Many of us are familiar with the need for accountancy services to support our business, however many small to medium sized business owners are unaware of what accounting services are available and the basic function of each.

Here we will provide a basic overview, highlighting the important details that you need to know about the different accountancy services available for business based in and across the UK:

Bookkeeping Services -  Many accountancy firms provide this service. Essentially what bookkeeping services provide is a way to keep a record of all the transactions, in, out and within a company so that a clear picture of the current financial state of the company can be determined at any point in time.

Management accounts – Essentially this accountancy service allows business decisions to be made, both relating to day to day issues and longer more strategic issues. Management accounting analyses the key performance indicators of the business, anything from new business generation to the depreciation of equipment.

Statutory accounts – All limited companies are required by company law to file statutory accounts with the Registrar of Companies within certain deadlines. This is a key accountancy service offered by accountancy firms.

Statutory audits – Are required if your company satisfies two of the following three criteria – £6.5 million plus annual turnover, £3.26 million gross assets or has over 50 employees.

Company valuations – This includes the valuation of companies for the purpose of buying, selling or if investment is sought. This can also be used if you are considering launching an employee share scheme.

Limited company set up – Creation of a new company.

Company secretarial services – This topic deals with the management and implementation of all statutory and legal functions required in relation to your business as a limited company with the Registrar of Companies.

Personal tax services – This includes dealing with issues relating to Tax returns,Tax planning, Inheritance Tax , Capital Gains Tax , Tax reliefs and Tax credits among many more.

Corporation Tax – This includes dealing with issues relating to Tax planning, Profit distribution, Profit extraction, Tax efficiency, and benefits in kind, to name but a few.

Payroll Services- Essentially payroll services can be split into three stages, firstly management of the payroll, secondly generation of staff  pay slips and then thirdly dispatch of wage slips to staff. Many accountancy services use specialised payroll software to manage this whole process for companies. Payroll services also include management of maternity pay, sick pay, (where appropriate) Construction Industry Scheme (CIS) and then all the month and year end return filing with HMRC.

This overview of accountancy services provides an important insight for all business owners to allow them to start to discuss with accounting professionals the most efficient and effective way they can manage their company finances and legal responsibilities.

Should you wish to know more or wish to discuss how we can help you implement any of these accountancy services within your organisation then please feel free to contact us.

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To sell or not to sell

If you own shares that have increased in value then you could have a CGT liability to pay when you come to sell them. This may be why you are hanging on to them, or, you may be thinking that they will continue to grow in value so you want to benefit from the continued rise in the future.

Let us look at an example dealing with someone holding on to shares for future share price increases.

The taxman allows you to make some tax exempt capital gains each year and for 2009/10 this is £10,100. So, for example, if you own shares worth £20,000 that cost you £11,000, you may think that you do not need to worry about CGT. It is only a £9,000 gain and within the exemption. BUT!! In five years’ time, the gain could have ballooned to a value far in excess of your exemption. This could leave you lumbered with an unexpected tax bill.

Example part 1

Enzo bought shares in IML Ltd costing £11,000 in 1997. In March 2010 IML Ltd is taken over and Enzo receives £25,000 for his shares. He has already used his annual CGT exemption against other gains and so the whole of the £14,000 gain on the IML Ltd shares is taxable at 18%. Thus giving a tax liability of £2,520.

But it could have been avoided entirely.

Uplifting the cost

In years where Enzo had not utilised some or all of his CGT exemption he could have sold IML Ltd shares and bought them back shortly afterwards. This would have uplifted the cost of the shares and so ultimately reduced his tax bill.

Example part 2

In 2008/09 Enzo sold all of his shares for £20,000 (cost was £11,000) making a gain of £9,000. He had no other gains in that year so his CGT exemption covered the gain and there was no tax. A month later he bought back the shares for £20,200. When the takeover happens in 2009/10 his gain will only be £4,800 an d the tax on this is just £864, saving him £1,656.

Potential issues to consider

When doing this you need to consider the following:

• Brokers fees – for selling shares these start from around £15 per transaction.
• Stamp Duty – there is also SD on repurchasing the shares at 0.5% of the cost.

These expenses will eat slightly in to your tax saving but not greatly.

There could be another problem though!

No uplift available

If you sell shares and repurchase them within 30 days the Taxman ignores the original cost. Instead, the gain or loss is treated as the difference between the sale and subsequent repurchase price. That means the original cost uplifting scheme will not work. But if you wait 31 days or more to buy them back, then the price could have leapt. What are your options?

Hint 1 – Married

On the day that you sell your shares your spouse can purchase an identical shareholding to the one you are disposing of. After 31 days he/she can transfer them to you and you will be treated as buying them at the same price as your spouse. The 30 day trap will then not apply and you will have boosted the cost of your shares without ever being out of the market.

