New HMRC Tax Dashboard
If you have recently logged-on to the HMRC online service for PAYE for employers, or corporation tax you will have seen a request to sign-up for the tax dashboard…read more.

How Gift Aid Works?
There has been a lot of coverage in the press recently about tax relief for charitable donations. When you make a donation to a charity or to a community amateur sports club you can make a declaration that your donation is made under Gift Aid…read more.

Employer or Personal Pension Funding?
Who should pay contributions into your pension fund: you or your employer? If you control the company you work for, the most tax efficient solution is almost certainly for the company to pay as your employer…read more.

Filing Online Difficulties
Most tax and VAT returns now have to be submitted electronically, so if the return is late, even by a minute, the computer spits out a fine. This also applies to filing accounts and annual returns for companies or LLPs at Companies House…read more.

May Q & A Section

Q. I’m thinking of starting a new company. Will it qualify for the NIC exemption?

Q. My business is VAT registered but the sales have dropped back, so my turnover is less than £75,000 per year. Can I stop charging VAT on my sales?

Q. Last month the Tax Office wrote to me saying I would no longer receive tax credits, but I did nothing about it. Now my wife is expecting another baby so has reduced her working hours. Can I get my tax credits back?

Click here for the answers!

For the taxpaying British public the new tax year brings a mix of the good, the bad and the ugly.

The Good
The personal tax free allowances increases from £7,475 a year up to £8,105. This will mean an additional £126 a year in your pay packet, or enough to buy one extra Starbucks a week. For savers, the ISA limits have been increased from £10,680 to £11,280, giving you the chance to shelter a bit more from the taxman (if you are lucky enough to have that amount of spare cash).  

The Bad
While the tax free allowance has risen by £630, the banding at which you pay tax at 20% has reduced by the same amount, £630. This means that the amount at which you pay tax at 40% remains the same, £42,475. If you are lucky enough to earn above this amount and receive a pay rise then all of this will be taxed at 40%.

The Ugly
The tax credits system which gives people with children an extra top up has been radically changed from today. An estimated 850,000 families will lose all of their tax credit, worth £545 a year. Couples with children will now be required to work a minimum of 24 hours a week between them (previously 16 hours) to qualify for Working Tax Credits. The Institute of Fiscal Studies estimates that this will affect 212,000 low earning couples.

We hope that more of our clients benefit from the good than are caught by the bad or the ugly. 

We had just under 20 clients, associates and friends out last week to talk about some the basics of FreeAgent as well as some of the great new features that are on the horizon. Then Colin Hewitt and Phil Roberts from Float gave a presentation on their cashflow forecasting application that integrates with FreeAgent.

It was an informative and interesting evening and we hope to hold another event like it before the end of the year.

Get in touch if you want to get an invite to the next event or if you have a suggestion for a seminar topic!

-          Increase in the tax free allowance to £8,105 from April 2012 and £9,205 from April 2013
-          Loss of child benefit will now affect individuals earnings more than £50,000 per year and not £42,500 as previously announced.
-          50p income tax rate for earnings > £150,000 to be cut to 45p from April 2013
-          Age related tax allowances to be frozen, effectively increasing taxes for those over 65 

Here are three announcements that impact on small businesses directly.

(1)     No corporation tax cheer for small businesses
The main rate of corporation tax (for companies with profits of £1.5m or more) will fall from 26% to 24% next week, and then by a further 1% to 23% in April 2013 then down to 22% in April 2014. While we applaud this reduction, the tax rate for companies with profits less than £300k remains unchanged at 20%. As 99% of businesses will fall into this category, there was definitely no corporation tax cheer for SME Limited Companies from Mr Osbourne.

(2)     Three million small firms to see tax simplification from 2013
This is one that got the One Accounting team very excited. The brilliantly named “Office of Tax Simplification” has announced a radical change to how small and micro-businesses prepare their accounts. The Treasury has proposed that from April 2013, businesses with sales of less than £150k per year (it’s estimated there are 3 million of them) can shift their basis of accounting from the traditional “accrual” method to a “cash’ method. Tax would be paid on the cash received in the year, less acceptable operating expenses. The proposals also note that the requirement to keep stock figures for tax purposes will end.

Put simply, this means that small businesses profits (and hence their taxes) will reduce when the new rules come in. If your business has received £50,000 payment in sales income and has £20,000 in unpaid sales invoices at the year end, the total sales under the ‘accrual’ method would be £70,000. Under the new ‘cash’ rules, the total sales are reduced to £50,000. Taxable profits (and tax) will reduce as a consequence. Of course, the £20,000 sales will fall into the next tax year, so the tax is deferred rather than avoided altogether.

The Treasury has announced that they want to introduce these rules for small businesses trading up to the VAT threshold at £77,000. The rules will apply to sole traders as well as companies.

This is a popular move that will appeal to the estimated 30% of small business owners who do not use an accountant or tax advisor. This creates an interesting challenge for the accounting profession as more business owners take a DIY approach to their accounting and tax filings.

