Archive for June, 2019

CGT giveaway?

Thursday, June 27th, 2019

The awkwardly named “Gift Hold-Over Relief” (GHOR) allows you to give away business assets – including certain shares – or sell them for less than they are worth, and not pay (or pay reduced) capital gains tax (CGT).

The person receiving the gift will potentially pay CGT when and if they sell the asset at some future date. Any taxable gain will then be the ultimate sale proceeds less the original cost.

The conditions for claiming relief depend on whether you’re giving away business assets or shares.

If you’re giving away business assets you must:

  • be a sole trader or business partner, or have at least 5% of voting rights in a company (known as your ‘personal company’),
  • use the assets in your business or personal company.

You can usually get partial relief if you used the assets only partly for your business.

If you’re giving away shares

The shares must be in a company that’s either:

  • not listed on any recognised stock exchange,
  • your personal company.

The company’s main activities must be in trading, for example providing goods or services, rather than non-trading activities like investment.

Claiming GHOR will usually mean that you can avoid paying any CGT on the gift

However, if you sell an asset for less than its true market value and if the value of the gift is more than you paid for it, CGT may be due. The example illustrating this point on the gov.uk website says:

Imagine that you sell a shop worth £81,000 to your brother for £40,000.

The shop cost you £23,000.

You would need to include the £17,000 gain (£40,000 minus £23,000) when you are working out your total taxable gain.

To claim this relief, you will need to make a joint claim with the person receiving the gift. We can help you complete the formalities and also consider other CGT reliefs that may be available to you.

Have you heard of the Prompt Payment Code?

Tuesday, June 25th, 2019

The Prompt Payment Code (Code) is not a fanciful device to access cash from bank machines or a way to secure automatic “prompt” payment from your customers.

The Code was actually set up by the Chartered Institute of Credit Management (CICM) on behalf of government in order to promote a culture of prompt payment. Signatories to the Code agree to pay 95% of invoices within 60 days and work towards 30 days as normal practice, plus commit to other standards of good practice such as not retrospectively changing payment terms. The Code also requires signatories to give clear guidance to suppliers on payment procedures, ensure a system for dealing with complaints and disputes is communicated to suppliers and to avoid any practices that adversely affect the supply chain.

As payment practices have knock-on impacts through the supply chain, the Code also requests that lead suppliers in a supply chain encourage adoption of the Code throughout their own supply chains.

Apparently, as at the end of April 2019, nearly 2,300 organisations had signed up to comply with the PPC.

As most of us in business will wryly observe, there are 5.4m businesses in the UK, and so to have a real impact on cashflow the Code will need to be much more widely adopted.

Out take on credit control is to set up and enforce a rigorous cash collections system based on credit terms clearly set out in your terms and conditions of sale. You can’t expect your customers to pay up on-time if you haven’t indicated by which date an invoice needs to be settled.

If you are suffering from significant delays in payment from customers, you should take a hard look at your present credit control processes. If your monthly sales are £50,000 and your average credit allowed is 90 days, you are leaving upwards of £150,000 in your customers bank accounts when it should be in yours.

We can help. Redrafting your terms and conditions of sale is a good starting point, as is the introduction of strict enforcement of credit terms. Those who shout loudest are likely to get paid first.

What exactly is insolvency?

Thursday, June 20th, 2019

The dictionary definition of insolvency is less than illuminating, it is:

The state of being insolvent…

Listed synonyms provide more detail:

bankruptcy · liquidation · failure · collapse · ruin · financial ruin · ruination · pennilessness · penury · impecuniousness · beggary · administration · receivership · folding · pauperdom

What these explanations do not provide is a definition of the state of insolvency. A simple definition could be the insolvency occurs when we are unable to meet our obligation to settle debts by the required due date.

In a business sense, a firm can be said to be insolvent its assets are less than its liabilities, but even this definition does not quite hit the spot.

Imagine that you use all your available cash reserves to purchase stock. To place this in a current context, you might consider this as a strategy to avoid supply line issues in the event of a no-deal Brexit.

You have no issue with doing this as you are owed a significant sum by your major customer that will restore your cash flow before bills and salaries are due at the end of the month.

But what happens if your customer is suffering cash flow issues and is unable to pay?

On paper, your business will be solvent. As long as your delayed payment from your customer does not become more serious, in time your cash flow will be restored, but how will you pay your bills at the end of the month?

Without private funds that you can introduce to see you through this impasse or the support of your bank, how will your staff and other creditors respond if you have to go cap in hand and explain there will be a delay in paying them?

Cash, liquidity, really is king, and lack of cash can actually place your business in the same position as an insolvent firm.