Hint 2 – Not married

Sell the shares and buy others in the same industry sector, as these are likely to perform similarly. You can then sell these and buy back the original type of shares after 31 days.

If you have share or other investments and would like to speak to someone about potential tax savings then please call us at Accountancy Services Direct.

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Solution

To avoid being caught by the new higher rates of income tax for 2010/11 the solution is simple, reduce your income for that year.
But who would want to reduce their income???

Having it all

The idea of cutting income is rather drastic and only worthwhile if you can recoup it later on when, hopefully, the tax rates will drop again. But, that could leave you waiting a long time.

An alternative is to shift your income to either:
The current tax year where the top tax rate is 40% and not 50-60%; or
To someone whose top tax rate will be 40% (or less) even after the April 6 2010 increases.

Benefits

From 6 April 2010 those with taxable income of more than £150,000 are liable to pay tax at 50% on income above that level. While those with income of between £100,000 and £113,000 are worse off, they will pay up to 60%.
Shifting, say, £5,000 of income from 2010/11 to 2009/10 can save you up to £1,000 (£5,000 x (60% – 40%)). But how?

Keep it simple

As mentioned earlier there have been some complex schemes put forward, but why make things complicated if you don’t have to?

Closing a bank or other interest producing account before 5 April 2010 can shift interest that would have been paid in 2010/11 in to the current tax year. This works best with accounts which pay interest only once or twice a year, or ones with lots of money in them.

Example

On 1 May 2009 Dave invested £75,000 in a fixed 4.8% twelve month account. This is due to pay him out £3,600 on 30 April 2010, ie in the 2010/11 tax year. He closes the account on 31 March 2010 and the bank pays him interest of £3,300 on that date. By advancing himself the interest in to 20009/10 he has saved himself up to £660 of tax (£3,300 x (60%-40%)).
One downside to this could be if banks etc charge any penalties for early closures of these types of accounts. You would need to compare the costs against what you would save in tax.

Give it away?

For investment assets other than deposit accounts the way to simply dodge the new higher rates may be even more simple. The new higher rates have breathed new life in to the idea of asset shifting.

Example

Billy is a company director with earnings of £95,000 per year after personal tax allowance. HE also receives income from stocks and shares etc totalling £15,000. Ava, his wife, is also a director and has a total income of £50,000 per year. It has never been worth shifting income between them before as they both paid tax at the higher rate of 40%. But now, if Billy transfers sufficient investments to Ava, so that his taxable income falls below £100,000, then they will save £2,000 of tax per year (£10,000 x (60% – 40%)).

Note – the spouse making the gift is deemed to sell the asset to the other spouse at a value that does not produce a capital gain or loss, ie will not trigger any Capital Gains Tax.

So, to surmise, if your taxable income will be more than £100,000 for 2010/11 but your spouses will be below that then transferring income producing investments will cut your joint tax bill.

We at Accountancy Services Direct can analyse your income and investment portfolio and determine what your tax liability will be for 2009/10 and 2010/11 to see if there are any potential savings which can be made. Contact us for more details.

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HMRC has a plan in place to have everyone filing their VAT online by 2012.

From 1 January 2010 there are two things to consider:

1.When are you registering for VAT; and
2.Is your turnover greater than £100,000?

Let’s look at each one in turn:

1.If you register for VAT post 1 April 2010 then you will have to file your VAT Return and make your payment online. Electronic filing is compulsory regardless of turnover.

2.Any business which is registered for VAT in the UK and whose turnover is over £100,000, exclusive of VAT, in the year ending 31 December 2009 (or on a later date) must file online and pay electronically. This covers periods of VAT beginning on or after 1 April 2010.

All other businesses can continue as before.

We at Accountancy Services Direct recommend making the switch before the 2012 deadline. Not only is submission quicker but you get an extra 7 days from the normal paper submission date to submit and pay your VAT. How generous!

Points on online filing

It is very similar to paper filing. The form is the same and you can keep a printed record or store it on a computer.

The online system will also check your calculation to see if you have done your sums correctly! Good piece of mind.

What happens next?

HMRC will write to everyone who will be required to complete their VAT Returns online in February 2010 and are planning to provide full instructions of what to do.

They are going to provide regular updates on their website: www.hmrc.gov.uk/vat/vat-online/moving.htm

Your first step would be to enrol for VAT online services. You can do this as early as you want, or you can contact us and we can either talk you through it or take the job off your hands. For information on how to sign up visit: www.hmrc.gov.uk/vat/start/register/signup-online.htm
For any other help then we would recommend speaking to your accountant, HMRC helpline – 0845 010 9000 – or us to go through how is best for you to proceed.

