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EU VAT B2C – e services to be vatable where they are consumed
At the moment all businesses supplying telecommunications, broadcasting and e-services such as downloaded ‘apps’, music, gaming, e-books and similar services to private consumers located in other EU Member States (referred to as ‘B2C’ supplies) are taxed where the business supplier is established, which is simple to understand and implement.
In the Finance Bill 2014 this will be changed and from 1st January 2015 VAT will be charged in the country where the customer has ‘use and enjoyment’ of the services.
So lets say you are an American (normally zero rated) on holiday in France, even though you pay with an American credit card and buy from a UK supplier because you are reading your ebook in France, French VAT will apply. Sounds like a nightmare, doesn’t it.
To help with this HMRC are introducing the VAT MOSS (Mini One Stop Shop) and businesses can register from October 2014.
Unless businesses opt to register for MOSS, businesses that make intra EU B2C supplies of telecommunications, broadcasting and e-services will be required to register and account for VAT in every Member State in which they have customers. MOSS will give these businesses the option of registering in just the UK and accounting for VAT on supplies to their customers in other Member States using a single online MOSS VAT return submitted to HMRC. This will significantly reduce their administrative burdens.
- Examples of telecommunications services include: fixed and mobile telephone services; videophone services; paging services; facsimile, telegraph and telex services; access to the internet and worldwide web.
- Examples of broadcasting services include: radio and television programmes transmitted over a radio or television network, and live broadcasts over the internet.
- Examples of e-services include: video on demand, downloaded applications (or “apps”), music downloads, gaming, e-books, anti-virus software and online auctions.
HMRC VAT Place of Supply Link
If you supply e services its worth considering the accounting and pricing changes that you will need to implement and how you will incorporate the ‘use and enjoyment’ rules.
steve@bicknells.net
‘Bean counter’ view of accountants is holding back entrepreneurs
Some entrepreneurs and small businesses may be holding themselves back by refusing to share information with their accountants who they sometimes regard as little more than “bean counters”, according to a new study.
There is a tendency for UK businesses, to make decisions without adequate financial information or analysis, there is often poor cash flow management and time and opportunities are being wasted because some owner-managers don’t want anyone else to know their business, it concludes.
The report, funded by the Chartered Institute of Management Accountants (CIMA) and compiled by Dr Michael Lucas of the Open University along with Professor Malcolm Prowle and Glynn Lowth, from Nottingham Business School, part of Nottingham Trent University urges accountants to improve their image by refuting bean counter accusations and promoting themselves in business partnering roles.
“Given the importance of financial issues and the increasing need for enterprises to operate economically, efficiently, effectively, efficaciously and ethically, management accounting has potentially a crucial role to play in improving the quality of planning, control and decision-making,” says the CIMA report called Management Accounting Practices of UK SME’s.
The authors also call for further research into the way small and medium-sized enterprises (SMEs) reach critical decisions and into the psychological profile of executives, particularly owner managers.
Dr Lucas said: “While most business owners are good at using accounting services for monitoring cash flow and costs they do not always appreciate that management accountants can add a great deal to decision making in the management of the business. Accountants were sometimes regarded as little more than bean counters, rather than potentially having a business partnering role where they can advise and improve efficiency
“Some entrepreneurs, in particular, are reluctant to employ management accountants, expressing a desire to maintain control and have exclusive access to information they consider sensitive.This could lead to higher costs in terms of management time which is turn can put constraints in time spend in growing the business.”
The report says its exploratory findings give important insights which should inform the development of further large-scale survey research into whether accounting tools were used and, if not, why not.
These tools include: Product costing; budgets for planning and control; standard costing variance analysis; cost-volume-profit analysis; responsibility centres; capital expenditure appraisal techniques; working capital measures; and strategic management accounting.
Dr Lucas is Senior Lecturer in Accounting at the Open University Business School, Professor Prowle is professor of business performance at Nottingham Business School and Mr Lowth, who is a former President of CIMA, is a visiting fellow at the Nottingham business school.
