It must be some six years ago I first met (virtually) Emily Coltman who was at the time working for a regional firm of accountants.

Emily was not long qualified but she was very interested in new technology and how this could help the smaller business, so no wonder that Emily has ended up as chief accountant FreeAgent.

I guess Emily felt she had more to offer because she has now published her first e-book – Finance for Small Business: A straight-talking guide to finance and accounting.

I have actually read it, cover to cover, before I decided to say anything about it.

It is another book worth reading if you are starting out on your own path towards self employment/small business.

There are a great many of these books, at Holden Associates we have our own £FREE New Business Kit.

So is it worth £10 (or £8 on Kindle), well actually Yes it is, and I have actually read the book rather than the promotional literature!

For the e-book click here.

For Kindle edition click here.

In the world of small and medium sized businesses change is an on-going feature of running a business. Some of the changes that occur are beyond the control of business owners. Frequently these changes emanate from statutory obligations to which the business must comply. For example changes that are instigated by Companies House or more commonly changes that come from Her Majesty’s Revenue and Customs (HMRC).

Different schools of thought

Even though HMRC have not confirmed it officially there is reason to believe that they are moving towards the closure the Time to pay taxation scheme. This is a scheme which allows small or medium sized businesses to delay or stagger payment of their taxes as long as they have prior agreement from HMRC.

A common and most obvious opinion is that any such change may result in financial hardship for small businesses. Staggering or delaying payment can have a positive effect of improving cash flow. As such the business is able to benefit from the delay in paying taxes. Satisfying taxation bills can mean that a considerable sum of money has to be paid out in one go. Inevitably this has the knock on effect of reducing any monies available to spend on a daily basis and may mean financial hardship. The ability to stagger the bill inevitably gives the business more options and an increased ability to manage their cash flow thereby improving the chances of survival.

Recent data

When compared to historical data dating back to 2009 figures show that HMRC has steadfastly declined repeat applications. As such one third fewer applications have been granted. The reduction in the number of businesses being able to delay payment coupled with the recent uncertainty in the current economic climate brings with it increased concerns for business owners. Statistics show that 9.3% of businesses who applied for time to pay in the first quarter of 2011 were refused permission to do so. This is compared to 6% in 2010 and 2.9% in 2009.

Allowing businesses to delay payment is a bonus during normal economic conditions; it can be a god send during difficult or turbulent times. Once again HMRC has not confirmed that the time to pay scheme will be scrapped but the writing is on the wall. Never the less HMRC still continues to offer a listening ear to businesses that find themselves in difficulty. Their Business Support Service can discuss options for payment and ways forward for the business. It is important that any options discussed be shared with your accountant as they will be able to add increase understanding to the situation.

Keeping abreast of changes

As well as working in your business it is equally important to work on it by keeping abreast of any changes that may or may or affect your business. The continued viability of any business depends on that business being able to satisfy taxation demands as such it is important to know what HMRC are doing or thinking about.

The new VAT turnover limits announced in the Budget with effect from 1 April 2011 are:

Registration           £73,000

Deregistration       £71,000

For any further guidance do not hesitate to contact Holden Associates.

Share This

With effect from 1 March 2011 new fuel advisory fuel rates for company car drivers have been announced.

For the new rates go to our website.

Share This

Rising taxation seems to be the new mantra for the 2011-2012 financial year. For most people it will be the rising cost of VAT from 17.5% to 20% in January 2011 on goods and services. For others who fall outside of the remit of PAYE scheme and earn in excess of £150,000 there will be the 50% tax rate to think about. Many self employed people may unwittingly find themselves caught up in the 50% tax scenario. As such they may find themselves having to pay extra money to the VAT man on 31st January 2011. Like it or not taxes and rising taxation will be a prominent feature of 2011-2012.

There is not much that can be done about the general rise in VAT to 20%. However, there is no doubt that those who fall into the 50% tax bracket will be looking for solutions to minimize the impact of taxation.

Incorporation of Partnerships

There has never been a better time for businesses to seriously consider the incorporation of their activities if they have not already done so. As a separate legal entity a company is charged corporation tax which is levied at 28% for larger companies and at 21% for smaller companies. Corporation tax has been at similar levels for many years. There is also speculation that rates are likely to be reduced in the near future.

More importantly the incorporation provides an opportunity to crystallize the value of a business as a capital gain, allowing up to £2,000,000 to be allocated to each partner at a reduced Capital Gains Tax (CGT) rate of 10%.

