How To Find A Great Accountant
February 12, 2015
You may think this article a little disingenuous, would you find an impartial post about finding an accountant on an accountancy company’s website? Well, I hope so. Because ultimately our job as accountants is to do the best for our clients, and therefore giving independent advice is essential.
Finding An Accountant: Are They A Qualified?
Did you know that in the UK anyone can call themselves an accountant, whether they have qualifications or not? Saying you’re a “professional” accountant or “tax expert” doesn’t mean anything either. There are three main professional qualifications that are awarded by professional bodies, these are:
- ACCA – Association of Chartered Certified Accountants – offers the ACCA Qualification, which focuses on business issues.
- ACA – The Associate Chartered Accountant – the professional qualification from the Institute of Chartered Accountants in England & Wales (ICAEW).
- CIMA – The Chartered Institute of Management Accountants Professional Qualification in Management Accounting – specialises in accounting for business.
Look for the term “chartered accountant” or “certified accountant”, and then the professional body they are registered with. As you can see some of these bodies award more specialist qualifications, for example CIMA, and therefore when looking for an accountant you need to find one who has relevant qualifications and experience for your business needs.
Here at Black & White we are Chartered Certified Accountants regulated by ACCA, which focuses on business accountancy issues. Accountants who are registered with a professional body, are not only qualified but they also have to maintain their skills and knowledge through continued professional development (CPD). This means that they are update with changes to legislation, development of ethical practices and HMRC. They also have to have professional indemnity insurance in place and, should you not be happy with the service you receive, the professional body are responsible for the regulation and the discipline of its members.
Look For An Accountant With Relevant Experience
Having identified accountancy companies who have the appropriate qualifications and are members of a professional body, we would advise you to find out whether they have any practical experience in your sector or with your particular business model.
Business start-ups have very different accounting needs to large corporations, and so it makes sense to use a company who understand your requirements. This will also have an implication on cost. For example accountants who work with self-employed individuals will appreciate that you may not want to outsource all your accounting needs in the interest of saving money, and will help you to achieve a balance.
To this end it is also worth seeing whether an accountancy firm have embraced cloud accounting. Software like Xero enables accountant and businesses to have instant access to the accounts, and allows both parties to collaborate on them. This can save both time and money.
Talk To Them About Fees
Typically accountancy fees are either a fixed fee, variable or a combination of the two. It is very important to have a conversation about fees from the offset and to find an accountant who offers the ideal financial package for you. This also includes payment terms. The good news is accountancy fees are tax deductible!
Be Specific About What You Want
When speaking to a potential accountant about your business and finances, be really clear on what you hope to achieve. Are you just looking for someone to do your tax return, or do you want financial advice too? Any reputable accountant will be transparent about the level of their services and whether they can provide what you are looking for.
Finally, a great way to find an accountant is to ask for recommendations, particularly if you are looking for a local firm. Speak to friends and family, or ask other business owners in your area and find out what their experience has been. You can also ask the accountant for testimonials and recommendations; we’re always happy to provide these, give us a call if you like!
Interest on PPI Compensation
January 29, 2015
If you have received compensation for mis-sold PPI it is likely to include an interest element calculated at 8% a year which is taxable. Depending on the type of organisation which refunded the PPI tax may have been deducted from the interest at source but in many cases the interest has been paid gross. Regardless of whether tax has been deducted or not the interest still needs to be included on your Self -Assessment Tax Return for the year in which it was received and any tax due paid over to HMRC.
If you need any further advice or assistance regarding this please contact one of the team on 0800 140 4644.
Still Time To File Your Tax Return (Just)
January 27, 2015
The deadline for filing your 2013/2014 Self-Assessment Tax Return online is at the end of this week; paper returns should have been filed in October 2014. If you, like thousands of other self-employed people, have left it to the last minute, here are my top tips for ensuring that you don’t leave anything out.