It ain’t what you do, it’s the way that you do it!
We are guests of honour!
These are the immortal words of Bananarama (or Nigel Botterill this weekend).
27th-28th September saw the first annual Entrepreneurs’ Convention at Birmingham’s International Convention Centre. Conference organiser Nigel Botterill is by any definition a very successful entrepreneur himself and the aim of the convention was to impart some of the knowledge and tools which have helped him build 8 £1m businesses in 7 years.
I went with Helen Lacey of Redberry Recruitment and we came back incredibly motivated with a box of tools we can implement in our businesses straight away. My new newsletter – Bright Business Bulletin – is a direct result of this new found zeal.
Nigel himself is a little like marmite (I am sure he won’t mind me saying that his approach is either inspiring or irritating), but it is hard to deny the relevance and effectiveness of his message to business owners who truly want to build the best businesses they can.
In Nigel’s words ‘Entrepreneurship is living a few years of your life like most people won’t…so you can spend the rest of your life like most people can’t.’
Whether we think of ourselves as ‘entrepreneurs’ or not, if we employ people or if we want our business to have a value, even when we are not working in it ourselves, we do need to think entrepreneurially.
I was also pleasantly surprised to see so many familiar faces. In a hall of over 1300 entrepreneurs from all over the country, there were 11 people I already knew. So Kim, Antony, Jonathan, Helen, Carly, Sanjeev, Fiona, Liz, Mary, Mark, John and Cynthia I hope you are all working on the nuggets you took away.
A key nugget for me was that speed is the key to growing a business. Money loves speed, speed attracts talent, talent drives innovation and innovation drives value. As the key is to minimise the gap between the idea and the action, I need to be quicker to get started on, and implement, the ideas I have for my business.
The highlight of the convention was Sir Chris Hoy. He gave an excellent talk about what it took for him to win 6 gold medals over 3 Olympic Games (not to mention world championships and Commonwealth gold medals). The type of dedication he needed, and the physical training he had to put his body through, to get to his end goals was truly inspiring.
We will certainly be going to next year’s convention and I recommend it to any business owner who is serious about growing their business. The dates for your diary are 21st-22nd October 2014.
fiona 🙂
Related Parties and Conflicts of Interest – Directors Responsibilities
The disclosure requirements for Related Party Transactions in published accounts are a common cause of confusion, on the face of it, its sounds easy but getting it right is often a balance between compliance and relevance. The rules are set out in the Companies Act 2006, FRS8 and for smaller companies FRSSE (April 2008). The rules apply to both Full and Abbreviated Accounts.
- FRS 8 defines a related party to include an entity’s subsidiaries, associates, joint venture interests, directors and close family members of directors.
- The standard requires an entity’s transactions with related parties, regardless of whether a price is charged, to be disclosed in that entity’s financial statements.
FRS 8 section 3 and FRSSE section 15.7 states that disclosure of the following is not required:
- Pension contributions paid to a pension fund
- Emoluments in respect of services as an employee or the reporting entity
- Transactions with parties simply because of their role as:
- Providers of Finance
- Utility Companies
- Government Departments
- Customer, Supplier, Franchiser, Distributor or Agent
The disclosure under FRS8 and FRSSE should include:
(a) the names of the transacting related parties
(b) a description of the relationship between the parties
(c) a description of the transactions
(d) the amounts involved
(e) any other elements of the transactions necessary for an understanding of the financial statements
(f) the amounts due to or from related parties at the balance sheet date and provisions for doubtful debts due from such parties at that date
(g) amounts written off in the period in respect of debts due to or from related parties.
Dividends to directors do meet the definition of related party transactions and are disclosable as such.
Trival items don’t require disclosure and the principle of materiality should be applied.
An item of information is material to the financial statements if its misstatement or omission might reasonably be expected to
influence the economic decisions of users of those financial statements, including their assessments of management’s stewardship.
