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 Over Christmas We Are Closed Between 25-27 Dec 2012 and New Years Day



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1. Info For Payroll Clients

Real Time Information - Major changes ahead for payroll
As you are aware, we currently process your payroll and there are significant changes to the way payroll information will need to be submitted to HM Revenue and Customs (HMRC). The new system of Real Time Information (RTI) is mandatory for all employers and is to be implemented from April 2013. It is likely that HMRC will have written to you recently about these changes.
The software we use to process your payroll is RTI-compliant. So rest assured we will take care of the transition from the current PAYE system to RTI.
However,  there are some preparations we will need to make ahead of its introduction- which we will need an element of input from you on.
In the meantime, if you should receive any correspondence from HMRC regarding RTI- in particularly, your RTI start date- please could you ensure you provide us with a copy.
Needless to say, should you have any queries regarding the above or any other matter, please do not hesitate to contact us.

2.Check out our latest daily paper "The Leicester Accountant" at
http://paper.li/f-1328806194

3. Q & A - Tax & Accounts


Accounting for factored debts
Q: I recently engaged a factor to collect some debts from my customers. How do I go about accounting for this? I’ve already received some cash from the factor.
I’ve had problems with customers paying in the past, so I am now on the Cash Accounting Scheme for VAT.
A: Technically speaking, the cash you received from the factor is in fact a loan and is therefore exempt for VAT purposes. So you do not need to account for the VAT on the debts at the point you receive payments from the factor.
Instead, you account for the VAT in the VAT period the customers pay the factor. The factor should issue you with statements, so that you can identify when and how much the customers pay.
You should account for the VAT on the amount the factors manage to recover; not the original invoiced amount. Please also note that if the factor deducts any commission or charges before remitting you the balance, you should continue to base the VAT on the amount the factor received from your customers; not the lower amount they eventually paid you.
Category: General Business

Business Records Check Phone Call
Q: I have received a letter saying that HMRC are going to call me about my record keeping under their Business Records Checks programme. How should I handle it?
A: Try not to panic at this stage. HM Revenue & Customs (HMRC) will be calling to ask you a few simple questions about your records. They estimate these calls will only last about 10 to 15 minutes.
There are three possible outcomes from the call:

1. They might be satisfied that you are operating your records effectively and that’s the end of it;
2. They might think you need some additional support so they may refer you to their appropriate department for record keeping training and education; or
3. Worst case scenario, they think your records sound inadequate and they will arrange to come and visit you.

But even in the event they come and visit you and aren’t happy with your bookkeeping management, they cannot fine you instantly under this programme. You should be offered time and support to improve your systems. The Business Records Checks are designed to be educational rather than punitive.

Category: General Business

Tax Credits – Actual figures
Q: When I submitted my Tax Credits renewal forms, I had to estimate my self-employment income because I had not drawn my accounts up. I have now completed my accounts and I am about to file my tax return. Will the Tax Credits office be informed of the actual figures on my tax return?
A: Sadly not I am afraid. You will have to give the Tax Credits Office a call to inform them of your actual figures and you must do so by 31^st January.
If you fail to meet the January deadline, your tax credits won’t stop but the tax credits you receive from 6th April may not be accurate. And if you’re overpaid, you may have to pay it back later- and you may even be charged a penalty.
HM Revenue & Customs telephone numbers change fairly frequently, so it's always best to check their website (www.hmrc.gov.uk) for the present Tax Credits Office number.

Category: Tax credits

High Income Child Benefit Charge – Avoiding a tax return
Q: My tax affairs are fairly straight forward, as my only source of income is my salary which is taxed at source by my employer. However, my partner receives Tax Credits and Benefits for our two young children and it looks like I may be affected by this High Income Child Benefit Charge. Is there any way I can avoid the completion of a tax return? I have never had to do one before.
A: To make things a little simpler, HM Revenue & Customs (HMRC) allow you to have the Charge collected via your tax code. This means the deductions of tax that your employer makes from you each pay period will be larger, but avoids the need for having to pay it to HMRC in one lump via the Self Assessment system. However, this does not negate the requirement for a tax return. It is merely an easier way to pay the Charge.
The only way you can avoid the requirement for a tax return if the High Income Child Benefit Charge applies to you, is to forfeit your Child Benefit and opt to no longer receive it. As it is your partner that receives it, they will have to do this- it cannot be done by you.

