Southside Accountants

The link below is to a check list on tax saving strategies.  It covers areas of tax savings that most small businesses should be looking at with their pro active accountant.

It should take you no more than 20 minutes to complete this check list.

Please feel free to contact us to arrange a one hour consultation with us to discuss any areas of tax savings.

Link to Tax Busting Check List: Tax Busting Check List

This is intended to help limited companies on ways to ensure you meet the legal requirements on information that you should put about your company on your stationery, website and emails.

You should put the following on your letterhead and invoices…

• The full name of the company, normally ending with the word “limited”.

• The company registration number given by Companies House.

• The company’s registered office address.

• Where the company was incorporated – England and Wales or Scotland.

• Your VAT number if VAT registered.

• Details of any regulated profession of which you are a member.

Directors names?

There’s no need to list all of the directors. However, if you do the rule is you must list them all. i.e. it’s all or nothing.

Outside the premises

The Companies Act requires you to display the company’s name in a prominent position, even if your business operates from home! Failure to do so could in theory lead to a fine. However, putting the name on your house could lead to a Council Tax Bill. It’s worth noting Companies House don’t go around checking.

Cheques and orders

You must show the company’s full name including the word “limited”. This is also important to avoid any confusion and you becoming personally liable for anything you thought was in the company name.

On Your Website

Every company must display on its website…

• Company name;
• Company registration number;
• Place of registration;
• Registered Office address.

All businesses whether companies or not must display the following on their website…

• Name and trading name (if different);
• Email address – it is not sufficient to have a contact us form, an email address has to be shown as well;
• Geographic address from which the business trades;
• Membership details of any trade or professional association including your registration number;
• VAT number

The details do not have to appear on every page of the website and will probably be included on a “About Us” or “Legal Info” pages.

The Distance Selling Regulations complete the set of the current regulations and have been in force since 2000. There are long lists of items to be shown including unambiguous prices (stating whether prices are inclusive or exclusive of tax), an accurate description of goods or services and the returns policy. If you are trading over the internet you should consult the Regulations.

Emails and Order Forms

All emails and order forms from a company must contain…

• Company name;
• Company registration number;
• Place of registration;
• Registered Office address.

Businesses will probably include this information in the footers or email signatures to each of their outgoing emails.

Please contact us if  we can help any further.

From 1/4/2010 all VAT registered businesses with turnover that exceeds £100,000 (excluding VAT) and all new VAT registered business will need to submit their VAT return online and pay the VAT electronically.

The online VAT return is similar to the paper version and there are no changes in the VAT rules. Further you will not need to change your record keeping system regardless of whether you maintain electronic or manual recording system.

Signing up for online VAT returns is straight forward. All you need to do is register on HMRC website.

Additional benefits of online VAT return is that you will receive an email reminder letting you know when you next VAT return is due. Further you get extra seven days (in addition to the usual month) to submit the return and ensuring your payment received by HMRC.

If we can help you with any aspect of this requirement, please contact us.

This is the third and the final blog on business structure that would be suitable for you. The first blog in the this series covered limited companies and the second blog covered partnerships.

Sole trader is the simplest form of business to start where you carry on business on your own account. You are liable to income tax and Class 4 National Insurance on your profits. You can employ people including your spouse for work done.

Your business format is not set in stone forever and you can change between them. It is fairly simple for a sole trader to take on a partner and become a partnership and for a partnership to become a Limited Company. There are however more complications with changing from a Limited Company to a sole trader or partnership.

This is the second of third blog covering the area of which would be most appropriate business structure for you. The first blog covered limited company structure. This blog cover the partnership structure. The third and final blog will cover sole trader structure.

Partnership

A partnership is two or more people carrying on business together with a view to making profit.

The partners are all joint and severally liable for partnership debts, although this does not apply to personal tax bills based on partnership profits.

It is advisable to have a partnership agreement to document the agreement between the partners. However, the partnership is often between husband and wife and there is no agreement.

