Business Accountant

Home » Posts tagged 'Chartered Institute of Management Accountants'

Tag Archives: Chartered Institute of Management Accountants

What fees does a barrister need to declare?

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.

English: A barrister on a mobile phone outside...

A barrister on a mobile phone outside Southwark Crown Court.
(Photo credit: Wikipedia)

Cash Accounting

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.

Transitional arrangements

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.

Useful links

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

Company Filing Requirements Consultation

newsSlider_redTape

Red Tape Challenge.

As part of the UK Government’s intention to make regulations more relevant to the world we live in there is a consultation on the filing requirements for UK companies.  The pdf document can be downloaded from the gov.uk website.  Included in the consultation are suggestions to reduce the burden of form-filling for small businesses including scrapping the annual return and reducing the need to hold duplicate information at your registered office and Companies House.

The consultation document goes into great detail on the costs and benefits of each change being proposed.  The cost saving to companies in not having to complete the annual return is assessed at £1.60, but this ignores any fines incurred by people who have missed their deadlines for filing.

Have your say.

The last consultation from Companies House only received a few hundred responses (according to my source) so if you have strong feelings on bureaucracy imposed on you, your response will have some impact.  If you are uncertain of your filing requirements you can ask an accountant who will be able to advise on anything you need to do.

Checking the record.

If you are company you can check your details on the Companies House website, or at the following link replacing the last eight characters with your own company registration:
http://data.companieshouse.gov.uk/doc/company/SC433814
If your company registration has fewer than eight characters add leading zeros to make it the correct length.  Of course you don’t have to limit yourself to checking your own details – whenever you are considering a new customer or supplier who is a limited company / limited liability partnership etc. it is a good idea to check their entry on the companies house register to get more information on them including names of directors.

contact@alterledger.co.uk

Useful links

Companies House WebCHeck http://wck2.companieshouse.gov.uk//wcframe?name=accessCompanyInfo
Red Tape Challenge http://www.redtapechallenge.cabinetoffice.gov.uk/home/index/
GOV.UK public consultations https://www.gov.uk/government/publications?publication_filter_option=consultations
%d bloggers like this: