Archive for July, 2019

A new business, have you considered your options?

Tuesday, July 30th, 2019

If you are setting up a new business one of the options, you will need to consider is your business structure. There are two basic choices:

  1. Be self-employed, or
  2. Incorporate your business, be a limited company.

There is a world of difference between the two options.

Self-employed

Self-employed suggests that you work on your own, and this is certainly one self-employed option, but there are others.

You could have a business partner, or partners, and trade as self-employed but in a formal partnership arrangement. There are two basic types of partnership: a limited partnership (where the partners are not personally liable for any business risks) and a non-limited version where the partners’ personal assets are at risk in the event that the business cannot pay its debts.

This personal liability aspect is one of the key reasons that need to be considered when deciding on a structure for your business. The other is the impact of NIC and income tax.

If you are self-employed the profits of the business are taxable based on the tax status of the business owner or owners. There is no flat rate applied to business profits. The more you earn, the more NIC and income tax you will pay. And don’t forget, if you are self-employed and you run into financial difficulties, your personal assets may be at risk – unless you have opted for the Limited Liability Partnership arrangement.

A limited company

Alternatively, you could set up a limited company that is treated as a legal entity in its own right. Companies pay corporation tax, not income tax, at a single rate, presently 19%.

At first sight it may seem like a no-brainer, why would you be self-employed and pay much higher rates of NIC and income tax? Combine this with the limited liability aspect and the argument for trading as limited seems compelling.

Planning is key

Every potential new business-person should consider both options. There are pluses and minuses to each, and both need to be considered.

If you are thinking about a new business, perhaps your first venture into self-employment, please call so we can help you consider all the possibilities. This is not a process to be taken lightly and messing up could prove to be very expensive.

Why invest in tax planning?

Wednesday, July 24th, 2019

The way we organise our business and personal financial affairs determines the amount of taxes we pay. Most of us are focussed on outcomes, outcomes that on the face of it increase our profits or income without due regard for the effect these transactions have on our tax position.

A classic example is the rule that removes your entitlement to the annual personal tax allowance if your income exceeds £100,000. For the tax year 2019-20, your £12,500 personal tax allowance would be reduced by £1 for £2 that your income exceeds £100,000. And so, when your income reaches £125,000 you will no longer be entitled to claim this allowance. Because you are being taxed at a 40% income tax rate and you also progressively lose your personal tax allowance – between £100,000 and £125,000 – you are effectively taxed at 60% on this top £25,000 of your income.

With the benefit of hindsight, or more practically, with the benefit of tax planning, there might be lawful ways that you could reduce your income without compromising your finances and maintain your claim to the personal tax allowance.

Clearly, cost benefit considerations need to be advanced at this point. It is difficult to argue that you adopt a tax planning strategy if the cost of the support you need are more than taxes saved.

Planning requires a three-step process:

  • A fact-find to fully understand your present position,
  • Research to discover if there are any viable planning opportunities, and
  • The agreement of a course of action based on an appreciation of the investment required to provide the necessary advice and the likely tax outcome(s).

If your business or personal financial matters are complex, and you don’t invest in an annual tax planning review, we would be interested in talking with you to see if we could impact your tax footprint in a positive way. Please call, we can help.

The advantages of tax compliance support?

Tuesday, July 23rd, 2019

As UK resident persons we are obliged to comply with the law, if we don’t, there are consequences. These range from financial penalties to imprisonment.

Tax compliance covers areas such as submitting returns to HMRC by the required dates and observing certain disclosure rules if our personal or financial circumstances change in a particular way. For most of us this means submitting an annual tax return and paying any calculated tax, NIC or VAT liabilities as they fall due.

For most taxpayers this s a chore that cannot be avoided, and it is tempting to see any investment in professional fees to complete these returns as a cost. As advisors we have sympathy with this point of view and yet there are compelling reasons to view this compliance service as beneficial, as an investment not a cost.