Category: Tax credits

Staff Christmas presents - Vouchers
Q: I would like to buy some vouchers in bulk for my employees. They will be worth £50 in store; but I am only paying £40. Do they get taxed, and if so, on which value?
A: If you provide your employees with vouchers that can only be exchanged for goods or services, the value for tax and National Insurance purposes is generally the cost to you as the employer, but it can include other associated costs such as costs of selecting the store or other “after sales” expenses.
But in your case, £40 will be the value to use. You will need to include this as earnings for Class 1 National Insurance purposes in the pay period in which the employees receive the vouchers- not when you pay for them. If they earn in excess of £8,500 per annum or they are a director (regardless of their salary), you will then also need to include the cost of the vouchers on forms P9D or P11D for tax purposes.
Needless to say, you should really warn your employees of the tax and National Insurance liability arising on these gifts. HMRC are likely to look to collect it via their tax code, so they may see their monthly deductions from their pay packet increase.
Alternatively, you can pay for their tax liabilities using a PAYE Settlement Agreement (PSA). This would also avoid the need to declare the vouchers on forms P9D or P11D.

Category: PAYE, NIC & Benefits In Kind

Business gifts
Q: What are the tax implications of sending my customers and suppliers Christmas presents? Do you have any ideas what I can buy them without losing out on the VAT and the expenses being disallowed for tax purposes?
A: A business gift is made in the course of your business. You do not need to account for the VAT on business gifts, provided that gifts to the same period in any twelve month period do not exceed £50.
For tax purposes, ‘small gifts’ may not be disallowed, provided they meet the following conditions:

• They carry a conspicuous advert for the trader (and the advert is on the gift itself- not just the wrapping)
• The gift is not food, drink, tobacco or a token/ voucher exchangeable for goods
• The cost of the gift (together with any other such gifts to the same person in the relevant tax period) does not exceed £50.

So you could give items such as branded diaries, clothing, bags, calendars, mouse mats etc. Whilst these aren’t particularly lavish, it will ensure that your costs are tax efficient.

Category: General 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.

Q & A - November 2012 - RTI, Christmas Parties & Gifts

RTI start date
Q: I am a small employer and I have been reading about Real Time Information. Can you tell me when I will need to be RTI-compliant?

A: I am afraid I am not in a position to advise you of an exact start date. Frustratingly, HMRC have not finalised the full migration timetable but they have announced plans to have most employers operating Real Time Information (RTI) by April 2013.
You should by now have received a letter from HMRC telling you what you need to do in the run-up to RTI. And HMRC are planning to write to everyone again in February 2013 with confirmation of their start dates.

Category: Payroll

Staff Christmas Party
Q: I would like to arrange a staff Christmas party to reward my employees for their hard work over the last year. It would be nice if we could invite partners to make it a special evening, but will this then be a taxable benefit in kind?

A: The cost incurred of holding staff parties/ social events can be provided as a tax-free benefit, providing certain requirements are met. The events must be annual, open to all staff to attend and the amount spent per head must be less than £150 per (including VAT).
If the total cost per person for all functions during the tax year exceeds £150, the exemption can still be claimed but only if the first two criteria above are met and the events individually cost less than £150 per head.
The exemption cannot be deducted against the cost of any event where the amount per head has exceeded the annual limit. Expenditure for any event not covered by the exemption would be a benefit in kind and need to be reported on the end of year form P11D accordingly.
Expenditure for staff entertaining is allowable as a deduction in your accounts on the basis that it is incurred for the benefit of your employees. For VAT purposes, input tax an be recovered on the proportion of entertaining expenses relating to employees only and not on any such expenditure relating to other guests.

Category: General Business

Christmas Gifts
Q: I’m looking at what to order for my employees for their Christmas presents. Is there any advice you have for me? I want to make sure the business gets tax relief and can recover any VAT it incurs, but more importantly, I don’t want my employees to pay tax or National Insurance on their gifts.

