Author Archives: Clare Vaughan

What responsibilities do directors have?

As a director of a limited company, you have many responsibilities.

And as your company grows bigger, doing what’s required to meet those responsibilities becomes more onerous and time-consuming. That’s because there are more opportunities within larger companies for mistakes to be made outside the purview of a director.

Companies Act 2006

The Companies Act 2006 details the statutory duties of all directors into seven categories:

  • Act within your powers as a director
  • Actively work to make your company successful and profitably
  • To use your independent judgement
  • To act with reasonable “care, skill, and diligence”
  • Avoid conflicts of interest (you can not enrich yourself to the detriment of your firm).
  • Do not accept benefits from third parties
  • Declare any interest you have in proposed transactions or arrangements with your company (for example, if your company purchases something from another company in which you have a shareholding and/or controlling interest)

Tax and accounting issues

As a director, you must:

  • keep good company records
  • file your accounts to Companies House
  • file your Company Tax Return
  • pay Corporation Tax
  • send HMRC a personal Self Assessment every year

In most cases, directors involve accountants like Kelsall Steele to assist them with tax and accounting issues.

It is very important that you are 100% open, honest, and up-front with your accountant because your accountant can only work on the information they have been given. Always provide your accountant with everything they ask for.

That’s because even when you hire an accountant, you and your other directors are personally legally responsible for the maintenance of proper records, the filing of accounts and reports, and the payment of any taxes due.

You have a duty to make sure that your business trades solvently, that you correctly pay staff at the National Living/Minimum Wage or higher, and that you make payments of income tax and National Insurance to HMRC on time.

Keeping Companies House and HMRC up-to-date

You must inform HMRC if your business name, your personal name, or your personal/trading address changes or if you appoint a tax advisor or an accountant like Kelsall Steele.

You also must let Companies House know within a fortnight if the following change:

  • the location of your business records
  • directors’ personal details
  • appointing or ending the appointment of the company secretary.

In addition, you need to complete and file a Confirmation Statement each year to Companies House – these new Statements have replaced the old Annual Return form. You must also produce and keep up to date a register of Persons with Significant Control (PSC) within your company. The PSC register is filed as part of the Confirmation Statement.

Your confirmation statement will also contain details of your company capital, shareholder information, and your SIC code (Standard Industry Classification which denotes your line of business).

Working with shareholders

Shareholders own the business and have the right to vote on:

  • whether to change the company’s name
  • whether to remove a director
  • whether to change the Articles of Association.

In most cases, a vote can be carried by a simple majority whereas others may require a higher level of agreement (“special resolution”).

Other important considerations

The board and every director serving on the board must work to the responsibilities required under the Health and Safety at Work Act of 1974. Failure to do so may result in a criminal offence against one or all of the directors.

You must make sure that you take out all relevant insurances (for example, Employers’ Liability, Public Liability, Professional Indemnity) and follow the relevant display notices for each insurance certificate.

Talk to your accountant

If you want to talk to us about the responsibilities involving in being a director, call us at any time on 01872 271655 or email enquiries@kelsallsteele.co.uk.

Is someone undercutting your prices?

Even if your customers seem extremely happy with your company, when a new business comes along offering lower prices or better deals, they’ll often follow them in a heartbeat.

The fact of the matter is that, for many customers, price comes above all else. You could deliver a world-class customer service, be a model of corporate social responsibility, and have the fastest shipping in your industry. But ultimately, if someone is greatly undercutting your prices, even the most loyal customers could jump ship to save their own cash.

So what can you do? Follow Kelsall Steele’s guide to fighting back against the competition.

Added bonus – offer free extras with your usual prices

This is an effective way of making your customer feel they’ve got a better deal even if they could have paid less elsewhere. And if you’re not willing to permanently offer the freebies, can simply describe them as “time limited”.

A good example of this is offering free delivery over the Christmas period. Limited time only deals tempt customers into buying, and savvy shoppers will be eager to avoid typical additional costs to the goods they want, which will give you an edge over your competitor.