Limited Liability Partnership (LLP)

LLP’s are treated like a normal partnership for tax purposes but have the protection of Limited Liability.

A LLP is a separate legal entity and can enter into contracts and deeds, sue and be sued. With normal partnerships every partner has to be party to certain documents and litigation. Floating charges can be granted over its assets in its own name, which normal partnerships can’t do. As with Limited Companies, there is public availability of accounts.

This is the first of three posts looking at 3 business structures:  Limited Company, Partnership and  Sole trader. We hope this will help you decided which is the best structure for you.

A limited company is a separate legal entity from its members. These are the basic facts…

• The business is owned by the limited company, not you.You are the shareholder who owns the business and with small businesses, the director who runs it.

• It must have at least one shareholder.

• It must also have at least one director. From 6th April 2008 it is no longer necessary to have a company secretary although the position may be retained if so desired.

• The shareholders do not have to be directors. Directors are employees of the company.

• The company pays corporation tax on its profits. A small company pays corporation tax at 21% (2009/10).

• They are governed by company law.

Main Advantages of using a Limited Company…

• A Limited Company may appear more credible and substantial although in reality this is not necessarily the case.

• The Liability of its shareholders is limited to the amount of the share capital issued and so offers protection to personal assets. In the event of company failure and not being able to pay its creditors,your personal assets are protected. However, banks, landlords and others when dealing with a Limited Company will often require personal guarantees.

• A Limited Company has better borrowing potential as it can use current assets as security by creating a floating charge over its assets.

• You can use shares to enable different people to have different shares of ownership that they can pass onto the next generation.

• You can have different classes of shares with different rights, such as non-voting shares for someone who wants to invest some money into the company but doesn’t wish to take part in the management.

• Having a limited company can change the tax rate of a higher rate tax payer from 40% to 21%, more than halving their tax bill. The exact savings do depend on how much of the profit you leave to reinvest in your business. Taxpayers can also avoid paying any national insurance at all by using dividends. For someone earning £30,000 in a year as a sole trader, the amount of Class 4 NI to be saved is around £2000.

Main Disadvantages of using a Limited Company…

• Your annual accounts have to be filed at Companies House and are available for public inspection as is other information about the company.

• Directors are personally subject to regulations and can be fined or found guilty of a criminal offence for failing to comply.

• A company is more complicated to wind up.

• Generally involves higher accountancy fees as there is more for the accountant to deal with.

• Taxable benefits on having your car in the company can be substantial.

Please contact us to help you decide which would be the best structure for you.

The question of  how much should be taken as salary and how much as dividend to minismise the tax bill  is raised very often.  I will response this question based on the normal small business situation. My response is not intended to apply people with very high earnings or where the company is making more than £300k profits per year.

The balance:

- Pay yourself a salary of £5,715

- Any further sums you need take it as dividends

Pay Dividends Correctly – Or Pay The Consequences
This is an area of tax planning that HMRC may want to attack in future years. You don’t want the Taxman wanting to treat the payments as a loan to you or even as salary.  If the dividends are treated as a loan, which is the Taxman’s most likely approach if you do things wrong, the company must pay 25% of the loan over to HMRC, and you are personally assessed to a benefit for having an interest free loan from your company. So this is what you need to do…

• You need to know you have enough retained profits to be able to pay the dividends by law. Retained profits are all profits since the company started that haven’t already been paid out as dividends.

• Check your company’s Articles of Association as to who can recommend and authorise a dividend. The directors of the company will normally recommend the dividend, and the shareholders will approve that recommendation.

• Pass a company resolution authorising the dividend. A simple standard word-processed document can be used, which we can provide to you if you sign up for our newsletter http://www.southsideaccountants.co.uk/diary/sign-up-to-our-monthly-tax-saving-tips-newsletter/

As a Director of  a small limited company you have 9 months, from your accounting year end date to file your accounts with Companies House. However, if you are a new company you have 21 months to file your accounts from the date of incorporation of your company.