A: If you buy your employees a seasonal gift such as a joint of meat, a bottle of wine or a box of chocolates, then this would be deemed ‘trivial’ and therefore, there are no reporting requirements and nor would any tax or National Insurance be triggered.
However, if your gifts are more lavish than the examples above- say a hamper or a case of wine- then the cash equivalent must be taxed via the payroll, form P11D or a Pay As You Earn Settlement Agreement (PSA). With the first two options, tax and National Insurance will be triggered and will be deducted from the employee. However, with a PSA the employer agrees to settle their liability.
Category: General Business

Sep 2012 - Q&A

Student employees
Q: What payroll procedures apply to student employees?


A: There are special rules for ‘student employees’. A student employee is in full-time education and only works during the holidays. This means they do not work in the evening or weekends during term time either. Provided they meet this condition and earn less than the personal allowance (£8,105 2012/13), you do not need to deduct tax from them. Ask the student employee to complete form P38(S) Student Employees
However, if they earn more than the lower earnings limit (£107 per week 2012/13) their wages should be recorded on a P11 Deductions Working Sheet or your equivalent payroll systems and you should complete form P14 End of Year Summary for them at the tax year end.
Student employees are treated like normal employees for National Insurance purposes. So if they earn more than the employees’ earnings threshold (£144 per week 2012/13), then you will have to pay employers’ NI as normal. Furthermore, you will have to start deducting employees’ NI from the student if they earn above the upper accrual point (£146 per week 2012/13).
Please note, under current plans, form P38(S) will; be withdrawn from 6 April 2013 which will mean students will be treated in the same way as all other employees for PAYE and NI purposes.

Category: PAYE, NIC & Benefits In Kind

HMRC registration
Q: I moved in with my girlfriend this year so we started renting out my house. When do I need to register with HMRC?


A: You have not stated exactly when you starting receiving rental income, but the normal rule is that you must inform HM Revenue & Customs (HMRC) by 5^th October following the end of the tax year in which you started letting the property. The tax year starts on 6^th April and ends on the following 5^th April.
This rule would also apply if you started to receive any other untaxed income- such as you started your own business or you received untaxed income from investments. The same date also applies if you made a Capital Gain.
So if you started receiving the rental income before 5^th April 2012, then you will need to register soon- by 5^th October 2012. But if you started receiving the rental income after 6^th April 2012, then you have until 5^th October 2013 to register with HMRC.
Penalties can apply for late registration, so you should always register with HMRC as soon as possible.

Category: Income Tax

Flat Rate Scheme: Reclaiming VAT
Q: I am on the Flat Rate Scheme for VAT and I was told that there are some instances when I might be able to recover VAT on my expenses. Is this true and if so, what are the requirements to meet in order to recover it?

A: Essentially, VAT can only be recovered on capital assets with a VAT-inclusive price of £2,000 or more.
However, you do not need to spend that on one single capital asset. If for example, you purchased a number of pieces of equipment at the same time from the same supplier, and the total price was over £2,000 including VAT, then you could require the VAT charged to you.
But there are other restrictions as follows:

• It must be a purchase of goods; and not services
• Leased/ hired assets are deemed to be a supply of services; therefore, if you hired a van, you could not recover the VAT on the rental payments
• In contrast, if you say purchased a van under a Hire Purchase agreement, then this is deemed to be a supply of capital goods and any VAT could then be recovered
• You cannot recover the VAT on capital goods that you intend to resell- whether you are selling them on their own or incorporated into other goods to supply to someone else
• You cannot recover the VAT on capital goods that you intend to let, lease or hire out- for example, a bouncy castle
• Buildings materials and building work are not capital goods- even if you buy them for someone else to actually undertake the work with

This list is not fully exhaustive, but highlights the most common requirements that might apply.

Category: Value Added Tax (VAT)

National Minimum Wage: increase?
Q: I believe in the past, the National Minimum Wage normally changes about this time this year. Is there an increase soon?


