Archive for December, 2018

Time for a tax-free seasonal bash?

Thursday, December 20th, 2018

Time to let your hair down? Enjoy a festive moment or two with your business colleagues and staff? If you are careful with your budgeting, you can enjoy the event without increasing your tax or National Insurance payments. Here’s what you need to consider:

What's exempt?

You might not have to report anything to HMRC or pay tax and National Insurance. To be exempt, the party or similar social function must all of the following criteria:

  • The cost must be £150 or less per head.
  • The event must be an annual event, such as a Christmas party or summer barbecue.
  • The event must be open to all your employees.

If your business has more than one location, an annual event that’s open to all of your staff based at one location still counts as exempt. You can also have separate parties for different departments, as long as all of your employees can attend one of them.

As long as the combined cost of the events is no more than £150 per head, they are still exempt.

You do have to report how much social functions and parties are worth to each employee if they are a part of a formal salary sacrifice arrangement.

A few additional considerations

  • 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.
  • The figure of £150 is not an allowance. For functions that are outside the scope of the exemption directors and employees 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.
  • If the employer provides two or more annual parties or functions, no charge arises in respect of the party, or parties, where the cost(s) per head do not exceed £150 in aggregate. Where there is more than one annual function potentially within the exemption, HMRC 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.

If you need help organising your annual celebration in the most tax effective way, please call.

 

Accountancy Jargon – The Basics

Wednesday, December 19th, 2018

Whether you’re a self-employed individual, a small business owner or CEO of a large agency, accountancy and tax is an inevitable part of being a working adult and we’re all bound to be faced with payroll or HMRC dilemmas at some point.

Getting to grips with understanding accountancy jargon is a tricky business, but we are here to help with a basic list to get you started:

Accounts Payable (AP): Money owed by the business or company to another business for services or goods they’ve provided.

Accounts Receivable (AR): Money owed to the business or company by its debtors (people or companies who have not paid for your services).

Accrual: An expense due but not yet recorded or invoiced.

Assets: All items or possessions owned by the business or company (money, vehicles, equipment etc).

Audit: An official inspection of a business’ accounts.

B2B and B2C: Business to business is selling to other businesses. Business to consumer is selling to the public.

Balance Sheet: A report summarising a business’ financial situation including all assets, income and expenses.

Bookkeeping: Keeping a detailed record of receipts and expenses.

Capital: Money belonging to the business owner.

Corporation Tax: Tax imposed on company profits. 

Credit Notes: Receipt of money given to someone who has returned goods, which can be offset against future purchases. 

Depreciation: Reduction in value of an asset (another word for this is ‘amortisation’).

Dividends: A sum of money paid annually to its shareholders out of company profits.

Equity: The value of your assets once debts have been subtracted.

Financial Year: A year for taxing or accounting purposes, usually April to April. 

HMRC: Stands for HM (Her Majesty’s) Revenue & Customs. The UK Government department responsible for the collection of taxes.

Income Tax: A tax imposed on personal income.

Inheritance Tax: A tax imposed on property, money and possessions of someone who’s died.

Liability: Debts owed by the business to others, including accounts payable, loans, wages and taxes.

National Insurance: A compulsory payment made by employees and employers to provide assistance for people who are sick, unemployed or retired.

Overheads: Business expenses not including labour, materials or direct expenses. They include accounting fees, advertising, insurance, rent, bills etc.

PAYE: Pay As You Earn. The name for an income tax system where an employee’s tax and national insurance contributions are deducted before the wages are paid.

Pensions: A regular payment that’s taken from your monthly wages, which will be regularly paid back by the government to people when reaching the official retirement age.

Personal Allowance: The amount of income you don’t have to pay tax on (currently, the UK’s personal allowance is £11,850).

Self Assessment Tax Return: You will do these annually if you’re self-employed or if HMRC requests one from you.

Tax Evasion: A criminal offence which involves individuals or businesses paying too little tax or wrongly claiming tax repayments. 

VAT: Value-added tax is a tax that is added to the price of goods or services (currently, VAT is 20% in the UK).

Tax and accountancy can be extremely difficult to understand. If in doubt, it’s always a good idea to talk to an accountant, to save you from any government fees or prosecution. At Barron & Co., we advise and help individuals and businesses with their tax and payroll. Call us today for an appointment or visit our website for more information.

