I can’t pay my tax
Q: Most of my tax is collected via PAYE, but I have a rental property which I make a small profit on. I have recently drafted my tax return for 2010/11 and my tax liability is £1,500, which I just can’t afford, especially with Christmas coming up. What can I do?
A: You could ask HM Revenue & Customs (HMRC) to collect your tax liability gradually from your employment income by adjusting your tax code. In order to do this, make sure that box 2 on page 5 of the tax return is blank before you file your return and the return is filed by 30 December 2011.
Please note, anyone can request to have their 2010/11 tax liability settled like this, provided their tax liability is under £2,000 and they submit their return by 30 December 2011 (from next year, the limit will be increased to £3,000).
Alternatively, there may be scope to negotiate a Time to Pay Arrangement with HMRC, which is effectively a payment plan.
Category: Income Tax
Separate bank account
Q: I have just started my own business- can you tell me if I should open a business bank account please?
A: Assuming you are not operating a company, you are not legally obliged to open a separate business bank account. However, if you use a personal bank account to put the business transactions through, HM Revenue & Customs will have access to your personal accounts if they were to launch an enquiry into your affairs.
If you operate a company, you must open a separate business bank account for it- in the name of the company.
Category: General Business
Tutors and coaches
Q: I do some private tuition in addition to my job and I have read that the Revenue have launched a campaign aimed at tutors and coaches. Is it likely that I will be affected by their campaign?
A: The Tax Catch Up Plan for Tutors and Coaches is an opportunity for tutors and coaches to come forward and declare any unreported income and pay the tax they owe. The Plan is open until 6 January 2012 and those coming forward are likely to face lower penalties than if HM Revenue & Customs were to find out first that they were not paying enough tax.
If you have any income to report and don’t come forward, HM Revenue & Customs have a variety of legal powers and access to information to identify you, such as information from academic, sport and leisure sectors, and a ‘web robot’.
Monday 19 December 2011
Wednesday 23 November 2011
Q & A's Starting A Business, Vans & Equipment
Q: I have just started my own business. When do I need to register with HM Revenue & Customs?
A: Firstly, you need to work out which tax year your start date falls into. The tax year runs from 6 April to 5 April, so your start date falls into the tax year ended 5 April 2012. You must therefore register by the following 5 October, i.e. 5 October 2012. As you are registering as self employed, the form you need to complete is HM Revenue & Customs form CWF1.
You will also need to pay Class 2 National Insurance which is only £2.50 per week for 2011/12 so most people choose to pay for these contributions via Direct Debit. You will need to complete HM Revenue & Customs form CA5601 if you would like to pay via this method.
Although you have some time before you need to submit form CWF1, avoid leaving it too long.
Q: We have just started up a plumbing and heating business and we’re going to buy a small fleet of vans and bit of equipment- probably totalling in the region of £60,000. It’s been a while since I’ve run my own business, but I know you used to get 50% of the cost of equipment offset against your profits in the year of purchase and 25% each year thereafter. What are the rules now?
A: In 2008/09 the Annual Investment Allowance (AIA) of £50,000 was introduced, which applied to general plant and equipment. Expenditure up to the AIA can be written down by 100% in the year of purchase. Any expenditure in excess of that or assets brought forward are written down by 20% (writing down allowance). The AIA was increased to £100,000 from 2010/11.
Assuming your vehicles meet the HM Revenue & Customs definition of a ‘van’, they will qualify for the AIA.
Please note, from 2012/13 the AIA will reduce to just £25,000 and the writing down allowance to 18%. If your accounting period straddles two periods when the AIA was different, then the AIA will be prorated. So for instance, if your start date is 1 October 2011 and your period end is 30 September 2012, then your AIA will be:
(6/12 x £100,000) + (6/12 x £25,000) = £62,500
A: Firstly, you need to work out which tax year your start date falls into. The tax year runs from 6 April to 5 April, so your start date falls into the tax year ended 5 April 2012. You must therefore register by the following 5 October, i.e. 5 October 2012. As you are registering as self employed, the form you need to complete is HM Revenue & Customs form CWF1.
You will also need to pay Class 2 National Insurance which is only £2.50 per week for 2011/12 so most people choose to pay for these contributions via Direct Debit. You will need to complete HM Revenue & Customs form CA5601 if you would like to pay via this method.