(3)     Business Tax Dashboard
In April 2012, HMRC will launch an online Business Tax Dashboard, which will offer a quick and easy way for businesses to see how much tax they have already paid and how much they still owe. It will bring together income tax liabilities for the business, VAT and PAYE & NIC. This will be a useful tool for business owners and accountants alike. We’re really encouraged by the additional efficiency and time savings that this will bring to our own firm.

Please leave us a comment if you have anything you would like to share about the budget!

Chris:
1. The response times to support enquiries from the FA team is excellent. There is also a great network of support from the actual freeagent users via the “Get Satisfaction” site.
2. We’ve found FA to be very user friendly for even the most technically inexperienced client.
3. The tax timeline allows the client to see when the next VAT, PAYE and corporation tax payments are due, and also provides a very accurate estimate of the tax due.

Neil:
1. Easy to fix mistakes.
2. Tax estimates as you go through the year.
3. We access the same data as the client, so no going back and forward with files.

Gemma:
1. Very easy to navigate around
2. No complicated accountancy jargon or processes
3. It’s very visual so all transactions are clear and easy to trace back

You can see a bit of theme in the answers. FreeAgent is an incredibly user-friendly system which both our clients and our accountants appreciate.

The event is going to be held right at FreeAgent HQ so you can come out and meet a few of the people behind the software and ask them in person how FreeAgent works. It’s a great opportunity to learn more about one of our favourite accounting systems!

Event info:
Date: Thursday 29th March, 2012
Time: 4:30pm – 6pm
Address: 40 Torphichen Street EH3 8JB To
RSVP, click here!

Book soon! Space will be limited!

Prize: A copy of Rework by Jason Fried & David Heinemeir Hansson

To Enter: Simply fill in the blank and tweet the following sentence:

Tax Returns are _____! cc @OneAccounting
(make sure we’re cc’d or we may not see your entry)

Winner: The winner will be chosen by random selection at 4pm today. We will post the book out to anyone with a UK address. One entry per twitter account.

Good luck and Happy Tax Deadline Day!

We send out a monthly email newsletter with a quick update about what we’re up  to and links to tax articles that are often quite useful. Because we use a lovely online program developed by the ever fantastic 39 Steps, I can track the number of people who open that email and the number that click on the links directed to our tax articles.  Those numbers are historically quite reasonable but I know there is plenty of room for improvement, I just wasn’t entirely sure how.

I signed up for an email marketing webinar that Attacat presented a month or two ago and nervously volunteered our little newsletter to be used as a sample. Kiril and David went over a ton of useful information during the hour long session, and using our sample, I got a few tips about what I could change to increase our click through rate. I have to admit that I have only found time to implement the most basic changes but even still our last newsletter saw a massive increase in both the number of people who opened it as well as those who click on at least one of the links. In fact, we nearly doubled the number of click throughs.

Part of the reason I’m blogging about this is that David and Kiril are the guest speakers at this month’s New Media Breakfast. Based on my experience, I’d highly recommend attending if you’re wanting to launch or improve your email marketing program. I try to get to the New Media Breakfasts whenever I can and often find them inspiring but this month will definitely be a good one.

I’m a huge fan of online accounting systems, such as FreeAgent and Xero. I would not normally admit this but I am also respectful of Sage Line 50 for its robustness, audit trail and also because it speaks the language that I learned in college (debit, credit, trial balance, nominal ledger etc).

One of the biggest advantages of going online is that every single user throughout the world is always using the same version of the software. No need for the user (or more specifically their accountant) to worry about updates, discs sent in the post, slow download speeds, kicking all of the staff off of the server, or being incapable of pressing the right buttons to install the upgrades.

For us as a firm, one of the biggest disadvantages of using an on premise software solution (such as Sage, there are others) is that it really is anyone’s guess which particular version your client is using and whether fixes and updates have been installed by your client prior to sending you a backup.

Here’s an extract from my working day yesterday of how that works in practice.

10:00 – 10:15 Client emails Sage backup so that we can start on the VAT return. I restore this to Sage V17.00 but cannot access the data using the username and password we have on file. I ask the client to change the password on their copy of Sage, run a backup and resend this file to me

10:30 – 10:45 Still cannot open the file using the new password. Sage V17 client manager now telling me to set up a new company. Call to Sage. Speak to support within 2 minutes – an excellent response. They check a few things and advise that the problem is that the client data is on V18, and I am trying to open the file using V17.

11:00 – 11:15 We don’t have V18 installed on our server! I look around the office and on our (neat and tidy) software shelf find FOUR identical unopened disks of V18 client manager which were sent to us in October. Blank looks from the staff as to why we did not think about installing the V18 software.

11:15 – 11:45 I attempt to install the V18 software on our server myself. Normally delegated to the IT support company but the update looks complicated so I want to do it myself. Sage has also introduced a neat Accountants Dataset Manager so we can view all of our clients and see the version of Sage that they are using. Email our IT support company for administrator password and after a couple of goes, I access the server.