The Companies Act 2006 places a statutory duty on directors in relation to potential conflicts of interest:
A director must “avoid a situation in which he has, or can have, a direct or indirect interest that conflicts, or possibly may conflict, with the interests of the company”.
Related Party Transactions will often create a potential conflict of interest.
Authorisation may be given by the directors—
(a)where the company is a private company and nothing in the company’s constitution invalidates such authorisation, by the matter being proposed to and authorised by the directors; or
(b)where the company is a public company and its constitution includes provision enabling the directors to authorise the matter, by the matter being proposed to and authorised by them in accordance with the constitution.
The authorisation is effective only if—
(a)any requirement as to the quorum at the meeting at which the matter is considered is met without counting the director in question or any other interested director, and
(b)the matter was agreed to without their voting or would have been agreed to if their votes had not been counted.
So it is vital that Directors disclose any potential conflict of interest and seek authorisation from the Board of Directors.
steve@bicknells.net
Why it’s important to understand the theory of Queuing
Essentially, the problem of Queuing is concerned with:
- Average waiting times
- The average length of the queue
- The number of service points (channels) there should be
- The cost of servicing the queue compared to cost of reducing waiting times
There are two main approaches to working out the solution:
- Simulation
- Queuing theory formulae
Queuing theory formulae can be complicated but are normally used in preference to simulation especially in simple situations.
Let’s take an everyday example, production staff queuing to collect stock from the company stores
So let’s run some numbers assuming the average number of production employees to be served every hour is 12 and we take 3 alternative service rates – 24, 18, 15 per hour, what is the probability of having to queue.
At 24 its 12/24 = 0.5 and the average number of staff in the queue will be 0.5/1-0.5 = 1 employee
At 18 its 12/18 = 0.67 and the average number of staff in the queue will be 0.67/1-0.67 = 2 staff
At 15 its 12/15 = 0.8 and the average number of staff in the queue will be 0.8/1-0.8 = 4 staff
The next stage is to work out the cost of servicing the production team quicker compared to the cost of a faster stores service to reduce queuing
If the production staff cost £20 per hour, based on a 6 hour day that’s £120 per day, that means based on the above the cost will be £120, £240 or £480 for queuing.
If the cost of a faster store man or faster servicing rate is less than the queuing cost then it’s worth investing to reduce the queuing cost.
steve@bicknells.net
Feed your innovative soul!
I am getting very excited about going to the Entrepreneurs’ convention at the Birmingham International Convention centre next week.
I am going along primarily to support a client for whom it will be excellent but I cannot help thinking I will get a terrific amount out of it too.
The programme over the two days looks exhausting and very interesting. As well as covering areas I am pretty comfortable with I am sure I will be taken well out of my comfort zone as well.
I think this is really important!
As business people we cannot afford to get stuck in a rut. We need to continue to be innovative if we want our businesses to be successful in the future – the only way to be innovative is to keep the inquisitive and inquiring sides of our brains exercised.
Meeting new and interesting people can also trigger leaps in creativity. Just talking to successful people can lead us to reach for goals we previously thought were unobtainable – because if they can do it why can’t I?
This is why I think training whether it is in the form of attending conventions and conferences such as the one above, or individual seminars and workshops; reading books or magazine articles; or just taking note of the things around us that we can emulate, is vital to any business owner.
The cost to your business could be the couple of hundred pounds it costs to do the training, or the thousands of pounds it could cost your business because you DON’T do it!
Fiona 🙂
Fiona Bevan Financial Management
DISASTER RECOVERY PLANNING
All businesses need to have some formal procedures in place in the event the unforeseen occurs.
Businesses must have an adequate recovery plan in order to ensure the continued survival of the company for the owners, staff and customers.
Here’s a short checklist
Be prepared
First and foremost have adequate insurance; it doesn’t take much to review it with your broker.