There are also online demonstrators on the HMRC website for you to view and use.

Should you wish to discuss anything surrounding online filing of VAT or anything else surrounding VAT then please do not hesitate to contact us at Accountancy Services Direct.

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VAT is having an update and we are going to look at a few key areas.

This part will deal with the rate changes.

The VAT rate is reverting back to 17.5% from 1 January 2010.

There are some anti-avoidance rules to be aware of, www.hmrc.gov.uk/VAT/forms-rates/rates/anti-forcestall-guidance.pdf, but the general principles affecting the switch are pretty straightforward.

Tax Point (TP)

The VAT charged is calculated at the rate applicable when a TP occurs.

A basic TP is when goods or services are actually supplied. So if you supply or deliver goods or services before 1 January 2010 then the 15% rate applies, afterwards it will be 17.5%.

One way you could improve cash flow is to encourage customers to pay early for post 1 January purchases. The incentive for them is the 2.5% cash flow benefit they will receive in terms of VAT.
For this to work you need to have invoiced them or they need to have paid pre 31 December 2009, even if the supply is made later.

What about Overlapping?

If you make supplies which start in December but end in January or later, eg a builder carrying out a job which straddles the turn of the year, then all the goods and services provided pre 31 December 2009 can be charged at 15%, thereafter 17.5%.

If you need to do this then you must show each element separately on your invoice.

Continuous Servicing

If you are providing a continuous service, eg bookkeeping, where you bill 31 January for services in November, December and January then, again, you need to split your VAT charge at 15% or 17.5% according to the periods covered on your invoices.

To discuss this or any other VAT issue then please contact us at Accountancy Services Direct.

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Gross payments are when the contractor will pay you gross, without any deductions for tax.

Here we look at how you are able to qualify for being paid gross. Should you not qualify for gross payments then you will be paid under deduction as discussed here.

To enable HMRC to register you for a gross payment status then you or your business MUST:

• Perform construction work in the UK through a UK bank account;
• Have a construction turnover, excluding VAT and materials, of over £30k each year;
• Have complied with all tax obligations.

Before HMRC grant you the status of gross payments then you will need to show that you or your business passes three tests based on the points above.

1.Business Test

You must be able to show that your business:

• Carries out construction work, or provides labour for construction work in the UK;
• Is run largely through a UK bank account.

2.Turnover Test

You will need to provide HMRC with evidence of your business turnover from construction work, excluding VAT and materials, for the 12 month period before you applied.

Your turnover must be at least:

• £30,000 if you are a sole trader;
• £30,000 for each partner in a partnership or at least £200,000 for the whole partnership;
• £30,000 for each director of a company, or at least £200,000 for the whole company.

If five or fewer people control the company or partnership then the annual turnover must be at least £30,000 per individual.

3.Compliance Test

You, any directors or partners in the business, or shareholders (where company is controlled by five or fewer persons) must have submitted all tax returns and paid all tax due on time in the last 12 months before application.

Also, if HMRC have requested any information from you in that time then you must have provided it.

A few minor lapses or late payments are allowed and HMRC will ignore any or all of the following:

• Three late submissions of the CIS contractor monthly return, including nil returns, up to 28 days late;
• Three late payments of CIS/PAYE deductions, up to 14 days late;
• One late payment of Self Assessment tax, up to 28 days late;
• Any employers end of year return made late;
• Any late payment of Corporation tax, up to 28 days late. This includes any shortfall in the penalty which has incurred an interest charge but no penalty;
• Any Self Assessment return made late;
• Any payment not made by the due date where it is less than £100.

If HMRC does agree that you qualify to be paid gross then you must declare your payments in your tax return at the end of each financial year.

Some further guidance on subcontractor obligations under CIS can be found on HMRC website.

Should you be paid gross then you may be subject to a Tax Treatment Qualification Test (TTQT) also known as a Scheduled Review. This is where HMRC check that you still qualify for gross payments for tax.

If you want any help or guidance surrounding registering for gross payments within CIS or anything generally about CIS then please do not hesitate to contact us at Accountancy Services Direct.

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The Construction Industry Scheme (CIS) is a scheme that applies to contractors and subcontractors in mainstream construction work. It can also apply to businesses and organisations who have such a large annual spend on construction that they are deemed to be contractors in their own right.

The scheme originated in 2002 but was extensively revised in 2007.

Introduction

The scheme is a special set of rules set up for handling payments made by contractors to sub contractors for construction work.

If you business is involved in the construction industry either operating as a contractor or a subcontractor the likelihood is that you should be registered for the scheme.

Both the terms subcontractor and contractor are defined within the rules of the scheme and you would need to know when you would be working as a subcontractor and when you would be classified as a contractor.

A guide to determining your status will be issued at a later date.