Merry Christmas

Tuesday, December 18th, 2018

From a business perspective there is not much to be merry about this year especially if you need some clarity regarding our impending exit from the EU.

Never-the-less, business owners would be wise to consider the tax-free gifts that can be made to ease the financial needs for extra funds over the festive season.

In particular, make the most of the trivial benefits allowance. Here’s what is available and how you can benefit:

You don’t have to pay tax on a benefit for your employee (including working directors – but see note below) if all of the following apply:

  • it cost you £50 or less to provide
  • it isn’t cash or a cash voucher
  • it isn’t a reward for their work or performance
  • it isn’t in the terms of their contract

This is known as a ‘trivial benefit’. You don’t need to pay tax or National Insurance or let HMRC know.

Be careful as:

  • you may have to pay tax on any benefits that don’t meet all these criteria, and
  • if you provide these benefits as part of a formal salary sacrifice arrangements, they won’t be exempt.

Special rules for directors of ‘close’ companies

As you might expect, HMRC are not keen for owner/directors of small companies to benefit unduly from these tax-free benefits. Accordingly, you can’t receive trivial benefits worth more than £300 in a tax year if you are the director of a ‘close’ company.

A close company is a limited company that’s run by 5 or fewer shareholders.

Brexit may be in limbo, but Making Tax Digital is not

Monday, December 17th, 2018

As we have highlighted in many posts to this blog, from 1 April 2019, ALL VAT registered businesses with turnover above the £85,000 VAT registration threshold will have to submit their VAT returns from within software that can link with HMRC’s networks. In techno- speak, your data will need to be transferred using a designated API (HMRC’s application programming interface).

The fact that you have always prepared your VAT returns electronically, for example, by using a spreadsheet to record transactions and create the data for your VAT returns, will not be enough. Your spreadsheet will not have the functionality to link with HMRC’s API. In these circumstances you will need to acquire bridging software that will draw data from your spreadsheet and forward it the HMRC in the required format.

HMRC have now clarified that only businesses with taxable turnover that has never exceeded the VAT registration threshold (currently £85,000) will be exempt from Making Tax Digital (MTD). You will therefore need to keep an eye on your taxable turnover, especially if you think it is close to the VAT registration threshold.

Additionally, you may be excused from applying the MTD filing obligations if:

  • your business is run entirely by practicing members of a religious society whose beliefs are incompatible with the requirements of the regulations (for example, those religious beliefs prevent them from using computers);
  • it is not reasonably practicable for you to use digital tools to keep your business records or submit your returns, for reasons of age, disability, remoteness of location or for any other reason; or
  • you are subject to an insolvency procedure.

For the rest of us that are required to observe the MTD regulations, we should be using accounts software that will be MTD compliant come 1 April 2019. If you have consulted us on this issue you can be confident that any software that we have recommended will pass muster.

If you are still unsure which way to jump, please call so that we can help. As far as we can tell HMRC are on track to convert to this new filing process and the clock is ticking.

Skilled Accountants and Tax Advisors Can Help to Safeguard Your Business

Wednesday, December 12th, 2018

Running a small business can be very difficult. There are so many things that need your constant attention. You need to wear many hats in order to keep your business operating smoothly. If you want your company to have continued success, then it is going to be smart to hire professional accountants who can assist you with the bookkeeping.

You only have so much time, and one person is not going to be able to do everything alone. Protecting your business is of the utmost importance. You need to have professionals on your side who can provide the accountancy services that you need and offer you the best tax advice. This can safeguard you from potential problems and ensure that your business will continue to grow.

Hiring the Right Accountants

The best accounting services will be able to help you in many ways. Of course, they will offer very thorough bookkeeping services. They will be able to maintain your books and keep everything balanced. Their keen eyes will alert you whenever anything seems off, so you will know if there are problems with any of your accounts right away.

Accounting firms should also be able to give you the very best tax advice. Being able to save as much money on your taxes is a big deal for any business. You want to make sure that you are doing everything in your power to maximise your earning potential. A tax accountant will be ready to look deeply to ensure that your business is getting the best deal possible.

Hiring a business accountant who is capable of handling such things is going to be in the best interests of your company. Tax preparation services will definitely come in handy and you will never have to worry when the tax deadline starts to loom. You will know that you have true professionals who are going to take care of things and safeguard your money. It’s the best situation for your business, so take the time to call for the professional help that you need now.

