The Services That Are Provided By An Accountant

The job of an accountant is to keep track of numbers that primarily are the result of business activity. Keeping track of day to day transactions such as sales, inventory, discounts, taxes and the like can get very detailed and if not recorded and made into some kind of sense, could cause a business to fail for lack of proper information.

In addition staying up to date on the value of assets, or that which is owned by a company, and liabilities, or that which is owed by a company is also very valuable information.

Nowadays the day to day transactions are usually captured by computer with point of sale devices in a retail operation and by invoices in various other businesses. The computer then compiles the data that is received into reports that tells the business owner how well the business is doing , is not doing, and from that information accurate business decisions can be made.

Taxes must be paid too, such as payroll taxes for employees which must be withheld from employee’s wages and sent to the government.  Income taxes also have to be paid by the business on its taxable profits.

The overall health of a business entity is determined on a daily basis, and the job of the accountant is to keep track of all of the financial transactions so trends can be established. If the trends are good, they can be continued, but if they are bad, appropriate changes can be instituted. Without proper accounting procedures, a business could be in deep trouble and not even know it.

Proper accounting is really the measure of whether the business is operating in a healthy manner, or whether there are problems. A good accounting system, run […]

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Self Assessment & PAYE tax gap narrows

Self assessment & PAYE tax gap narrows
The UK’s tax gap, which is the difference between tax collected by HMRC through self assessment, disclosure schemes and tax investigations and the amount of tax owed has narrowed to 6.4%. This is welcoming news for both the Treasury and the economy as a whole. Much of the gap will relate to avoidance and evasion.

Despite this fall, from 6.6% in 2012/2013, there is still a staggering £34bn to be collected, showing there is still much to be done, says ACCA (the Association of Chartered Certified Accountants).

Chas Roy-Chowdhury, ACCA head of taxation, stated:

“It is a huge credit to the staff at HMRC that they have managed to lower the tax gap despite constant cuts to their budget. However with £34bn still uncollected, and the government struggling to meet its borrowing target the Chancellor should reconsider his decision to cut HMRC’s resources.

Corporate tax avoidance may be falling but there is still a sizeable amount lost due to innocent mistakes and evasion. It is in these areas where more resources for HMRC could be best deployed. In helping guide those who want to pay the right amount of tax and in investigating those who are determined not to pay tax.

We should also remember that these figures include £1bn collected from accelerated payment notices. Those are a one off catch-up from historic schemes that won’t be repeated – and there is always the risk that even some of those amounts will have to be returned, as taxpayers are challenging HMRC’s approach in this area.”

Tim Healy v HMRC – Claim for renting a flat

Crackdown on duality of purpose – Tim Healy v HMRC
The decision in Tim Healy v HMRC [2015] TC04425 , published in June 2015  has shown how tax payers should demonstrate that their expenses are solely for the purpose of the trade.
The Claim

In this case, an actor failed in his claim for tax relief for renting a flat whilst working away from home. He inadvertently claimed the three bedroom flat was required not only required for business use, but to accommodate guests as well, which meant that the expense was not “wholly and exclusively incurred” for the purpose of his business.

In 2012 the case was heard by the First Tier Tribunal  and had decided in the actor’s favour. In 2013 HMRC appealed to the Upper Tribunal on the grounds that the law had been misinterpreted and the case was sent back to the First Tier Tribunal.

The Facts of the Case
The facts of the case were that Mr Healy was an actor based in Cheshire and was casted in a West End musical. When the show went live in March 2005 , he rented a flat in London as it was cheaper than renting a hotel.  The rent was for a 12 month contract with a 6 month break clause. He terminated the lease when he finished the musical contract.

HMRC disallowed the rental expenditure on the basis that the rental term was for a year, stating that a taxpayer cannot obtain tax relief on rental accommodation as the costs of living are private costs.
The Law
Section 34 of the Income Tax (Trading and Other Income) Act 2005 states that:

(2) If an expense is incurred for more than one purpose, this section does not prohibit a deduction for any identifiable part or identifiable proportion […]

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Micro Businesses Fast Payers

Micro Businesses are Fast Payers
Micro businesses tend to be the fastest to pay their invoices out of all sizes of business in the UK, according to new research.

Data from Experian shows that businesses with 2 workers or less paid overdue invoices within an average 20.58 days beyond the contract terms in 2014/15.

This is half a day quicker than in 2013/14 and almost 4 days quicker than the national average of 24.29 days.

Large businesses with more than 500 employees took an average 34.18 days to pay overdue invoices in 2014/15. This is the slowest in the country and more than 10 days above the national average.

