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Making Tax Digital could be an opportunity for businesses to embrace a more efficient way of accounting
With the planned roll out of HMRC’s Making Tax Digital in April 2019, initially just for businesses that are VAT registered, there is a big push by the government on bringing tax accounting into the 21st century and creating the online revolution in this area that has already occurred in sectors such as banking.

The system has been piloted with businesses on a small scale from the end of 2017, and this has been stepped up into 2018 to include a wider live pilot. While there are no plans as yet to mandate individuals and businesses into the online filing system – which is part of HMRC’s plan to make tax more manageable for businesses and individuals, and to make it more efficient and accurate – it is worth understanding what it is all about and how it might affect your business in the future.

Why is HMRC launching Making Tax Digital and who does it affect?

HMRC wants to close a tax gap that is costing the government dearly, and is largely due to inaccuracies in tax returns – not as a result of tax avoidance or fraud, but simply mistakes that are being made when filling out tax returns. The plan is to mandate businesses into the system that are VAT registered. These businesses already file VAT online quarterly, but HMRC is integrating digital record keeping. This means that if the business or their accountant uses accountancy software, the accounting records will also be sent along with the VAT return, to make the whole process seamless. For business that use spreadsheets, the data from these can be linked to HMRC’s system using an appropriate interface.

There is the opportunity for businesses to provide quarterly update for other tax obligations too, but they won’t have to do this. Small businesses and individuals won’t be mandated into the system at all in the near future, as the introduction of it in VAT is a trial and must be proven to work well before it is rolled out on a large scale. However, we expect that this should happen eventually as the digitisation of accounting and tax return filing evolves.

Embracing the opportunities that Making Tax Digital will bring

So, if you’re an individual who files a tax return, a sole trader or limited company with no VAT obligation, you can sit back and relax for the moment. But rather than see the Making Tax Digital initiative as a potential future headache that involves more frequent tax information updating, it should be embraced as an opportunity to negate the headache of end-of-year tax return filing and a chance to look at overhauling your book keeping for the new digital era.

Many small businesses will still be keeping paper records of accounts and expenses logs/receipts, or using spreadsheets to keep track of income and expenditure. This works well for many people, but is the equivalent of cheques and a paying in book at the bank! We all use online banking services these days and benefit from a higher level of convenience that this brings. Getting tax accounts into a simple software system that keeps all records electronically, safely in the cloud to avoid loss of important documents or security breaches, and easily accessible by both business and accountant, is the way forward.

Not only will you be glad when it comes to end of year filing that your accounts are up-to-date, in one place and available to your accountant, but your business will benefit from the foresight and planning capability that having real-time accounts brings. Having your expenditure and income figures to hand whenever you need them means you can easily review the status of your business and better plan for business growth plans such equipment investment. You will know your likely tax liability well in advance to plan your finances accordingly.

It is just a matter of time before digitalised book keeping becomes a mandatory requirement, so while there is no need to panic just yet, why not get ahead of the curve and start now for plain-sailing transition.

Adams Moore offers Xero accountancy software. For further details on this, get in touch on 01827 54944.

Over the last decade, Adams Moore has concentrated heavily on developing business solutions to meet the evolving demands and requirements of our clients, and making investment in customer service processes and communication channels – not least of all our website. Providing a quality service is important to us. However, there is one area we thought was due for a major overhaul – and that was our office frontage.

After making several internal improvements to make the office environment nicer for staff and clients, such as new windows to the rear, we thought it was high time we addressed the face of our tired looking building to make it more inviting, and frankly, less shabby!

So, after an investment of almost £10,000 involving a complete new skim to the outside walls and a mighty decent paint job to walls and windowsills, we must say we’re rather pleased with the facelift. In fact, it’s such a transformation that we’ve almost not recognised our offices and walked straight past. We hope our clients don’t do the same!

Perhaps you are thinking of renovating your business premises in some way, or investing in equipment for your business? With the end of the tax year approaching, there’s not much time, but it is a good opportunity to make the investment. For further advice, get in touch with us on 01827 54944.

