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Sunday, 11 March 2012
Superb Value Offer For New Business Start-Ups
Saturday, 10 March 2012
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:
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:
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.
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.
Thursday, 16 February 2012
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.
Wednesday, 8 February 2012
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
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
Monday, 30 January 2012
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.
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.
Tuesday, 17 January 2012
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.
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.
Monday, 19 December 2011
Questions & Answers - Tax, Business Bank Accounts, Tutors.
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’.
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’.
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