If you are concerned that you may be skating close to a cash flow crisis or a deeper insolvency, please call so that we can help you figure out your available options. For certain, pretending that all will work out well in the end may not be the best strategy to apply.

Complaining to HMRC

Tuesday, June 18th, 2019

Although many of the tax office processes are automated, dealt with by computerised systems, the rest is managed by human beings each subject to the same range of foibles as the rest of us. And we all know how reliable computerised systems have proven to be.

If you are certain, or have misgivings, about the accuracy of HMRC’s assertions regarding your tax affairs, these need to be challenged.

Initially, use the relevant HMRC helpline to discuss your particular concern. If this proves to be ineffective, you will need to ask HMRC to deal with your grievance under their official complaints handling system.

The chronology of the complaints process is:

  1. You will need to inform HMRC, online or by submitting your complaint by post.
  2. HMRC will consider your request and respond.
  3. If you still feel that you case was handled incorrectly you can request a second review by HMRC.
  4. If you are dissatisfied with this second review you will need to present your case to the Adjudicator’s Office.
  5. If you disagree with the Adjudicator’s Office, you will need to refer the matter to your Member of Parliament who will approach the Parliamentary and Health Service Ombudsman on your behalf.

Interestingly, if you are successful and resolve the issue in your favour, HMRC are obliged to cover your costs in exposing HMRC’s mistakes or challenging their delays in dealing with matters.

Costs you can claim include postage, phone charges and professional fees; which brings us to the final part of our post on this subject.

If you are convinced that you are correct, and HMRC have made a mistake, you could seek professional help in resolving the issue and it may be possible to recover any professional support charges from HMRC. If you would like to consider this option, we can help. Call us initially to discuss your grievance and we can take it from there.

The real tax cost of benefits in kind

Thursday, June 13th, 2019

There is a sting in the tail for companies that provide their directors or employees with taxable benefits as part of their remuneration package.

Obviously, the directors or employees that receive the benefits will pay additional income tax if the benefits provided are chargeable to tax: for example, the use of a company car.

The cost of the benefits is generally a deduction for the employer, and this would reduce the employer’s corporation tax bill, but it also triggers an additional, employers’ Class 1A National Insurance liability.

The amount payable is 13.8% of total taxable benefits provided.

Although this extra National Insurance payment is itself a deductible item for corporation tax purposes, this is still a net loss of cashflow for the company and needs to be considered when planning remuneration packages for directors and employees.

As we have posted previously on this site, one way that a company can trim this additional NIC charge is to negotiate a repayment of a taxable benefit from affected employees.

Why consider this?

Why would an employee consider repaying all or part of the cash equivalent of their benefit in kind? Doesn’t this diminish the value of their perks?

Certainly, this is not a strategy that you would use for all benefits provided, but there are some where there are real win-win outcomes for the employer and the employee.

A prime example is fuel provided to employees or directors for the private use of their company car. You would need to crunch the numbers, but it may well pay the employee to pay back the cash cost of private petrol provided – thus avoiding the car fuel benefit charge and reducing their income tax payments by more than the refund of fuel costs – and at a stroke, reducing the employer’s Class 1A NIC charges.

6 July 2019 deadline for 2018-19

The deadline for employees to make refunds of these types of cost to employers is before 6 April 2019 for the tax year 2018-19.

If you are unsure if this would work for your company, please call, we can help you calculate if there would be an overall benefit from adopting this idea.

E-bike cycle to work scheme announced

Tuesday, June 11th, 2019

Readers who have been tempted to cycle to work but are challenged by fitness issues or really can’t afford the bike they would like, might be interested in the recent announcement that has extended the existing Cycle to work scheme to include the use of so-called e-bikes.

These are bikes with electric motors that assist with taking on those challenging gradients.

Here’s what the Department for Transport have said:

A refreshed Cycle to Work scheme could help many more commuters turn to greener journeys using e-bikes.

  • push to increase use of e-bikes to help tackle congestion, speed up commutes and cut travel costs coincides with the launch of Bike Week
  • refreshed government guidance will make it easier for employers to provide cycles and equipment including e-bikes worth over £1,000
  • employers encouraged to get their workforces cycling through loan and pooled cycle schemes, as part of government plans to encourage more active travel

Commuters will have more opportunities to boost their health, benefit the environment and speed up their journey to work, thanks to updated Cycle to Work guidance.

Cycling Minister Michael Ellis has announced a refreshed scheme today (9 June 2019), which could help many more commuters turn to greener journeys using e-bikes, 70,000 of which were sold in the UK last year.