A: You’re absolutely right; there is typically a change to the National Minimum Wages (NMW) annually on 1^st October.
The rates are due to on 1^st October 2012 to:

• £6.19 – the main rate for workers aged 21 and over
• £4.98 – 18-20 year old rate
• £3.68 – the 16-17 year old rate for workers above school leaving age but under 18
• £2.65 – the apprentice rate, for apprentices under 19 or 19 or over and in the first year of their apprenticeship

As you can see, the only rates due to change are the main rate – which is up from £6.08 – and the apprentice rate – which is up from £2.65.

Category: PAYE, NIC & Benefits In Kind

Private mileage in company cars
Q: My employee has a company car, and historically, he has always had a benefit for the car itself and the fuel- because he doesn’t reimburse me for any fuel he uses for private journeys. Is there any way we can reduce his benefits in kind, because they’re costing him a lot on tax now.


A: This may sound a bit extreme, but you could discuss the company no longer paying for his fuel. Whilst this may sound expensive for him, if you sit down and do the calculations, you may actually find he is better off this way- particularly if you intend to increase his salary as a result of him losing his fuel benefit.
He could then charge the company for any business mileage he does, using the advisory fuel rates.
The other alternative is that the company continues to pay for all of his fuel, but the company charges the employee for all of his private mileage- again using the advisory fuel rates.
In either case, the fuel benefit could be reduced down to nil if you can meet all of the requirements.
Please not that due to the frequently changing fuel prices, HM Revenue & Customs regularly updates the advisory fuel rates, so always check their website for the latest figures here:
http://www.hmrc.gov.uk/cars/advisory_fuel_current.htm
.

Category: PAYE, NIC & Benefits In Kind

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.

Q & A' s - Tax & Accounts - Tax Credits, Tax Refunds, Car Leasing

Claim tax credits

Q: One of my friends mentioned that she thought tax credits could only be paid directly into your bank, but I receive mine by cheque. Has something changed?

A: If the Tax Credit Office don’t have your bank account deails, the Office can pay your tax credits by cheque rather than straight into your bank account. But from 6 April 2012, they'll only do this for the first four weeks that they don't have your account details.

If you haven't given details of an account for your tax credits to be paid into, the Tax Credit Office will contact you. You will then need to give account details within four weeks, or your payments could be stopped.

If they don’t contact you, call the Tax Credit Office with your bank account details on 0345 300 3900.

Category: Tax credits

Claiming a tax refund

Q: I left my job at the start of the year and I still haven’t found a new job yet. Am I eligible for a tax refund?

A: Based on the information you’ve provided, it is difficult to say with certainty whether you’re entitled to a tax refund. But if you think you've paid too much tax, you can make a tax refund claim from HM Revenue & Customs (HMRC) if any of the following applies:

• you've been unemployed for at least four weeks
• you stopped working because you've retired and you're not getting a pension from your old employer
• you've returned to studying

You can claim a tax refund by filling in form P50 - Claiming tax back when you have stopped working, which is available online at www.hmrc.gov.uk. Send the form to HMRC, together with form P45, Parts 2 and 3 - and keep Part 1A for your own records.

HMRC will send you any tax refund you're entitled to by post. They'll also send you a new form P45, Parts 1A, 2 and 3, if necessary.

Category: PAYE, NIC & Benefits In Kind

Leasing a car

Q: I’m thinking of leasing a car in the name of my personal company. Do you have any recommendations to keep the tax burden down?

A: Firstly, if the car triggers a benefit in kind, then you will always be better off looking for a vehicle with low CO2 emissions, as this will result in a lower car benefit percentage and therefore a lower personal tax liability for you.

Furthermore, you should also be aware that if the car has emissions over 160g/km, it is likely that 15% of the lease payments will be disallowed for corporation tax purposes. If the emissions are below this level, the entire lease payments should be tax deductible.

However, please note that this level will reduce to just 130g/km from 6 April 2013.

Category: Corporation Tax

Beep Beep!

The wifes car has been branded up, so if she cuts you up-don't hold it against me!

Your Fired! -Although Technically You Were Never Hired!

I have been recruiting and I thought I'd share my experiences, regarding the applications I received.

