In April 2014 the Government introduced the National Insurance contributions Employment Allowance. Eligible employers can reduce their National Insurance bill by up to £2,000 a year by claiming Employment Allowance on Class 1 National Insurance contributions, through their payroll software.
Not all employers are eligible, so check your eligibility on the GOV.UK website. If you are eligible, you can claim Employment Allowance through your payroll software. Read more about how to claim on the GOV.UK website.
VAT changed on 1 Jan 2015, so how will it affect your business? Business-to-consumer trades will now be required to charge VAT, at the applicable rate, in the EU country in which the consumer is located, rather than where the seller is located.
The changes have been introduced in an attempt to avoid the distortion of competition and create a level playing field across the EU.
These rules apply to television and radio broadcasting services or other electronically supplied services such as websites and website hosting, downloaded software, downloaded texts, information or images, access to electronic databases, downloaded music, games or films as well as the supply of e-books or electronic publications.
Ordinarily the rules require a (UK) supplier to register for VAT in each EU country in which it makes the affected supplies. To alleviate this burden, alternatively, the supplier can register for a “Mini One Stop Shop” (MOSS) online service, which will enable the UK supplier to account for VAT due in any other EU country by submitting a single MOSS VAT return and the appropriate payment to HMRC in the UK.
Businesses have been able to register to use the MOSS scheme for VAT returns from October 2014 and the online service has been available to use since 1 January 2015.
The Government has stated that it could see an extra £300m in revenue as a result of the recent tax changes.
Without doubt SMEs will be most affected by this new regulation, not least because they have been obliged to implement many changes in a relatively short space of time. As a result, billing management could become much more complex. In addition, their costs may go up in certain countries.
Businesses will be forced to think carefully about where they carry out their operations. The previous scheme encouraged many firms to be based in countries such as Luxembourg, because it charges a lower rate of tax than the UK. The new scheme will revoke this advantage. This means that business owners can no longer reap the benefits of their current location and may choose to move to areas with lower staff costs, for example.
These new rules may also adversely affect costs, so SME owners will need to ask themselves if they can realistically pass this on to their customers. One way to deal with this may be to make the increase very gradual. In this way you may reduce your profits temporarily but are less likely to lose customers in the short term.
Copyright © 2015 Carol Cheesman of Cheesmans Accountants.
Many small business owners choose to file their own tax return, rather than hiring a book-keeper.
As the deadline approaches, those submitting their self assessment for the first time are likely to be full of questions. While there are plenty of guides to completing HMRC’s online form, many people are left wondering what records they will need in the first place.
To make completing your first tax return light work, accounting tutor and qualified accountant Patricia Barlow will be running a webinar on the 15 January at 2pm, and again on Friday 23 January, also at 2pm, due to high demand.
She will be covering:
To attend the webinar, simply sign up here: www.babington.co.uk/self-assessment-webinar.
Every company has a responsibility to pay tax, including VAT, PAYE and National Insurance contributions (NIC). This money belongs to HMRC, so if payments are missed, it won’t be long before it investigates or even takes legal action.
If cashflow is tight, it can be tempting to push aside VAT or PAYE and focus on supplier or marketing costs to boost income. In the past, it was possible to understate PAYE liability with the aim of catching up with payments later on. However, since April 2013, Real Time Information systems (RTI) have changed the way you pay taxes, making it very difficult to pay less than required.
From March 2015, HMRC will be issuing penalties for late payments through RTI, therefore it is important for businesses to address potential VAT or PAYE issues now before it’s too late to prevent fines or legal actions.
If your business can’t make payments when due, you need to act quickly to avoid legal action. HMRC has its very own department to help businesses in this situation and has dealt with a large number of businesses. They will know all the excuses. Sometimes, however, it may be necessary to look at other turnaround methods if there are ongoing financial problems.
If you need more time to pay off debt, your business may be able to enter a Time to Pay arrangement (TTP) with HMRC. This is an informal debt repayment scheme that allows you pay off debt over a year to 18 months. You can contact the Business Payment Support Service to arrange a TTP or instruct a turnaround professional to do so on your behalf. Depending on the situation, HMRC may refuse, so be prepared for a plan B.
This is a formal restructuring deal between the company and its creditors. A proportion of debt can be paid back over three to five years (with the rest written off). This allows the company to continue trading while creditors receive £X amount in the pound, paid from future profits.
A CVA is a powerful turnaround solution that helps to cut costs, improve cashflow and bring the business back to profit. If Time to Pay (plan A) doesn’t work, it’s worth looking into plan B!
Seek insolvency and legal advice if your company is struggling financially to avoid putting the company in a worse position. Other options, such as administration or liquidation (CVL) may be more suitable than a TTP or CVA, however, it is best to talk through all options with a professional before going ahead with any restructuring plan.
Copyright © 2014 Keith Steven of KSA Group Ltd. He has been rescuing and turning around companies since 1994 and is the author of leading insolvency and turnaround website www.companyrescue.co.uk. Follow @KSAGroup on Twitter.
Keeping an up-to-date record of your financial activities is an essential part of running a business. Web-based accounting systems can offer useful features for small business owners – and more and more are choosing to take their accounting online.
The main advantages of online accounting are immediacy and convenience. With a web-based system, business owners can manage any aspect of their accounts – all from anywhere they have Internet access. If you’re thinking of setting up your bookkeeping online or migrating from an existing system to an online system, following these four steps will make the process easier.
Take time to find the right online accounting software for your needs and seek expert advice. What makes it right for you? First, a good interface. If you find it intuitive to browse and can quickly find the features you need you’ll have a much easier time when using the system.
Second, does it offer multi-currencies? If your business requires you to have multi-currency accounts, this is a deal-breaker.
Third, VAT. If your business is subject to slightly complicated VAT rules, find out if the software helps. Also, not all software implement reverse charge calculations automatically – so you may wind up making mistakes on your VAT Returns.
Fourth, does it offer a good journals module? Your Accountant may need to post a number of journals especially if you want your accounts to match the final accounts, but some software systems have a poorly designed module to enter Journals.
Finally, what kind of reporting is available? You may require comprehensive reports at the month-end, for example, and some may not offer project-based recording or retrospective reports for analysis, etc.
Allow for some time and cost during the migration process. Set a start date for the transition. Check the last submitted final accounts to get the opening balance figures, the trial balance and the balance sheet.
The exact steps will depend on your business type, but you can expect to do the following: reconcile the data, the bank, aged debtors and creditors; set all required nominal codes and project codes; set accounting periods, VAT periods and VAT schemes; confirm the right depreciation rates for the asset register; and customise the sales invoice template with your logo and design.
Hiring someone to help you can be really beneficial – be sure to allow a reasonable amount of time and budget. Based on size, this can be from £500 and a couple of days, to £3,000+ and a couple of weeks.
Test the migration by checking the balances. If migration is done in the accounting year April to March 2014, you should have balance sheets for March 2013 statutory accounts matched with opening balances on your new system now. Compare sample information from your previous system: for example main supplier’s statement, main customer’s statement, bank balances, etc.
Start using it – practice makes perfect! A learning curve is involved. Do not assume everything will go as easily as the advertisement states. There will be several ways of working within the system you have chosen, so find by trial what works best for you, and when in doubt – seek advice.
By making the transition to online accounting software you can save yourself considerable time, keep your records up-to-date wherever you are and ensure you have all the correct information recorded – both for your own use and for filing VAT returns and company accounts.
Copyright © 2104 Riz Wasti from 2E Accountants.