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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Read Andy’s Answer –

If HMRC issue you with a tax return notice for 09/10 then unfortunately you will need to do a Return for your PAYE earnings plus your 2 weeks as self employed.

HRMC provides you with information or you should seek professional advice from an accountant.

Or Listen to the Accountancy Services Podcast –

If you need further assistance or have a question for a future podcast contact us at Accountancy Services Direct.

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I have two part time jobs and i earn £20000 combined, should i have a BR tax code ?
I having been working 2 part time jobs for 5 yrs, but both are part time. I got my pay slip last week and for one of the jobs, my tax code has changed and has gone to BR and they have charged me more tax, even though i earn less than 20000 combined, is this right ?

Here is the podcast, please click to play:

Accountancy Services Podcast extra information:

BR, or Basic Rate, codes are used when someone has two jobs to ensure the correct level of tax free pay is used for the individual each year.

If you have any questions, please feel free to contact us at Accountancy Services Direct.

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I will re-awaken enterprise Britain, says David Cameron
Capital gains tax rise to punish prudent savers
Retailers say massive job losses will follow VAT rise
Capital Gains Tax: Q&A

If you need help with you Capital Gains Tax, or require any other Accountancy Services please contact us.

Have a great weekend.

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Click to play

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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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If you were late with your 2008/09 self-assessment tax return, you will soon be receiving a notice from HMRC charging you a £100 penalty.

But, if you had paid all the tax you owed for 2008/09 by 31 January, or you didn’t owe any tax in the first place, the penalty can be reduced to nil. HMRC should do this automatically, but our experience shows they don’t.

Hint

If you receive a late filing penalty notice but had paid all tax by 31 January 2010, write to HMRC and point this out. They MUST reduce the penalty to nil, even if you were late with your tax return.

Haven’t paid

Whether or not you have submitted your 2008/09 tax return, if you still owe tax for that year and don’t pay it before 1 March, HMRC will hit you with a surcharge equal to 5% of the tax due. Even if he doesn’t know how much tax you owe, it wont stop them issuing a legally enforceable estimated demand.

Hint

If you’re late with your tax return and don’t know how much you owe for 2008/09, it’s still not too late to avoid a surcharge. Pay your best estimate of the amount due. Whatever you pay will go towards reducing the amount you owe and will also reduce the surcharge levied against you.

If you are late with your 2008/09 tax returns and need help in bringing your affairs up to date then please contact 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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