If a rival company charges £100 for a product but doesn’t deliver but you charge £120 with free delivery, a customer will often choose you to avoid the personal burden of arranging and paying for delivery themselves. And if that means multiple customers choosing you over the competition, not charging for delivery will pay for itself.

Better deals – cluster pricing and voucher discounts

“3 for 2” and “buy one get one half price” will always catch a customer’s eye. Feeling like they’ve got a good deal outweighs the fact they may have only initially wanted one in the first place.

Most household names in the pizza delivery market are well known for offers like this. A single pizza may cost around £12 to £17 on their own, but when ordered with another pizza using the right voucher or during the right ‘happy hour’ time frame, the price is almost always around £20.

This is an extremely clever and effective pricing strategy that means customers feel like they’re getting an amazing deal. Most people wouldn’t pay £17 for a single pizza, so the deal makes them feel that they’ve ‘won’.

If your customers tend to order products in particular combinations, making a deal out of them with a time-limited voucher can both reward existing customers for their loyalty to your company and attract new customers looking for a good deal.

This method may lower your unit margins but it’ll greatly increase your average order value and help to keep customers coming to you without having to lower your prices.

Know your enemy – price matching

Find out what your competitor is charging. You could search on their website or even call anonymously to find out what their prices are.

Once you have them, compare the numbers with your own price list. How much less are they charging for the same goods and services as you? Does their pricing seem viable?

As you’ll know, supermarkets very publicly undercut each other’s prices and usually advertise ‘price match guarantees’ so their customers don’t feel the need to switch to a new store offering a better price.

Work out how your cashflow would be affected if you were to offer to match their pricelist.

Say you charge £100 for product A, but your competitor charges £90 for it. Reduce your sales figures for that product by 10% on your cashflow and P&L forecasts. Do this for all of the products both you and your competitor sell. Is your competitor’s business actually viable?

Of course, offering a product for less could positively impact your sales figures. But that might mean you have to scale up for extra capacity to produce your pizzas – more people, more ovens, more bikes. Would you actually make any more money from selling 50% more pizzas and loading your business with fixed costs?

If not, price matching may not the best option for your company. Another drawback is that you and your competitor could end up in a price war – knocking down prices to stay ahead only for your competitor to follow suit until neither of you can afford to pay your overheads.

It’s important to think about the future too. It’s so much easier to drop your prices than it is to raise them. If you win the price war and your competitor shuts up shop, it’s unlikely your customers will be happy going back to the old levels again.

Keep profits high – bring overheads down

When a competitor is undercutting your prices, you may be solely focused on increasing your sales. But it is just as important to remember your outgoings too.

If you have to pay out over the odds for your utilities, processing fees, internet or rent, you’re never going to get the profit you’re hoping for.

Scrapping useless expenses or renegotiating with suppliers can cut your annual overheads greatly, leaving you with more money at the end of the year for profit or to run further promotional deals.

Talk to an expert

If someone is undercutting your prices, you need to act quickly and get your fightback plan together. Speak to the Kelsall Steele team for expert, impartial advice on any deals you’re thinking of offering and how it might affect your business.

Tax Return Excuses

Whilst the majority of us manage to submit our tax returns in a timely manner, there are always a number of late filers, and with late filing normally comes an excuse!

HMRC have again released their list all time most bizarre excuses offered by taxpayers who left it a little late in filing their self assessment returns.

This year’s deadline for the completion and submission of your self-assessment tax return is 31st January 2017. Time is fast running out, so if you’ve been putting it off, now is the time to get your accounts in order and submit your tax return to the revenue. Failure to meet this deadline will result in an automatic £100 fine.

HMRC are always open to accept reasonable, legitimate excuses for the late filing of returns, however if you’re thinking of using any of the classic lines on this list, I would think again!

1. My tax return was on my yacht, which caught fire.

2. A wasp in my car caused me to have an accident and my tax return, which was inside, was destroyed.

3. My wife helps me with my tax return, but she had a headache for ten days.

4. My dog ate my tax return…and all of the reminders.

5. I couldn’t complete my tax return, because my husband left me and took our accountant with him. I am currently trying to find a new accountant.

