I think most people will agree that the most daunting part to owning a business is preparing your annual accounts. Yet this doesn’t have to be as scary as you think.
Address the following 8 areas for instance, and you can ensure that you have all the information you need to get your accounts in on time.
- Recognising your Legal Requirements – as a business owner there are certain things you are legally responsible for, including: the accuracy of your accounts and submitting them on time (this has to be done within 9 months of your company’s year end). Without this information (and your corporation tax return) the HMRC cannot determine the amount of taxes you have to pay.
- What do your Financial Statements consist of– any financial information you supply in your annual accounts is referred to as financial statements. This can be split into 4 sections:- an overview by you the business owner
– a balance sheet outlining the financial position of your business at the end of your financial year
– a profit and loss account showing your trading performance over the year
– notes on any tax provisions you may have made
- Managing your Accounting Records – if your business is relatively small, then the minimal amount of records you should be keeping are: bank statements, cheque books and paying-in books; any original invoices; PAYE records; VAT records; stock or uncompleted work at the end of the year and a list of fixed assets.
- Record of your Purchases and Sales– this doesn’t have to be complicated although it is important that you set these out clearly and logically and that you cross reference them.Take the following examples:
– all sales made before the year end – if they haven’t yet been paid for, list them as ‘outstanding debtors’ and include the following information: the amount, invoice number and date
– purchases made before year end – if these haven’t been paid for yet, list them as ‘outstanding creditors’ and again include the amount owed, suppliers name and when the payment is due.
- Dealing with Stock and uncompleted work– you need to be careful here as there is the potential for error if you’re not careful. That is why if a purchase has arrived at your warehouse, but without an invoice, the cost is included in the accounts.Similarly if you have sold and invoiced an item but have not yet delivered it, you need to exclude these goods from the valuation of your stock. And so on and so forth.
- Fixed assets – it is important that you keep a ‘fixed assets register’ of all the assets you own. Simply break them down into the various types of assets you own, when you purchased them, how much you paid, and give a description of the item and its location (Note: remember to give your accountant a copy of all your purchases and sales invoices).
- Dealing with Employees – you are liable, not your employee, if tax and NI is deducted incorrectly. For this reason it is important to keep records of all payroll and expense claims, so you can complete a P11D form.
- Take note of key dates – it is important that you are aware of all the relevant tax dates which can affect your business. By marking them off on your calendar you can ensure your accounts are always sent off on time and that you don’t get penalties for submitting them late.
As you can see, preparing your annual accounts doesn’t have to be daunting; however if you need help preparing them then a business accountant can help.
With their support they can help you to collate and manage all your records, invoices and assets, and ensure you send the correct information to the HMRC on time.
So if the task of doing your annual accounts is getting you down or you need more advice on what to send and when, why not hire a clever business accountant to help?
You could easily say the work of an accountant and a financial director goes hand and hand, as both can help your business to put your finances in order, manage financial risks and ensure that you invest wisely.
Yet if we had to make a distinction between the two then I would have to say that financial directors can offer your business more specialist accounting advice.
This is not to say that an accountant cannot offer you detailed knowledge of your industry. But the bonus of hiring a part-time financial director is that you can receive access to the following services, but only pay for them as and when you need them:
- Manage financial risks and investments
- Assess long term financial planning
- Keep financial records
- Financial reports
Your accountant on the other hand is accessible all year round, for an annual or monthly fee and can offer you a more diverse range of accountancy advice, such as:
- How to handle acquisitions
- Tax planning
- Corporate finance
- Saving a business from financial difficulty
- Raising finance
See what we mean?
Both accountants and financial directors can offer you the financial/taxation support you need to develop your business and ensure your long term profitability.
The question really is: how often do you want access to this advice and how much are you willing to pay?
Like we mentioned before, you can hire a financial director on a part-time basis and pay for their work by the hour.
So if for instance your business is small or you are looking for a more affordable way to handle your accounts then you may find a financial director is more useful.