Call Baron & Co Ltd. Today

Please give us a call here at Baron & Co Ltd. today. We have ample amounts of experience when it comes to tax preparation and general accountancy. Our firm has helped many small businesses similar to yours to thrive. Simply reach out to us by calling 0121 426 4155, and we can talk about the needs of your business.

Whether you are in need of tax services, or if you are looking for regular small business bookkeeping, we will be happy to oblige. Our commitment to our clients is second to none. We look forward to making your acquaintance. You can fill out our form to send us a message, and we will get back to you as soon as possible.

A possible, unwelcome increase in service charges

Tuesday, December 11th, 2018

From 1 November 2018, owners of properties on estates or sites that are obliged to pay service charges to a management company – for example, for the maintenance of common areas, gardens, or the employment of a site warden or caretaker – may be in for an unwelcome surprise.

It would seem that HMRC have applied a concession in the past that allowed the management companies to treat service charges collected on behalf of a landlord as part of an exempt supply for VAT purposes – in other words, when the management company charged a resident, no VAT was added to the fee.

From 1 November 2018, if the right circumstances apply, the management company will need to treat the supply of services as a standard rated supply for VAT purposes. As the current rate of VAT is 20%, residents affected may see an equivalent increase in their charges.

However, if the management company for your property is obliged to charge you VAT, it will also be able to claim back VAT on expenses related to your service charge: this is VAT that in the past was a cost to the management company. It is estimated that a more likely service charge increase due to this change in VAT rules will be between 10% to 15%.

Smaller management companies should not be affected by these changes.

As always, unpicking the various “grey” areas of the VAT regulations will likely prove to be a headache for residents and the management companies affected. If you are reading this short article and have concerns, please call for more information.

What is an OpRA?

Thursday, December 6th, 2018

OpRA is the acronym for an optional remuneration arrangement. Before April 2018, these were termed “salary sacrifice” arrangements. Essentially, both are benefits in kind (BiK) offered to employees in place of salary increases.

Recent changes ensure that that where such benefits are offered recipients many are taxed as if the cash value of the benefits provided were taken as salary.

Readers should also note that there are still a small number of BiKs that are tax and NIC efficient.

Accordingly, we feel that there is a need to review all BiK arrangements before the end of each tax year to make sure that the most tax efficient remuneration options are being provided.

Where an arrangement falls under the new rules, the work to be included in an annual OpRA review could be:

  • Test each benefit provided against the OpRA legislation.
  • If OpRA applies, what are the increased tax and NIC costs for the employee and is the employer willing to compensate?
  • Consider alternative benefit arrangements that have a lower tax and NIC footprint.
  • Consider substitution for exempt BiKs, including: pension provisions, cycle to work schemes, ultra-low emission cars, and employer supported childcare.
  • Consider an arrangement to purchase more holiday, effectively unpaid leave.

Our initial report would usually be directed to the employer to agree any changes, and then provide updates for employees to communicate these changes, if any.

Please call if you would like to schedule in a BiK review before the end of the tax year.

How an Experienced Accountant Can Help with Company Registration

Wednesday, December 5th, 2018

When setting up a new business, there’s a lot to consider. From choosing the company name, all the way through to your employee’s first paydays, it’s likely that you’ll seek support and advice from all around you. When the time comes to register a company, delegating out roles within areas you’re unsure of to trusted professionals can be extremely profitable for your business.

One of the main areas new small business owners struggle with is accounting, often because they are, rightly so, focused on the business idea and getting it off the ground. Handing over the financial affairs to a trusted accountant allows you to concentrate on your passion for running the business, whilst also saving time and money.

Below we’ve outlined the main challenges you could face if you choose to go it alone in the world of small business accounting. However, we’ve also provided solutions. Working with an experienced accountant can help with the entire start-up process, including registration, complying with tax regulations and the day-to-day management of your business’ finances. Once you know what an experienced accountant can do for you, choosing the right one is straightforward.

Accounting challenges for new businesses:

If you’re considering starting a new business, you’ll already be aware of the huge journey you’re about to embark on. You’ll probably feel like you’re spinning hundreds of plates at once; just managing the financial side of things alone comes with a breadth of challenges. What with monitoring cash flow, keeping on top of expenses, setting up payroll, completing tax returns, understanding tax law, and predicting, recording and reporting on finances, the list feels endless.