6. My child scribbled all over the tax return, so I wasn’t able to send it back.

7. I work for myself, but a colleague borrowed my tax return to photocopy it and lost it.

8. My husband told me the deadline was the 31 March.

9. My internet connection failed.

10. The postman doesn’t deliver to my house.

*Source: http://economia.icaew.com/en/news/december-2016/the-top-ten-worst-late-tax-return-excuses

 

Accounts and Auditing Independence

There is always much scrutiny in the industry and in the press about the ethics of auditors especially when big cases hit the press such as Enron or Tesco.  One of the largest threats to a firm like Kelsall Steele is independence, being able to separate the work surrounding year end accounts, management accounts, budget preparation and the one off year end exercise of the statutory audit.

An audit must be carried out without the non-audit work affecting the opinion to be given on the audit report.  We always flag to our clients this potential issue and we talk about how we introduce safeguards to negate the threat of our independence.  We often have separate staff preparing the accounts to those carrying out the audit work and we make no decisions for the client.  Every posting to the bookkeeping software, every adjustment to the accounts, all accounting estimates are decided, agreed and implemented by our clients.

We therefore sidestep the self review threat which goes hand in hand with this issue as the client is making his/her own adjustments to their accounting systems.  We are able to provide the background to decision making, such as implementation of FRS102 but the end game of writing down goodwill, for example, or valuing freehold properties lies with the client as they are the most knowledgeable people in their own businesses and are best placed to make the ultimate decisions.

If you would like to discuss your audit requirements with us, please give us a call.

Annual Confirmation Statement

Introduced on the 30th June 2016 as a direct replacement for the Annual Return (Companies House form AR01); the Confirmation Statement (Companies House form CS01) is a simpler version of the Annual Return, yet serves the same purpose of confirming the details held at Companies House for your Company or LLP are correct.

The Confirmation Statement is simpler in that as long as there are no changes to the information Companies House holds for your company, you simply need to check and confirm the details without the need to to re-enter previously filed information.

People with Significant Control

We previously wrote about the Register of People with Significant Control (PSCs) – for companies registered before 30th June 2016, information about PSCs will need to be included in their initial Confirmation Statement. Companies incorporated after this time will have provided PSCs details during the incorporation process.

How to file and cost

The easiest way to file your Confirmation Statement is online via Companies House Webfiling or a software filing application. Not only is this easier, as the online forms benefit from automatic checks and pre-population but it’s cheaper also. To file the CS01 form by post will cost £40, whereas filing the form online costs just £13.

Filing deadline

A Confirmation Statement, as with an Annual Return, must be filed each year. The date this is due (the ‘confirmation date’) falls 12 months after the incorporation date or ‘made up’ date of your final annual return. Filing of the Confirmation Statement must be completed within 14 days of the confirmation date. This is a reduction to the 28 days previously allowed for Annual Returns.

You can find further, more detailed information on the Gov.uk information page. However, should you have any queries feel free to contact us.

Marriage Tax Breaks

Marriage Tax Breaks

For those who want to leap into marriage this year (according to an old Irish legend, women are allowed to propose to men on 29th February) there are some financial breaks for taking the plunge:

Marriage Allowance

You may be able to claim marriage allowance to allow you to transfer 10% or £1,060 of your Personal Allowance to your husband, wife or civil partner (in 2016/17 this rises to £1,100). This reduces their tax bill by up to £212 in the tax year. To be of benefit, you as the lower earner should have an income of £10,600 or less.

Capital Gains Tax (CGT)

A couple can pass ownership of assets between them free of tax (unless you separated or didn’t live together at all in that tax year).  And if you are selling assets that would attract CGT, you will be taxed on any gains over £11,100 in 2015/16 but as both spouses have a CGT exemption, assets may be transferred and shared so that effectively a couple can realise gains of £22,200 before CGT is due.