The data shows that all business sizes improved their payment times in 2014/15 from 2013/14:

micro businesses with 3-5 employees saw the biggest improvement in payment time, falling from 22.64 to 21.34 days
firms with 26-50 employees paid an average 24.11 days late, down from 24.77
large businesses cut their average late payment time from 35.25 to 34.18 days
the national average dropped from 25.28 to 24.29 days.

Max Firth from Experian, said:

“The improved payment performance shown by businesses of all sizes in the last tax year is an encouraging sign for the economy. Cash flow is especially important to SMEs. Late payments can hinder their profitability and growth prospects, while also having a knock-on impact on suppliers.”

 

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Small business stresses revealed

Small businesses stresses revealed
A poll of 600 small businesses has revealed 32% of small business owners find hiring new staff as the most stressful task they have to deal with.

Other tasks which affect the stress levels of a business are:

 31% stated moving business premises
27% stated handling finances
19% stated dealing with staff absences
13% stated dealing with customer complaints

The stress of moving business premises
The research by E.ON found three quarters of small and medium-sized companies delay moving premises because of the stress. In addition, small businesses have lost on average of 7.5 working days due to moving premises.

The findings from the research revealed the actual cost of moving and upgrading, as well as the losses caused due to disruption of business came out as £40,000, over a five year period, or 2.5% of their annual turnover.

This hassle, as seen by small business owners has lead to more than 75% of small businesses delaying moving, have to compromise with “cramped, dilapidated, expensive or inefficient buildings”.

Comments from business owners included worrying about the cost of moving, not knowing where to start and being unable to deal with transferring service providers.
Comments from E.ON
The business energy director, Anthony Ainsworth at E.ON stated:

“To hear that more than three quarters of SMEs are staying in potentially inappropriate premises because moving is considered just too hard is surprising. The disruptions businesses face are a very real barrier to relocation and possible future growth.”

E.ON has released some tips on making sure small businesses have a stress free move. Their suggestions include:

Making regular visits to the site with other members of staff, so all are aware of the layout and visualise where assets can be placed.
Ensure utilities are working and all current services providers and contacted […]

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Small Business Tax Rate Summaries

Individual and Small Business Tax Rate Summaries
The 2015/2016 tax year commenced on 6 April 2015.

We have set out below a few points on the impact of a new tax year for individuals, sole traders & partnerships, employers and small businesses.
Individuals

Personal Allowances have increased to £10,600. This is the amount an individual earning less than £100,000 can earn tax free.
Individuals earning over £100,000 also have this personal allowance available to them, however it is reduced by £1 for every £2 they earn over £100,000. Therefore anyone earning £121,200 in 2015/16 will have no personal allowances (assuming they were born after 4th April 1948).
Personal allowances for individuals born before 6 April 1938 have gone up an extra £60 to £10,660.

 Sole traders and partnerships

Many businesses align their accounting year end with the tax year end. If you haven’t already, it is a good opportunity to review margins, reduce costs and increase prices.
Although the government proposed to abolish Class 2 National Insurance Contributions, they haven’t set a date yet. The rate has increased by 5p to £2.80 per week.
Where profits are below the Small Profits Threshold of £5,965,  individual may elect to apply for the Class 2 Exemption. It may affect your entitlement to state benefits therefore careful thought is required on whether it would be appropriate to apply for this exemption.

 Employers

Ensure End of Year 2014/15 PAYE reporting requirements have been completed and successfully submitted to HMRC.
Employee tax codes have to be updated.
Review business to consider whether Employment Allowance is applicable. If business is eligible it gets a £2,000 allowance to set off against Employer’s National Insurance Contributions.
Employee National Insurance threshold has increased to £155 a week. Therefore an employee can earn up to £155 before they need to pay National […]

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Small Business – impact of Auto Enrolment

Small Business – impact of Auto Enrolment
Whilst Auto Enrolment has already been embraced by majority of the companies with more than 50 employees, there are more than 17,000 companies that are on the edge of staging.
Survey of small business
A survey undertaken  showed 43% of these companies who are on the cusp of staging are worried that they will not be able to offer their staff with pay increases in the future.

Employees feel similar thoughts, with 72% of employees working in companies who have a staff of less than 50 are fearful that they may not see increases in their pay, due to the work place pension regulations.

Some 21% of companies who have less than 5 employees feel that they may be put of business due to auto enrolment.

Many businesses who have 1 – 5 employees are of the opinion that their product/service costs would have to increase to absorb the Auto Enrolment implementation and running costs.
Comments by Matthew Mitten
Mathew Mitten, director of Enrolsme, stated

“These are worrying trends, given small businesses are the lifeblood of the economy. Employment in this sector may be affected with a third claiming they won’t be able to recruit more staff; and almost one fifth telling us they will have to reduce their investment plans.”

