Broadly speaking, accounting is the quantification and communication of both financial and non-financial information concerning economic organisations, such as corporations.

 

More specifically and in terms of business, accounting is primarily the process of tracking and recording finances in order to keep track of money coming in to, and going out of a company. This allows companies to gain a deeper insight and understanding into their spending, as well as where their money is going.

 

Accountants themselves are professionals who carry out all these procedures and are also responsible for other tasks such as ensuring that financial data is recorded correctly and generating reports to represent this data in a way that makes it clearer for businesses to understand and interpret.

What do accountants actually do?

Whether the business is big or small, the role accountants play within the business tends to be extremely significant and carries a lot of responsibility.

 

An accountant will typically work with individual clients or larger businesses and organisations and bear responsibility for a range of finance-related tasks, such as explaining invoices and accounting policies to the client (or various facets of the business), determining payroll requirements, analyzing revenue and expenditure trends, and ensuring that the books are balanced correctly.

 

Other duties might include preparing and reviewing budgets, monitoring spending so the client can avoid unnecessary expenses, and even business planning.

What role would an accountant play in my business?

In addition to all the typical responsibilities we just discussed, an accountant helps businesses with financial management by recording, tracking, and quantifying data, and using it to calculate how much money they make and spend each month. This includes recording transactions such as invoices, receipts, and payments. They also keep records of assets and liabilities and stay continuously aware of finances in order to ensure that a company has enough money to, for example, pay its bills

Why should I hire an accountant?

No matter the size of your business, hiring a qualified accountant or outsourcing to an accountancy firm is important in order to make sure you are able to stay on top of the company finances, and all other financial affairs. A qualified accountant will be able to help out with reviewing the financial aspects of a business plan, explaining legal business structures, and correctly preparing tax documents, which is likely to save you both money and time.

 

If you’re running a small business, accounting on your own can quickly become overwhelming, especially when you have other aspects of the business to keep an eye on. Hiring an accountant in this instance can help to almost immediately alleviate some of the pressure you might be feeling. They’ll also be able to assist in areas such as calculating business metrics, which will help you run your business as efficiently as possible.

 

Equally, you may feel a little bit hesitant to hand over any control of the business you’ve worked so hard on, even though it can be stressful at times. As your business grows, delegating at least some parts may become increasingly inevitable, if only to allow you some time to rest. Choosing to delegate financial affairs can be a good place to start – going with the right accountant will mean you’re able to feel confident that your company’s finances are being well looked after by someone more even experienced than you are and allow you to concentrate on other aspects of your business.

 

Another reason you might consider hiring an accountant is if you plan to start a new business, or further expand your current one. In fact, accountants can also assist in handling growth transitions, such as hiring employees or deciding to acquire more office space.

 

Whether you’re a huge corporation or a small startup, the range of services an accountant can offer, along with their high level of expertise and professionalism, means that many of the most critical company responsibilities will be taken care of, completely hassle-free.

Types of accountants

The two primary types of accountants are non-chartered accountants (NCAs) and chartered accountants (CAs). Non-chartered accountants are not required to take exams but do still undergo education and training. Chartered accountants are required to train for up to five years, study intensely and pass a rigorous set of examinations.

 

Whilst both are permitted to practice as accountants, the key difference between the two is that chartered accountants are typically more qualified and experienced, and may also be a member of a professional body, such as the Association of Chartered Certified Accountants (ACCA).

 

Beyond these two initial categories, there are many different possible accountancy specialties, such as public accountants, management accountants and government accountants.

How much does it cost to hire an accountant?

It is most common for accountants to charge a fixed fee, and costs really depend on the level of services required, as well as the area in which you need assistance. Just like we’ve outlined, there are different types of accounts, and different types of accountants, so it’s important you choose one you feel is right for you.

 

Whilst many businesses prefer to pay a monthly fee to their accountant, it is absolutely possible to pay by the hour, or for individual services. You can also mix and match if that suits you. This is another reason why considering which accountant is best for your business is really important.

 

An initial consultation may be a good place to start. These are usually free and will help to outline the areas that you may want an accountant for.

 

Looking for an accountant?

Shenward is an established and highly respected family-run chartered accountancy firm, dedicated to providing exceptional client service. We are always happy to help out with any personal or business inquires you may have. Please do get in touch at hello@shenward.com.

HMRC recently announced that to ensure all claims made on research and development (R&D) tax are legitimate, and to prevent abuse of R&D tax credit payments, it will be strengthening its extensive compliance checks.

 

In this article, we explore why.