Firstly, if you don’t have to complete and fret over what does and what does not need to be returned, you will have more time to spend on activity that furthers your business interests or gives you more time to spend with your family. It will also, we hope, give you comfort that your affairs are being handled professionally – the sleep better at night outcome.

Secondly, an impartial review of your tax affairs – in order to deal with your compliance obligations – may reveal opportunities to change the way you organise your business or personal financial affairs in order to reduce the impact of taxation.

Timing is also an issue. There are compelling reasons to have advance notice of tax payments. For example, our self-assessment tax returns do not need to be submitted until 31 January following the end of a particular tax year. So, for the tax year 2018-19, the filing deadline is 31 January 2020. Why leave completing your return until the last minute if this means you have no time to figure how you are going to fund tax payments due?

Tax compliance, if managed correctly, is much more than a rubber-stamping activity, and hopefully, this post will convince you that your investment in the process has advantages that will justify your investment. Please call if you need help with your tax compliance obligations.

No deal

Thursday, July 18th, 2019

The phrase “no-deal” is assuming a rather specific meaning as the exit from the EU grinds towards a conclusion – the present deadline for achieving a withdrawal agreement is the end of October. If we fail to achieve consensus by that date, there are three outcomes:

  • We agree terms for the withdrawal agreement,
  • We kick the deadline down the road, or
  • We leave with no agreement.

Recent debates on this topic would seem to indicate that the first option is unlikely, the second option doubtful which promotes the no-deal option to the top spot, more likely.

Although the majority of smaller businesses in the UK do not have direct trading links with firms in the EU, it does not stretch imagination by many degrees to conceive that our expanded supply chains (customers of our customers, suppliers of our suppliers) are EU businesses.

This inevitable conclusion means that if there is a no-deal outcome, and if this triggers a disruption in supply lines, then we all need to sit up and take notice.

Many firms who trade with the EU have already invested in strategies to secure their business interests in the event that we leave the EU with no-deal and have to cope with World Trade Organisation tariffs. Other practical difficulties, moving goods across the channel for example, require more imaginative planning.

It is instructive that the only detailed instructions published by government departments cover the no-deal scenario. We recommend that all businesses take a look at this material. See:

https://www.gov.uk/government/publications/uk-governments-preparations-for-a-no-deal-scenario/uk-governments-preparations-for-a-no-deal-scenario#conclusion.

We are working with clients to run risk assessment tests and create plans that will help them manage a no-deal transition. If you would like to avail yourself of this advice, please call asap. This topic is now assuming greater prominence and there really is little time left to get prepared…

It is business as usual at the Treasury

Wednesday, July 17th, 2019

With all the present upheavals in UK politics it is reassuring that for one government department, the Treasury, it’s business as usual.

Ordinarily, we would expect the next Budget to be presented to parliament in the autumn, usually November. As part of the Budget 2018, certain changes to the tax code were disclosed in advance of their expected implementation, April 2020.

These future changes have now been published as draft clauses for the 2019 Finance Bill.

In their recent press release, HMRC have confirmed:

The government is today (11 July 2019) publishing draft legislation for the next Finance Bill to deliver on our Budget 2018 commitment to a competitive and fair tax system, including updating tax policies for the digital age by ensuring large digital companies pay their fair share through a world-leading Digital Services Tax.

This Finance Bill, published in draft form today, ensures that from April [2020] next year:

  • large digital businesses pay a new Digital Services Tax that reflects the value derived from their UK users,
  • off-payroll working rules will ensure that two people working side by side in a similar role for the same employer pay the same employment taxes,
  • when a business becomes insolvent, more of the taxes paid in good faith by its employees and customers will go to fund public services as intended, rather than being distributed to other creditors such as financial institutions.

The consultations on the draft legislation will run until 5 September, with measures included in the next Finance Bill.

Apart from the above and a multitude of technical changes to be included in the Finance Bill 2019, there are also changes to Private Residence Relief for capital gains tax purposes. The mooted changes are listed below.