And just to prove just how much our frontage has been improved, here are some before and after photos to illustrate.

 

 

 

Short-cutting the red tape in business can be a costly mistake. Investment in compliance will reap business benefits.Don’t ignore the red tape when setting up in business

There are many important business duties and rules that all business owners should be aware of, from tax and employment rules to pensions and required industry regulations. Understanding what these are, which ones you might need to implement and how it could affect your business if you don’t is crucial for small businesses. Growing a business can also result in increased regulation, so it’s important to know how this might affect you.

Meeting tax duties

One of the key red tape aspects of business has to be tax duties. Getting it right from the start will save you a huge headache later on:

  • Choose the right business structure – get advice on which business structure will suit your business goals both now and in the future. Having the right structure will mean your business can operate in the most tax efficient way from the start, so it’s always best to seek professional advice on this
  • Establish an adequate book keeping system – whether you do this manually or using accountancy software systems such as Xero, it is absolutely vital to keep accurate business accounts both for ease of tax return filing at year end, and to meet HMRC requirements
  • Be in-the-know on available tax relief – there may be available tax relief that could apply to your business and is worth exploring. A good accountant will be able to advise on this. It’s advisable to use an accountancy firm that can give you guidance on all tax matters, as tax is an evolving landscape with rules and rates changing on a regular basis
  • Get to grips with deadlines – not meeting tax payment deadlines can result in surcharges and needless interest costs. Knowledge of deadlines is key, and being sensible when it comes to allowing enough time for the payments to reach HMRC i.e. ensure if a payment is due over a weekend, make the payment early enough to clear in time.

Employment rules

There is a plethora of red tape around employment, and when thinking about employing staff, you should consider:

  • Legal advice – there is much legality around the recruitment of staff, the contracts they are employed on, and other aspects such as holidays they are entitled to. Getting legal advice is a must to help ensure you carry out the necessary steps and due diligence in this area, to avoid costly problems later on. The cost of employing professional advice here will be money well spent
  • Accountancy advice – you can fulfil employee payroll duties yourself, but dependent on how much time you have and how many employees you have, you might feel it is more efficient to outsource this to your accountancy firm. The compliance around payroll can be complex with RTI report submission and various rules being updated all the time, so it’s worth outsourcing to an accountant that offers the latest in payroll processing and is fully compliant with HMRC rules
  • Pension auto-enrolment – this has been rolled out over the last five years or so, whereby businesses have had to auto-enroll employees into a pension scheme at their designated staging date. Most new companies will now have to auto-enroll straight away, as there is no longer a roll-out time. There are fines for non-compliance, so it’s worth exploring the options and getting a pensions provider in place if you are looking to bring staff on board.

Data protection rules

When thinking about marketing to your customers, you may want to consider electronic delivery of promotional materials such as e-newsletters and email shots – which are incredibly cost effective to produce and execute. But there is red tape around this area too. Do consider:

  • General Data Protection Regulation (GDPR) – it’s important to ensure that you are not sending any communications to customers or potential customers who have not opted in to your marketing. The General Data Protection Regulation (GDPR) coming into effect from 25th May 2018 will require you to check with your customers that they are happy to continue to receive communications from you, and if you don’t and they aren’t, you could be liable for a large fine. You will need to remove anyone from the list who has unsubscribed, in order to be compliant.

 Industry regulations

Dependent on what industry you’re in there could be a variety of regulations governing your profession or sector, so it’s important to be knowledgeable about these to ensure your business operates within the rules. Get in touch with industry bodies and organisations to find out what these might be and how you can comply.

For many businesses, regardless of sector, it’s worth looking into:

  • Public liability insurance – it’s there to protect you and the public in the event your work caused damage or injury to anyone. The amount of cover you’ll need and the cost of the cover will vary depending on what type of business you’re in, but the cost of not having it could be astronomical if an accident were to occur and blame could be attributed to your business, as claims could be anything from thousands to millions, dependent on the incident
  • Professional indemnity insurance – for those in professional services, professional indemnity insurance covers legal costs and expenses associated with a case that might be brought against you as a result of you providing inadequate advice, services or designs, that could cause your client to lose money. Again, legal fees could run very high in such cases.