Put together a list of key stakeholders with contact details that can be accessed. We all have smartphones so create a directory. Better still use dropbox or Google drive where key staff can access the information.
Complete regular back-ups in the cloud; and check they work
Response
It’s difficult to plan a response if one can’t design endless scenarios. It’s probably not a useful exercise anyway.
The ability to respond has two elements: short-term and long term. Look at the situation and decide what can be done to minimise the damage immediately and what resources are needed, available and within your means.
Recovery
This is the longer term response, getting the business back to the position it was prior to the event.
Often when short-term and long-term objectives are mixed chaos ensues.
Mitigation and prevention
In an ideal world this should be the first priority but life’s not like that and generally under Health and Safety rules most of this should have been covered, no matter what industry.
A final thought, there are always annual events, some good and some not so. Just because a particular situation hasn’t occurred before doesn’t mean the resources are not available. There is always help at hand.
Niall O’Driscoll FCMA
OD Business Advisors and Accountancy Services
4 Things a charity needs to know about annual reporting
Image courtesy of Stuart Miles / FreeDigitalPhotos.net
Charities survive on their reputation.
Whether your charity is funded from voluntary donations, grant funding or commercial activities it is important that all funders can look up key information to check your organisation is working effectively. The annual reporting is time-consuming and potentially costly, but it is possible to restructure a charity to save on administrative costs.
1 – Charities must report to their regulator
Charities in England & Wales with an annual income of over £10,000 must report to the Charity Commission for England and Wales. Charities in Scotland must report to the Office of the Scottish Charity Regulator. The Charity Commission for Northern Ireland has recently been set up for the regulation of charities in Northern Ireland.
2 – Cross border charities must report multiple times
Under the Charities and Trustee Investment (Scotland) Act 2005 (the 2005 Act), bodies which represent themselves as charities in Scotland are required to register with OSCR. This requirement includes bodies which are established and/or registered as charities in other legal jurisdictions, such as England and Wales.
3 – Not all charities require an audit
Historically, the term ‘audit’ has been used loosely to describe any independent scrutiny of accounts. However, under the Charity Regulations if the term ‘audit’ is used in a charity’s constitution or governing document the charity must have its accounts audited by a registered auditor.
Charity Trustees may consider that the benefits of having an audit are outweighed by the costs. Trustees may wish to review their constitution and either:
- retain the term audit in their constitution or
- amend the constitution to require an independent examination of the accounts
Any change to the constitution must be carried out in accordance with the terms of the constitution and following professional advice. Notification of any change must also be sent to the charity’s regulator.
If an audit is not required by your members or governing document, an independent examination can be much more cost-effective than a full external audit and can be carried out by wider range of accountants and financial professionals including a member of the Chartered Institute of Management Accountants.
4 – Your current legal form may not be the best for you
Many charities have been set up with archaic governing documents and may be a Trust or Limited Company or other type of body, which is no longer suited to them. Trustees of Trusts and Unincorporated Associations are personally liable for the actions of a charity and expose themselves to a greater risk that Trustees of a Limited Company. Trustees of a Limited Company are required to report to Companies House as well as their charity regulator, increasing the administrative cost of the organisation.
A new legal form has been developed to allow charities to incorporate and report to just one body. Any Charitable Incorporated Organisation in England & Wales or Scottish Charitable Incorporated Organisation in Scotland is recognised as a corporate body which is a legal entity having, on the whole, the same status as a natural person.
This means it has many of the same rights, protections, privileges, responsibilities and liabilities that an individual would have under the law. As a legal entity, the CIO / SCIO may enter into the same type of transactions as a natural person, such as entering into contracts, employing staff, incurring debts, owning property, suing and being sued. As the transactions of the CIO / SCIO are undertaken by it directly, rather than by its charity trustees on its behalf, the charity trustees are in general protected from incurring personal liability in the same way company directors of a Limited Company.
