an accountant's perspective

myths


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Dispelling the Myths of Accountancy

The myths of accounting like the myths of any industry have travelled far and wide. The whole point of these blogs is to get to the bottom of what people want from the accounting industry – what we can offer to make your relationships with accountants smoother. There are some government bodies who are extremely efficient at worrying people into making impulsive decisions and paying tax bills instantly without a seconds hesitation.

It is far better for our clients, and for any business owner, to know the facts and understand exactly what is happening with the information they provide. Accountancy is not a dark art and truthfully there is no magic wand. There are incompetent accountants that can make the rest of us look like magicians but once we have answered your questions and dispelled some myths you should be able to spot a dodgy accountant a mile off!

We have put together a short video of the first five myths we objected to. We will be producing a monthly blog on myths to run beside the monthly questions and answers piece (coming up next week folks!). So, by the end of the year you will be polished experts on the topic of accountancy and all that it involves. Enjoy the video and get in touch if you have a myth you wish dispelled or confirmed, or questions you need the answer to – we are always reachable.

Autumn


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Is your Accounting ready for Christmas?

If you are a retailer then you know exactly what I am talking about. September is in many ways the last month before the seasonal storm begins and that is for retailers and accountants alike.

Accountants are hoping to get as many tax returns done as possible before the Christmas break and the January mania that follows it. Retailer are preparing for heavy footfall, massive online traffic and hoping their stock levels have been gauged perfectly. Autumn long nights represent the perfect opportunity for you to get your books ready for the seasonal peaks.

There are many challenges placed on businesses and polished accounting records could be the difference between succeeding and failing when the shopping frenzy begins. Now is the time to give your business a much needed winter service.

CASHFLOW

cashflow

 

Cash flow management has to be meticulous. From careful bookkeeping accurate cash flow forecasts can be made. Seasonal businesses can anticipate when heavier inflows will come in and make sure that outflows are scheduled to occur at the same times. It is also a good opportunity in many cases to create a reserve for the off-season ebbs in cash flow.

INVENTORY

The challenge of managing inventory will also rely on accounting transparency. The yearly cash flow forecasts will take into account the stock bought and shifted in the last seasonal periods but they cannot predict fluctuations. Detailed sales and inventory plans need making before the season begins and are often done months in advance to ensure timely delivery. You have bought the stock, anticipated the seasonal shopping habits – have you brought your bookkeeping up to date.

It is September, another month and you will be in the thick of it give or take a few days/weeks. Your business will be stronger next year when inventories are being created if you do not have to project back information and make everything balance after the fact. Do it now while it is fresh in your mind and you are not worn out from the Christmas rush.  

WORKERS

seasonal worker

The last thing has very little to do with accounting but is essential for retail businesses at exactly this time of year. Seasonal workers usually get taken on in September or October. There are increasing commercial pressures which can lead to corners being cut. Make sure you spend the right amount of time interviewing and training staff that will fit in with your team’s ethos and work ethic.

Seasonal workers represent your business alongside permanent workers. Christmas represents a huge opportunity and it is potentially the only time a customer visits a store. Your customer service needs to be at its best so those newest to the team need the right incentives, training and motivation to deliver just that. Spend time training seasonal workers to the right standard otherwise the cost to the business could irreparable.

 

It is time to get the Christmas stock out but before you do make sure your accounting is top notch. Your will impress your accountants when you take your books in at the beginning of January and you will impress yourself to boot! Good business is built upon good accounting – there is just no way around it and yes we are bias but you know it makes sense.

Put the long nights to good use – crack open a bottle of wine or pour out a can of Fosters and catch up with your record keeping so you do not have a mountain to climb in three months’ time. Do it at the end of the month until the end of the year and you will be laughing come January. Best of luck – great bookkeeping is what we accountants dream about!

 

 


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10 great resources to help you start your own business

 