Although you have some time before you need to submit form CWF1, avoid leaving it too long.
Q: We have just started up a plumbing and heating business and we’re going to buy a small fleet of vans and bit of equipment- probably totalling in the region of £60,000. It’s been a while since I’ve run my own business, but I know you used to get 50% of the cost of equipment offset against your profits in the year of purchase and 25% each year thereafter. What are the rules now?
A: In 2008/09 the Annual Investment Allowance (AIA) of £50,000 was introduced, which applied to general plant and equipment. Expenditure up to the AIA can be written down by 100% in the year of purchase. Any expenditure in excess of that or assets brought forward are written down by 20% (writing down allowance). The AIA was increased to £100,000 from 2010/11.
Assuming your vehicles meet the HM Revenue & Customs definition of a ‘van’, they will qualify for the AIA.
Please note, from 2012/13 the AIA will reduce to just £25,000 and the writing down allowance to 18%. If your accounting period straddles two periods when the AIA was different, then the AIA will be prorated. So for instance, if your start date is 1 October 2011 and your period end is 30 September 2012, then your AIA will be:
(6/12 x £100,000) + (6/12 x £25,000) = £62,500
Tuesday 1 November 2011
Common Q & A's - Property Accounts & Tax
Buying your children property
Q: My wife and I are retired and we would like to give our son and daughter some of their inheritance now. We’ve thought about buying them a house in joint names, which they could rent out (because they’ve already moved out and live with their families). What would the tax implications be?
A: Firstly, they wouldn’t qualify for Stamp Duty Land Tax Relief for First-Time Buyers, because firstly, they aren’t intending to live in the property and secondly, it sounds like they already own other property.
If you gift the cash to your son and daughter, there shouldn’t be any Capital Gains Tax to pay on the purchase because cash gifts are exempt from Capital Gains Tax. However, there would be Capital Gains Tax implications should they decide to sell it.
Your son and daughter would need to declare their share of the rental income and expenses on a self assessment tax return each year and pay any tax due.
And finally, if you both survive for another seven years then the gift will be ignored for Inheritance Tax purposes. If you don’t, then the cash gift will effectively be included as part of your estate at the time of death, and could be subject to Inheritance Tax depending on the size of your estate.
Selling your home at a loss
Q: My house has been on the market for four months now, so I have decided to drop the asking price. However, this now means that I’m selling it as a loss. Is there any way I can utilise this loss?
A: If you were to sell your house at a profit, it is unlikely there would have been any tax to pay because of Private Residence Relief (PRR). To qualify for the relief, the property must have been your only home and you should’ve used it as a home and nothing else.
The amount of PRR may have been restricted if you have a very large garden, you’ve let part of your entire home or you’ve used part of the property for business purposes.
If you would’ve qualified for PRR (had you made a gain), then I’m afraid you cannot obtain any relief if a loss was generated instead. If your PRR would’ve been restricted, then you may be able to claim loss relief for the part of the gain that didn’t qualify for PRR. But please note, these losses can only be used against other capital gains; not income.
Q: My wife and I are retired and we would like to give our son and daughter some of their inheritance now. We’ve thought about buying them a house in joint names, which they could rent out (because they’ve already moved out and live with their families). What would the tax implications be?
A: Firstly, they wouldn’t qualify for Stamp Duty Land Tax Relief for First-Time Buyers, because firstly, they aren’t intending to live in the property and secondly, it sounds like they already own other property.
If you gift the cash to your son and daughter, there shouldn’t be any Capital Gains Tax to pay on the purchase because cash gifts are exempt from Capital Gains Tax. However, there would be Capital Gains Tax implications should they decide to sell it.
Your son and daughter would need to declare their share of the rental income and expenses on a self assessment tax return each year and pay any tax due.
And finally, if you both survive for another seven years then the gift will be ignored for Inheritance Tax purposes. If you don’t, then the cash gift will effectively be included as part of your estate at the time of death, and could be subject to Inheritance Tax depending on the size of your estate.
Selling your home at a loss
Q: My house has been on the market for four months now, so I have decided to drop the asking price. However, this now means that I’m selling it as a loss. Is there any way I can utilise this loss?
A: If you were to sell your house at a profit, it is unlikely there would have been any tax to pay because of Private Residence Relief (PRR). To qualify for the relief, the property must have been your only home and you should’ve used it as a home and nothing else.