Marriage gifts

If family are feeling generous, there may be no inheritance tax on wedding or civil partnership gifts worth up to £5,000 for a child, £2,500 for a grandchild or great-grandchild and £1,000 to anyone else.  The gift must be given on or shortly before the date of the wedding or civil partnership ceremony.

Inheritance Tax (IHT)

Your estate is exempt from IHT if you left everything to your husband, wife or civil partner (who lives permanently in the UK).  Again married couples and civil partners can give any value of gifts to each other during their lifetime without IHT being due on them.

There are more benefits to being married than you may have thought so maybe consider taking that leap! For more information on any of the points in this article you can contact Clare Vaughan at clare.vaughan@kelsallsteele.co.uk or 01872 271655

Budget Highlights

Further to the Chancellor’s recent Summer Budget, some of the key headlines for our small and medium businesses are as follows:

Corporation tax

  • The Annual Investment Allowance has been set at £200k from 1 January 2016 for an indefinite period, giving businesses a chance to plan their capital expenditure.
  • The rate of corporation tax will be reduced to 19% from April 2017 and to 18% from April 2020;
  • Corporation tax relief will be removed from companies who write off the cost of goodwill purchased on or after 8 July 2015.
  • Dividends paid out of company profits will see a change in the way they are taxed in the recipient’s hands; from April 2016 the dividend tax credit will be abolished and a new dividend tax allowance of £5,000 a year will be introduced. Dividend income above this allowance will be taxed at 7.5% for basic rate taxpayers, 32.5% for higher rate taxpayers and 38.1% for additional rate taxpayers.

Payroll and National Insurance

  • The annual Employment Allowance for National Insurance Contributions will be increased from £2,000 to £3,000 from April 2016.  However, companies where the director is the sole employee will no longer be able to claim this allowance.
  • The National Minimum Wage (NMW) for employees over 21 will increase from 1 October 2015 to £6.70 per hour; from April 2016 a new National Living Wage (in the form of a premium on top of the NMW) will be introduced for workers aged 25 and above, initially set at £7.20 per hour, it is expected to rise to over £9 by 2020.
  • The personal allowance is set to rise from £10,600 in 2015-16 to £11,000 in 2016-17 and to £11,200 in 2017-18.

Other key proposals

  • Farmers will be allowed to average their incomes for tax purposes over five years rather than two from April 2016.
  • From 6 April 2017, landlords will no longer be able to deduct all of their finance costs from their residential property income, they will instead receive a basic rate deduction from their income tax liability for their finance costs.
  • Rent-a-room relief will be increased from April 2016 from £4,250 to £7,500.
  • Inheritance tax nil-rate band (NRB) will remain frozen at £325,000 until April 2021; with an additional NRB for the main residence if passed to a direct descendant of maximum value £100,000 in 2017/18, rising £25,000 per year until it is £175,000 in 2020/21. This NRB cannot exceed the value of the property, and is tapered away to £nil for estates exceeding £2m in value.  Any unused residence NRB can be transferred to the surviving spouse
  • From April 2017, IHT will be payable on all UK residential property owned by non-domiciles including property held indirectly through an offshore structure.
  • From April 2016, the Government will introduce a taper to the Annual Allowance (the limit of tax relieved pension saving that can be made by an individual or their employer each year) for those with adjusted annual incomes (including their own and employer’s pension contributions) of over £150k;
  • From April 2017, anyone who has been resident in the UK for more than 15 of the past 20 tax years will be deemed UK-domiciled for VAT tax purposes and be liable to UK tax on their worldwide income and assets;
  • Government to consult on improving the effectiveness of IR35 legislation to counter disguised employment.

Late Filing Penalties – Companies House

Late filing penalties

Many companies are still failing to meet the nine month filing deadline for their accounts and are not aware of the deadline for filing of their company’s Annual Return, it is not surprising when a company has four deadlines to meet, the accounts filing, the Annual Return filing, the Corporation Tax payment and the Corporation Tax return filing that deadlines are sometimes missed.  Monetary penalties are imposed by Companies House for the late filing of accounts and potential striking off action can be implemented for late filing of Annual Returns.  HM Revenue & Customs also impose their own fines and interest with regard corporation tax returns and corporation tax payments.