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  1. We are completely bias but without hesitation on this account. You usually get a free consultation with an accountant – a try before you buy deal. This gives you a fantastic resource to talk with an expert about what you need to get your business started and what they know from their years of experience about businesses like yours. Grab a cup of tea/coffee and talk to an accountant about what they could do for you and what they would advise you to do for yourself. Yes you can come to us for a free consultation and a chat if you like: abc-accounting-services.co.uk
  2. One of my favourite resources is The Start Up Donut because it is such an accessible and content rich site that covers every element of starting a business in depth: http://www.startupdonut.co.uk
  3. Do not let the Sage sponsorship put you off there is some very useful tools on Startups with some industry specific content to boot. Take a look at: http://startups.co.uk
  4. For a blog rich site take a look at smallbusiness.co.uk. They have in-depth articles about all sort of subjects from ‘how to run a business around your family’ to ‘making a connection’ which is a guide on communication technology: http://www.smallbusiness.co.uk
  5. NBV Enterprise Solutions offers free start-up seminars and there is tons of useful information on their site to get you going. Just go to: http://www.nbv.co.uk/?gclid=CjwKEAjw68ufBRDt0Zmrn4W_8AwSJADcjp1cxntSras9p19SnaoGw__xvBkgMaBxmypMK252JqgcGxoCup_w_wcB#/i-am-starting-a-business/4574476849
  6. No list of start-up resources would be complete without Gov.uk. A comprehensive and trusted resource on all business matters: https://www.gov.uk/starting-up-a-business/start-with-an-idea
  7. Unfortunately, no list would be complete without HM Revenue and Custom’s (HMRC) site either. However, handle this one with care. HMRC have a habit of confusing simple subjects and presenting their information in the driest, yawn inducing format known to man/woman! Enter at your own risk but do consult for deadlines and for trusted lists of employers/employees responsibilities:  http://www.hmrc.gov.uk/
  8. For inspiration alone visit the BBC’s page on start-up stories. This will also help you recover from HMRC’s sombre tone: http://www.bbc.co.uk/news/business-11629784
  9. Start Up Britain is a great site created this year with fresh and in some cases live content being added as the Start Up Tour navigates the country: http://www.startupbritain.co/inspiration
  10. To finish off this modest list of resources let’s throw in a bit of Richard Branson. When it comes to business there is always room for Branson and his engaging insights. This piece is called ‘ 8 tips to evolve a start-up into a successful business’: http://www.virgin.com/richard-branson/8-tips-to-evolve-a-start-up-into-a-successful-company

 

One of Richard Branson’s favourite bits of advice is:

“Screw it, let’s do it!”

So, shall we?

If that isn’t enough to satisfy your hunger for information then we also have our own book out, written by our marketing manager with sections of insight from ABC Accounting Service’s director Belinda Darley.

This book has the perfect blend of tried and tested formula with a straight talking delivery so you will have a great grasp of the basics and own a resource that you can keep dipping into. To purchase a copy go to: Starting Up Your Own Business: An Accountant’s Perspective 

You can also visit our downloads page for more free resources: www.abc-accounting-services.co.uk/downloads.php

Or arrange a free consultation at our offices in Gainsborough, Lincolnshire: info@abc-accounting-services.co.uk


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Accountancy Basics Q & A

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There are a range of questions accountancy firms get asked on a regular basis from serious stuff like ‘my turnover exceeded £81,000 one month but this was a freak occurrence – what do I do?’ to ‘can I call my business Froggy Feet Footwear or do you think that has been taken already?’

ABC Accounting Services is more than happy to answer any questions you may have whether you are a client or not. To start addressing some of the more common accountancy questions we are going to provide a Q&A blog once a month. Any questions you send in will be addressed in these blogs because usually if one person has a query then there are tons of other people wondering the same thing.

Here are six common questions to get the ball rolling, do not be afraid to speak up, we really have heard everything!

  • When should I register for VAT?

If you are doing business in the UK as an individual, a partnership, a company, an association, a charity, a local authority or any other organisation/group of people acting under a chosen name, then you could need to register for VAT.

If your annual turnover is more than £81,000 (this figure can change on an annual basis) then VAT registration is compulsory. This also applies if you are anticipating your turnover to be higher than that amount in the next 30 days. If you turnover exceeds that amount temporarily then you must apply for an exception from registration.     

If you have received goods from other countries in the EU, registration for VAT is compulsory if the total value of the goods acquired has gone over £81,000 in the current year since 1 January.

For more on VAT: 

  • How do I close my business?

First of all make sure you plan it carefully and have gone through your reasons with our accountant. There may be solutions to problems you have not thought of. The first stage is to inform HMRC of your intent. They will settle matters related tax and National Insurance owing. You should also negotiate with HMRC, or have an accountant do it for you, as sometimes it is possible to extend deadlines for payments or perhaps claim back some tax or National Insurance depending on your circumstances.

The self-employed and business partners will just need to fill out a simple online form. It is more complicated for shareholders who may still have to file Company Tax Returns, pay Corporations Tax while closing the business and account for any capital gains made during the closing process. Employers have to submit a final Full Payment Submission (FPS) with the final payroll, making sure than any due PAYE tax and National Insurance deductions are paid.

Any VAT registered businesses will have to de-register.

  • What is CIS and how do I know if it is relevant to my business?

CIS stands for the Construction Industry Scheme. It regulates the procedures of making payments to subcontractors by contractors in the construction industry. A business that involves construction work and spends much of their funds on construction will also fall under CIS.

CIS encompasses all businesses which are active in the construction industry in the United Kingdom in the form of a partnership, a company, a limited liability partnership (LLP) as well as self-employed sole traders.

As a benchmark, if you spend over £1 million a year on average on constructions within three years, HMRC may consider you a ‘deemed contractor’ and you will have to register with CIS. CIS is also applicable to businesses that are not based in the UK but operate in the UK or UK territorial waters.

