VAT

My turnover is over the threshold. Should I register for VAT?

For many small businesses, VAT is something they could manage without. Finishing returns can be tedious and on the off chance that you make a mistake, HMRC can push serious punishments. However you may be able to make it work for you… Regardless of whether your turnover is below the enlistment limit of £85,000 you can seek voluntary enrolment

The main question is who are your clients? In the event that you bargain essentially with purchasers, VAT is an expense to them that they are unable to claim back. So being VAT registered is an extra cost to them. At which point your customers may decide that they are able to do business with another company who will not charge them extra for VAT..

In the event that you are managing business clients who are enrolled for VAT themselves, they can recover this cost so it is not an extra charge to them.

The second question is, what amount of VAT would you say you are paying out on costs and direct expenses? How about we take a look at a fundamental sample:

XYZ Limited gives consultancy services to organisations. Their principle expenses are offices, phone and broadband expenses. This is the business profit and loss account on the assumption they are not registered for VAT:

  • Sales: 40,000
  • Expenses
  • Rent: 6,000
  • Telephone: 1,200
  • Broadband: 240
  • Total costs: 7,440
  • Profit: 32,560

In the event that the business was VAT registered, all expenses included VAT

If the business was VAT registered, all costs included VAT and assuming all the customers were able to claim all the VAT back so pricing was not affected, the profit and loss account would now look like:

  • Sales: 40,000
  • Expenses
  • Rent: 5,000
  • Telephone: 1000
  • Broadband: 200
  • Total costs: 6,200
  • Profit: 33,800

The time spent finishing the VAT returns has expanded profits by £1,240 which equals £310 per VAT return.

With littler organisations (turnover up to £150,000) it is conceivable to utilise the Flat Rate Scheme. The point of this plan is to disentangle the consummation of VAT returns and diminish the stress over whether you can claim back VAT on your own purchases. With this plan, fundamentally a business could pay less VAT than it would under the typical VAT plans.

Everybody will have their own individual circumstances, so if you wish to speak to somebody, do not hesitate to contact us:

Sole Trader or Limited Company

Business Start-Ups...Should You be a Sole Trader or a Limited Company?

If you are thinking of starting a new business then you may be wondering if you should be a sole trader or a limited company.

So what are the differences?

Here we look at both methods in more detail to understand the pros and cons of both.

According to the British Chamber of Commerce there are over 3.6 million people making a living from sole trading, which most certainly tells us how popular it is. Conducting your business this way is a viable easy option and it can be much more convenient. There are no set up fees, only one self-assessment tax return to file each year and it is easier to keep track of your finances and setting money aside for taxes.

It all sounds well and good but unfortunately there is one big catch…. A sole trader is not recognised as a registered business therefore any capital you put into the business is not protected by government laws. Personal assets such as your house or car could be at risk if your business fails and you are left with debts to clear. Limited companies do not have the same risk as they are seen as a separate entity to your personal finances and if things do go wrong then you will not be personally liable.

Which companies benefit the most form being limited?

When looking at which companies benefit the most from being limited, it really all comes down to how much money your business is making. Most businesses won’t benefit from the perks of incorporating until they are showing profits of around £25,000 a year. This is mainly due to the introduction of registration fees and
corporation tax when a company is incorporated. Once these are deducted from your annual income, you could be left with very little.

However, for companies beginning to turn larger profits, forming a limited company can actually be more cost efficient. Tax reliefs are available on business expenses, so if you have paid for things like, equipment, machinery or uniforms then they are usually exempt from corporation tax. For small businesses producing profits of less than £300,000 a year, this can mean significant savings, especially if you pay your shareholders in tax-free dividends. If you are in doubt over the classification of an expense, then it is worth asking an accountant for their advice.

How will I know when to incorporate?

There isn’t really a definitive answer to this question, but you can usually work this out by considering the above factors. Firstly, you need to consider your liability. Are you largely funding the company yourself? Do you stand to lose a significant chunk of this money if something goes wrong? Because this risk is so high if you are a sole trader, many businesses choose to go limited, even if they are not actually achieving large profits. For example, if you are running a company which involves the general public and one of your customers is injured then you could become liable for any legal claims. Although you can take out insurance policies to minimise the risk, one small mistake or misread clause in the paperwork could leave you vulnerable. The main thing to remember is that you can incorporate at any time. If you begin to worry about the security of your finances, then going limited might be the right step to take.

For more help and advice on how to grow your business successfully

TALK TO US TODAY.

We have a team of dedicated professionals who are happy to assist you.

“Benefits In Kind” & Understanding Your P11D

What is a P11D?

P11D forms must be completed annually and provide an annual report on your ‘benefits in kind’. These are essentially ‘perks’ on top of your salary, including company cars, childcare, private healthcare and travel and entertainment expenses.