E-bikes have an integrated motor that helps a cyclist pedal, allowing them to reach speeds of up to 15.5 mph in the UK. They are seen as a game changer for their potential to make it easier for older or less fit people to make cycling a part of their commute.

The refreshed guidance will make it easier for employers to provide bicycles and equipment including e-bikes worth over £1,000, by making it clear that FCA authorised third party providers are able to run the scheme on their behalf.

If you are interested, we suggest that you seek out a local bike dealer who can organise the formalities for you.

What is VAT and what do you need to know?

Friday, June 7th, 2019

Most people are aware of the term “VAT”, but unless you have experience in selling goods, the chances are that your knowledge of VAT and what it truly means is fairly limited. VAT, otherwise known as value-added tax, is a tax put upon products to compensate for any taxpayer-funded services enlisted in their manufacture and distribution and, in the UK, is included within the retail price of goods.

Here, we’ll discuss the ins and outs of value-added tax and answer some of the most frequently asked questions about this tariff.

Does your business need to pay VAT?

If you own a business, you may be wondering whether you need to pay VAT on any goods you buy or sell. Currently, companies who turn over more than £85,000 a year must pay VAT to HMRC, which is recorded and dealt with during quarterly tax returns. Once registered, businesses need to charge their customers VAT throughout the year – in addition to paying other businesses VAT on any goods purchased from them. This needs to be recorded accurately throughout the year so that you don’t end up over or underpaying HMRC.

How much VAT do we pay for goods in the UK?

For countries in the European Union, implementing and paying VAT is compulsory. However, the amount of VAT charged on goods and services depends on individual states who have the flexibility to define their own value-added tax rates – as long as it complies with the EU’s VAT law. Currently, the minimum rate that a member of the EU can charge is 15%, however, some countries do decide to charge significantly more.

In the UK, VAT rates are as follows:

  • The standard VAT rate is 20%
  • The reduced VAT rate is 5% (this rate is applied to some products and services, such as sanitary wear)
  • The second reduced VAT rate is 0% (this rate is applied to some products and services, such as the majority of food items)

It’s important for businesses to note that:

  • The sale of items with 0% tax does need to be recorded on your VAT return – despite the fact that no VAT is actually paid.
  • Items which are exempt from VAT, such as stamps, do not need to be recorded on your VAT return.

Do VAT rates change?

VAT rates do change, so it’s important for businesses to pay attention to make sure they’re charging and paying the correct amount. These changes are usually announced in either March or April, before the beginning of the new tax year, so businesses will need to make sure their sales prices are updated accordingly in order to comply with the new figures.

Understanding the ins and outs of VAT, including all legal processes involved with VAT returns, can be challenging. That’s why, if you’re a VAT-registered business or you predict you may be soon, it’s advisable to hire the services of a chartered accountant to help you with honest and accurate financial advice.

As experienced charted accountants based in Birmingham, we at Barron & Co Ltd are the top choice of accountancy company for businesses in the local area. We have all the expertise you need to navigate through your VAT returns and are dedicated to helping our valued clients with a whole range of financial services. For more information about what we could do for you, please don’t hesitate to get in touch with us at Barron & Co Ltd today.

Common payroll mistakes to avoid

Friday, June 7th, 2019

Taking care of your company’s finances is one of the most important parts of running any business. Evaluating your profit and expenditure, paying your taxes on time, and making sure you’re in a position to pay your employees correctly are all imperative, and failing to do so will likely land you in hot water time and time again.

Paying your workers is essential to keeping your workforce happy and fulfilling your obligations as an employer, but tackling payroll can seem challenging to many. Here are some of the most common mistakes you’ll need to avoid if managing payroll is your responsibility:

Being inconsistent

Your employees will have bills to pay and financial obligations of their own to meet, and they’ll likely be relying on the monthly payments they receive from work to deal with these. As a general rule, you should be paying your employees on the same date every month, or a few days before the agreed date if it falls on a weekend or Bank Holiday. Being inconsistent with your payments could cause them lots of problems, leaving you with a discontented workforce and a reputation for unreliability.

Over or underpaying your employees

Miscalculating how much you owe your employees from month to month will cause a whole number of problems, many of which require a lengthy process to resolve. If you underpay your employees, you’ll need to react quickly to make sure you don’t have to deal with complaints or grievances later on down the line. On the other hand, if you overpay your employees, you may end up losing money – especially if the problem isn’t flagged up by your employee or noted by your financial department. Additionally, if the employee in question doesn’t agree to pay back the extra money, you may have to seek legal assistance.

Leaking private information

Your employees’ financial information must be kept confidential at all times, so you’ll need to make sure this is properly protected. In order to run a happy company, your employees must be able to trust you and rely on the fact that you’re keeping their personal information safe and secure. From maternity payouts to childcare support, there are some things that your employees may not want to share, so you’ll need to make sure you have strong confidentiality measures in place when dealing with payroll.