Common Mistakes On Tax Returns
Filing your tax return in a hurry is a recipe for making mistakes. The best advice is to get it done early, or get a professional to do it for you. But if you’re up against the clock, don’t make these common mistakes:
- Leaving Income Out: Many self-employed people also have income from other sources as well as their own business; perhaps you also have a salaried job, are in a partnership or have income from UK property. You’ll need to complete the relevant section to declare this income, these are called “supplementary pages”; help is available here. Don’t forget to also include any non-cash benefits an employer provides (such as medical insurance), and if you’ve been reimbursed for expenses incurred as part of a salaried job include these in boxes 17-18 of the “Employment” pages, so that you don’t pay extra tax on these.
- Not Declaring Interest On Savings And Bank Accounts: HMRC want to know every single penny you have earned, including interest on personal savings or bank / building society accounts. If you have a joint account with your partner or spouse, you’ll need to declare your share of any interest. Also include interest from PPI compensation payouts. ISAs are tax-free so these are excluded.
- Mixing Up Gross And Net: A common mistake when under pressure is to mix up your numbers and this can either result in you paying more or less tax than you should. Either way it’s an incorrect return that could mean a penalty. Check that you know what HMRC require when declaring income (gross or net), and ensure that you understand what numbers in your accounts refer to.
- Forgetting Unpaid Invoices And Costs: Unless you are using the cash basis for your accounts, you must also include any unpaid invoices and unpaid costs falling in the 2013/2014 tax year period. To help keep your accounts in order now’s the time to chase outstanding invoices, or declare bad debts, and account for costs incurred such as business mileage.
- Not Declaring Gift Aid: This may not affect your personal tax (unless a higher-rate taxpayer*), but it does impact on those charities you have supported over the tax year. For every donation of £1 gift aid is worth 25p to the charity. You’ll need to know exactly how much you have donated during the tax year so if you don’t have this information this time around, make sure you keep a record for future donations. *Higher-rate taxpayers can claim the difference between the higher and basic rate on each donation.
Late Returns And Penalties For Mistakes
If you miss the 31 January 2015 deadline unfortunately you will incur a £100 fixed penalty – up to 3 months late. After this you will be fined £10 per day (as well as the fixed penalty) up to a 90 day maximum. If your return is over 6 months late a fine of either £300 or 5% of the tax due (whichever is highest) will be incurred, on top of all previous penalties. 12 months late and another £300 fine or 5% of tax due, and of course you will also need to file your next tax return.
If you miss the deadline for paying your tax, interest will be charged from the date it was due. After 28 February 2015 if your tax is still unpaid you will receive a surcharge of 5%, and again after 31 July 2015 if your tax is still outstanding.
If you are struggling to pay your tax on time, you can contact HMRC’s Payment Helpline on 0845 366 1204 for advice.
Penalties for incorrect tax returns depend on whether HMRC believe it to be a genuine mistake, or whether you have attempted to mislead them:
- If you have taken reasonable care to fill in your return correctly, you’ll have no penalty to pay.
- If you have been careless, the penalty will be between 0% and 30% of the extra tax owing.
- If you have deliberately underestimated your tax, the penalty is between 20% and 70%.
- If you have deliberately underestimated your tax and attempted to conceal the fact, the penalty will be between 30% and 100%.
If you’re completing your online tax return this week, I hope you don’t have too many late nights! Why not consider delegating the job to someone else next year and get in touch with us at B&W Accounting? Call us on 0800 140 4644 to have a chat or email email@example.com
HMRC crack down on Second Homes
January 20, 2015
That latest HMRC taskforce is focused on property owners who are letting or have sold a second hole and are not declaring the Income Tax on letting or the Capital Gains Tax on selling. This includes the renting out a room in your own home for more that £4,250 per annum (or £2,125 per annum if let jointly).
Initially the taskforce will be primarily focused on South Wales and South West England. They are likely to look at land registry records for properties bought and sold and match them to the taxpayer’s tax return for that year.
If you do not make the disclosure and HMRC finds out about the letting or sale of a second home at a later date you could face higher penalties and criminal prosecution.
Act now and make a voluntary disclosure and we will off course help you to maximise any claims for expenditure and make all possible claims for allowances or reliefs.
For further advice please contact Jon on 0800 140 4644.
What Start Ups Need To Know About Tax and National Insurance
January 14, 2015
If you are just setting up your first business you’ll need to follow HMRC’s rules for tax and National Insurance. This is one of the jobs that needs doing early, before you get swept up by other demands such as earning a living!