The measures make a number of changes to Capital Gains Tax private residence relief (PRR) where individuals have more than one residence.

  • It reduces final period exemption from 18 months to 9 months (there are no changes to the 36 months that are available to disabled persons or those in a care home) and
  • reforms lettings relief so that it only applies in those circumstances where the owner of the property is in shared-occupancy with a tenant.

And no doubt there will be more content added to the Finance Bill as the Brexit process unwinds.

What is Goodwill?

Thursday, July 11th, 2019

According to the dictionary goodwill is:

1. a feeling of benevolence, approval, and kindly interest

2. (modifier) resulting from, showing, or designed to show goodwill: the government sent a goodwill mission toMoscow.

3. willingness or acquiescence

4. (Accounting & Book-keeping) accounting an intangible asset taken into account in assessing the value of anenterprise and reflecting its commercial reputation, customer connections, etc

Goodwill, as discussed in this post, is the intangible asset, that amount that a buyer is willing to pay for your business over and above the valuation of physical assets (plant, equipment, stock, property and net working capital).

If you have a business, goodwill is a payment a buyer is prepared to pay for your customer list and the reputation that your business may have built over the years.

Valuing goodwill is a tricky process as it necessarily involves consideration of intangible items. Ultimately, the agreed valuation will be the amount someone is prepared to pay, and the amount you are prepared to accept.

How is the sale of goodwill treated for tax purposes?

A company or person selling goodwill will create a taxable gain. If possible, sole-traders, partners or shareholders would seek to have this gain taxed under the capital gains tax legislation and claim reliefs that would restrict any tax payable to 10% of the chargeable gain.

HMRC, on the other hand, would prefer that any gain is taxed as income, and subject to the much higher income tax rates.

These opposing points of view can make for lengthy and complex arguments that often play out in the courts.

Goodwill is a payment for the hard work that you have committed to your business and you will want to plan for any sale with an eye to any tax payable, which is why planning a sale is a must-do. Very often the way that you structure a sale, and its timing, will determine the tax outcome.

As with most tax planning this process should be completed before contracts for sale are signed.

Readers contemplating a sale should invest in professional advice. In this way you will maximise the amount you receive for goodwill and minimise any tax liabilities. Please call if you would like to discuss your options, we can help.

Why Choose a Chartered Accountant?

Tuesday, July 9th, 2019

If you’re in need of financial advice, your first move will most probably be to get in touch with a local accounting firm. Whether you need help supporting your personal finances or you’re finding the world of corporate tax befuddling, a professional accountant will be able to help you to iron things out and make sense of your finances again. However, how do you know if their advice is accurate, informed and compliant?

Surprisingly, technically anyone can call themselves an accountant, even if they have no professional training or qualifications. For this reason, it’s essential that you choose an accountancy firm you can trust- but how do you know if they’re trustworthy? Well, as a rule, you should always choose a chartered accountant, and we’re here to tell you why.

Extensive experience

In order to qualify as a chartered accountant, you’ll need to have worked with a range of clients across various industries. Due to this extensive experience, chartered accountants are able to think on their feet, be adaptable and are aware of business operations in all types of contexts. When choosing a chartered accountant, it pays to hire one that specialises in your specific field or industry, as you can guarantee that their advice will be backed up by a wealth of experience.

Regulated by professional bodies

Chartered accountants are professionally qualified accountants that are bound by a code of ethics, regulated by a regulatory body such as the Insitute of Chartered Accountants in England and Wales (ICAEW). This is the global body of chartered accountants in England and Wales and as a member, accountants will undergo regular monitoring of compliances, as well as quality reviews of their professional practice. This means being frequently observed and evaluated by an external governing body, not just management within their own firm; a guarantee of quality, accuracy and veracity.