However, if you want access to accountancy advice around the clock and without limit, then you may find that a chartered accountant is more suitable.
Whichever you choose to use, in the current climate it is important to ensure your finances are order. With their support you can ensure all your taxes and audits are done on time.
With more and more companies turning to chartered accountants stating that they want their auditing bill cut if they want to retender their business, it does make you wonder what is being cut/lost in order to make this achievable.
Across the middle-tier, a price cutting war has kicked off amongst accountants to the extent that some have cut as much as 25%-40% off their original bills.
In fact, this price cutting war has got so bad that some accountants are even withdrawing from the bidding war completely so that they can focus on keeping their existing clients.
But what has prompted this war?
The answer is simple: the economy.
With companies and businesses alike all looking for alternative ways to improve their efficiencies, many of turning to their accounting needs to find savings.
Yet by demanding that their accountants charge less; businesses are risking receiving fewer services as accountants will have to make a reduction in their service offerings in order to make a profit themselves.
And as top chartered accountants explained, there is a limit to how much you can cut before the service itself becomes hindered, leading to a continuous cycle of companies asking for more price cuts to get better value for their money.
What can you do?
Whether you have got a business accountant or are looking for one, the lesson to be taken from this price cutting war is to first assess the service you’ll be receiving before asking for a reduction.
By comparing their service offering against their pricing, then reviewing these prices and services against other accountants, you will be able to judge whether you are getting value for your money.
More importantly, by comparing their service offerings and prices, you can ensure that your business is getting all the auditing support it needs.
After all, just because they are cheaper, doesn’t always necessarily mean they are better. You need to find the right balance…
Whether your business is big or small it doesn’t pay to get involved in tax avoidance schemes.
Apple is the latest in a long line of technology companies to be accused by the HMRC of avoiding their tax responsibilities.
In a recent report, Apple was found to have paid only £10.3m in UK corporation tax for its 3 main UK subsidiaries during the last financial year – despite having earned £6bn during the same period.
And they are not alone…
Amazon have also come under investigation after it was found to have generated £7.6bm in sales in the UK, yet didn’t pay any corporation tax for this profit.
What is to be learnt?
These investigations into Apple, Amazon and Google are a testament that no matter how big your business is or how powerful you think you are, you can’t get away with tax avoidance.
Yet things are only set to get stricter…
During the recent 2012 Budget, the government announced a long line of measures to stop companies from entering into tax avoidance schemes, including a variety of taxes, penalties and clauses.
You could even say that the theme of this year’s budget was: pay your taxes or face heavy penalties.
However, just because tax avoidance schemes are no longer an option for businesses, doesn’t mean you can’t improve your tax planning and limit your liabilities.
With the support of a chartered accountant they can help your business to create effective accounting strategies which will not only help your business to grow but will ensure that you remain profitable and are not burdened by unnecessary taxes.
So speak to your accountant today and ensure your business meets the HMRC’s guidelines. Alternatively, if you’re just starting out or are looking for a new accountant, sign yourself up for a free business appraisal today and make sure you have got the right accountant for your business.
The HMRC may claim that their new measures are designed to prevent companies who are not paying their PAYE tax deductions or National Insurance contributions on time from defrauding the HMRC.
However, many tax advisors feel that these new measures are having the opposite effect and are in fact damaging small businesses.
How does the scheme work?
Under these new rules, the HMRC will be asking employers who they feel are at risk of not paying the above taxes to pay a financial security.
If they don’t they will face fines of up to £5,000.
Now, whilst this may sound simple enough. Especially for businesses are wrongly not paying their taxes. What top tax accountants are worried about is the impact this will have on businesses who are genuinely struggling to raise the funds to pay these taxes.
Faced with potential fines of up £5,000 as well as criminal sanctions and insolvency, these new rules may force some businesses to increase their working capital; fire employees or attempt to get a loan in an economic climate that is not going to improve anytime soon.
How can chartered accountants help?