What records should you keep?

We recommend that you keep a record of:

  • the date and details of every expense or benefit you provide;
  • any information needed to work out the amounts you put on your end-of-year forms;
  • any payment your employee contributes to an expense or benefit.

We would also recommend that you keep any correspondence you have with HMRC. Please note that all records must be kept for 3 years from the end of the tax year they relate to.

Example of records to keep.

Let’s say you reimburse an employee’s travel expenses , then you will need to keep a record of when and why the employee travelled and where possible keep the receipts as evidence.

Why do I need to do this?

Essentially “benefits in kind” increase your overall salary so you will be taxed on them and the company may have to pay National Insurance contributions on them.

Can I get out of it?

Some expenses and benefits are eligible for a dispensation, meaning you won’t have to report them to HM Revenue and Customs (HMRC).

Dispensations can cover routine business expenses and benefits like:

  • travel;
  • phone bills;
  • business entertainment expenses;
  • company car fuel.

Find the type of expense or benefit you’ve provided at: https://www.gov.uk/expenses-and-benefitsa-to-z.

You can check whether you can apply for a dispensation so you won’t have to report it to HMRC. https://www.gov.uk/apply-for-a-dispensation.

There’s no time limit on dispensations, but HMRC reviews them regularly to make sure that they still apply.

Checking your expenses

You can only apply for a dispensation if you have a system in place to check expense claims.

Your employees aren’t allowed to check their own expenses, so someone else within your company needs to do this to make sure that they are legitimate claims.

If this isn’t possible, you’ll need to prove that your claims are covered by the dispensation. In most cases receipts will be enough, but you may be asked for more evidence if your receipts don’t include enough information.

Who files my P11D?

P11Ds are filed by the company, not the employee.

The company must file P11Ds for all company directors or employees earning over £8,500 per year and any company director with a shareholding in excess of 5%.

Where do I get my P11D Form From?

The P11D form is available on www.gov.uk – search P11D form.

When do I submit my form?

The deadline for submitting P11Ds is July 6th following the tax year in question. So for example, your P11D for the tax year ending April 2015 must be filed on July 6th 2015.

If you miss the 6th July deadline you won’t pay penalties immediately, you have around two weeks to put things right. If you submit after this period, your company could incur fines of £100 per month per 50x employees.

If you are interested in discovering how Cloud Accounting could help grow your small business……..

Talk to us today to….
We have a team of dedicated professionals who can assist you.

IT’S TIME FOR BUSINESSES TO EMBRACE THE CLOUD

A MODERN, COST-EFFECTIVE SOLUTION FOR START-UPS AND SMALL ENTERPRISES

Simply put, Cloud Accountancy is enabling business owners to stay connected to their data and accounts, online, anytime, anywhere, from any device. Designed for small to medium sized businesses, it is allowing business owners to access their financial information at the touch of a button 24 hours a day 365 days a year.

Data storage is a typical concern but contrary to common belief the Cloud is more secure than most technological wizardry you already use – the providers all surpass required data protection laws and have extremely high levels of security. The advantage of Cloud is that your software is always up to date as all upgrades are carried out by the supplier at typically no extra cost.

Additionally, the provider does all of the software maintenance for you as part of their monthly fee: version upgrades, maintenance etc. Many providers offer affordable monthly subscriptions instead of a hefty lump sum which makes it even more attractive.

Cloud accounting enables real time insight to your business, this is invaluable in understanding your current financial position. Online accounting means small business

owners stay connected to their data and their accountants. Additionally, multi-user access typically comes as standard making online collaboration with your team and advisors easy. When your accountant can access your data in real time, they can help you with problems, post year-end journals and there’s no need to mess around with creating and importing backup or accountants’ copies.

Ultimately, the Cloud is here to stay and savvy businesses are embracing the opportunities it affords. It can’t be beaten on scalability and ease of use and it’s totally flexible so you can run your business from work, home, or on the go; and from any device. The way we now work is finally being reflected in new technology and this is where CLOUD based accountancy packages certainly do assist.

WHAT CAN CLOUD ONLINE ACCOUNTING OFFER YOU?

  • An affordable fixed monthly cost, so no hidden charges or unexpected “big one off
    bills”.
  • SIMPLE & EASY to use and can be customised to your individual requirements.
  • Online expertise with off line support and guidance available.
  • You can get up to date financial information 24 hours per day 365 days per year.
  • You can keep track of income, outgoings, expenses and financial reports as all your records are stored securely on the Cloud.
  • You can issue invoices and expenses on the move. (If you download the Application onto your tablet or i-Phone.)
  • You can take control of your business and put yourself ahead of your competitors.

Cloud Accountancy Is Cost Effective And More Reliable Than Traditional Accounting Systems.