The amount of PRR may have been restricted if you have a very large garden, you’ve let part of your entire home or you’ve used part of the property for business purposes.
If you would’ve qualified for PRR (had you made a gain), then I’m afraid you cannot obtain any relief if a loss was generated instead. If your PRR would’ve been restricted, then you may be able to claim loss relief for the part of the gain that didn’t qualify for PRR. But please note, these losses can only be used against other capital gains; not income.
Tuesday 25 October 2011
Bookkeeping Tips 1 - Credit/charge cards for business
I come across many businesses who are using cash to pay for small items of expenditure. They use the receipts for their bookkeeping, or make them available to us when we are doing their bookkeeping. Some even do a little spreadsheet for this expenditure-which is nice-bless you!
One way of making this task easier is to use a credit/charge card for your business account (if its available). You simply use this to pay for everything and everywhere that accepts the cards. This way:
1. The bank have summerised the expenditure for you, saving you the job!
2. Everything goes through your business account, so is traceable and much easier and quicker to do your bookkeeping from. You get a statement every month showing exactly what you've spent. With cash its easy to lose the receipts, and its fiddlier to do the bookkeeping.
3. If you lose the statement, then you can request another. With cash receipts, if you lose them- you'll have a job trying to get replacements!
This simple method will save you time, make the bookkeeping less hassle and improve your record keeping.
One way of making this task easier is to use a credit/charge card for your business account (if its available). You simply use this to pay for everything and everywhere that accepts the cards. This way:
1. The bank have summerised the expenditure for you, saving you the job!
2. Everything goes through your business account, so is traceable and much easier and quicker to do your bookkeeping from. You get a statement every month showing exactly what you've spent. With cash its easy to lose the receipts, and its fiddlier to do the bookkeeping.
3. If you lose the statement, then you can request another. With cash receipts, if you lose them- you'll have a job trying to get replacements!
This simple method will save you time, make the bookkeeping less hassle and improve your record keeping.
Tuesday 18 October 2011
Common Q & A's regarding Accountancy and Tax - Part 4
Q: I’ve just bought a restaurant and I know that the taxing of tips is a tricky area to get right. But can you tell me in a nutshell what the rules are?
A: The three basic options you have for the payment of tips are as follows:
Q: I have just paid my July tax bill. But am I right in thinking this payment is roughly based on last year’s (2010) accounts? My business’ profits for 2011 are definitely down on last year, so is there any way I can reduce my payments?
A: Yes you are right; the July payment is based on your previous year’s tax liability. There are in fact two ways that you can reduce your tax payments to take account of a reduction in profits.
Firstly, you can submit form SA303 to HM Revenue & Customs (HMRC). On this form, you must estimate what you think your tax liability for 2011 will actually be and why it has fallen from last year. The form must be submitted by 31 January following the tax year, i.e. a SA303 for a 2010/11 tax return must be submitted by 31 January 2012. Be aware that if you reduce your payments too low, HMRC will levy interest- but you can amend a SA303 if you discover this in time.
Alternatively, you could just prepare and submit your tax return. This will then trigger the comparison of these estimated payments (called Payments on Account), with your actual tax liability. So any over or underpayment will be calculated.
A: The three basic options you have for the payment of tips are as follows:
- You allow the employees to keep their own tips. In this way, any tax or national insurance due is their own responsibility
- All of the tips get put into one ‘pot’ (tronc) and you divvy them out amongst the employees. Their tips would then get added to their normal pay and appear as a separate item of pay on their payslip. In this instance, it would be your responsibility to calculate any tax due.
- You set up a tronc system but someone else manages it (the troncmaster), such as a manager and they will independently manage the tronc scheme. Again, the tips are put into a ‘pot’ and divided amongst the employees but this time it would be the troncmaster who would calculate the tax due. Unlike the above though, a separate payroll scheme would be required, so they would not appear on their normal payslip.
- paid, directly or indirectly, to the employee by you and are not monies previously paid to you by customers, or
- allocated, directly orindirectly, to the employee by you
Q: I have just paid my July tax bill. But am I right in thinking this payment is roughly based on last year’s (2010) accounts? My business’ profits for 2011 are definitely down on last year, so is there any way I can reduce my payments?