Luckily businesses will not have to face these new rules alone…
With the help of a tax accountant, they can help you to manage your taxes and ensure that you don’t fall into the ‘at risk’ category. More importantly they can help your business to overcome the burdens of the current economic climate and create a business plan which will ensure that your business prospers and becomes profitable.
So if you are worried about how these new rules may affect your business, make sure you speak to your accountant now. Alternatively, arrange for a free business appraisal today and make sure you have got a clever business accountant working to your advantage.
It is believed that over 400,000 tax payers submitted an online tax return on the 31st January (the deadline for tax returns), despite the fact that most of the call centre workers at the HMRC were on strike.
In fact, the HMRC has revealed a total of 7,446,291 tax returns have been submitted this tax year – 8% more than the previous year.
So why the sudden increase?
Experts have revealed that the main reason for this rise in submissions is partially down to the fact that submitting your tax return online is faster and easier than filing out a form.
How are online and paper tax returns different?
Aside from the obvious difference in their deadlines – Paper (31st October following the end of the tax year ) and online (31st January following the end of the tax year) – the main difference between the 2 is how you approach the submission.
For instance, to submit an online tax return you first need to register so you can use the online system. Once registered, the HMRC will send you an activation code (in the post) which will then enable you to log on.
Similarly, whilst with the paper versions, you are provided with all the pages you need to fill in; online, the HMRC’s free software doesn’t display Ministers of Religion, Non-resident pages and Trust income, meaning you will also need to get commercial software, so you can submit a partnership tax return online as well.
In addition, by submitting your tax return online you can benefit from:
- Checking your account details at any time to see what tax is due
- Amend your tax return
- Being able to save an electronic copy of your return and print it off
- Receiving immediate acknowledge that your tax return has been received by the HRMC (the HRMC do not send out receipts for paper tax returns meaning should your return get lost in the post, you can’t prove that you sent it or that they received it)
- Having your tax calculated automatically, meaning if you have overpaid you will get repayments faster
Either way, whether you choose to submit your tax return online or offline, you need to be careful that you put in all the correct information and get it submitted on time, otherwise you may face getting a fine.
Fortunately you don’t have to tackle your tax return alone. Accountants for business can easily help you to manage your accounts, fill in your tax return and ensure it is sent in on time.
So if you are struggling to fill in your form, why not consider employing the help of a business accountant?
For months there has been speculation over what the Chancellor would announce at the Budget 2012. Yet in the end top chartered accountants were fairly spot on with their predictions making the actual Budget feel fairly anti-climatic.
Now if your accountant hasn’t filled you in yet on the governments proposed changes to taxes, allowances and reliefs, here is a quick highlight of some of the proposed changes:
- Personal allowances – as expected these will be raised to £9,205 in 2013/14, with the higher rate threshold being reduced to £41,450.
- Age allowance – these will be frozen from 2013/14, before being phased out completely.
- Income tax relief – the government have set a maximum limit on the amount of the income tax relief that can be claimed from 2013/14.
- Income tax – additional rate of income tax will be reduced to 45% from 2013/14.
- Stamp Duty Land Tax – a 7% rate will be introduced on residential properties worth over £2m, as well as a series of measures to counter ownerships set up through corporate entities.
- Tax relief – the government plan to restrict the amount of tax relief which is available on benefits from regular premium life assurance policies.
- Child benefits – for families earning over £50,000 a year, this relief will be phased out.
- Corporation tax – the main rate will be cut to 24% from April of this year (2012) and then to 22% by April 2014.
- EMI (Enterprise Management Incentive) schemes – individual grant limits will be increased from £120,000 to £250,000.
And this is forgetting the increased measures the government is putting into place to reduce the number of tax avoidance cases.
How will these affect me?
There is no denying that each of these tax changes comes with its own advantages and disadvantages. So whether you are a business or an individual we thoroughly recommend speaking to your accountant who can help you to make the most of them.
Alternatively if you haven’t got a chartered accountant, now is the time to get one. With the right tax advice you can use this information to your advantage and offer your finances a brighter future.