Reliable advice

As well as undergoing regular monitoring, it is compulsory for chartered accountants to keep up to date with professional development standards within the finance industry. This means that their knowledge and skills are always going to be informed and accurate. Whether handling your personal or business finances, you need to know that you can rely on your accountant to look after your hard-earned cash. You must also feel comfortable going to them for advice during financial difficulty and expect them to be trustworthy and discrete. With a chartered accountant, you know that their training and experience enables them to offer the most reliable advice possible.

If you’re looking for a trustworthy and accurate accountancy firm in Birmingham, look no further than Barron & Co. Our team of chartered accountants are fully qualified and trained in various areas of finance handling, and offer a wealth of experience spanning across multiple industries. For reliable advice, get in touch with us today.

How Comprehensive Payroll Services can Benefit your Business

Tuesday, July 9th, 2019

Payroll is a crucial aspect of any business, and ensuring accuracy is crucial not only to employees but also to business owners. More and more often these days, companies are looking to downsize by streamlining their business functions. The question that business owners often face is whether to carry out tasks in-house or to outsource the functions that do not generate revenue or add value to core business activities and are ultimately taking you unnecessary additional time. 

HR functions such as payroll have frequently been taken care of in-house in the past, a greater need for efficiencies has seen many companies gaining the benefits of outsourcing payroll to a managed services provider. 

As a business owner, it is essential to make sure that all legal requirements are official and taken care of in regards to your expenses, wages, and anything related to the finances of your company. Payroll is how you reward and retain employees, compensating them for the work they’ve done. When there are errors due to miscalculation, you’ll wind up with dissatisfied, unmotivated employees.

If you are a business consisting of more than just one person, you may have heard the term ‘payroll’. But, how do you go about organising payroll for your business and how is this beneficial to you?

What is payroll?

A company’s payroll is quite simply their list of employees, this being everyone who is employed and paid by the business. Business owners frequently also use the term payroll to refer to the following:

The amount of money which a company pays to its employees

This is a reference to every employee who receives  full wages including any bonuses and not including any deductions, these amounts will be tallied up and the total will be used as a part of the account record.

The company’s full listing of employee’s salaries and wages, bonuses and taxes

A detailed account of all money paid out to each and every employee must also be recorded. For some this may involve tallying up the hours they have worked, hourly wages or salary and any extra payments which have been made to an employee. Many companies use timesheets, rotas and even clocking in machines to keep a record of times and hours that have been worked within a week. It is also highly advisable to take note of how many sick and holiday days your employees have had.

The department which calculates and pays employees

In some cases, companies will have a specific department in the business which will organise the payment of employees. Within a business, the department is frequently referred to simply as ‘payroll.’

Payroll advancements

Payroll and the methods surrounding it  are ever-changing and developing. This is partially due to alterations in requirements from the government, but also to try and make the process as accessible and easy as possible for companies. New, regulations and expectations entail that it is crucial as ever to keep track of what is happening within your company, you need to ensure that finances are in order and controlled in order to succeed.

These days with plenty of opportunities to move around in their careers, many people are choosing to stay in one job for a much shorter amount of time. With this in mind it’s important to keep employees happy by maintaining that their payments are correct and on time.

Mistakes are unsurprisingly, highly satisfactory from an employee point of view and when it comes to HM revenue & Customs, so it is important to keep up to date with how payroll is progressing.

So, how has the payroll process advanced over the years?

Below in chronological order are the payment methods businesses have used over time, showing the development in laws, requirements and expectations for the government and for businesses.

  • Cash payments
  • Handwritten cheques
  • Printed cheques
  • Manual direct transfers of money into employees’ bank accounts
  • Online direct deposits into employees’ bank accounts

 Maintain a sense of control in the business

A great deal of business owners fear that outsourcing work will result in a loss of control in regards to business. However, with a managed payroll service – you can still have control in regards to the day-to-day running of your business, this is due to the fact that with a managed payroll service, you are able to select which functions you want to handed over, and which ones you maintain in-house – if any.