Although incorporation can trigger a liability of CGT it will also create a pool of tax paid reserves available to the owners to draw down, free of any further income tax or national insurance, as the business generates sufficient cash flow from its future trading profits. It may also be possible for owners to maintain similar levels of net drawings before and after incorporation whilst keeping overall tax levels lower.

Income Splitting

The higher income tax environment may lead to inclusion of non-earning or low-earning spouses and/or family members into family businesses. Equally sole traders should consider bringing in partners in order to limit taxation. There does however need to be good economic justification for sharing the income and profits across a wider base of taxable individuals.

In its simplest form a non-earning spouse undertaking administrative tasks for the business could take £20,000 of profits from a 50% partner and reduce the tax liability from £10,000 to £2,700. In incorporated businesses the use of dividends to reward a wider ownership base can keep taxable income levels below critical thresholds.

Finally....

As always time is of the essence - you will need to take action now if you want to reduce your January 2012 tax bill. A conversation with your accountant is the first positive step in reducing your tax burden.

With effect from 1 December 2010 new fuel advisory fuel rates for company car drivers have been announced.

For the new rates go to our website.

As previously announced in the March 2010 Budget, although many small business owners could be forgiven for not noticing, a revised penalty regime will apply to taxpayers who fail to file their tax returns on time or pay their tax liabilities in full and on time for:

• VAT and insurance premium tax;
• aggregates levy, climate change levy and landfill tax;
• air passenger duty, alcoholic liquor duties, tobacco products duty, hydrocarbon oil duties, general betting duty, pool betting duty, bingo duty, lottery duty, gaming duty and remote gaming duty; and
• other excise duties.

The revised penalties will:

• be introduced over a number of years;
• treat late payment of tax and late-filed returns separately;
• reflect the more frequent filing and paying obligations for these taxes and duties compared to direct tax;
• try to encourage filing and payment by the correct dates by imposing an escalating series of penalties, depending on the number of failures within a set penalty period. Further penalties will arise if there is a prolonged delay in filing returns or paying the tax due;
• include a right of appeal if the taxpayer has a reasonable excuse for the lateness; and
• be avoided where taxpayers have agreed a time to pay arrangement with HMRC (as regards the late payment penalties).

The key features of the revised penalty for late filing of quarterly returns are:

• £100 penalty immediately after the due date for filing (whether or not the tax has been paid);
• the failure also starts a penalty period, which is set for a year;
• if there are further failures within the penalty period, then the fixed penalty escalates by £100 for each of those subsequent failures, up to a maximum of £400 per failure. The penalty period is also extended to the first anniversary of the latest failure;
• if any of the failures are prolonged, then additional penalties of five per cent of the tax on the relevant return are charged at six and 12 months from the date of the failure; and
• if, by failing to make the return, the taxpayer is deliberately withholding information to stop HMRC from correctly assessing the liability to tax, then penalties of up to 100 per cent of the tax on the return may be chargeable.

The revised penalty for late filing of monthly returns is similar to the quarterly model as explained above, except that, the fixed penalties are £100 for the first three failures in any penalty period, £200 for the second three failures, etc., up to a maximum of £400 per failure.

The key features of the revised penalty for late quarterly payments are:

• if a taxpayer first pays late, although there is no penalty, it starts a penalty period, which is set for a period of a year;
• any further failures within that period attract a penalty of two per cent of the unpaid tax, as well as extending the penalty period to the first anniversary of the latest failure;
• a third failure within the period attracts a penalty of three per cent, with further failures attracting a maximum of four per cent; and
• if any of the failures are prolonged, then additional penalties of five per cent of the unpaid tax are charged at six and 12 months from the date of the failure.

The revised penalty for late monthly payments is similar in structure to the quarterly model above, except that, after the first failure, the tax-geared penalties are:

• one per cent for the next three failures in any penalty period; and
• two per cent of the next three failures, etc., up to a maximum of four per cent per failure.

Special provisions deal with circumstances where taxpayers change from a monthly to a quarterly return, or where exceptional payment obligations arise.

The necessary legislation will be contained in a Finance Bill to be introduced after Parliament’s summer recess.

So now you have been warned, be very careful not to be late with any filings or payments to HMRC in future, otherwise it could cost you dear.

Share This

Now live on our website are the details of the new fuel rates for company car drivers effective 1 June 2010.

Share This

The new rates for those on the Flat Rate VAT Scheme from 1 January 2010 are available here.

Share This

Now live on our website are the details of the new fuel rates for company car drivers effective 1 December 2009.

Share This