“However, even more concerning is the portion of small companies that believe automatic enrolment could see them going out of business all together. This was certainly not the goal of the legislation. These are tricky times for small business in the UK and more should be done to help support them.”
Other findings of the survey
The survey undertaken also stated that despite the media hype publicising the legislation, a third or employers are not sure what Auto Enrolment means.

In contrast, […]

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Small business, Enterprise and Employment Act

Small Business, Enterprise and Employment Act receives Royal Assent
A wide ranging Act designed to make UK the best place to start and grow a business have become reality by being granted Royal Assent.

The Small Business, Enterprise and Employment Act paves the way for businesses to improve access to finance, put an end to zero hour contracts and creates fairer provisions for tied pub tenants.

The Act will provide a path for small businesses to expand, creating jobs, assist with innovation and help bolster the economy. .
Business Secretary’s comments
Business Secretary Vince Cable has stated:

“Small businesses provide jobs for millions of people across the country and are driving the economic recovery. The Small Business Act will create the right environment for small businesses to continue to thrive by giving them greater access to finance to help them innovate and grow, and make it easier for them to export goods and services made in Britain.

“The Bill’s measures also mean there is nowhere to hide for firms who do not play by the rules, whether by abusing zero hours contracts or not paying the minimum wage.”
Business Minister Matthew Hancock’s comments
Business Minister Matthew Hancock has stated:

“The government has backed small businesses like never before to build a Britain where entrepreneurs can break the mould and take on the world.

“Coming from a small business background myself, I know first-hand how cumbersome bureaucracy can stifle your ambitions to grow.

“The Small Business Act is the first set of laws specifically to help level the playing field for small business. There really has never been a better time to start and grow a business in the UK.”
How the Act will assist small businesses
The Act is designed to assist small businesses through the following measures:

•increase availability […]

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Small businesses lack basic digital skills

Small businesses lack basic digital skills
The latest UK Business Digital Index has polled that 23% of small and medium sized enterprises (SME’s) lack basic digital skills.
Digital Trends
The Index tracks and measures levels of digital ability amongst SMEs and charities. It suggests that there is a trend towards SMEs embracing digital skills. However there are still a million SMEs that don’t have basic digital skills.

In the charity sector, 58% of charities don’t have digital skills.
Digital skills
Digital skills can include having a website and updating it regularly with blogs, having social media presence such as Twitter and Facebook and using e-commerce.
Challenges and perceived benefits for small businesses
There are challenges around the benefits many SME perceive from embracing digital skills. 25% of SMEs see this as irrelevant and 27% believe they have embraced as much digital skills as they possibly could.

The report found that firms which embrace digital skills are twice as more likely to increase turnover.
Comments from Lloyds
Miguel-Ángel Rodríguez-Sola,the group director for digital at Lloyds Banking Group stated:

“In just one year it is pleasing to see that over 100,000 more small businesses in the UK now have basic digital skills.”

“But what is also clear is that real challenges remain – over a million small businesses and charities still lack basic digital skills and the perceived benefits of being digital remain. For example 25 per cent of all organisations surveyed believe digital is ‘irrelevant’ to them. We cannot emphasis enough the benefits that digital adoption can offer – such as saving time, increasing revenue or funding or reaching wider audiences. Digital is the key to unlock these benefits.”

To find out how Avery Clifton can assist small businesses with their digital marketing please contact us on 0118 907 […]

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Small business cash flow tips

Small business cash flow tips
Managing late payments are a significant issue to small businesses, with £46.1 billion currently being owed to businesses. In 2008 the amount owed was £18.6 billion, less than half of what is currently owed. With the situation worsening, businesses need to take real action to ensure they have a healthy cash flow by managing their credit control effectively.

Government has stated that small businesses spend on average 130 hours a week chasing late payments, which equates to a cost of £1,500 per business. As small businesses are reliant on a healthy cash flow, late payments can have a huge impact on the liquidity of a business and can lead to insolvency. 34% of businesses have used external finance in the form of loans and overdrafts from banks to bridge the gap caused by late payments, resulting in interest charges of £180 million. With tightening profit margins, businesses should be looking at ways of getting their invoices settled quicker to avoid unnecessary costs.

Small businesses should therefore implement the following tips as a minimum to manage their cash flow effectively:

Ensure business has a clear and easy to implement credit control strategy. Setting out an approach which sets out the strategy on a day to day basis will assist in getting paid on time. For example business policy should state when reminders are sent, whether emails or telephone calls are appropriate, templates for reminder and when court action is required.
The key task before undertaking business with a prospect is “knowing your client/customer”. Credit should only be provided once a credit check has been done on a client. With financial circumstances changing all the time, it makes sense to ensure credit checks are an ongoing process.
Payment terms should be incorporated in […]

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