1. Spelling
If you are going to bother to apply, get your spelling right. With spellchecker these days there is no excuse. Even worse is when my name is spelt wrong! I would'nt mind but it was on the advert and on the website.

2. Attachments
I had been accepting CVs by email.  I've had quite a few where applicants have not actually attached their CVs, even though they say they have. Check and make sure before you send it. It looks really sloppy and most dont even realise they haven't attached it.

3. Company research
A real bugbear for me. Ive had a couple of promising candidates who knew nothing about the company. All it takes is 5-10 minutes on Google so there really is no excuse. If you have'nt got time or nous to do that or cant be bothered then why should I make time for you.

4. Relevance
I received alot of CVs which dont seem to understand what they are applying for. Either they are not qualified or over qualified. It may be that emailing a CV means you can fire them out quickly at no cost, and little thought. Ask yourself would you hire yourself for this role?

5. CV Layout
Set your CV out in a logical manner and simple and clear layout. I spend about 1 minute scanning the CV so I need to see quickly if its worth considering. Your CV needs to tell a story-if you have gaps-then explain your gaps in your covering letter. If you dont explain them then I'll make assumptions which may not be correct.

6. Achievements
If you are going to put these on the CV then make sure they mean something, alot of the achievements I've seen are frankly a load of waffle. Achievements should be specific, what objective was achieved, and it should be measureable.
For example - "I reduced debtors from £100k to £50k within 6 months". Not I "produce accurate accounts" - thats not an achievement-thats your job!

7. Dress
For heavens sake dress appropriately. Open neck shirts and denim jackets are not acceptable. A smart appearance looks like you've made the effort, and you want to impress.

Some of my favourites were
"I worked for William Hill Bookkeepers" - I assume she meant bookmakers!
"I didnt have time to research the company" - This from a candidate who had been out of work for 18 months!
Under Hobbies - "Cleaning" !!!

Directors’ Loan Accounts Explained

March is a popular year end for small companies to opt for because it falls in line with the tax year. Therefore, this time of the year sees directors and shareholders undertaking a pre-year end review and high on the agenda, is often how to deal with the dreaded overdrawn director’s loan account.

Taking money from the business for personal use when trading as a sole trade or partnership is fairly painless and unless proprietors’ drawings are a major drain on the business’ assets, there are generally no tax implications.

A company on the other hand is a separate legal entity, and therefore, making withdrawals from a personal company requires far more consideration.

In this article, we take a closer look at the consequences on overdrawn director’s loan accounts and how their impact can be reduced, or even avoided.

An overdrawn Director’s Loan Account

If a payment is made to a director and it does not form part of the director’s remuneration package or is not an allowable expense for the company, the payment must be set against their director’s loan account. If the director has a balance available on their director’s loan account, then the director can merrily set such a payment against their loan account with no tax implications.

However, once the available funds are exhausted, the director is in default and therefore a debtor of the company. This can have two implications:


Corporation tax charge - S455

Firstly, if a balance remains outstanding on their loan account at the company’s year end, this can lead to a tax charge on the company called S455. This only applies to ‘close companies’ though- generally speaking a company with less than five shareholders/ directors. The loan account balance must be shown on supplementary pages of the company’s corporation tax and the S455 charge is calculated as 25% of whatever balance was outstanding on the director’s loan account at the period end. The S455 tax is payable nine months and one day from the end of the relevant accounting period.

An overdrawn director’s loan account is effectively an interest-free loan, so S455 is supposed to deter the company from providing such generous perks to its directors. However, S455 is rather unusual in so much as it is temporary- it is repaid back to the company by HMRC, as the loan is repaid by the director to the company. Where the loan is repaid within nine months of the end of the accounting period though, relief is due immediately, i.e. the S455 is never physically paid (although disclosure is still required in the company’s tax return).

Provided the director repays the loan within nine months of the end of the accounting period, say by the company electing a dividend, S455 may never actually need to be paid.