Whilst the thought of employing professional advice to help you wade through the red tape and comply with regulations might be scary and deemed unaffordable for small businesses, the cost of not getting advice on such important matters can be far higher. Unexpected costs associated with not being compliant can really rack up, so investment in getting it right is wise.

Technology in accountancy won't negate need for guidance and advice from tech-savvy accountants, but will benefit businessesAccountancy services have changed dramatically over the last decade. Once maybe viewed as a necessary evil and nothing more than a tax return or payroll services facilitator, accountancy was an expense for businesses simply to help them meet statutory duties. However, the last decade has seen forward-thinking accountants look for ways to add value to businesses, particularly in a changing economic climate spurred by the recession.

Many accountancy firms have looked to up their game and add fixed-fee options to their offering. Services providing a higher level of support with strategic planning, management accounts and regular health checks – alongside business protection services helping with issues such as financial checks – have emerged and benefitted businesses infinitely. But as technology evolves and permeates every sector (and indeed every aspect of life), how will this bear on accountancy services?

Technology in accountancy gathering pace

The main technologies that have affected the accountancy arena are sophisticated software packages such as Xero. Offering a cloud-based system to digitise everything from receipts filing and mileage logging to invoice generation and recurrence, it has transformed the way businesses handle their book keeping. This move to app-based software will continue to evolve and gather pace, and more and more businesses will adopt this technology as they favour a way to do business ‘on-the-go’, making life simpler. It has also made it significantly easier for accountants to do their job – with all the necessary ‘paperwork’ in one place.

Many businesses have thus far been using Sage – a popular accountancy software – and Sage has responded to the emergence of software competitors with the launch of Sage 24. At Adams Moore, we offer both Xero and Sage 24, to provide clients with the best systems available. Both of these allow us to log into the software and access all accounts at the end of the year, making tax return filing stress-free.

Additionally, Making Tax Digital, HMRC’s plan to make it easier for businesses and individuals to manage their tax efficiently and accurately – effectively spelling the end of the tax return – is currently being piloted and could be live by 2019. This would see all businesses having access to their own personalised digital tax account, making use of real-time technologies and allowing HMRC to interact digitally with businesses.

How accountants will continue to add value

You might think accountants could be quaking in their boots with the thought of technology in accountancy potentially doing them out of a job. However, there will be a variety of ways that accountants can still add lots of value for businesses. Whilst software will just keep growing and impacting the sector, and digitisation continues to emerge, businesses will increasingly need advice and assistance. Business owners will need to ensure their accountant is tech savvy and can use the new technology – as well as have the capability to keep abreast of the roll-out of HMRC’s Making Tax Digital. These two developments alone will see some of the ‘old school’ accountants fall by the wayside, as historically accountants generally aren’t keen on engaging in new practices!

Using a technologically enabled accountant means businesses will benefit from better tax planning as a result of available data (through accountancy software), allowing more effective identification of cost savings to be made. Another huge benefit of using accountancy software will be that accounts will be done earlier and more efficiently, and the business will be aware of its tax liability earlier and can plan better. We never fail to be surprised by the number of businesses who still leave accounts filing to the last minute and are then surprised by what they need to pay. Earlier accounts filing through efficient software = more time to plan for tax bills and negates a real headache.

Businesses should also bear in mind how other developments will drive a higher need for accountancy advice. With the changes to dividends being taxed, and tax relief on rental properties, the knock-on effect on businesses is still happening. There is also auto-enrolment to consider – something which is affecting many business right now and will be compulsory for start-ups in the near future.

When looking for an accountant, businesses should look for a good mix of new technology offering and a demonstrable ability in using them, value-added services and a proven track record in staple accountancy functions and business advice. Embracing new technology in accountancy whilst having firm roots in traditional services is what any successful accountant of the future should aspire to.