However, there are three key challenges that you will face in small business accounting:

  • Setting up your business. This is an exciting but daunting time as a new business owner and it’s tempting to rush through it, which could be detrimental in the long run. Knowing how to register your business properly is not always clear, whilst creating an extensive business plan which includes a structured, in-depth financial analysis can also be extremely overwhelming.
  • Understanding taxes. Tax law is renowned for being very complicated, and with laws changing all the time, it’s difficult to keep up. Attempting to understand the ins and outs whilst also setting up your business can be very time-consuming and completing tax returns is no simpler – they are often referred to as an art form!
  • Recording all financial transactions. Otherwise known as bookkeeping, this needs to be done from day one, i.e. as soon as you start incurring expenses, even during the setting up of your business. Recording all financial transactions, from sales and purchases to payroll, can be extremely burdensome as it must be done in real-time and constantly maintained.

Clearly, there’s a lot to think about and bringing in expertise from elsewhere can, at the very least, lighten the load. But at most, working with an experienced accountant can make the above challenges much more manageable. Here’s how accounting experts can help:

1.   Advising on business structure and financial analysis

Creating the foundation for a successful business starts with working out which legal business structure best suits your needs. An accountant will explain the legal business structures available and help you to consider whether your business is a sole proprietorship, a corporation, a partnership or forming as a limited company.

Many accountancy firms specialise specifically in limited company formation and can make your company incorporation straightforward. They will help you set up with Companies House and HMRC; making sure you’re aware of all the information you need in order to register your company.

Once you’ve decided on your business structure, you’ll need to work on your business plan. Writing your company description, describing your product or services and understanding where you fit in the market will make perfect sense to you. However, the financial analysis is often the dreaded part, especially if you don’t have a financial background.

An experienced accountant can support you in writing this aspect of your business plan, as they will have worked with similar companies before and will understand your industry inside out. Making predictions for future growth and estimating expenses is second nature to them.

2. Offering a Chartered Tax Advisor

Complying with tax law and calculating your contributions as a business can be a lengthy and complicated task. In fact, small business owners in the UK lose around three working weeks every year to tax compliance. But, every new business must register for corporation tax and maintain their contributions. With the added pressure of trying to minimise your tax bill with ever-changing rules and regulations, it may feel as if you’ve barely got time to actually run your business.

A qualified Chartered Tax Advisor, provided by your accountancy firm, will do all of this for you. It is their job to manage your business’ contributions, remain up to date with the latest developments in tax law and also to understand the tax-related nuances between industries. Chartered Tax Advisors are dedicated to helping clients at any time of need. Should you need support through difficult legal processes involving tax, a qualified tax advisor can ensure you’re above board at all times, whilst remaining confidential and taking due care.

This level of expertise can only be offered by a Chartered Tax Advisor, as in order to receive their qualification, they must demonstrate a high level of technical knowledge and high standards of ethical and professional conduct, and maintain these standards throughout their career. The Chartered Tax Advisor qualification is internationally recognised; when you choose to seek advice from a Chartered Tax Advisor, you can rest assured that the support you’re given is certified, specialised and of the highest calibre.

3. Structuring bookkeeping and payroll

Bookkeeping is essentially the recording of all financial transactions in a business and must be extremely well structured. Inputting purchases, sales, receipts and payments can feel endless, particularly if you have a high transaction rate business, such as a restaurant. It’s a long slog of admin and probably isn’t where your passion lies. However, it is vital that you establish a solid bookkeeping system from the day you register your business and start making transactions, to ensure everything is done ‘by the book’ – if you’ll pardon the pun!

Accountants provide expert bookkeeping services to free you from handling this admin. They are passionate about completing rigorous and timely bookkeeping and based on this, you can measure the health of your business more accurately.

Similarly, if you’re a new business and planning to employ a team, your payroll must be a well-oiled machine. Setting up your payroll system is also something an experienced accountant can assist with. Calculating wages based on hours worked and making sure your employees receive payments on time can be managed by your accountant, so you can stick to personably managing and supporting your team.

Along with bookkeeping, setting up payroll may involve installing accounting software for your business, which will help you to manage your own payroll and bookkeeping in future. Investing in an experienced accountant to structure your financial data management at the beginning of your business journey will make for a much smoother ride along the way.