A: Yes you are right; the July payment is based on your previous year’s tax liability. There are in fact two ways that you can reduce your tax payments to take account of a reduction in profits.
Firstly, you can submit form SA303 to HM Revenue & Customs (HMRC). On this form, you must estimate what you think your tax liability for 2011 will actually be and why it has fallen from last year. The form must be submitted by 31 January following the tax year, i.e. a SA303 for a 2010/11 tax return must be submitted by 31 January 2012. Be aware that if you reduce your payments too low, HMRC will levy interest- but you can amend a SA303 if you discover this in time.
Alternatively, you could just prepare and submit your tax return. This will then trigger the comparison of these estimated payments (called Payments on Account), with your actual tax liability. So any over or underpayment will be calculated.
Thursday 29 September 2011
Common Questions and Answers part 3
Two jobs
Q: I have just left university and I am currently working two part-time jobs at the moment. I’m doing one day a week at a pub, which should earn me about £2,500 a year and my other admin job pays about £5,000 a year. I’ve seen the stories in the press about the tax errors arising on people with multiple jobs and I want to avoid having this problem. Do you have any tips?
A: I imagine you’ve probably got a BR tax code on your job in the pub, which means you’re having 20% tax taken off your earnings. And a tax code of 747L on your admin job, which means you’re having your entire tax free amount of £7,475 (personal allowance) offset against your £5,000. You are therefore wasting £2,500 of your personal allowance.
I would recommend that you contact HM Revenue & Customs on 0845 300 0627. Make sure you have you have a payslip to hand for each job, so you know your national insurance number and your tax reference. You should ask them to split your personal allowance across your two jobs. This way, your tax codes will be 250L on your job at the pub and 497L on your admin job.
You should then find that you pay less tax overall, because you won’t be wasting any of your personal allowance.
Joint ownership of property
Q: My husband and I have only just celebrated our first wedding anniversary. We have just bought an investment property together, which we plan to let. However, I am in a better paid job than my husband so I put up 70% of the purchase money. Right now, all our assets and income are kept pretty separate because we haven’t been married very long- so is there any way that we can apportion the rent from the house according to our investment?
A: If you live together with your spouse or civil partner, HM Revenue & Customs (HMRC) will normally treat income from property held in your joint names as if it belonged to you in equal shares and tax each of you on half of the income, regardless of actual ownership.
However, if you actually own the property in unequal shares and are entitled to the income arising in proportion to those shares, then you have the right to be taxed on that basis.
You must simply complete HMRC form 17, which is available from their website www.hmrc.gov.uk. HMRC will expect to see some evidence to support your claim for the income apportionment.
It would be advisable to seek the advice from a solicitor on this, as there may be legal issues to consider.
Q: I have just left university and I am currently working two part-time jobs at the moment. I’m doing one day a week at a pub, which should earn me about £2,500 a year and my other admin job pays about £5,000 a year. I’ve seen the stories in the press about the tax errors arising on people with multiple jobs and I want to avoid having this problem. Do you have any tips?
A: I imagine you’ve probably got a BR tax code on your job in the pub, which means you’re having 20% tax taken off your earnings. And a tax code of 747L on your admin job, which means you’re having your entire tax free amount of £7,475 (personal allowance) offset against your £5,000. You are therefore wasting £2,500 of your personal allowance.
I would recommend that you contact HM Revenue & Customs on 0845 300 0627. Make sure you have you have a payslip to hand for each job, so you know your national insurance number and your tax reference. You should ask them to split your personal allowance across your two jobs. This way, your tax codes will be 250L on your job at the pub and 497L on your admin job.
You should then find that you pay less tax overall, because you won’t be wasting any of your personal allowance.
Joint ownership of property
Q: My husband and I have only just celebrated our first wedding anniversary. We have just bought an investment property together, which we plan to let. However, I am in a better paid job than my husband so I put up 70% of the purchase money. Right now, all our assets and income are kept pretty separate because we haven’t been married very long- so is there any way that we can apportion the rent from the house according to our investment?
A: If you live together with your spouse or civil partner, HM Revenue & Customs (HMRC) will normally treat income from property held in your joint names as if it belonged to you in equal shares and tax each of you on half of the income, regardless of actual ownership.
However, if you actually own the property in unequal shares and are entitled to the income arising in proportion to those shares, then you have the right to be taxed on that basis.