  • What is capital gains tax?

Capital Gains Tax is a tax that you pay when you make a profit by way of selling assets (shares or property). Your Capital Gains Tax may be reduced by a tax-free allowance and some additional reliefs. To calculate your Capital Gains Tax work out the gain or loss separately for each asset. Then add everything together to get the overall gain or loss for that tax year.

  • What are the advantages to being a sole trader?

The biggest advantage is that there are no formation costs. They are not legally required by law to have annual accounts or to file accounts for inspection BUT annual accounts are required for tax returns.

Sole Traders are not limited in the amount and purpose of borrowings and losses generated can be set against other income of the year and even carried back to prior years. Tax can be paid in instalments on January 31st in the tax year and July 31st following the tax year.

The down side to being a Sole Trader is that you are personally liable for any debts related to the business so any assets are savings are vulnerable to a claim made against you.

  • What are the advantages of becoming a Limited company?

The biggest advantage is that you literally place a limit on your liability. That limit is the value of the company, including any money you may have invested in, loaned to or are owing to the company. This means that the company has a separate legal identity away from your personal affairs so you are not liable for any claim that exceeds the companies limit as outlined above.

There are a number of advantages to limited companies including:

  • You can give a share of the business to others eg family
  • They tend to attract investments easier than Sole Trader businesses
  • Easier to obtain bank loans
  • No higher rate tax bands
  • Easier to sell the business
  • The business generally has more clout – social standing
  • It can assist in the protection of a name
  • Builds confidence in your business as people can check up on your company on the public records at Companies House

The main disadvantages of becoming a limited company are the extra costs of preparing of annual accounts, formation costs, and the loss of some financial privacy.


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What is Self Assessment and when should you go Limited?

What is it? Or rather: what is it other than a phrase that terrifies many, stresses out

more, and bores or baffles everybody else?

 

It is mainly for the self-employed so whether on your own or in a partnership. It also

affects directors of limited companies, some pensioners, subcontractors, people who

have rental properties, and those people who are employed but fortunate enough to be

paying high rate tax.

 

How do I even begin to approach Self-Assessment?

If you are in business make sure you keep accurate and up-to-date business records,

an accountant can help you in this respect by telling you exactly what you need to keep

hold of. The receipt for the sandwich you ate with a bag of crisps and a can of Fanta will

need to be stored away safely just like the invoice for the new desktop you just bought.

See the section of Accounting and Bookkeeping for more details.

 

If you are employed, keep details of all tax statements (P60, P45, P11D), details of

interest, and all other income received, as well as details of any expense you incur

whilst employed. Don’t write it down on a number of sticky post-its because they will fall

off your desk, get stuck to your shoe and wind up down a supermarket aisle. A

notebook will suffice.

 

You have to complete your tax return, submit to HMRC, preferably on time, and pay the

correct amount of tax, again within the time limits.

Find a marker pen that will not wash off or get smudged over time. Walk over to your

wall calendar and put these dates in:

31st January: PAY TAX

31st July: PAY TAX

 

Self-Assessment in a little more detail

Self-Assessment basically means that you take into account all of your resources of

income, such as property income, savings, dividends, PAYE etc. You would then deduct

a personal allowance (for 2014-15 this is £10,000) and then your income tax and class 4

national insurance liability is calculated. If your liability is over £1000 then payments on

account are required.

To go into a little more detail, the lower limit for class 4 national insurance is £7,956

and the upper limit is £41,865. Subcontractors will need to take into account the

Construction Industry Scheme (CIS) tax suffered.

 

Limited Companies

An increasingly popular way of running your business because of the tax breaks it can

afford. If you are currently self-employed, we can quickly assess whether this would be

a viable option for you. Directors become an employee of the company which also has

shareholders that may or may not hold different classes of shares. So, one shareholder

might have 40% share of the company while the others each hold ten. Or, there could

be 5 shareholders that each possess 20% of the shares. Always remember that a 50%

shareholder will have half the say in a company and a 51% shareholder can take control of said company.

 

Limited companies pay corporation tax and profits up to 300k are taxed at 19%. Ouch!

Profits more than 300k are taxed at a marginal rate. So try not to make 301k profits! The

company must submit a CT600 12 months after the year end, although the tax must be

paid 9 months and a day after the year end.

 

Penalties and Interest

For late submission of tax returns and tax payments, penalties and interest will be

charged by HMRC.

If late submission is an issue because you are struggling with your accounts or

bookkeeping then consider outsourcing this work to an accountant.

Is there anything I can get back?

It all depends on your year-end figures. If you qualify then you could be eligible for

capital allowances and so could claim:

Annual Investment Allowance (AIA)

First Year Allowance (FYA)

Writing Down Allowance (WDA)

There is a special 10% tax pool for low emissions cars.

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