How to choose the right accountant

After weighing up the costs and deciding to hire an accountant, choosing the right one is fairly straightforward if you know what you want. Here are a few things to consider when choosing your accountancy firm:

  • What services do they offer? Work out what services you require. For example, you may have already employed someone to do bookkeeping and payroll in-house, but you still require expert tax advice. Most accountants offer a range of services, whilst some specialise in certain areas.
  • Where do they operate? Having an accountant who operates in your local area is beneficial as they’ll understand your market well and can meet with you regularly. However, the development of could-based accounting means location is less of an issue and can sometimes save you time.
  • Do they have experience in your industry? It’s important that your accountant understands your business and the industry it lies within. Speak to peers in your sector to find out which accountants they’ve used, or simply enquire at the firm where their experience lies.
  • What qualifications do they have? Ideally, you’ll choose a Chartered Accountant; their expertise is regulated by a professional body and is recognised by the government. You don’t necessarily need a certified accountant for more basic services like bookkeeping, but for expert advice on how to get the most out of your business, choose a qualified accountant.
  • Can they save you money? An experienced accountant will be proactive about saving you money, while some may simply manage your accounts and complete your tax returns. Before choosing an accountant, ask them how they will endeavour to save your business money and ask for evidence of doing so in the past.

Choose Barron & Co. as your trusted accountant

There are many different accounting companies that can support you through the setting up of a new business, offering a range of services. However, choosing a team of Chartered Accountants and Tax Advisors ensures the highest quality of expertise.

At Barron & Co. our team of chartered and experienced accountants have experience in working with large companies, small businesses, partnerships and sole traders based in Birmingham. We aim to make business accounting more straightforward and as a result, significantly boost your bottom line.

With years of experience in limited company formation, offering chartered tax advice and providing bookkeeping and payroll services, you can trust that our friendly and professional team will focus on the time-consuming accounting work, whilst you focus on what you do best. Book a consultation by contacting us today, or browse our range of services on our website.

Would you set off for uncharted territory without a plan?

Tuesday, December 4th, 2018

Truthfully, no one knows what trading conditions will be like once we exit the EU. Will supply chains seize up or will it be business as usual?

If there is a possibility, however remote, that the commercial landscape will change, doesn’t it make sense to undertake an assessment of any downside risks and plan accordingly?

From a Brexit point of view, supply chain concerns are likely to cause the most disruption, at least initially. Even if your business does not buy or sell goods to the EU, many of your customers and suppliers may, and this could affect your sales and purchases of goods if transport links are affected.

Accordingly, we recommend that you undertake a basic supply chain risk assessment. For example:

  • If you sell goods to EU concerns could you encourage them to increase their stocks of your goods before 29 March 2019?
  • If you buy goods from the EU, could you increase your stocks prior to the same date?

If we head for a no-deal Brexit, and you import goods, what effects will import VAT and other duties have on your margins and cash flow?

And if your suppliers or customers have similar concerns, will you be under pressure to reduce your selling prices to customers or find alternative suppliers in the UK?

Until we are certain which way the no-deal or negotiated separation will pan out, we should be planning for all options. Whilst this may seem to be over-the-top at present, come spring 2019, you will be grateful that you are ready for any disruption whatever shape it may be.

Tax Diary December 2018/January 2019

Monday, December 3rd, 2018

1 December 2018 – Due date for Corporation Tax due for the year ended 29 February 2018.

19 December 2018 – PAYE and NIC deductions due for month ended 5 December 2018. (If you pay your tax electronically the due date is 22 December 2018)

19 December 2018 – Filing deadline for the CIS300 monthly return for the month ended 5 December 2018.

19 December 2018 – CIS tax deducted for the month ended 5 December 2018 is payable by today.

30 December 2018 – Deadline for filing 2017-18 self-assessment tax returns online to include a claim for under payments to be collected via tax code in 2019-20.

1 January 2019 – Due date for Corporation Tax due for the year ended 31 March 2018.

19 January 2019 – PAYE and NIC deductions due for month ended 5 January 2019. (If you pay your tax electronically the due date is 22 January 2019)

19 January 2019 – Filing deadline for the CIS300 monthly return for the month ended 5 January 2019.

19 January 2019 – CIS tax deducted for the month ended 5 January 2019 is payable by today.

31 January 2019 – Last day to file 2017-18 self-assessment tax returns online.

31 January 2019 – Balance of self-assessment tax owing for 2017-18 due to be settled on or before today. Also due is any first payment on account for 2018-19.