You will get a reminder from Companies House about 6 weeks before your accounts are due. This reminder will be sent to your registered office address.

If you miss the deadline of filing your company’s accounts you will incur an automatic penalty. Please be aware that late filing of accounts or not filing the accounts may mean you could be prosecuted and may end up with a criminal record and a fine that could be as high as £5,000.  You may also be disqualified acting as a director.

Late filing penalties are as follows:

Missed Deadline by:                                                  Penalty

Less than 1 month                                                            £150

Over a Month but less than 3 months                                 £375

Over three months but less than 6 months                         £750

Over 6 months                                                                £1,500

The above penalties will be doubled if you are late in filing the accounts again in the following year.

If your tax affiars are straightforward and you pay tax through PAYE (Pay as You Earn)  you will not need to complete a tax return. However if your tax affairs are complicated and/or you receive income from many sources, then you will need to complete a tax return.

These are the most common groups who are asked by HMRC to complete a tax return:

• Self-employed

• Company directors

• Income from savings and investments that are £10,000 or above

• Income from rental (after expenses) of £2,500 or above

• Income is over£100,000 in a tax year

• You need to pay capital gains tax (CGT).  This following link explains CGT . It talks about CGT on the sale of shares. The principles are the same whether you are selling shares or any other assets http://www.southsideaccountants.co.uk/diary/2010/01/17/what-is-the-tax-position-if-listed-company-shares-sold-at-a-loss/

• You want to claim certain expenses. For example as an employee you want to claim professional subscriptions of £2,500 or more.

• You live or work abroad

The onus is on you to complete your tax return. If you are not sure whether you need to complete a tax return please contact HMRC or ask your accountant.

Do I need an Accountant to complete a tax return?

You do not need an accountant to complete a tax return. However, to ensure that you pay the minimum amount of tax within the law, it would be best to employ an accountant. http://www.southsideaccountants.co.uk/diary/2009/11/17/check-your-accountant-is-qualified/

What is the deadline  for completing tax returns?

• There is a deadline of  31/10 if you complete a paper tax return.

• If you complete a tax return online the deadline is 31/1.

What if I don’t complete a tax return, when I am required?

You will get an automatic penalty of £100. After several reminders from HMRC, you will get a big fine as high as twice your tax bill plus  interest.

http://www.southsideaccountants.co.uk/taxation-services.html#perstax

As an employee you will only be taxed on a company van if you use it for private (non business) journeys. Private use other than commuting (work to home and vice versa) means using the van for your social activities or your supermarket shopping.

If your employer  allowed you unlimited use of the van, this will be assessed under PAYE as benefit in kind of £3000. If your employer also pays for the private fuel, there will be additional £500 benefit in kind on you. If you are basic rate tax payer (20%)  for the tax year 2009/10, your tax bill for private use of the van will be £700.

Where your only private use of the van is for home to work  travel (and vice versa) this is not treated as private use so you will not be taxed under these circumstances if all other private use is not allowed by your employer. Your employer should ask you to sign an agreement stating that you will only be allowed to use the van for private purpose to travel from your home to work and vice versa. Any other private use would not be allowed. You also need to keep mileage logs recording your mileage for each business journey and the reason for the journey.

To ensure you do not end up with an unwarranted tax bill, please make sure you that you sign the only business use agreement before the new tax year starts – 6th April.

http://www.southsideaccountants.co.uk/free-consultation.html

Donating under Gift Aid means that the charity you are donating to will be able to recover 28p for every £1 you donate from the Taxman.  This is available until 5th April 2011.

For your charity to recover this cash you must give a Gift Aid declaration. Where you make a donation over the phone instead of  using a website, your charity will write to you to confirm this Gift Aid declaration.

Another requirement is that you must be a taxpayer who has paid tax that is at least the amount  that you charity will claim under Gift Aid.  If you are not a taxpayer you cannot make a Gift Aid declaration.