Companies House eReminders

Companies House offer a free, convenient eReminder service which provides those companies who register you with a timely electronic reminder of when accounts and Annual Returns are due for filing.

Recent analysis of the Companies House reminder service  has revealed that email reminders are more successful in achieving on time filings, and avoiding those late filing penalties, than paper reminders.

The email reminder service is free and can be benefit as follows:

  • Up to 4 people, including your accountant, can receive the reminder.
  • Within the reminder is a link for you to file say the Annual Return.
  • It’s more convenient and better for the environment.

Here at Kelsall Steele, we of course keep a detailed tracker of all of our clients’ deadlines and regularly send our own reminders, however receiving the email reminders straight from Companies House would certainly give a belt and braces approach in order to avoid late filing penalties for your private company accounts.

Accounts Late Filing Penalties

Not more than one month £  150
More than one month but not more than three £  375
More than three months but not more than six £  750
More than six months £1,500

Be Aware:

  • The penalties will be doubled if the accounts are filed late two years in succession.
  • If you form a new company, you must deliver your accounts to Companies House within 21 months of the date of incorporation so you do not get until a month end, it could be an odd day of the month.

If you have any queries or concerns over the eReminder email service, the accounting or Annual Return deadlines, please give us a call.

Engagement through Marketing

Engagement through Marketing

You may think that we accountants are focussed on our clients’ businesses, profit maximisation and growth strategies at all times, which of course we are, but sometimes we have to focus on our own business and enter the complex world of marketing.

Social Media strikes fear into the hearts of those not used to it and I am still unclear on the whole ‘twit’ and tweet’ thing but here at Kelsall Steele we have embraced this and have regular updates on our Twitter feed, Google+, Facebook page and LinkedIn.

Networking is a big part of our business also and we are regular attendees at Chamber breakfasts, Hall for Cornwall gatherings and encourage our whole staff to take their business cards and go out and meet people, our junior staff can have as many, if not more, contacts than the partners so it is key they are empowered to be social.

Web video is a growing trend as YouTube is the second largest search engine and we have recently engaged a firm to create a Kelsall Steele video for the Truro Livestock Market, please keep an eye out for our short film on Wednesdays in particular.  Watch this space also for a Kelsall Steele bespoke web video in early 2015.

Just like yourselves, we are looking to grow and strengthen our business, and would welcome new followers to our social media, the opportunity to meet people at networking events and the chance to meet new clients at our initial free consultations.  We are a very friendly bunch of accountants so please do give us a call

Charity Mergers

Merging Your Charity

It may be that you would like to bring in more skills or additional funds to your charity but are not sure that standing alone will present the charity with the opportunity to grow, attract new funders or just retain stability.

It is possible for two or more charities to merge into one organisation by one of the charities taking over another’s activities and assets or by forming a completely new charity to take over the same for all charities involved.

If merging is something you, as Trustees, are considering, then be sure to check that the governing documents allow a merger and that all charities involved have similar charitable aims and core values.  It may be that you will need to obtain permission from the Charity Commission.

Things to consider

The merger should be in the best interests of the charities’ beneficiaries, the Trustees should be united in believing that a merger is the best way forward and certain questions, amongst others, need to be answered:

  • Have we approached our beneficiaries for their view?
  • What will be the risks and benefits for our charity of a formal merger?
  • Are there any other forms of collaborative working we could explore that might achieve the same benefits?
  • Have we considered the full cost of merging?
  • Are we carrying out a due diligence exercise?

Charities need to be clear about all factors influencing the decision, can the charity reach more services, will the merger reduce overall costs, can the charity overcome financial uncertainty, will it achieve a better public profile.

There is much to consider but it may be worth exploring and the Charity Commission provides good guidance on this subject.

For more information on this topic, please contact Clare Vaughan on 01872 271655 or at clare.vaughan@kelsallsteele.co.uk.