 

Pay in 3 Days is a pledge by the business community to support prompt payment. This helps negate cashflow problems that can significantly affect a business
With late payments reportedly costing SMEs more than £2bn a year, it’s a real issue that needs addressing. Consequences of late payment range from having to rely on overdraft facilities, paying staff late or stunting business growth because of lack of funds to invest.

At the worst end of the scale, bankruptcy is unfortunately a common result of late payment. One in five small businesses say they face the potential of bankruptcy if they are owed between £20,000 and £50,000. according to a survey by Bacs Payments Schemes Limited. The same research highlighted that seven per cent of UK business feel they are already in the danger zone.

So, whilst there are ways that businesses can limit the exposure to late payment, the business community also needs to come together to support the cause of getting paid on time. The Greater Birmingham Chambers of Commerce is backing a scheme called Pay in 30 Days. Companies are being called upon to sign up to the scheme to pledge their support and stand strong in the face of late payment.

Benefits of supporting payment in 30 days are boosting the local economy and growing your business as a result of having cash flow to invest in staff or equipment. For the government, growing businesses means more tax and VAT for the pot.

Adams Moore supports the Pay in 30 Days scheme and is urging clients and local businesses to do the same. A simple online sign up makes the process quick and easy, and will make a significant difference in getting the word out there that late payment is simply not acceptable.

Business interested in learning more about ways they can help avoid late payment through better invoicing processes and good knowledge of customer payment procedures can access advice here.

 

 

 

 

It may be time to change your accountancy company if you're looking for a breath of fresh air for your business

Many established businesses may have been using their accountancy company since start-up, but should assess whether the firm is still offering the services that suit the needs of the business as it evolves. Instructing an accountant is usually one of the first things a business owner will do to ensure they can fulfil their obligatory duties to HMRC, and often just look for end of year accounts and tax return filing services.

However, as the business develops, so might the accountancy requirements, so it’s worth exploring additional services from either your existing accountancy company or another firm. End of year accounts, payroll, statutory compliance for tax and VAT and management accounts are just some of the staple services most accountants will offer – but it’s worth checking out what else is out there.

Help with business growth

For businesses looking to grow, a firm that can help them with advice on funding sources and getting accounts in order to aid a successful finance application, is a must. Effective forecasting and planning will be needed to ensure business growth is underpinned with robust plans – so finding an accountancy company that has a strong track record in this area is advisable. If you already have an accountant, ask them about their business advice and growth services and how they can support you. Money spent on advice to get it right first time will reap rewards.

Guidance on avoiding pitfalls

There are a variety of pitfalls you’ll want to avoid as a business owner such as cash flow issues, late paying customers and not properly assessing the market for a new product or service. A good accountancy company can help with all of this – ensuring you have an arsenal of tactics to ensure cash flow runs smoothly and customers pay on time. Knowledge of how to submit the invoice in accordance with the customer’s processes, adequate follow-up and gentle reminders when invoice due dates are approaching, will all help greatly and will be something your accountant can advise on. Cash flow is the biggest business killer so help to avoid issues in this area will help your business no end.

Opening your eyes to the bigger picture

As well as identifying and avoiding pitfalls, there may often be business opportunities that slip by because you’re either too focused on the day-to-day to see them or just don’t have the experience or knowledge to capitalise on them. An accountant that offers additional support services can be instrumental in catapulting your business into a different league. Having a thorough health check of the business, with recommendations and strategic planning support, could be the new lease of life your business has been waiting for. Many forward-thinking accountants offered unlimited support on a fixed-fee basis – so you don’t have to worry about escalating costs but have the security of ongoing, high-level support.

So, if you’re stuck in a business rut and need a breath of fresh air for your business, ask your accountant what else they can do for you, or explore what’s out there!

Anyone interested in additional services offered by Adams Moore such as Board Support, Business Protect and Business Review, get in touch for a no obligation chat on 01827 54944

 

 

 

 

 

 

 

 

 

 

Effective accounts management should be top priority for businesses, for smooth business functions and enhanced successWith the new year well underway, there may be a variety of business plans or resolutions you’ve pledged. However, in any business, effective accounts management underpins a successful operation, so this should be top of your resolutions list if it hasn’t been a priority in your business thus far.