Not keeping up to date with payroll changes

Staying up to date with all payroll-related legislation and regulations is essential for every business. Failing to comply with the law could see you run into trouble with the government, which is something that no company wants to deal with. Additionally, failing to stay up to date with tax changes and other amendments is likely to waste time in the long run. You’ll have to spend more time identifying and fixing errors than you would by simply updating your payroll in the first place.

Payroll mistakes, even those which may appear to be minor, can cause a lot of problems to both small and large businesses. To minimise the risk of errors from occurring, consider investing in payroll services from a chartered accountancy business, such as Barron & Co Ltd. Based in Birmingham, we provide top quality payroll services to businesses in the local area, helping them to save money and develop a trusted relationship with their employees.


For more information about our accountancy services at Barron & Co Ltd, please don’t hesitate to get in touch today.

Tips for Finding Expert Accounting and Bookkeeping Services – Choosing a Chartered Accountant

Friday, June 7th, 2019

Whether you run a small local business or are in charge of an international company, there’s a lot to think about when it comes to your business finances. From staff payroll to tax contributions, every business has procedures they have to follow, which can be difficult when you’ve got a thousand and one other tasks on your hands. It’s important to keep accurate records of all your financial transactions, and if you’re stressed or busy this might be one of the first things to let slip.

Luckily, this is where professional accounting services come to the rescue; a chartered accountant has all the skills and qualifications needed to take care of bookkeeping and accounts on your behalf. From professional advice to account auditing, financial reporting and more, accountants provide many valuable services, so it’s important to select the right one for your business. If you’re thinking about hiring an accountant for the first time, or switching companies, read on for a brief guide about the services a chartered accountant can provide and how to select the most suitable candidate.

What is a chartered accountant?

As you might expect, a chartered accountant provides many of the services that a regular accountant does, however they have a higher level of training and qualifications so you can be sure that you’re getting a certain degree of expertise.

To become a chartered accountant candidates need to have successfully passed the ACA, a highly respected qualification that involves at least three years of on the job training and a series of exams. While accountants tend to specialise in one area of finance, a chartered accountant will often be responsible for all financial records for a business, as well as providing professional advice and financial expertise. They tend to work in sectors such as large non-profit organisations, government, large corporations or the industrial sector.

What services do they provide?

It’s vital to think about the specific needs of your business before hiring an accountant, and it’s worth weighing up what it is you need that a chartered accountant can provide over a regular accountant. Below we will look at a few of the specific services they offer so you can decide whether it’s right for your business.

Accounting audits

Accounting audits are one of the most important tasks performed by a chartered accountant, and they are used to make sure a company’s financial statements are accurate. It also examines whether the company’s accounting systems are functioning as effectively as possible, if there are any weaknesses that can be identified and what, if any, steps can be taken to eliminate the risks of accounting errors or fraud.

Taxation

As you might expect, tax services are a big part of what a chartered accountant provides for a business. A CA can offer tax compliance services, which assess the degree to which the taxpayer is abiding by tax laws, e.g declaring earnings, filing tax returns and paying taxes on time.

A chartered accountant can help businesses get all their taxes in order, and also offer advice on where money might be saved, as well as general best practice for how businesses manage their taxes. This includes tax planning to minimise tax liability where possible, and any tax issues that might arise from business mergers or acquisitions.

Management accounting

A chartered accountant will be trained to analyze and interpret financial data in order to advise a company how best to manage and develop their business. It includes formulating policies, performance evaluations and analyzing business costs to produce reports and records that can be used to further a company’s performance.

Financial and investment planning

This includes developing effective strategies to improve and strengthen financial security, advice for managers on making important financial decisions, assistance putting financial plans into action and ongoing management of a company’s investments.

Investment planning helps a business manage their financial goals with the resources available, as well as advice on how and where to invest, for example whether to use cash, bonds, equities or property.

Share valuation

This simply calculates the total value of any private or public company’s shares based on quantitative techniques. Share value will depend on market demand and supply, and share valuation is often calculated in the event of a company takeover, merger or acquisition.

Business advice

A chartered accountant can offer your business advice covering a wide range of scenarios, from business transactions like mergers, to how to improve certain areas of the business, dealing with insolvency, tax and treasury issues and expert advice regarding investments or future business plans.

Cost accountancy

This involves recording all costs incurred by a company’s activities and coming up with a plan of action to improve efficiency. It includes assigning certain costs to products and services the company needs, and how best to manage the budget set by the management. A chartered accountant could advise how best to split costs amongst certain outgoings, products or services to ensure the company is operating as cost efficiently as possible.