Financial Reporting Standard – FRS 102

UK GAAP to FRS 102 – Key Points

The Financial Reporting Council has replaced our well known UK GAAP (United Kingdom Generally Accepted Accounting Practice) with FRS 102 (Financial Reporting Standard 102) with effect from periods beginning on or after 1 January 2015, with early adoption permitted.

As most of our small and medium sized entity clients have their financial statements prepared under UK GAAP, the introduction of this new Standard may have a major impact on the reporting.

 

Overview of changes

The adoption of FRS 102 will cause changes to the look and layout and disclosures of the financial statements but more importantly will affect the numbers as well.  The starting point for the transition will be to restate the opening balance sheet. So whereas it may seem that the switch will not affect us all until 2016 when we come to prepare 31 December 2015 accounts, if a company prepares its financial statements to 31 December 2015, its date of transition (i.e. opening balance sheet position) will be 1 January 2014 – so in the past.

 

A few of the key areas affected

 

Investment Property

Currently, UK GAAP requires that investment properties are revalued each year to their open market value with revaluation gains or losses taken to the revaluation reserve and the statement of total recognised gains and losses (STRGL) with no effect on deferred tax. FRS 102 requires revaluation each year to fair value with value changes taken to the profit and loss account and any increase in the property valuation to be matched with the appropriate deferred tax position.

Intangible Assets and Goodwill

Current UK GAAP presumes a maximum useful life of 20 years but this presumption can be rebutted with proper justification.  Under FRS 102, the view is that intangible assets and goodwill always have a finite life AND if no reliable estimate can be made, the useful life will be limited to a maximum of five years.

Holiday Pay Accruals

Under UK GAAP, there is no explicit requirement to provide an accrual for holiday pay entitlement at your year end.  With the implementation of FRS 102, an accrual is required so if the holiday year and accounting year are in line, there should be no significant impact. However if they do not align, unused holiday entitlements at the financial year end will need to be compiled to enable the accrual to be accounted for.

Interest Free Loans, eg Director’s Loan Accounts

Under the current regime, the loan could be carried on the balance sheet at the loan capital amount and, if interest was applied, this would be charged through the profit and loss account.  The major change under FRS 102 is that EVEN an interest free loan will need to be recognised at its present value having discounted using a market rate of interest.  E.g. if a director has introduced £100,000 interest free for say 10 years, this will then need to be recognised as a liability in the company at say £61,391 at a 5% market interest with an immediate credit to the profit and loss account of £38,609 fully taxable in year one.  Over the remaining years, the company will then have an annual tax deductible interest debit to recognise the company’s interest-free arrangement. These are a few of the key headline areas and many accounting lecturers have expressed this is the biggest change in accounting for decades.

If you have any queries or concerns, please do not hesitate to contact us on 01872 271655

Salary, Dividends or both?

Salary, Dividends or both?

You may have heard mention of tax efficient methods of extracting monies if you operate your business through a limited company, particularly with reference to salary and dividends.

Salary

Salary is subject to income tax and national insurance (NI), both employee’s and employer’s and any salary or bonus payment should be fully tax deductible in the company’s hands.

Dividends

Dividends are withdrawn out of post-tax profits and, up to the basic rate band, (currently £41,450) with no other income, these can be drawn at no personal tax cost to the individual due to a deemed 10% tax credit already paid.

So which is better?

Lets take as an example a company making a profit of £60,000 and look at three methods of extracting funds within a corporate vehicle. The assumption is that there is a single director shareholder with no other forms of income and the whole £60,000 is extracted by either salary only, dividends only or a mixture of salary and dividends.

salary-dividend-table

We can see from this table that the by taking a mixture of salary and dividend, there is a greater level of income in the individual’s hands and a lower overall tax cost by way of income and corporation tax. If the level of salary is taken to at least the lower earnings limit (currently £109 per week), this will ensure the individual’s entitlement to state benefits is preserved.