In England and Wales you can:
- apply to register a completely new organisation as a CIO
- set up a CIO to replace an existing unincorporated association or trust
(You can’t currently convert a charitable company to a CIO)
In Scotland you can:
- apply to register a completely new organisation as a SCIO
- convert existing charitable companies, charitable industrial and provident societies and charities of any other legal form to a SCIO
For more information on an accountancy firm who can provide the statutory reporting, and also support you in the running of your charity please contact a member of the Chartered Institute of Management Accountants using the link to The Team above.
Useful links
| Charity Commission: | http://www.charitycommission.gov.uk/ |
| OSCR: | http://www.oscr.org.uk/ |
| Charity Commission NI: | http://www.charitycommissionni.org.uk/ |
10 ways to improve your business credit rating
Having a good credit score is essential in the current economic climate, your credit score will be checked by Customers, Suppliers and Banks/Lenders, so how can you improve your score?
1. Pay your bills on time – many credit rating agencies (Dun & Bradstreet, Creditsafe, Risk Disk to name a few) now collect payment data from your suppliers every month and update your score, often showing days beyond terms (DBT), if you have a dispute with a supplier try to resolve it quickly as it could affect your credit score.
2. Don’t make multiple applications for credit – credit searches by lenders leave footprints on your credit file and could make it look like you have cash flow problems.
3. File your accounts on time – late filing can really hurt your credit score, sometimes it can reduce your score by 50%.
4. Avoid CCJ’s – Getting a judgement against your business even for a small value is extremely damaging to your score.
5. Retain Profit – this increases net worth and shows you are investing in your business.
6. Record Borrowing Terms – in your published accounts and notes makesure you explain the terms and split the loan between short and long term, if all your loans are shown as short term this will damage your score because it will impact on working capital.
7. Review Share Capital – if you have directors loans that you have made to the business and you aren’t expecting repayment in the near future convert them to Share Capital, this will increase net worth.
8. Keep Credit Card Balances below 30% – Its bad for your credit score to max out your business credit card and its also bad to have too many business credit cards, it makes your business appear desparate for cash.
9. Avoid Negative Net Worth – it can wipe out your score.
10. Fix any mistakes – if a credit score is wrong and contains errors speak to the credit agency and get it fixed.
Do you have any tips to share?
steve@bicknells.net
CIMA la difference?
For most clients the institute a qualified accountant is a member of isn’t a key factor, especially if they are only looking to have their accounts prepared and tax return done. Some simply look for a “Chartered” accountant, which most qualified accountants in practice are if they belong to one of the main professional bodies.
However there are some key differences between the skills and experience of a traditional “high street” accountant and a CIMA Member in Practice. Here are a few:
- A CIMA accountant will tend to look at the business from the inside, rather than just the numbers that make up statutory accounts.
- Their professional training placed a lot of emphasis on providing businesses with meaningful data to support the day to day running of the business, so called management accounts.
- They are likely to have been exposed to a variety of different software systems, and may think more in terms of business processes.
- They are less likely to have worked on statutory audits (which are usually only needed for companies that meet 2 out of the following requirements: turnover of over £6.5 million; assets of more than £3.26 million; has more than 50 employees) so for SME’s that tends not to be an issue.
- They will generally be less obsessed with timesheets and billable hours!
That’s not to say that hiring an accountant who has just emerged from a 30 year career in the Management Accounting department at a local shoe factory is going to be the best thing for a small business, but CIMA have thought about that. Before a CIMA member can get the Practising Certificate they need in order to provide services to the public they need to meet the institute’s skills and experience requirements.
Back to the beginning, many individuals and companies hire an accountant without checking if they are qualified at all. Unlike the financial services industry, accountancy is lightly regulated and anyone can set up shop. Indeed, there are many “qualified by experience” accountants out there giving a good service to their clients. However should things go wrong ……. we’ll look at “when accountants go bad” in a future blog.
Business Accountant 