How to Pass an HMRC Compliance PAYE Visit

As a small business owner, there is always the possibility that HMRC will choose to pay you a visit to audit your PAYE records as part of a compliance visit.

If they do pay you a visit, their focus is usually on the following contentious items;

• Payments to casual employees
• Private Petrol
• Payments to Spouses or spouses travel costs
• Travel to work from home
• Travel for purpose other  than 100% business – eg – social events, golf days etc
• Home telephone
• Entertaining payments
• Expenses for use of home as an office
• Goods and services provided for free or below market value
• Clothing
• Accommodation
• Medical Expenses

As part of a visit, HMRC will wish to inspect;

• PAYE deduction working sheets
• Reconciliation of payroll records with P35 forms
• Treatment of starters and leavers
• Expense payments and paid benefits and P11D forms
• Compliance with dispensation agreements
• Compliance with National Insurance regulations
• Compliance with Contractors rules

 

Accountant Romford – Transform Accounting – Essex Accountants

Read Full Post »

Finance Departments – Gaining Competitive Advantage Through Internal Process Optimisation

Finance functions in the UK have always had a strong focus on costs and cost reduction. Most CFO’s like to set a good example by constantly looking at their own Finance department for cost efficiencies.

Traditional productivity levers like workforce reduction and automation for most organisations finance departments have been used extensively over the last two decades.

This focus has increased in its intensity over the last 4 years since the global recession began.

For most companies in the UK, this is a well trodden path however most are now experiencing diminishing returns as they attempt to repeatedly “transform” their finance functions in this way for cost reduction.

The days of easy simple staff reductions and automations are now behind most finance functions.

Treading this same path over again just results in a choice of either consciously taking decisions to do less with less resources and choosing which activities to stop, or the more common and far worse situation of attempting to do the same activities but with less resource. As many have found out, this path only leads to increases in risk, compliance and business support issues.

So, given the diminishing returns, what is the CFO under pressure to reduce costs to do?

The finance function is mainly made up of four key processes.

A good place to start is a benchmark exercise to consider the current in house processes against best practice and consider how these processes can be improved and streamlined where necessary.

Business Planning – The entire planning cycle.

Source to Pay (S2P) – The entire process from purchase requisitioning, supplier and product selection, order processing and payment.

Order to Cash – The process from sales order processing through to cash collection.

Consolidation To Report – The process of reporting at low local level, through to financial consolidation and subsequent management and statutory reporting.

For each of the above processes, the cost conscious CFO needs to look carefully at the three main areas of cost generation – staffing, consulting and systems costs.

The streamlining of a process may involve investment in systems and consulting, but the key is to take a bottom line cash view to any review.

Benchmarking of these key processes is always the right place to start, but is one that is so often overlooked by finance departments. It is only when current practices are carefully reviewed and compared to best practice that  a lack of investment in modernisation of techniques and systems can become apparent.  Comparison then of “as is now” with the best of breed should point the way to running a finance department that is as efficient and cost effective as the best can be achieved.

Accountant Loughton – Transform Accounting – Accountant Essex

Read Full Post »

Pay Less Tax – Director Loans and Interest

Pay Less Tax – Director Loans and Interest – How the Tax Works

If the owner of a limited company makes a loan to the company, then he is entitled to charge interest to the company.

Here is how the tax works.

When the company makes a payment on the loan, this payment will include an element of interest.
The company has to deduct basic rate tax at 20% on the interest – this is effectively the same as a bank that must deduct 20% basic rate tax on interest paid to savers.

Remember – this 20% is only levied on the interest, and not on any repayment of principle.

The company must also complete a form CT61 each quarter.  This form sets out the interest paid, and tax deducted and must be submitted to HMRC along with the withheld tax.

For the owner of the limited company – if you are a lower rate tax payer, then this 20% withheld tax will be sufficient and there is no further tax to be paid.
However, should you be a higher rate tax payer, then there will be additional tax to pay on the interest received and this will be included in your annual tax return.

Ongar Accountant – Transform Accounting – Accountant Essex

Read Full Post »

Real Time Information – Small business owners mustn’t ignore it

Recent surveys have shown that over a quarter of small business owners are still unaware of incoming changes to the way PAYE tax details must be filed.

And even more worrying, in the survey of 1,700 small businesses by the Federation of Small Businesses, only 16% of business owners stated that they were fully aware of what Real Time Information meant for their business and had made the appropriate preparations.

There is now less than 6 months before the changes are due to come into force in April 2013.

The survey also reported that of the firms that had prepared for RTI, over 30% had to buy new payroll software for their business.

If you have any concerns regarding Real Time Information and how it might affect your business, be sure to discuss this with your accountant in good time before April 2013.

Accountant Epping – Transform Accounting – Essex Accountants

Read Full Post »

Pay Less Tax – Charitable Donations and Your Business Tax

Charitable Donations and Your Business Tax

If you wish to make a charitable donation through your business, there are tax implications that should be considered to ensure that you do not pay too much tax.

Charity Must be Registered

If the charity that you intend to make a donation to is a registered charity, then you are able to claim corporation tax relief for the full amount of your donation.

You Must Not Exceed Your Current Year Profits

However, the amount of the donation must not exceed your profits in the current year – ie – you cannot claim corporate tax relief on losses.

Also, you cannot use carried forward tax losses from previous years to offset a charitable donation – it is only the current year’s profit that can be used.

A Real Donation

Finally, in order to receive the full tax relief benefit, you must not receive any benefit from the donation such as advertisements.

If you require assistance with your tax planning and charitable donations, please contact a suitably qualified accountant.