Benefit in Kind

The second implication of an overdrawn director’s loan account is that it can trigger a benefit in kind. As mentioned above, an overdrawn director’s loan account is effectively an interest-free loan. The benefit would be equal to the interest (the calculation of which is stipulated by HMRC). There are a few exceptions though, which can mean no benefit arises:

• the loan is used for certain ‘qualifying’ purposes by the director, such as buying an interest in a partnership
• the company chose to charge the director interest, but the tests for this are fairly stringent
• the loan is deemed ‘small’, i.e. it is under £5,000 throughout the year
  

The interaction between S455 and the benefits code

The interaction between S455 and the benefits code can lead to some unexpected consequences:

• A S455 charge may be mitigated by an election of a dividend after the year end. However, if the balance on the loan was over £5,000 at some point, then a benefit in kind would arise.
• A loan remains under £5,000 throughout the year but does not get repaid by the year end or within the nine months following. This would result in a S455 charge payable but no benefit in kind arising.

So as you can see, an overdrawn director’s loan account could result in a S455 charge or a benefit- or both.

Record Keeping and Disclosure

Good record keeping with regards to a director’s loan account is essential. Poor records could result in the misallocation of expenses/ payments and ultimately, the right taxes not being paid.

Good records are also important, because disclosure of the balance on each overdrawn director’s loan account must be made in the company’s accounts, and the largest balance during the year must also be stated. This would ensure that a loan account that starts and ends below £5,000 is highlighted and also shows lenders and other interested parties how responsible directors are being.

Overall, the key is to keep timely, accurate records and to keep the transactions relating to each of the directors separate.

So what’s the best solution for dealing with an overdrawn director’s loan account?

As with a lot of scenarios, it’s hard to give one solution that will suit everyone’s circumstances. But as a general rule, the triggering of a benefit in kind and S455 charge can be fairly painless provided the director is intending to repay the loan fairly quickly.

However, if the overdraft may exist for some time, it may be preferable for the company to declare dividends (profits permitting). Although there may be personal tax implications for the directors, it is likely to be the quickest way for the overdraft to be cleared. Furthermore, dividends do not attract National Insurance, so it is also likely to be the cheapest option too.

Were All Going On A NI Holiday - Apparently Not!

According to government figures, small businesses are failing to take advantage of a NI tax break, given to new businesses who employ staff. The relief means no employer NI contributions need to be payable for 12 months. This isn't available nationally, only in certain areas.
It is available in Leicester. The government were expecting 132,000 to take advantage of this scheme, but only 5000 have done so. There seems to be a lack of awareness of the scheme, and I certainly find this to be the case in my experience. Businesses do have to apply for this relief, it isn't automatically given.

See link for further details.
http://www.hmrc.gov.uk/paye/intro/nics-holiday/eligibility.htm

Superb Value Offer For New Business Start-Ups

See above for our latest offer to new start-ups, to make sure they get off on the right foot. Starting right and making sure you comply with rules is important, and we can do that, and let you concentrate on working on your business. We also help you to grow and prosper. Remember we work for you, NOT the Inland Revenue!

Common Questions Regarding Accounting & Tax - March Part 1

Problems with paying tax

Q: I’m self employed and I’ve only just prepared my tax return. As a result, I’ve only just found out that I haven’t put enough aside for my tax liability. What should I do?



A: Your balancing payment for 2010/11 and the first payment on account for 2011/12(if applicable) are due by 31 January 2012, together with your tax return.

If you are struggling to pay your tax, you should call HM Revenue & Customs’ (HMRC) Business Payment Support Service (BPSS). HMRC will ask you probing questions about the business and your cashflow, to ascertain why you can’t pay your tax. If they think you genuinely cannot pay your tax they may grant you an extension to settle your taxes in or agree a payment plan. However, they do not reduce the amount outstanding and they will still charge you interest.

Even though you can’t afford to pay your tax, make sure you still file your return before 31 January 2012. Otherwise, you will be charged an automatic penalty of £100.

Sole trade or company?

Q: Up until recently, I was employed in a fairly well-paid job. However, I have left my job and started my own business. Do I need to set up a company? If not, are there any benefits of doing so now?



A: No, you are not obliged to form a company.

