November 21, 2017

Have you got 31st July in your diary?

tax, self-assessment, HMRC, 31st July, accountant, herefordshire, monmouthshire, gloucestershire

Have you got 31st July in your diary?

 

We may all have put this matter to one side, filing the reminder letter in the unshrinking in-tray, but staying on top of our taxes is vitally important to all small businesses and those who are self employed.

The key is to not fear them or forget them!

 

I know you are busy, time so often our enemy and much better spent delivering our goods and services, but time has to be taken to keep our business affairs in order and avoid any nasty penalties. And if you don’t have the time, engage with someone who has both the time and the expertise.

Diary dates.

So, let’s start by reminding ourselves of the key dates for your diaries regarding taxes:

  • 5th October – registration date for individuals who are self-employed
  • 31st October –paper tax returns completed submission deadline
  • 31st January – online tax returns submission deadline
  • 31st January – deadline to pay taxes you owe
  • AND if you paid more than £1,000 tax on 31st January 2017, you may have more to pay by 31st July 2017.

How do you know if the July 31st deadline is applicable to you?

HMRC state this: ‘If you are self employed and earn enough to pay over £1,000 in tax and you have not already settled all tax due for the year to 5th April 2017, you will need to make a payment by 31st July this year.’

Also, if you have rental income or large amounts of investment income such as dividends, you may also be affected.

There is further information on the gov.juk website, or if you are unsure talk to your/an accountant.

You still have time.

If you haven’t already completed your tax returns, don’t panic! You can still avoid HMRC’s late filing penalties just start taking action now.

  • Gather together all your receipts, bills, bank statements, mileage logs, sales invoices and takings summaries
  • If you have already entered these into a spreadsheet or accounts software, such as QuickBooks Online, well done. It will make your life easier, and you will have a better handle on how the business is doing.
  • Gather other details of income such as bank interest, rental income (and related expenses), P60s and P45s and P11ds from any employment or pension you have. Also pension payments if you can deduct those from your tax bill
  • If you are married, discuss with your spouse whether there is benefit in reallocating some of the personal allowance to the other spouse (10% can be moved although some rules apply)

Decide if you are going to feel brave and prepare your own tax return. If so

And if you would rather have help making sure you are declaring everything and claiming all you can, call me and we can get things sorted.

Penny Lowe, Wellington Consulting

Visit my website to find out more about how I can help you and your business >

Business Advice from Berkshire – Cost of working at home

gravatarIf you work from home, how do you calculate how much you can claim from the taxman? Over recent weeks, one of my clients has been experiencing a tax investigation. I am glad to say that he got the all clear, but in the meantime, I have had the opportunity to chat with a current tax inspector. When I thanked him for sharing some of the Revenue’s view of allowable expenses and what they look for, he said it was all part of the education process. Whatever the reason, I would extend a thank you.

One area we spoke about was the claim for ‘use of home as office’. He took quite a tight rule on this. He was looking to see if other members of the family also used the room, whether the children had their own access to the internet or used the business computer. How much of the home was taken up with storing papers (or was everything scanned in and only taking up space on the computer). Were there outbuildings for the storage of materials and large equipment used in the business, or were they full of push bikes, lawn mowers and other domestic items.

Although he was asking simple questions, you can see that the Inspector is only trying to establish the truth. Considering whether you are crossing the line between tax avoidance and tax evasion. If you issue one or two invoices a month for working at client’s premises, and it’s a long term contract so you are not spending hours surfing the internet for the next client, what percentage of internet/computer use is actually for work? How would you justify 100% business use?

HMRC have recently brought out an option for claims like this called simplified expenses. You can use them only if a sole trader or partnership. If you want to claim use of home, HMRC will expect you to work for more than 25 hours per month from home. If this is all you do, you can claim £120 per year, 100 hours per month, and it goes up to £216 per year and 200 hours per month is £316. So, instead of the flat rate, you can start to calculate exact components, but this involves square feet, number of people, number of working hours etc. If you have staff coming in with their own key, this adds to the justification.

Book coverThe truth is, it is not easy to be accurate, but you must feel confident that you can justify the figure. This is a time when talking these things through with an accountant – and then documenting the method applied can be very useful.

Have a look at your last set of accounts. Talk to your accountant before signing off this year’s. Remember it is your signature even if the accountant has calculated the figures!