How to find the best candidate

As you can see from the services listed above, a chartered accountant provides many specialist services on top of those offered by a regular accountant. If you’re making a one-off important financial decision, or run a large company with complicated finances, a chartered accountant can help. They also offer peace of mind that the advice given is up to a certain professional standard and level of accuracy, and they are regulated by a professional body with its own high standard of policies and procedures.

You can also be sure that they have a certain level of experience (minimum three years) working and training on the job before obtaining their qualification, and they can aid a business to thrive and grow, going above and beyond the usual tasks of keeping records and filing tax returns. If you think a chartered accountant is right for you, see below for a few ways to find an accountant to suit your needs.

Check the ICAEW database

The Institute of Chartered Accountants in England and Wales (ICAEW) has an online database that provides the only directory of chartered accountants in England and Wales. An ICAEW registered accountant or firm gives you the guarantee that they have passed the necessary qualifications to become a professional chartered accountant.

All members will have obtained their initial qualification from the Association of Accounting Technicians (AAT), as well as the higher Association of Chartered Certified Accountants qualification (ACCA).

Use social networks

This is applicable to both online and offline networks; ask any family and friends with their own business about their accountants and who they would recommend, although bear in mind that every business is different and what they value highly might not work for you.

You can also make good use of social networks online, LinkedIn is a great place to start searching for recommended accountants, and even Facebook can be useful for getting the word out there. 

Think about location

Nowadays, more and more companies are choosing to work with accounting firms online, using cloud-based technology to manage all their affairs. This makes a local location less of an issue, but it all comes down to personal preference. If you’re comfortable communicating via phone, email and video calls, then you could choose a chartered accountant based anywhere in the world. If you do choose an accountant abroad, make sure they’re up to date and know the tax laws in your country inside out to prevent any crucial mistakes.

However, some people believe there is no substitute to building a face-to-face relationship, so if that sounds like you then you’ll need to research accountants based in your area, or those willing to travel on an occasional or regular basis.

If you’re looking for highly experienced, friendly chartered accountants in Birmingham, get in touch with Barron & Co Ltd. Our professional and reliable team of chartered accountants are fully equipped to adapt to the needs of your business, whether that’s a global company, sole trader or charity organisation. If you need accounting bookkeeping services, company registration, business and tax advice and much more, we come highly recommended and can be on hand to help with any issue you may have. For more information and to discuss how we can help your business thrive, give us a call or visit our website.

Four Important Things That an Accountant Can do

Friday, June 7th, 2019

In today’s economy it’s now recognised that supporting small businesses should be encouraged, however the success of these ventures depends largely on the financial situation of the business. Starting up a business is a big step, so it’s understandable that you would want to have complete control over every aspect, but it’s important to recognise that there are professional services on had to help.

Accountants are experts in finance-related procedures and are a great way of ensuring your business is financially sound. If you haven’t already, it could benefit your business to have an accountant on board – this blog will provide a little more insight by explaining three of the important tasks that an accountant can help with.

The start-up process and growth

If you’re trying to come up with a financial business plan for your next venture then an accountant can assess whether your predictions are feasible, or how a new business may pan out in the future. Through insight across your finances they’ll be able to identify areas for growth, areas that can be improved and practical budgets for different areas of your business. It’s also important to build a good reputation for your business, if you’re late paying clients for example this may not bode well in building future relationships.

Help with tax

All small businesses are required to submit a tax return to declare your earnings to HMRC. But when it comes to submitting your tax-related figures, it can be easy to miss out important information unintentionally. An accountant will be able to go through your business with a fine-tooth comb to make sure you’re making full use of your tax allowance and paying what you owe.

Decisions and change

Whether you plan on adding a new service to your business or changing your supplier, every decision you make will affect your business finances. You should never rush ahead with this as something that appears to be a good move may actually have a negative impact on other areas of your business. An accountant will be able to guide you in your financial decisions and provide financial forecasts to help you make an informed decision about where to take your business.

Payroll

Even a business with a small team of employees needs to have a professional way of organising payroll. When people are off sick, do overtime or have holiday making sure you pay each employee the right amount can get confusing. Not to mention important forms such as P45’s and new starter information that’s needed to enroll someone in your business. By hiring an accountant this can all be covered in a manageable and easy to understand way. If you’re looking for a team of experienced and friendly accountants, then Barron & Co is the Birmingham based firm that can provide just that. With in-depth knowledge and expertise, we can help make a positive difference to your business and reduce the stress of organising your finances. For more information about what we can do to help contact us today for more details