If this is something you are currently considering, or you’d just like some further information on the topic, please don’t hesitate to get in touch with Clare Vaughan on 01872 271655 or email at clare.vaughan@kelsallsteele.co.uk

HMRC Let Property Campaign

Let Property Campaign

Following on from the Property Sales Campaign which HMRC ran in the summer (as well as numerous other campaigns in recent years) HMRC are now targeting landlords with their Let Property Campaign.

This campaign targets landlords who have not paid the correct amount of tax, allowing for them to bring their affairs up to date under the most favourable terms. The Let Property Campaign is aimed at individuals rather than companies or trusts and will include landlords who are:

 

  • Renting out a single property
  • Renting out multiple properties
  • Specialist landlords, e.g. student or workforce rentals
  • Renting out a room in your main home for more than £4,250 a year or £2,125 a year if letting the property jointly, i.e. above the Rent a Room Scheme threshold
  • Living abroad and renting out a property in the UK
  • Living in the UK and renting a property abroad
  • Renting out a holiday home even if you use it yourself

As with other campaigns, using this facility does not guarantee that you will not be penalised but HMRC do say that they will view individuals in the most favourable light.

How to take part

The first step is to notify HMRC of your intention to make a disclosure under the campaign. This can be done by completion of the Let Property Campaign Notification form, which can be submitted via the Internet or post. Alternatively, you can telephone the Let Property Campaign helpline on 03000 514 479  indicating that you wish to take part in the scheme.

You will need to follow up with a calculation of tax owed to HMRC within 3 months of the notification, along with the disclosure form. The calculation will need to cover the previous 6 tax years unless there has been a deliberate error.

If you believe the Let Property Campaign may apply to you and would like assistance with making the disclosure then please contact Clare Vaughan on 01872 271655 or by email on clare.vaughan@kelsallsteele.co.uk.

Self-Assessment – filing your tax return on time

Filing on time

With the filing deadline of 31 January fast approaching for self-assessment, there has recently been published the 10 oddest excuses for sending in a late return.  The highlights of these run from ‘my goldfish died’, ‘my wife won’t give me my mail’, ‘I’ve been cruising round the world in my yacht’ and from an accountant ‘I’ve been too busy submitting my clients’ tax returns’.

Excuses

HM Revenue & Customs accept reasonable excuses for late filing with some examples such as a failure in the HMRC computer system, problems with the preparer’s computer, a serious illness or not receiving the activation code in time.  However these are just examples and each case will be considered individually. HMRC would still need to see a reasonable effort has been made to meet a deadline.

Penalties

In normal circumstances, the penalty for late filing of the tax return is an initial fine of £100, even if there is no tax to pay or the tax due is paid on time.  After three months, an additional daily penalty of £10, up to a maximum of £900, applies.  After 6 months a further charge of £300 is imposed ,or 5% of any outstanding tax, whichever is greater.  There are also additional penalties for paying late of 5% of the tax unpaid after 30 days, 6 months and a year.

If you have any queries or concerns, please contact our tax experts

Considering becoming a Charity Trustee?

There are over 900,000 serving charity Trustees in England and Wales who have a real desire to make a difference to society and not only contribute their time and expertise to the aims and objectives of charities but learn from the people with whom they interact.

The responsibilities of being a Trustee are serious and far reaching and include:

  • Directing the affairs of a charity;
  • Ensuring it is well run and solvent;
  • Delivering the charitable outcomes for the benefit of the public;
  • Ensuring the charity complies with applicable charity law and if relevant with company law;
  • Ensuring the charity is run in accordance with its governing document;
  • Avoiding personal conflicts of interest; and
  • Using reasonable care and skill in your work as a Trustee.

These are the fundamental obligations of accepting a role as a Trustee and it is also worthwhile doing your homework before agreeing to the task, for example:

  • Learn as much as you can about the charity;
  • Enquire into their induction procedure for an incoming Trustee;
  • Attend Board meetings prior to accepting the role;
  • Meet the key staff and potentially beneficiaries; and
  • Review the filed charity accounts and governing document;

Becoming a charity Trustee should not be undertaken lightly as it can be a large commitment of time, onerous obligations and no remuneration.  However if the right people can come together on a Board to bring their experience, passion and knowledge in the advancement of a charity, it can be an enormously rewarding role.