Loughton Accountant – Transform Accounting – Essex Accountant

Read Full Post »

Card Payment Protection – Latest PPI Ruling

The Card Payment Protection Company (CPP) faces a fine of £10m after being censured by the FSA for mis selling insurance products.

In addition to the fine, CPP have been ordered to set aside £14 m to pay compensation to customers wrongly sold their card protection insurance.

The ruling from the FSA stated that CPP sales agents were 2overly persistent” when selling their products, aimed to protect people against identity thefts.
In many cases, customers were already covered by their banks and credit card providers.

Tracey McDermott of the FSA said in her statement that “this exposed a large number of customers to the unacceptable risk of buying products they did not want or need”.

So, if you have bought CPP insurance in the last decade, this could be another opportunity for a PPI claims.

Accountant Harlow – Transform Accounting – Essex Accountants

Read Full Post »

Petrol Prices Rip-off …Again

The wholesale price of a litre of petrol fell from 54pence at the beginning of October to 45pence at the end of the month.

Wouldn’t it be great if that was the price that motorists could pay, but the “wholesale” price is the price that retailers pay for their petrol before adding profit margins, fuel duty and VAT and selling it on to the UK’s motorises.

So, if the price to retailers has fallen by nearly 10pence, how much has the cost to consumers fallen in that same time period?

The answer? Less than 4p.

Something seems very wrong here, as VAT should have increased this difference from 9p to 11p, not decreased it to 4p.

So where has this difference gone?

There is very little transparency about wholesale fuel costs so it can be hard to identify where the blame lies. The obvious candidate is fuel retailers, but in the summer the Daily Telegraph newspaper identified that motorists had been paying too much for their fuel because banks and other traders are likely to have manipulated oil prices in the same was as they rigged the libor interest rate.

Calls from groups such as the Automobile Association for the Chancellor George Osborne to get a grip on price manipulation are now increasing in volume, but for now, it appears that an increase in fuel prices is passed on to the motorists almost immediately whilst a fall in the wholesale price seems to take an age to be seen at the pumps.

Accountant Chelmsford – Transform Accounting – Essex Accountants

Read Full Post »

Chancellor gives in to protests about 3p rise in fuel duty

George Osborne became Chancellor or the exchequer in May 2010 and since then has been keen to increase fuel duty to boost the government’s coffers. But due to repeated protests from the fuel lobby and hard up UK residents and businesses, he has postponed the planned rises in fuel duty four times.

In his autumn statement delivered last week, the Chancellor finally admitted defeat and cancelled for good the 3p a litre risk in fuel duty due in January. It was estimated that this increase would have cost the average family motorist in the region of £80 a year extra.

The decision was welcomed by motorists. The coalition government have not increased the level of duty on fuel since they came to power, but due to the method of calculating fuel duty and VAT, the recent increases in the wholesale cost of fuel still result in the government collecting a record 81p per litre and tax remains around 60% of the cost of UK fuel.

Edmund King of the AA said “This decision avoids a new years headache and a long hangover for all drivers and is very much welcomed by the AA”.

Accountant Ongar – Transform Accounting – Essex Accountants

Read Full Post »

Calls on the Chancellor to scrap 3p a litre fuel rise in January

Pressure on Chancellor of the Exchequer George Osborne to scrap the planned 3p per litre increase in fuel duty has increased in recent weeks.

The tax increase was originally supposed to be introduced in August, but was postponed by the Chancellor for five months in light of the poor economic performance in the UK.

Even the chairman of Asda, one of the UK’s largest supermarket chains and fuel retailer has joined in these calls. Andy Clarke reminded the Chancellor that the rise would come at the worst time for families facing rising energy costs. “With households feeling the cost of Christmas and energy price rises”, now was not the time to put more pressure on spending by raising fuel costs.

But as to whether the chancellor listens to these calls, or can afford to abandon the proposed rise remains to be seen.

If he remains resolute with his plans, remember to fill up on New Years Eve !

Accountant Brentwood – Transform Accounting – Essex Accountants

Read Full Post »

Pay Less Tax – Payments on Account

How do Tax Payments on Account Work?

For the self-employed, there is a lengthy delay between earnings, and paying the tax related to those earnings in the first year of trading.
This lengthy delay can sometimes cause issues for the sole traders ability to pay if sufficient funds have not been put aside.

To prevent these issues, and to aid HMRC with early recovery of taxes due, HMRC require the self-employed to submit “Payments on Account”.

The following example attempts to explain the key dates involved in payments on account.

Assuming that you were setting up a new sole trader business, let’s address the timing of tax payments for the first year of trading.

First Year Trading;

Assuming you start trading in the tax year 2012-2013 (6^th April 2012 to 5^th April 2013)

The tax for this year will not be due until on 31 Jan 2014.

This will need to be paid in full on 31 Jan 2014.

Second Years Trading

There are three parts to the tax payments for the second year of trading (2013-2014).

A 50% payment on account is due on 31^st Jan 2014.

A 50% payment on account is due on 31^st July 2015

These payments on account are based on the tax paid in the previous tax year.

A tax return for the 2013-14 tax year is due to be filed by 31^st Jan 2015.
Following this submission, the “correct” tax payment for the 2013-14 year is calculated, and the difference between this and the two 50% payments on account is either levied or refunded.

Subsequent Years Trading

All subsequent years trading payments on accounts follow the same pattern as the example shown above for the second years trading.

Exemptions from Payments on Account

If the total tax liability is less than £1,000 or if over 80% of the individuals tax has been collected at source, then there is no need for payments on account.

Writtle Accountant – Transform Accounting – Essex Accountants

Read Full Post »