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If you have not yet filed Annual Accounts for a CIC (Community Interest Company), then please be aware that the process and procedures for filing the Annual Accounts at Companies House is different from normal electronic filings.
Firstly you cannot file electronic Annual Accounts.
Guidance is published here at the Companies House web site (or click the Companies House logo below).
In order to file the Annual Accounts you will need to prepare a form CIC 34 which can be downloaded from the link.
The completed and signed (by a director or company secretary) CIC 34 form, together with a printed copy of the Annual Accounts and a £15 filing fee must be sent to Companies House well in advance of the filing deadline. This is to avoid any late filing penalties, should Companies House reject the initial filing and you need to make any amendments that might be necessary in order to re-file the Annual Accounts.
Companies House officials were not yet able (during April 2015) to provide us with information as to when the electronic filing of CIC Annual Accounts will be possible.
Hence, just like filing Limited Liability Partnership Annual Accounts, the traditional hard copy and postage paid (preferably recorded delivery) or handing in the documents at a Companies House official Contact Centre office location, is still the only way to get the Annual Accounts filing compliance check done, for the time being.
©3resource – 2015
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.
Order your debts
My advice is straightforward and you will have seen it before, but it is probably one of the easiest ways for individuals and companies to save money. If you have any debts make sure you know which has the highest rate of interest. If you are in a position to repay debt, you should pay off your most expensive loans first. For individuals this is likely to be store cards or credit cards, followed by other unsecured lending to banks in the form of an overdraft.
Even with historically low base rate from the Bank of England, you can pay between 30% and 40% interest a year on store card and credit card purchases.
Maintain minimum payments
For the remainder of your debt, make sure you keep up your minimum payments. Failure to do this may mean additional charges are added to the debt and may affect your credit score.
Check for forgotten accounts
If you have a balance in your PayPal account or your energy supplier you are lending money free of charge. You might be relaxed about this, but while you are paying interest on your own debts you are much better getting the balances transferred to your lenders. Clear out any long term balance from PayPal etc and check your statements from your energy suppliers and any other suppliers to arrange for overpayments to be refunded.
Let’s say you have a balance on your credit card of £200, which you are repaying at £5 a month. The table below shows the total interest you will pay and the time taken to repay the entire balance. At an annual interest rate of 32% (2.34% monthly interest) you will pay nearly £395 in interest on your original purchase of £200 and it will take nearly 10 years to pay the whole balance back. If the annual interest rate rises to 35% you monthly interest would be more than the £5 monthly payment and you would never pay your original £200 off.
|Annual Interest||Total Interest £||No of months to repay loan|
So – if you happen to have £200 in your PayPal account that you had forgotten about at the same time as a £200 credit card balance, you could transfer the cash, pay off your credit card balance and save yourself between £70 and £395!
Manage your cashflow
Work out how much cash you actually need for your day-to-day needs. It is likely that you are receiving little or no interest on cash in the bank. If you are confident that you have surplus cash, use it to pay down any debts you have – but start with the expensive debt don’t share it out equally between the different debts you have.
For support and advice on restructuring and paying off debt contact Alterledger or visit the website alterledger.com.
Special rules for barristers and advocates
Barristers are not permitted to provide their services through a limited company. All barristers have to register as self-employed and submit business accounts as a sole trader to HMRC. There are special provisions relating to cash accounting and the rules have changed in recent years meaning there are three different regimes that can apply. There are time limits for the cash accounting schemes so if you are in your first few years of practising you will need to make sure that you are reporting the correct figures to HMRC. Guidance is available from the Bar Council here.
The Finance Act 2013 introduced the possibility of cash accounting for most unincorporated business including sole traders from 6th April 2013. Barristers already had a cash scheme available when they started their practice with permission to continue the same cash accounting principles for up to 7 years under the Finance Act 1998. This old cash scheme is no longer available to new barristers, but anyone who started preparing accounts under the old cash basis by 5th April 2013 can continue to do so until their seven years is up or they transfer voluntarily to another scheme. Once you have left the old cash scheme there is no turning back.
Barristers can join the new cash scheme where fee receipts do not exceed the VAT registration threshold (currently £79,000 per year). If receipts are more than twice the VAT registration threshold (currently £158,000) the barrister must leave the scheme.
The advantages of the cash schemes are that they are easier to administer so there is less need to engage an accountant to prepare your accounts. You only pay tax on fees received and you do not have make calculations at the year-end for work that is incomplete or invoiced and not yet paid by your clients. This means that your tax payments are delayed compared to the earnings basis below and will improve your cash flow. There are other aspects of the cash schemes which are explained in more detail here.
A barrister on the old cash scheme can elect to leave the scheme early, but the new cash scheme does not allow exit unless there is a “change in commercial circumstances”.
Earnings based accounting
UITF 40 requires that long term contracts are recognised in the year-end accounts to the extent that partly performed work is recognised as taxable income. This requires barristers to calculate the value of any Work In Progress (WIP) at the end of their financial year and include this in their total income.
Materiality is a key concept in accounting, but the materiality of the total WIP must be considered not just the materiality of each individual contract. It is not permitted to disregard a number of immaterial amounts if when considered together they are material to the accounts. In practice this means that almost all WIP is chargeable to tax under the earnings method. One of the few clear cut exceptions is a no fee no win case, where no WIP is to be recognised.
When changing from either cash accounting scheme to the earnings based scheme a calculation of the WIP must be made which will increase the taxable income for the year. The old cash method allows the closing WIP at the time of the change to the earnings method to be recognised over a period of up to 10 years. The provisions under the new cash scheme have a reduced timeframe of 6 years. It is normally the case that anyone transferring from the old cash scheme to the new cash scheme would not need any adjustment to the annual accounts. There are corresponding adjustments for barristers transferring from the earnings scheme to the new cash scheme – explained in more detail here.
For more information on an accountancy firm that can set you up with online accounting and deal with all your business accounts and VAT – contact Alterledger or visit the website alterledger.com.
|Bar Council Guidance||practice-updates-and-guidance/remuneration-guidance/|
|Faculty of Advocates||http://www.advocates.org.uk/|
|HMRC crackdown on barristers||http://www.bbc.co.uk/news/business-19635051|