However, business owners often chose to set a company up because they can be a more tax efficient vehicle to trade through. Furthermore, being a company makes the business look established and gives it status. And it gives the shareholders (the owners of a company) assurance that their liability is restricted to their investment in the event the company begins to fail to meet its debts.

Having said that, new businesses often generate losses in their early years of trading. If you believe your business will generate losses initially, you ought to consider remaining unincorporated. This would then allow you to carry back any losses against your employment income. If you form a company to trade through from the outset, any losses made by the company are confined to its affairs and cannot be used against your personal affairs.


What is a K code?

Q: I have just received my tax code from HMRC for 2012/13, and it is a K code. Can you tell me what this means and how it will affect my income?



A: Your tax code shows how much tax-free pay (personal allowance) you are entitled to.

Your personal allowance can be increase by things like the Married Couple’s Allowance and professional allowances/ subscriptions.

But it can also be reduced by taxable income that you receive without any tax taken off it (some state benefits/ pensions etc), taxable company benefits and any unpaid tax you owe from previous years.

If you have been issued with a K code, such adjustments have reduced your tax-free allowance to such an extent, that they are actually more than your personal allowance. Normally, the number in a tax code indicates the amount of income you are entitled to tax-free. However, the number in a K code denotes how much should be added to your gross income, before calculating the tax to be deducted from your pay.


Do I pass Class 2 NI if I’m employed and self employed?

Q: I have a full-time job but I also have a small business of my own. Therefore, I pay Class 2 NI contributions. But as I am paying my ‘stamp’ on my employment income, do I have to continue paying Class 2 as well?

A: Class 2 contributions count towards:

• Incapacity Benefit/Employment and Support Allowance
• Basic State Pension
• Bereavement benefits
• Maternity Allowance

I’m afraid you do have to pay Class 2 NI; despite the fact you are paying Class 1 on your employment income. However, if your profits are deemed to be ‘small’ (currently £5,315), you may be eligible for an exception from paying Class 2 NI.

If you are only liable for Class 2 contributions, you should consider your position carefully before applying for an exception.


Is my company dormant?

Q: I formed a company a while ago and I am now receiving letters from Companies House telling me to file the company accounts. However, I did not set the business up eventually. The only transactions were the bank charges in the company bank account. Do I still need to file accounts or is the company dormant?



A: By definition, a dormant company will have no ‘significant accounting transactions’ during the period. There is little guidance on what is deemed to be ‘significant’, but when deciding you should consider whether such a transaction would be entered into its accounting records. You may also disregard the following specific transactions:

• Receipts from shareholders for the payment of their shareholdings
• Fees paid to Companies House for a change of company name, the re-registration of a company and filing annual returns; and
• Payment of a civil penalty for late filing of accounts.

Bank charges do not meet the above definition, and therefore, the company is not dormant. It should therefore abide by the normal obligations for a small private limited company.

If you do not intend to make use of the company for some time, it may be advisable to source a business bank account that does not incur bank charges. You may then be able to take advantage of the reduced filing requirements for a dormant company.

New Bookkeeping Folders For Clients

See photos of our NEW Bookkeeping files, we give to clients to keep their records in order. We also give a laminated instruction sheet, along with a records checklist, to make record keeping for bookkeeping a doddle!

Client reaction has been fantasic!, they love the simplicity. Get in touch to see how we can make your life easier so you can concentrate on your business.

FREE PR For Interesting Start-Ups

Do you know an interesting Start-up business that would like some Free PR?

We are starting to work with Startups.co.uk now and they have launched their 'Just Started' section which profiles brand new businesses that are of interest.

The following note is from Steph Welstead the Editor of Startups.co.uk:

"At present, we send questions to interviewees via email and then follow up by phone if necessary. We publish one or two of these profiles a week and our main requirement is that the businesses featured must have started within the last 12 months – other than that we look for new businesses that are interesting (and that we think sound viable/promising).

So if you do ever want to mention this section to any suitable start-up clients/potential clients, as a way to help them generate some press coverage, please feel free to pass on my details and tell them to drop me a line.