Proper accounts management is the kingpin of business. Here are some reasons why getting accounts in order is crucial.

Making lifer easier when it comes to tax return filing – whether you’re conducting your own tax return submission or using the help of an accountant, having proper accounts kept in an orderly manner, with all expenses and income logged along with corresponding bank statements and receipts, will help the process enormously. If the process of manually recording expenses and keeping reams of receipts gets you in a tangle, consider investing in accounting software, which automates the process for you. With recurring invoice generation, digitalised expense logging and receipt filing – among other features – all kept secure in a cloud-based system that can be accessed from a mobile device with a fingerprint log in, you might wonder how you managed without this technology.

Increasing chances of access to finance – looking for finance to take your business to the next level or to invest in vital equipment or more staff? Gaining bank finance can be a difficult enough task, but nigh on impossible if your accounts are in a mess. Whilst alternative lending sources means the bank no longer has to be the primary source of lending and your first port of call, private investors or crowdfunding organisations will still want to see some robust accounts. 

Heading off a potential crisis – forearmed is forewarned, and with effective accounts management, you’ll be able to identify any potential financial issues the business may face and help put in place a strategy to deal with them. Having a non-routine approach to book keeping is a recipe for disaster and can often mean potential cash flow problems are discovered too late to be able to deal with them. Cash flow is one of the biggest business killers, so don’t let it ruin yours. Additionally, having good, orderly accounts means you can execute business planning much more effectively.

Adams Moore offers accountancy software Xero, to help with bookkeeping. To find out about Xero or any other aspects of accounts management, get in touch on 01827 54944.

 

 

 

 

 

 

 

 

 

Knowing how to complete self-assessment is a must for self-employed and those who receive income from sources outside of their regular jobJanuary can bring a new start, exciting prospects and new year’s resolutions – but for business owners who have not yet submitted their self-assessment tax return, it can bring stress. Knowing how to complete self-assessment is a must, if the dreaded task has not already been done. So, here are a few pointers to help you on the way to getting this duty fulfilled.

Know the deadlines

The deadline for filing the self-assessment tax return is 31st January, 2018. However, if you have never filed one before, you’ll have to register with HMRC first. You must allow up to 20 days for this registration to go through – as you’ll need an activation code –  so time is of the essence! Failing to register in time is not an excuse in HMRC’s eyes, and automatic £100 fines will be issued to those not submitting self-assessment on time. If you want HMRC to collect your tax from wages and pension, the deadline for submission is 30th December. This is only for people eligible to pay tax in this way – which is those who owe less than £3,000 and pay tax through PAYE.

Be prepared with all required information

One of the most important elements when considering how to complete self-assessment is having the necessary information to hand. You will be required to enter details from your accounts if you are self-employed, P11D and P60 forms from employers if you are employed, information on tax deductible elements and bank statements. You will also be required to fill in details of income from other sources, such as dividends from trusts. Having all this in one place won’t be a problem if you have been diligent on book keeping. If not, make it your new year’s resolution!

Call for help instead of burying your head in the sand

HMRC provides a variety of self-assessment help resources on its website, such as videos and webinars that people can join to learn more about how to complete self-assessment. These can be invaluable. However, if it all just gets too much, getting a professional to help could be the answer. Appointing an accountant to do the self-assessment tax return on your behalf can remove the burden and relieve your stress, and is often well worth the outlay. However, with the deadline fast approaching there really is no time to waste if you are planning to do down that route.

Need help with your self-assessment return? Get in touch now on 01827 54944.

 

 

Business planning at Christmas is vital to head off cash flows issues in the new year. Make resolutions now for better planning for your business at ChristmasBusiness planning at Christmas should be high on the list for firms in the months and weeks running up to the big event. With Christmas now just days away, you will probably all be either frantically working to get on top of deadlines and deliver agreed products or services before the break, or winding down in readiness for some festive fun. Or, for those involved in industries such as retail, it can be one of the busiest and most stressful periods.