In this post I’m going to look at limited companies, generally the preferred option for startups. In this instance you need to remember that as a business owner you have tax responsibilities for both your limited company and your personal earnings. You’ll also have to pay tax and National Insurance through the PAYE system for any employees, but that’s another blog post…
Why Set Up A Limited Company?
Your limited company is set up to run your business and its finances are separate from your personal earnings. For those individuals who want a more simplistic method of running their business, self-employment as a sole trader is the alternative. However, there are key advantages to create a limited company, not least that you are likely to pay less tax than a sole trader.
Limited companies pay Corporate Tax on their profits. Currently small businesses (profits under £1.5 million) pay the ‘small profits rate’ at 20% and larger businesses the ‘main rate’ at 21%. But from April 2015 these will be unified at 20%.
As the director and shareholder of your limited company you can choose to pay yourself a salary, pay yourself in dividends or a combination of both. Dividends are taxed separately and are not subject to National Insurance Contributions (NIC), therefore this can reduce your personal tax liability and overall save you and your company money; compared to the sole trader route. If you would like to explore this further to see how this might impact on your finances and tax, please call us to speak to an advisor.
Setting Up Your Limited Company
If you decide a limited company is the best choice for you the process is fairly easy and pain free! You can do this yourself, or get an accountant to do it for you.
- Register your company with Companies House: once registered you’ll receive a ‘Certificate of Incorporation’, confirming the company legally exists, company number and date of formation.
- Inform HMRC of your new company: you will then receive your Unique Tax Payer Reference.
- Set up your company for corporation tax: using your Unique Tax Payer Reference you must provide HMRC with specific information about your business within 3 months of starting up your company.
Please note that this is the basic procedure you need to go through, however there are various considerations when forming a limited company; directors, shareholders, company secretary etc. If you would like some advice on this, get in touch with our team.
Your Tax Responsibilities
Having set up your limited company you have the following tax responsibilities:
- To put together annual statutory accounts.
- To send Companies House an annual return.
- To send HMRC an annual Company Tax Return.
- To register for VAT if your company expects to take over £81,000 p/a.
- To pay your tax!
Legally you do not have to employ an accountant to do this, but it helps! There are penalties and fines for late and incorrect filings, and remember you are legally responsible for your company’s records, accounts and performance. If you would rather have peace of mind and concentrate your energies on your core business, delegating these onerous tasks to an expert is a good idea.
And the last thing to remember…
Don’t forget that as a director of a limited company you must also file your own self-assessment tax return for the salary and any dividends you draw: and pay tax and NIC through the PAYE system.
Please get in touch if you would like to discuss any of the above. The B&W team is always happy to help you work out the best accounting solutions for your needs, as well as helping you save money on your tax and accounting. Call 0800 140 4644 or email firstname.lastname@example.org
Charities We Support
The Butterfly Tree
The Butterfly Tree supports rural communities in Zambia. It is a UK charity that is run entirely by volunteers, meaning all the money goes directly to the cause.
We have been sponsoring 5 children through the Orphan Sponsorship Programme since 2007. In March 2012 Wendy was lucky enough to meet them when she went to do some voluntary work in Zambia, with The Butterfly Tree.
Artfully AWARE (AfA) is an international not for profit organization that connects communities, collaborates with local partners and generates positive change in people’s lives through advocacy events and innovative community development projects.
We are currently working with Artfully AWARE UK on a number of projects, as well as running their finance function.
Sam Veasna Centre for Wildlife Conservation (SVC)
SVC manages wildlife viewing trips with exclusive access to Wildlife Conservation Society sites across Cambodia. SVC was established by WCS to provide an alternative sustainable livelihood from ecotourism for the local communities at the sites that WCS prioritises for conservation.
In July 2011 Wendy spent 3 weeks working with the Sam Veasna Centre organising their finance system, training the finance staff and setting up templates for budget reporting and cash flows.
We feel that giving something back is an important part of business and are always interested in hearing about organisations that we may be able to help. If you have a project that you would like us to get involved in please get in touch.