Please see the Charity Commission website for more information on becoming a charity Trustee.

If you’d like any further information on this topic, please speak to Clare Vaughan on 01872 271655 or email clare.vaughan@kelsallsteele.co.uk

Business Rate Relief

Many small business owners have to focus heavily on cost scrutiny and management, a relief that is widely available to the small business entrepreneur is ‘Business rate relief’.

This relief is readily available if you use only one property and its rateable value is less than £12,000. Up until 31 March 2014, you will get 100% relief for properties of rateable value less than £6,000. The relief is tapered if the value is between £6,001 and £12,000.

There is also potential relief available if you have more than one property.

If your property has a rateable value below £18,000 you are considered a small business and your business rates will be calculated using the small business multiplier.

You can visit the Gov.uk website for more information on small business rate relief.

There are also special reliefs in the following areas:

  • Rural rate relief for businesses in rural areas with a population below 3,000.
  • Charities and amateur community sports clubs can apply for relief of up to 80% if a property is used for charitable purposes.
  • You can get up to 100% business rate relief if you start up or relocate to an enterprise zone.
  • Empty property relief for buildings unoccupied for 3 months, some buildings have further exemption such as warehouse, listed buildings, properties owned by charities.

Please contact your local council if the above could apply to you.

Rates are a heavy cost of running any business so it is worth checking that any relief available is being investigated.

If you’d like any further information on this topic, please speak to Clare Vaughan on 01872 271655 or email clare.vaughan@kelsallsteele.co.uk

Invoice Factoring

An increasingly popular method of regulating a business’ cash flow is to sign up to invoice factoring or financing and release the book debts quicker than the customers may pay you. It is therefore often appealing to start-ups or growing businesses. There are pros and cons of undertaking such a step as follows:-

Pros

  • You may typically receive up to 80-90% of the value of your outstanding invoices very soon after raising the bill, often within 24 hours.
  • The factoring company chases up the debt to take the task of debt collection out of your hands (factoring only).
  • You may be able to take out bad debt protection to cover a possible non-payment by a customer (non-recourse).
  • It will provide the immediate cash to assist you in growing your business.
  • You are not taking out a business loan but borrowing in line with work and bills already completed.
  • The security is against the book debts, not against the physical property or machinery of the business.

Cons

  • Financing costs can be in the form of interest, at 1.5%-3% over base of the value of the amount receivable calculated daily and applied monthly; fees, in the form of an administration charge and; bad debt protection (non-recourse).
  • Customers may be wary of being chased by the factoring company. Note, invoice financing may be preferable as you retain responsibility for your credit control function.
  • Credit limits may be set for your customers by the factoring company.
  • Exiting the agreement can be difficult.
  • Recourse factoring can mean you have to repay any debts that default.

If you are considering this option or would like to know whether it will benefit your business, please speak to Clare Vaughan on 10872 271655 or email clare.vaughan@kelsallsteele.co.uk

Charities and Public Benefit

The Charity Commission has recently updated and enhanced its guidance on public benefit. This has long been an area of scrutiny by the Commission particularly within existing charitable entities as to how they tick the tests of public benefit. With this detailed guidance, the Commission now recognises that there are three elements to public benefit in the life of a charity as follows:-

  1. Being a charity means being an institution which is for the public benefit. Understanding at the outset what public benefit means can help those looking to set up a charity.
  2. Running a charity means the charity trustees must carry out the charity’s purposes for the public benefit.
  3. Reporting public benefit provides a means to report within the annual accounts the main activities undertaken by a charity to carry out its charitable purpose for the public benefit.

There is guidance on the Charity Commission website regarding the detail of the above which seeks to clarify at the inception of a charity the purpose for its existence and to continually challenge trustees to ensure their charity’s purpose continues to be for the public benefit.

Should you require any assistance on this topic within your charity or are thinking of setting up a new charity, contact Clare Vaughan  on 01872 271655 or clare.vaughan@kelsallsteele.co.uk