You shouldn’t look at this as an all-or-nothing kind of deal, more so a flexible and scalable partnership that is designed to help you in managing your services. You can delegate what you wish the third party to carry out, ensuring it gets done without having the time consuming task of doing it yourself.

Risk management

As you can probably imagine, payroll and tax regulation can be highly complex, as with any business, you’ll want to control costs in a way that will enhance profit. A managed payroll service will provide you with the flexibility you require to turn your fixed overhead costs into variable cost structures. This is especially significant during an economic downturn: as your business shrinks or grows, the same will invariably happen to your costs. You won’t have to carry on paying a large salary out to a payroll clerk if the workload doesn’t warrant the fixed cost. Moreover, you won’t have to pay for payroll software fees, equipment, and training.

Time saving strategy

As a business when you are not forking out so much money on valuable time on maintaining payroll systems, your business can save valuable time that can be spent on more important factors. Instead of spending hours on manual data entry, researching legislature, and double checking numbers, your HR professionals can focus time and resources on strategy and other critical activities that increase efficiency and productivity and optimise your workforce.

Costs

Larger businesses have the funds to maintain a large payroll department. For smaller businesses, an in-house payroll service is a huge financial drain but you’ll be surprised by the result when you compare that amount to the cost a payroll service provider can offer.

Saves you on training to operate a payroll system

It can often be costly to hire employees with the necessary training to operate a payroll system. For a smaller business where a payroll role is not enough to justify a full-time employee, you may need to use your current staff to train in payroll as an addition to the role they may already have. Your payroll staff will also need to constantly be up to date with the on-going tax procedures and legislation. 

Increase speed with an accounting service

Payroll service providers are specialists in their field, with this in mind, they can process the highly complex payrolls at a great speed, providing a quick turnaround time on your payroll when needs be.

Attention to detail and taxes filed correctly

Payroll mistakes can be stressful and are unfortunately, all too frequent. A good payroll service provider is much less likely to make any glaring mistakes than your in-house staff, you are being charged for their expertise, knowledge and finely-tuned checking procedures that they have in place.

Last tax year, HM Revenue & Customs charged over 28,000 people for tax returns that had been filled out incorrectly, that figure appears to be growing annually, this is most likely due to the complexity of what is required in this process.

If your business’s taxes are filed incorrectly or sent in late, you are going to incur fines, which can build up and increase, and if this is a regular occurrence, your fines could rise even more drastically, indicating  that you will be unnecessarily spending money where you needn’t be. In the worst case scenario, you may even end up owing a lot of money you were not necessarily aware of, having to pay money back at a later date when you may not have the finances due to other investments. With the use of a professional provider of payroll, you can be sure that your taxes will be filed correctly and equally as importantly, sent on time.

Barron & Co Ltd – business accountant services based in Birmingham

Here at Barron & Co we understand that running a business can be highly stressful and two of the most important aspects of running an organisation are: the tight management of resources and the maximisation of business efficiency, this includes the organisation of a company’s finances. We offer accounting services and financial advice to help you to reduce your tax liabilities. So if you are looking for a ‘accountants near me’ and to find out more about the financial services we offer, get in touch with us today.

Four Small Business Practices To Boost Your Company in 2019

Tuesday, July 9th, 2019

As a small business owner, you’ll know how difficult it can be to balance everything you need to do. From keeping your employees happy to staying ahead of the competition, it’s fair to say that business owners have a number of plates to spin at once. However, over the last 20 years, there has been a 63% increase in the number of small to medium-sized enterprises (SMEs) here in the UK, so it’s clear that managing a business is still a worthy and profitable venture.

Now, in 2019, there is a myriad of popular practices that business owners are taking on in order to not only making running things smoother but to hopefully boost business too. Here are four SME practices that could make your business even more successful this year.