Whilst Christmas is a time many of us look forward to, it can throw up issues such as cash flow, as finance offices close down, perhaps leading to late payments from customers. Whilst we’d hope that everyone is prepared, for those who aren’t, perhaps it could form the basis of some new year business resolutions. Here are a few suggestions:

Plan, plan, plan – we said it three times because it’s really important! Business planning at Christmas around cash flow or a potential slow start to the new year is vital in managing it effectively. Ensure invoices are submitted promptly in anticipation of accounts department shut downs, and chase them through to ensure payment is being processed. Find out about the working schedules of your customers over the festive period, to ensure you can get everything in and processed before they close, so they have no excuse not to pay you!

Create plan B – there can never be too much planning, but sometimes even the best laid plans can go awry. Have a contingency in place to cover eventualities such as late payment, and the higher expenditure that the season can bring, such as staff parties, client entertaining or higher utility bills. Try to limit or postpone unnecessary spending. Some businesses even hold their Christmas parties in the new year, capitalising on lower costs than having it in the peak festive season, and delaying the expense. Staff might even enjoy having something to look forward to at what can often be a bleak time.

Don’t panic – providing enough planning is in place, any issues will be highlighted early on and can be catered for. For instance, if, despite following the above advice, there might still be a shortfall in cash in the business, consider putting in place some temporary funding to cover the difficult period. Forearmed is forewarned, and as long as a potential crisis can be identified early enough, it can be averted with some short-term funding measures. Speak to your accountant about options such as invoice financing or alternative lending sources.

Christmas can provide a steep learning curve for the following year. Note the mistakes and the impact on your business, and make a resolution to learn from them. Whether it’s late filing of year end accounts, not submitting invoices promptly or chasing them through before the festive shut down, there’ll be a check list that is born from a Christmas not properly planned for, which will ensure a better plan for the following!

Whatever your situation, we hope that you manage to find some downtime to spend with family and friends, and enjoy the season of goodwill. A very Merry Christmas from us all at Adams Moore.

 

 

Understand what are expenses so you can ensure you plan any Christmas expenditure, from client gifts to staff parties, tax efficiently“What are expenses” is a question often posed to us, and still causes some confusion among business owners. This is exacerbated in the festive season when there can often be all sorts of extra costs, so working out what are expenses when it comes to expenditure at Christmas time will help business owners claim for the right things, and understand what can be offset against tax liability.

So whether it’s a staff Christmas party, client gifts or a cab home, make sure you’re in-the-know when it comes to what are expenses that can be claimed for.

Christmas staff parties – whether you’re treating staff, or yourself if you work alone (it is Christmas after all!), there are some rules about exemptions from tax duties. Events such as annual Christmas parties, summer social events are exempt from tax and NICs – and 100% of the cost can be written off as a business expense – as long as it is available to all employees and doesn’t exceed £150 per head. It’s important to note this is a total figure for the year, so if you blew some of the budget on the summer event, this will need to be taken into account when planning the Christmas soiree. If employee partners are invited, the cost should still not exceed £150 per head for each employee invited.

Client/customer entertaining – you may want to treat your clients or customers at Christmas time, to get in the party spirit and thank them for their custom over the year. This is tax deductible, however, only 50% of the cost can be classed as a business expense. This means you’ll foot the bill for the other half. This might be a contributory factor when deciding who to take out, and where to take them!

Christmas gifting – giving gifts is a significant part of Christmas, and when it comes to treating clients, Christmas gifting provides a great opportunity to do just that. HMRC will allow a business gift worth up to £50 in any tax year. It should be a gift relating to business (stationery items, for example), must carry a ‘conspicuous’ advertisement for the company, and cannot be food, drink or tobacco. Anything exceeding £50 would be disallowed in its entirety, not just the amount by which it exceeds the £50. When it comes to gifting for staff, anything over and above the annual party allowance is taxable.

So before you pull a cracker, don your Christmas hat and start swigging the fizz, make sure you plan your Christmas expenses as efficiently as possible to reduce tax burden.