Once you have determined what you will be, subcontractor, contractor, or both then you need to register with HMRC.

Subcontractors

When you obtain a contract to do work which is covered within by CIS then you will need to register as soon as possible if you have not already done so.

Call the HMRC CIS Helpline on 0845 366 7899 or register online at www.hmrc.gov.uk.

The information you will be required to give HMRC will vary depending on whether you are a sole trader, partnership or company. It will generally consist of your name, your business name, the business address and any other details about your business.

HMRC will then issue you with a Unique Taxpayer Reference (UTR) which you will need to keep to hand.

When you are contracted to perform any CIS work you will need to give all of the information you gave to HMRC to the contractor along with your UTR. This will enable the contractor to verify you with HMRC and confirm how they are to pay you.

Note – if you do not register or HMRC are unable to locate you on the system then you may end up suffering a higher rate of tax deduction on your invoice.

Contractors

If you are in the business of contracting construction work out to subcontractors then you need to be registered as a contractor with HMRC.

Phone HMRC as detailed above or register online and provide them with all your information.

You will then need to start verifying all of your subcontractors to establish how you are to pay them.

You need to verify a subcontractor with HMRC in one of the following ways:

Calling them – 0845 366 7899
Using the HMRC website – www.hmrc.gov.uk
Using Electronic Data Interchange (EDI) or other third party software

However you decide to proceed you will need to have the following information ready:

• The name of your business;
• Your UTR;
• Your Accounts Office reference;
• Your employer reference.

You will also need the following information about the subcontractor:

• Their business name or their personal name if they are an individual;
• Their UTR;
• The partners name if they are a partnership;
• Their National Insurance number if they are self employed;
• The company registration number if they are a limited company.

You will also need to be able to confirm that you have a signed contract in place or that you have formally accepted their tender for work.

HMRC will then check these details against the details they hold about the subcontractor, confirm that they have registered or not, tell you how to pay them and give you a verification number.

This has given you a brief look in to the world of CIS and what you have to initially do as a contractor or a subcontractor.

The next Accountancy Services Direct articles in this series “More about CIS” and “Even more CIS” will explain more about how to pay and get paid under CIS, what documents need to be produced, what tax needs to be deducted, how and when to pay tax to HMRC and submitting monthly returns to HMRC.

Should you wish to explore this subject in more detail then please do not hesitate to contact us at Accountancy Services Direct.

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Within this article the effect of an increase of corporation tax and the knock effect that includes unemployment figures are explored, however any shift in taxation also presents an opportunities for accountancy services to work closely with heir clients to find business solutions to help grow the company, despite the external factors of tax and government legislation.

To read the article in full please click on the link below.

http://www.morethanbusiness.com/Knowledge-Centre/Business-News/2009-10-28/Dont-increase-tax-on-small-firms,-FSB-says/1161

As always if you would like to discuss the effect of tax or any other corporate finance issue, please contact us at Accountancy Services Direct on the contact details shown.

Posted via email from accountancyservicesdirect’s posterous

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It is also charged on goods and some services (even accountancy services!) which are imported from countries outside of the European Union (EU) and brought in to the UK from other EU countries.

VAT is charged when a VAT registered business sells their goods or services to another business or non-business individual.

When VAT registered businesses purchase goods or services then they are generally able to reclaim the VAT they have paid from HM Revenue and Customs.

VAT registered businesses must add VAT to their sales figure if:

• Their turnover in the previous 12 months has gone over a specified limit (currently £68,000);
• They think their turnover will soon exceed this limit;
• They have voluntarily registered for the scheme which any business can do if they think it is going to be a benefit to them.

There are three rates of VAT depending on the type of goods or services which the business provides, they are:

• Standard – 15% (to become 17.5% from 1 January 2010): This rate is charged on most goods and services unless specifically defined as reduced or zero;
• Reduced – 5%: Examples are domestic fuel and power, the installing of energy saving materials, sanitary hygiene products and children’s car seats among others;
• Zero – 0%: Examples are food (not restaurant meals or hot take aways), books and newspapers, children’s clothes/shoes and public transport among others.

Some goods or services can also be defined as:

• Exempt from VAT – These can be insurance, credit provision and members subs for example;
• Outside of UK VAT system – For example non-business activities (selling some of a personal collection), fees which are fixed by law (statutory fees) like MOT’s or the congestion charge.

There are many more issues surrounding VAT including how to administer it, how to complete and submit your VAT form, how to register and what scheme you should be registering for (Cash Accounting, Annual Accounting or Flat Rate Scheme).

These points will be discussed in detail in later help sheets that we at Accountancy Services Direct will be producing.

Should you wish to discuss your VAT requirements then please get in touch with us at Accountancy Services Direct, we are always happy to help.

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