11:45 – 12:15 This is getting silly. Sage V18 has been sent on a DVD but the server only has a CD drive! Our very logical IT support chap suggests that I copy the software onto a network drive from a PC that has a DVD drive, and attempt to install the V18 software from there.

12:15 – 12:30 Software copied to network drive and installation of the Accountants Dataset Manager (ADM) commences.

12:30 – 13:00 One part of the installation fails so I have to uninstall the ADM, install Sage V18 separately and then reinstall the ADM. Bingo! I get a message saying that the installation has been successful.

13:00 – 13:30  Pause for coffee. Try to open the clients data using the ADM but this does not work. I load up Sage V18 (looks like there are some nice new features) and try to open the client file. A message pops up saying the equivalent of “Data being restored is on version 18.1.0, program is on version 18.0.6 – you need to install some updates”

13:30 – 14:45 A call to Sage lasting one hour and thirteen minutes. Through to support in around 6 minutes (OK considering it is the first day back after the holidays) and speak to Peter. Install three upgrades which are required to take our V18 up to the required level to read the client data. Open up Sage V18 and am able to read the client data at last! However the ADM is still not working properly so Peter and I attempt to fix that. We try a few things and establish that the problem is caused by us having a Hyphen in the server folder name where we save all of the Sage program data (it is called ‘Sage Accounts – Licences’). I am not making this up, as Sage have it recorded as a known problem! Peter tells me that if I can amend the folder name and remove the hyphen, everything should be OK. Unfortunately the network permissions don’t allow me to do this. I thank Peter for his patience and leave this job for another day.

14:45 – 15:00 Five hours after starting, I can review the client data and we can get on with the job of preparing the VAT return.

To be fair to Sage, this is probably a once a year occurrence and the new Accountants Dataset Manager is going to be a real benefit to us so that we can see exactly which version the client data has been provided in (including which updates the client has or has not installed).

Have you had similar issues? Do you think the added benefits of a tradition system like Sage outweigh the convenience of user-friendly online software? Please leave a comment and join in on the discussion. 

A. If permission is granted from the Taxman in advance (called a C16 clearance), the funds the company distributes to the shareholders during the winding-up process will be treated as a capital gain and taxed at 10% where entrepreneurs’ relief applies.

However, the law will change on 1 March 2012. From that date where more than £25,000 is distributed to shareholders in anticipation of the winding-up of the company, the amount of the distributed funds will be treated as income and taxed like dividends. That means entrepreneurs’ relief cannot apply and the rate of tax due on the distribution will leap from 10% to 25% or more. The capital gains treatment can still be achieved if the company is put into formal liquidation, but that is likely to cost £7,000 or more. So if you want to wind-up your company and it holds more than £25,000, get those funds paid out by 1 March 2012.

Q. My energy bills have soared since I started using a room in my home as the base for my company’s business, as I have to have the heating on all the time. I’ve heard that my company can pay up to 1/3 of my gas bills tax-free, is that true?

A. Your company can pay you (as the company’s employee) £3 per week, £156 per year tax free, for working at home and no evidence has to be provided to support that payment.
If you can prove your heating bills increased because you heating the property while working there, when otherwise it would be empty and not heated, then your company can pay that extra heating cost to you tax free. However, if the Taxman asks you will need to provide copies of the gas bills for a period before you worked at home compared to a similar period when you have worked at home, to prove the increase in costs. The Taxman may also want to see a schedule of the days you work at home and days when you work at clients’ premises. This type of claim is referred to as ‘use of home as office’ which can also cover other costs incurred in running your business from home. Contact us for further guidance.

Q. I received a letter yesterday addressed to my new company, asking for a payment of £320 to register the company on the ‘Intercom VAT Registry’. Should I pay this fee? Is it compulsory?

A. Do not make any payment or respond to this letter. It is a known scam. The ‘Intercom VAT Registry’ does not exist and it is not an official EU body as the letter suggests. If you are ever suspicious about letters or emails your business receives, check them against the list of known fraud on the Action Fraud website: http://www.actionfraud.org.uk/. We are more than happy to check any suspicious correspondence you receive, so contact us if you are unsure of the legitimacy of any letters or emails sent to you.

You will no longer be able to pay the VAT due by cheque. You have to pay by electronic means. This includes using a direct debit, bank-transfer such as CHAPS or BACS, a personalised bank giro payment slip paid in at a bank (these need to be ordered in advance), or a debit card or credit card over the internet.

The good news is that Tax Office has now instructed its bank to accept tax payments by the faster payment service. This means the tax or VAT due will take less than a day to clear from your account to the Taxman’s bank account. Before relying on this shorter timescale, check whether your bank account is set-up to use the faster payment service and if any money limits apply. Many bank accounts can only pay out up to £10,000 by electronic payments in one day. If your VAT bill exceeds that cap you may have to spread the payment over several days, or talk to your bank about other transfer methods.

We can file your VAT electronically on your behalf once you have completed the necessary authority forms from HMRC. We will also require all your VAT information in good time before the due date for the VAT return, so we can calculate the VAT due and tell you what to pay to ensure the return and payment is received by HMRC before the deadline.