Please share your thought on this subject.

How do I choose a Good Accountant ?

What is your definition of good? For the person I was with today it included: someone who understood QuickBooks accounting software, has experience of factoring, doesn’t just delegate to junior staff, was prepared to ask questions and communicate. The last accountant but one got the sack – having worked with the firm for a day I would suggest much of this was due to poor communication rather than poor work. The last one walked out at the end of the first day. This was because the ‘books’ needed sorting out before he could move forward. The last 4 months they have tried to manage without, so there is some sorting still to do. I am sure they will be back on track within a month. What will they do then?

 

Last summer I was asked to profile my perfect client. When I showed the list of good points to the first few people, they agreed that I was describing their ideal customer. Clear on what they wanted, quick to pay, kept to an agreed timetable, refer new business your way etc.. However, they went on to say, that they would not fulfil all my criteria. It reminds me of the saying ‘do unto others as you would have done to you’. If you profiled you perfect client, would you fulfil your own criteria?

 

So, in summary, decide what you want from an accountant, discuss this with them and, most importantly, give them a chance to do it. If you or your accountant haven’t yet filed your tax return, give them all the information and help they need. If you need to get an accountant, or are going to change, start the process today as they will want to get authorisation from you to speak with HMRC and this takes time. Remember, you are not the only client they have.

Like to chat a little further ? Im happy to advise

When should you outsource?

The four reasons why you might outsource are:

Lack of skill
Lack of equipment
Lack of capacity
Cheaper than doing it yourself
The one thing you cannot outsource is the responsibility for completion and quality. That is down to you.

The reasons I have chosen this topic are twofold. Firstly I am writing a book ‘Understanding Your Accounts for the UK Business Owner’. I have outsourced the publication and PR as I do not have the capacity (or the skill) to find appropriate individuals to work with. I know that this may not be the cheapest option, but if my time is available to charge to clients, I can make the money to pay for those with appropriate skills, knowledge and contacts.

The second reason for my choice is I have recently been passed a client who thought they could manage without an external accountant to compile their company accounts and corporation tax returns. Basically they had a go and then buried their head in the sand. It didn’t go away and they ended up with a £20,000 tax bill. Having done the work, the bill should be nearer £2,000 including interest for late paid tax. What they will have to pay are the penalties to Companies House and HMRC. These will be nearly £1,500 in total and could have been avoided. Recognising that you need help or advice and acting can save you money – or at least stop you wasting it.

When considering outsourcing, make sure you are happy with the quality and ability to deliver from your chosen supplier. Having clearly specified your requirements and time frame don’t forget to get progress reports to ensure they are on track. In the meantime make the most of what you can do that you are not outsourcing as you have decided you can do that better and/or more cheaply without compromising the core work.

Have you completed your Tax Return ?

You may see advertising regarding submission of your tax return by 31st October. This only applies if you (or your accountant) are doing it on paper. If you submit via HMRC web site you have until 31st January 2013 but I wouldn’t recommend you leave it that long.

I am a great believer in keeping on top of the figures. One figure is how much tax you owe. If you know in advance you can make sure you plan to have sufficient funds available so the earlier you can complete your return, the more time you have to plan.

Tax return sooner rather than later If you don’t currently need to submit a self assessment return, you can choose to optionally submit one. The benefit is that you declare each year what income you have and any claims such as pension contributions that can reduce your tax bill and you then pay the correct tax each year. Last week I had one client who had been sent a tax return this year for two years ago and ended up with a tax bill of £3,500. He had changed employments during the year and the tax codes had not been updated. With company cars, medical insurance and other factors affecting your tax bill. This could happen to you.

 

Earlier this year I acted for a client who had been self employed for many years and submitted his own tax return. When we reviewed what he had done/hadn’t done the tax bill should have been more. We were able to declare his errors before penalties were applied, and he was given time to pay. Claiming your loan repayments for your holiday home as an expense against business profits is not correct. If you are not sure about something, find someone to ask. Although HM Revenue and Customs offer advice, you need to ask the right question to get the right answer – and then they have been known to change their mind. You never know, it may be a repayment you can claim before Christmas rather than a tax bill to pay in January.

Would you like a no-obligation chat about your tax obligations and returns ? Contact me and lets simplify your tax affairs