the company;
(d)orders for money, goods or services purporting to be signed by or on behalf of the company;
(e)its bills of parcels, invoices and other demands for payment, receipts and letters of credit;
(f)its applications for licences to carry on a trade or activity; and
(g)all other forms of its business correspondence and documentation.
(2) Every company shall disclose its registered name on its websites.
Companies House enforce the regulations and can levy penalties of £1000 for non compliance.
Sole Traders can trade under their own name or a “trading as” name provided its not offensive, contains sensitive or resticted words, includes PLC, Limited Company, LLP or is similar to another business (check the internet for potential conflicts).
Partnerships should show all the partners names or if there are more than 20 partners it may keep a list of names at its principle place of business.
steve@bicknells.net
Business Accountant 