You must simply complete HMRC form 17, which is available from their website www.hmrc.gov.uk. HMRC will expect to see some evidence to support your claim for the income apportionment.
It would be advisable to seek the advice from a solicitor on this, as there may be legal issues to consider.
Tuesday 20 September 2011
Making Groupon Pay
There has been a growth in the number of one day sales websites. Groupon is the biggest. A special offer heavily discounted, runs from midnight to midnight. The offers are provided geographically by small businesses. It is a great way to create a large database of customers very quickly, albeit at a loss.
New start-ups can find it particularly useful. I have a couple of clients who have taken part in such offers. Typically they offer a heavily discounted good or service, with Groupon taking half the offer price. If you are going to take part in such offers, then you need to have a strategy in place, to make this pay off in the long run.
You need to assess how many of the offer buyers will return and how much do they need to spend. What about the offer buyers who dont come back?, what can you offer them?
Now that you have this database of buyers, its important to communicate with them - email offers, facebook, twitter. Create and maintain that communication.
Special offers can be built around events, times of the year/month/week, i.e. flash offers which last a day - just like Groupon does. What about linking up with other non competing businesses around you - perhaps ones that also have participated in Groupon, and them offering something to your customers and vice versa. Keeping good records of customers and their buying habits will help to ensure that the investment in a loss leader can be made to pay in the long run and create repeat customers at the right price. To many rely on anecdotal evidence to assess whether their offer has been successful. See earlier post on "What gets measured, gets done"
New start-ups can find it particularly useful. I have a couple of clients who have taken part in such offers. Typically they offer a heavily discounted good or service, with Groupon taking half the offer price. If you are going to take part in such offers, then you need to have a strategy in place, to make this pay off in the long run.
You need to assess how many of the offer buyers will return and how much do they need to spend. What about the offer buyers who dont come back?, what can you offer them?
Now that you have this database of buyers, its important to communicate with them - email offers, facebook, twitter. Create and maintain that communication.
Special offers can be built around events, times of the year/month/week, i.e. flash offers which last a day - just like Groupon does. What about linking up with other non competing businesses around you - perhaps ones that also have participated in Groupon, and them offering something to your customers and vice versa. Keeping good records of customers and their buying habits will help to ensure that the investment in a loss leader can be made to pay in the long run and create repeat customers at the right price. To many rely on anecdotal evidence to assess whether their offer has been successful. See earlier post on "What gets measured, gets done"
Tuesday 13 September 2011
Common Q&A's part2
Investment Property
Q: I have just bought a house with my girlfriend, so at the moment, I own my ‘bachelor pad’ and our new house. We plan to keep my old house and rent it out. I know there won’t be any tax to pay on the sale of our new house, because I don’t think you pay tax on your home. But can you tell me what tax implications there’ll be on my old house please?
A: Firstly, you’re right- you don’t tend to pay tax on your home due to Private Residence Relief (PRR).
If you’re going to rent your bachelor pad out, then you will pay tax on the rent received, but you could claim relief for any mortgage interest and relevant expenses etc.
When you come to sell it, you’ll have to figure out how long it was your home and how long it was let for. The period that you occupied it should be covered by PRR. But the period when it was let, may instead be covered by Letting Relief- which at best, can mean you won’t have any Capital Gains tax to pay at all!
It would be advisable to write to HM Revenue & Customs (HMRC) and let them know that your circumstances have changed and that you wish to nominate your new house as your home.
There are criteria to qualify for PRR and Letting Relief, so please make sure you seek professional advice - ideally from me !, before making any decisions.
Employing an apprentice
Q: I’ve been thinking about taking on my grandson in the business. He’s only just left high school, but I’d like him to get involved in the business as I’d like him to look after the business after I’m gone. I’ve always taken on adults, so can you tell me what the main things I’d need to consider would be please?
A: Young workers have a lower limit to how many hours they can work (working time directive), when during the day then can actually work and more breaks are required during their shifts. And normal holiday and health and safety rules apply to young workers.
On the plus side, the National Minimum Wage that applies to young workers is lower than that for adults.
Depending on the level of their income and when they’re working, young employees can be subject to normal tax and National Insurance deductions. If they earn above £102 per week, then they’ll need to be added to the payroll, but they can earn up to £136 per week before you need to start calculating any deductions.