Kind regards,

Stephanie Welstead
Editor, Startups.co.uk
________________________________________

ddi +44 (0)20 8334 1651
tel +44 (0)20 8334 1600
fax +44 (0)20 8334 1601
email stephaniew@crimsonpublishing.co.uk
web www.crimsonpublishing.co.uk
Westminster House, Kew Road, Richmond, Surrey, TW9 2ND

Common Accountancy & Tax Q & A' s - Jan 2012 Part 1

Can I get some tax back now?
Q: I am a subcontractor and I get 20% tax taken from my receipts by contractors. But I haven’t done any work for the last couple of months. Is there any way I can get some of my tax back now?
A: No. The only way for you to get your tax back is to wait until the tax year has passed, and then submit your tax return. You should enter all of your income- gross of the tax deducted. Your income tax liability will then be calculated. But all of the tax deducted during the tax year under the CIS scheme, will be offset against your liability.
If there are gaps in your income or it is low, you may be due a refund.
In the long term, you may be eligible to receive your payments gross from contractors. But there are criteria to meet, for example regarding the size, history and make-up of the business.

Q: I have just received my Unique Taxpayer Reference as I need to file a tax return this year. What is the next step to filing my tax return?
A: 2010/11 tax returns may be submitted on paper, but the deadline of 31 October has already passed for paper returns. Subsequent 2010/11 tax returns must be filed online in order to avoid an automatic filing penalty of £100.
Therefore, you will now need to register for HM Revenue & Customs’ Online Services and obtain an Activation Code. Please note, it can take seven working days to receive your Activation Code, which means you must register by 21 January 2012 in order to obtain your Code in time for the filing deadline of 31 January 2012.
Alternatively, an accountant can file your tax return for you provided they use specific software- even if you haven’t completed the official form to authorise them to deal with your affairs.

Q: I have only just prepared my accounts and I now realise that my business exceeded the VAT registration threshold. What happens now?
A: You have to register for VAT if your sales in any twelve month period exceed the VAT registration threshold- currently £73,000. Please note the reference to any twelve month period; not necessarily your business’ year end.
So your first task is to work out the date when your turnover went over the threshold. Using this date, register for VAT with HM Revenue & Customs (HMRC) as soon as possible- which you can do online at www.hmrc.gov.uk or using form VAT1 which is available on the same website.
HMRC will then send you details of your VAT registration. But in the meantime, you should calculate the VAT due on your sales from the date you established above- even though you weren’t VAT registered at the time. However, you will be able to reclaim VAT on some of your business expenses. The net of these figures will need to be paid over to HMRC.
Please note, HMRC may also charge you a penalty for notifying them late.

Bookkeeping Tips - Part 2 - Petty Cash Expenditure

Alot of clients dont seem to have any method of recording petty cash expenditure. The business owner sends out their employee to buy milk, stationery, etc and the receipts end up in their pocket, or in a desk drawer, or in the bin!
So what you need is a process, and system.

1. Get yourself a cashbox.
2. Put your initial float (cash) into the box, this could be £5,£10, etc-all depends on how quickly your float gets depleted.
3. Petty cash vouchers - you can buy pre-printed ones, which have spaces for:

For Example:
Date:                    01.01.12
Item:                    Printer paper
Cost:                    £5.50
Requested by:    A.N. Employee
Authorised by:    A.N. Manager

(The italic script is what is filled in,  for each voucher)

The receipt for the above item is then attached to the above voucher.

4. When the float starts to run low, it will need replenishing. So the proprietor/director/manager will top the float up by the standard amount, and record this on a voucher as above.

5. At the end of the month, the cashbox will need to be checked, to see if the cash balance reconciles with the vocuher activity. For example:

Opening Balance Float:     £50
Total Expenditure:             (£48)
Float Top Up:                       £50
Closing Balance Float:       £52

So at the end of the month, there should be £52 in the cashbox. If there isn't then something has gone wrong somewhere, so investigate!
The vouchers can now be coded to the types of expenditure for your accounts, i.e stationery, catering, etc

The key is to maintain the system, so all employees are aware of how it all works, and of course to maintain the physical security of the cashbox.