If you are a higher rate tax payer you can also claim the difference the 40% high rate of tax and 20% basic rate of tax on your personal tax return. You need to keep your accountant informed of donations you have made under gift aid so he/she can claim the difference.

This is a plain English Guide to Income tax.

What is income tax?

This is tax paid on money you earn, It includes your salary, some state benefits, savings and pensions. If you are an employee benefits such as company cars are also taxed.

Please note the rates below are for the tax year 2009/10.

How much tax do you pay?

This depends on how much you earn.

All of us are entitled to earn up the the level of our personal allowance of £6,475 (for the tax year 2009/10) without being taxed. This is your tax free income that the taxman cannot touch.

Those of us who fall in the higher age bracket get a higher level of personal allowance:

• Aged between 65 to 74 the personal allowance is £9,490

• For people  aged 75 and over it is £9,640

There is also a blind person’s allowance, and married couple’s allowances based on age

After using your personal allowance, any income that you earn after £37,400 you will be taxed at 20% . Any income above £37,400 after using your personal allowance will be taxed at 40%.

Any interest paid on your savings, the first £2,440 above your personal allowance will be taxed at 10%.  However, if your other income (non savings) exceeds £2,440 after deducting your personal allowance, then any interest from savings will be taxed at the basic rate of 20%.

How is income tax paid?

If you are:

Employed: Tax will be collected through PAYE (Pay As Your Earn). If you receive a pension, your pension provider will collect the tax in the same way.

Self Employed: Tax will be paid through self assessment. You or your accountant will complete a self-assessment form to determine your tax bill.

Savings Income : Your bank will deduct tax from the interest you receive it.

Newsletter

http://www.southsideaccountants.co.uk/diary/sign-up-to-our-monthly-tax-saving-tips-newsletter/

If you are selling some stuff  that is lying around in the attic then the answer is unlikely. To pay tax on what you sell you either need to be trading or make a capital gain.

HMRC are likely to consider you as trading  where you are buying or making goods to sell them on to make a profit. This also applies where you sell these goods for a third party and you are paid a commission on your sales.

If  you just sell  odd items on Internet auctions, classified adverts or car boot sales it is unlikely HMRC will regard you as self-employed. This is because in most situations the amount you receive for goods sold is less than the amount you originally paid for the second hand goods you have put up for sale.  Tax is only to be paid where you make a profit.  You have have not made a profit here.

The same applies to capital gains tax. You only need to pay this tax on gains you made on selling certain assets. You will only make a gain where you sell the asset for more than what you paid for it or where the value of the asset has increased over the period your ownership and price you sell it for is above this increased value. The items you sell are more than likely to personal effects or goods – these are known as chattels, they are separately worth than £6k when you sell them. They are exempt from capital gains tax so it is unlikely that you will make a gain that is chargeable to tax.

If you would like us to help just get in touch.

http://www.southsideaccountants.co.uk/taxation-services.html#perstax

I am looking for people who would be interested in joining  a 4n (4 networking) group in Putney. Networking as you may know is the most effective way to form good relationship this in turn will further your business.

I was cynical about networking. After attending 4n networking  meetings I am converted. Very friendly and easy going meetings. You will not be held up by rules. I did not like BNI at all – just too many rules. 4n is different.

Please call me on 020 875 3314 if you are interested in attending  a meeting  just to find out more. You are allowed to attend two meetings before deciding to join.

This is just a big caution for those considering a franchise – be very careful. There are more than a few franchisors who are very good at presenting a positive picture of how well you will do. The reality may will be very different.

Do not take the fact that they are a member of  The British Franchise Association (bfa) as an indication of additional security. BFA  is funded by franchiors. In addition, it does not have any legal authority over franchiors. When you have problems, it may suggest mediation. This is likely to cost you.

I am sure they are some good franchisors but they are many who simply will not to do much to help you.

There are many people I know who have been bitten badly by money grabbing franchisors.

If you decide to join a franchise please make sure you go with your eyes fully open by doing  your own research. Proceed with extreme caution.