You may also be interested in the National Apprenticeship Service. Through this scheme, young people obtain on-the-job training from the employer and qualifications, and the employer gets some or all of the training costs subsidised by the government.
Q: I have just bought a house with my girlfriend, so at the moment, I own my ‘bachelor pad’ and our new house. We plan to keep my old house and rent it out. I know there won’t be any tax to pay on the sale of our new house, because I don’t think you pay tax on your home. But can you tell me what tax implications there’ll be on my old house please?
A: Firstly, you’re right- you don’t tend to pay tax on your home due to Private Residence Relief (PRR).
If you’re going to rent your bachelor pad out, then you will pay tax on the rent received, but you could claim relief for any mortgage interest and relevant expenses etc.
When you come to sell it, you’ll have to figure out how long it was your home and how long it was let for. The period that you occupied it should be covered by PRR. But the period when it was let, may instead be covered by Letting Relief- which at best, can mean you won’t have any Capital Gains tax to pay at all!
It would be advisable to write to HM Revenue & Customs (HMRC) and let them know that your circumstances have changed and that you wish to nominate your new house as your home.
There are criteria to qualify for PRR and Letting Relief, so please make sure you seek professional advice - ideally from me !, before making any decisions.
Employing an apprentice
Q: I’ve been thinking about taking on my grandson in the business. He’s only just left high school, but I’d like him to get involved in the business as I’d like him to look after the business after I’m gone. I’ve always taken on adults, so can you tell me what the main things I’d need to consider would be please?
A: Young workers have a lower limit to how many hours they can work (working time directive), when during the day then can actually work and more breaks are required during their shifts. And normal holiday and health and safety rules apply to young workers.
On the plus side, the National Minimum Wage that applies to young workers is lower than that for adults.
Depending on the level of their income and when they’re working, young employees can be subject to normal tax and National Insurance deductions. If they earn above £102 per week, then they’ll need to be added to the payroll, but they can earn up to £136 per week before you need to start calculating any deductions.
You may also be interested in the National Apprenticeship Service. Through this scheme, young people obtain on-the-job training from the employer and qualifications, and the employer gets some or all of the training costs subsidised by the government.
Thursday 8 September 2011
Time To Get The Source Out ?
I come across many clients who are just starting out in their new business. Understandably money is tight and they want to conserve as much cash as possible. One of the ways they do this is o do their own bookkeeping and VAT, and leave the annual accounts and tax returns to the likes of me!
This makes sense, as in the early days you may not be that busy in terms of trading, so have more time to devote to non-core activities such as bookkeeping. But as the business develops, and you get busier in the sales activity of your business, it makes no sense to be doing your own bookkeeping. The time spent would be more efficiently used if you spent that time on money making activity.
You need to work out what your time is worth per hour and if thats more then what you would spend on bookkeeping than you should outsource. As a business owner we have to wear many hats, but many of these tasks can be outsourced to companies for whom its their bread and butter. The other issue for business owners is to concentrate on the skills they do best, their passion, what they actually went in business for in the first place! - you'll be more efficient and happier. Why spend time on something that you probably hate doing, and it takes you longer because of it!
Look at your business. Are there areas you could outsource, that would free up your time to spend working on your business ?, or god forbid even on yourself!
This makes sense, as in the early days you may not be that busy in terms of trading, so have more time to devote to non-core activities such as bookkeeping. But as the business develops, and you get busier in the sales activity of your business, it makes no sense to be doing your own bookkeeping. The time spent would be more efficiently used if you spent that time on money making activity.
You need to work out what your time is worth per hour and if thats more then what you would spend on bookkeeping than you should outsource. As a business owner we have to wear many hats, but many of these tasks can be outsourced to companies for whom its their bread and butter. The other issue for business owners is to concentrate on the skills they do best, their passion, what they actually went in business for in the first place! - you'll be more efficient and happier. Why spend time on something that you probably hate doing, and it takes you longer because of it!
Look at your business. Are there areas you could outsource, that would free up your time to spend working on your business ?, or god forbid even on yourself!
Tuesday 30 August 2011
Where will you be in 5 years time?
"Where will you be in 5 years time?", is one of the questions I ask prospective clients. Its a popular question in interviews, to assess whether a candidates ambitions match that of his prospective employer.