Remote working

The days of 8 hours cooped up in an office are slowly starting to dwindle, with many employers offering remote working as an option to their staff. Enabling workers to utilise and manage their own time to develop independence is one way to not only improve productivity but also boost employee satisfaction. The office environment can become suffocating, and having the option to work elsewhere every now and again offers a welcome break and hopefully, as a result, improved work rates.

Transparent employee communication

Whilst this may seem obvious, transparent communication between employees and management is still only a recent practice. The younger generation of workers wants to have a more holistic view of the business and understand why, how, and what they’re doing contributes to the big picture. Your team should feel ‘in the loop’ and be on the same communicative level as management through regular meetings, shared calendars and free-flowing socialisation between all of your teams.

Health and wellbeing

Over the last few years, there has been a big push towards making sure employees are happy at work, whether that’s through playful office design, more opportunities for socialisation or more pastoral care services. As well as happiness, it’s also your responsibility to ensure your staff are healthy too. This can be encouraged through team exercise classes, mindfulness training, workplace step-counting competitions and, at the very least, ergonomic and comfortable workspaces.

Social and environmental responsibility

As a business, you’re responsible for the people you manage and your customers, as well as the environment you work within and for this reason, recently there’s been an emphasis placed on the social and environmental responsibility of businesses. It’s vital that your company is inclusive, diverse and tolerant, and that you take steps to develop a social purpose too. For example, give back to your local community through your work.

A successful company will also do its bit for the environment by recycling as much as possible and introducing cycle to work schemes, for example. When you put social and environmental missions before profits, you’ll find that in turn, the reputation of your business will increase dramatically.

Here at Barron & Co, we offer accounting services to small business owners across Birmingham and help them to ensure their companies are performing at their best. If you’re looking to boost your business this year, it’s a good idea to work with a professional corporate accounting service, so that you can focus on what you do best. To find out more, get in touch with us today.

Filing documents with Companies House

Tuesday, July 9th, 2019

In the not too distant past, if you filed a set of accounts for a registered company with Companies House this usually involved sending the required documents using the postal system.

Inevitably, this involved a certain amount of delay: initially, for the package to find its way from your location to Companies House, and then for the document to be opened and processed. Which is fine if allowed plenty of time for delivery to complete or to send a replacement set of documents if the item was “lost in the post”.

Clearly, leaving this process to the last minute is a recipe for disaster as there are now fines if you fail to file accounts or other documents by the required filing deadlines.

Fortunately, Companies House now has an online filing portal which means you can file using an electronic version of your accounts; no more fretting about the postal system.

From 1 October 2019, Companies House are updating their internal guidance which dictates how they will respond to appeals against late filing penalties.

In a recent press release Companies House offered the following advice to companies:

We remind all customers to:

  • plan ahead – do not leave your accounts until the last minute
  • make sure your accounts are correct before you file them
  • check the status of all documents you’ve filed using Companies House service

You should also use our online filing service wherever possible. It:

  • is quicker to complete and register (it can take around 10 days to process paper accounts at peak times)
  • uses less paper and is more environmentally friendly
  • lowers your risk of getting a penalty, as companies receive electronic confirmation that we’ve received your accounts and if they’ve been accepted or rejected
  • has lower rejection rates than paper filed accounts (0.5% for electronic accounts against 6% for paper filed accounts)

Clients reading this update will be relieved to note that we do file accounts – where this is possible – online.

For those readers who still rely on the postal system please give yourself plenty of time, failure to meet the required deadlines can result in significant financial penalties. Currently they are:

  • £150 – if less than one month late
  • £375 – if more than one month but less than three months late
  • £750 – if more than three months but less than six months late
  • £1,500 – if more than six months late

The above penalties automatically apply to all overdue accounts. Failure to comply with the filing requirements for the previous financial year will result in the above penalty being doubled.

And don’t forget:

A private company has 9 months from the end of the accounting reference period in which to deliver its accounts, and if you change the accounting reference period the filing time may be reduced.