The reason I ask it is:
If I know where you want to take your business and what your "vision" is, then I can help you to get there, and advise accordingly. You may want to just tick along and view your business as a lifestyle business, which is fine and theres nothing wrong in that. On the other hand you may want to grow the business and maybe replicate it in another location, and therefore you need to work on the business rather than in it. You need to build processes and systems, and put them in place early on, that way you will build a business with growth in mind and therefore will be able to scale your business more readily. Have you thought about this in your business? If you are a start up or thinking of starting up what is your vision for your business?, and ask yourself where you want it to be in 5 years time, or I will!
The reason I ask it is:
If I know where you want to take your business and what your "vision" is, then I can help you to get there, and advise accordingly. You may want to just tick along and view your business as a lifestyle business, which is fine and theres nothing wrong in that. On the other hand you may want to grow the business and maybe replicate it in another location, and therefore you need to work on the business rather than in it. You need to build processes and systems, and put them in place early on, that way you will build a business with growth in mind and therefore will be able to scale your business more readily. Have you thought about this in your business? If you are a start up or thinking of starting up what is your vision for your business?, and ask yourself where you want it to be in 5 years time, or I will!
Monday 15 August 2011
Q & A - Part 1
QI am setting up my own business soon and I plan to re-mortgage my current home to raise the start up capital. Will the interest payable on my mortgage be considered a tax deductible expense against my business profits?
A Whether or not the interest is deductible depends on the purpose of loan. Although the loan will be financed by other means, (and in your case on your personal residence), the interest on the element that will be used wholly and exclusively to fund your new business venture is an allowable deduction when establishing the net profit from your business activity.
However, you can only claim a deduction for the amount of “qualifying interest” which applies to the business. This is the interest paid on the amount of the loan used for your business, and any interest payable on the element relating to your existing residence is not deductible against the profits from your business.
QI recently registered my hairdressing business for VAT. I understand that you can claim back VAT from my previous two years of trading. Is this true?
A Unfortunately its not all the VAT you have suffered in the last 2 years, as you can only claim back the VAT on goods that you have acquired in the 4 years prior to registration which are still held in stock (or used to make other goods which are still held in stock) and originally acquired for business purposes.
Equally, it also includes the VAT on any capital assets such as equipment which you have purchased in the previous 4 years, but I am afraid any VAT suffered on goods or items that have been sold on to customers cannot be re-claimed once you have registered. You are also able to recover the VAT incurred on services, which have been supplied within 6 months prior to the date of registration, assuming they were also supplied for the purpose of the business.
Disclaimer – advice shared in this column is intended to inform rather than advise and is based on legislation and practice at the time. Taxpayer’s circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this column, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.
Thursday 11 August 2011
What Gets Measured-Gets Done
I can't remember who came up with the above phrase, but it basically means if you measure something over time and crucially make someone responsible for it. Then you can keep that particular issue under control and take corrective action if needed.
So for instance you may have a product X, which comes with a 1 year guarantee. Now some of these products are going to come back under this warrenty- so you want to be able to measure it.
A simple measure might be returns per 1000. It could be further broken down by type of fault/total faults. If this measure is monitored over time, you can see if it is getting better or worse, then investigate the reasons why and take corrective action, to improve the this statistic. Having a budget/target will help to keep this figure in check. Having a person responsible for this should ensure something gets done about it. Hence what gets measured gets done.
Could you apply this to your business?
If you are a one man band you probably have a rough and ready grasp of the numbers important to your business-albeit they are in your head rather then on paper or in a spreadsheet. But once you start to employ people these performance indicators become more important, as they will be what you monitor to control and manage your business and your staff if you are to be successful.
So for instance you may have a product X, which comes with a 1 year guarantee. Now some of these products are going to come back under this warrenty- so you want to be able to measure it.
A simple measure might be returns per 1000. It could be further broken down by type of fault/total faults. If this measure is monitored over time, you can see if it is getting better or worse, then investigate the reasons why and take corrective action, to improve the this statistic. Having a budget/target will help to keep this figure in check. Having a person responsible for this should ensure something gets done about it. Hence what gets measured gets done.
Could you apply this to your business?
If you are a one man band you probably have a rough and ready grasp of the numbers important to your business-albeit they are in your head rather then on paper or in a spreadsheet. But once you start to employ people these performance indicators become more important, as they will be what you monitor to control and manage your business and your staff if you are to be successful.
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