Background

£7.4bn is the estimated total amount of R&D tax relief support claimed for the year ending March 2020, an increase of 19% from the previous year. This corresponds to £47.5bn of R&D expenditure, which is 15% higher than the previous year. These newly implemented checks will not only seek to scrutinize any and all claims, but also aid in a better understanding of the scale and nature of errors and fraud associated with these particular reliefs.

 

Despite allocation of extra resources, including the hiring of 100 supplementary compliance officers, these additional checks mean HMRC’s standard processing time will increase significantly. In lieu of this fact, HMRC has also noted that it is seeking to return to standard processing time as quickly as possible.

What is Research & Development Tax?

Research and Development reliefs are tax credit payments designed to encourage investment in innovation from UK companies. It can be claimed by a wide variety of different companies, regardless of size, who are working on innovative projects that seek to research or develop an advance in their field or resolve a particular uncertainty.

 

For the work to qualify, it is essential for it to be part of a specific project aiming to make advances in the spheres of science or technology. However, this only applies to the project itself, not to to the company as a whole. The tax credit allows a company’s R&D spend to be recovered, either as a reduction in Corporation Tax or a cash repayment. It is also possible to claim for projects that were ultimately unsuccessful.

What costs can I claim?

Starting from the date you began working on the project or resolving the uncertainty, you can claim a range of costs right up until you discover or develop an advance, or the project comes to an end.

 

Costs that qualify for R&D tax credits include:

 

  • Staff – employee costs including salaries, pension contributions and employer’s National Insurance contributions.
  • Subcontractor/freelancer costs (up to 65%).
  • Some types of software, including software license fees.
  • Payments to volunteers who took part in any clinical tests or trials.

 

You cannot claim for the costs of rent, capital expenditure, production and distribution of goods and services, or the cost of land, patents or trademarks.

How do I claim R&D Tax Relief?

You can make a claim for R&D tax credit payments up to two years after the end of the accounting period that it relates to.

 

Essentially, to claim the relief, you need to submit your enhanced expenditure into the full Company Tax Return form (CT600). Following this, you should use the online service to support your claim.

 

To calculate enhanced expenditure, start by working out costs directly attributed to research and development – remember to reduce any subcontractor or freelancer payments to 65% of the original cost. Add all costs together and multiply the result by 130% – this gives you the additional deduction to put into your tax calculations. Add this figure to the original R&D expenditure cost to get the figure for enhanced expenditure. This is what you must enter into your tax return.

 

Whilst there is no legal obligation to do so, it’s a good idea to produce an R&D technical report that not only justifies the advancements/uncertainties of the work, but also sets out the eligible expenditure being claimed on a project-by-project basis. The report should also include a short summary explaining the project, the start and end dates of the relevant accounting period, and your 10-digit company unique tax reference number. It may be helpful to speak to an R&D tax specialist when compiling any supporting documents to ensure they cover all necessary ground and to maximise your claim.

What does the ramp up in investigation mean for businesses?

The main consequence of the enhanced investigations is longer processing time for tax credit payments. Despite the standard processing time being 28 days, HMRC currently aims to pay the tax credit within 40 days. This means businesses should be prepared to wait significantly longer to either receive payment or be contacted regarding a claim.

 

The additional compliance officers working to implement these checks also means an increased level of scrutiny when inspecting R&D relief claims. However, this is unlikely to cause any problems, particularly if the claim has been checked by a qualified and experienced accountant or tax specialist, and all procedures outlined below have been properly considered.

What procedures to follow

It’s important to follow correct procedures when submitting a claim for R&D tax relief to ensure your application goes as smoothly as possible, particularly given the added level of scrupulousness that HMRC is currently fostering.

 

When putting together your claim, there are several points to consider in order to ensure it will meet the required standard. Make sure all entries are completed on the R&D section of the corporation tax return (CT600 form) and stay up to date with the latest guidance on completing the CT600 form on gov.uk.

 

Submitting any and all additional information to support the claim, including the R&D report, will help HMRC process the claim quicker, reducing any potential additional processing time. And finally, be aware that if a claim is submitted that is incorrect, inflated, or fraudulent then you may be liable to a penalty.

Get in touch

Compiling tax relief claims can be overwhelming. If you need to discuss any aspect of the claims process for R&D tax relief, or anything specifically regarding your claim, please do not hesitate to reach out to us at hello@shenward.com.

In a post-covid world, where working remotely and ditching the physical office has become something of the norm, many are asking whether using a virtual office for their registered business is the next step.

In our view, using a virtual office is the final piece in the remote working jigsaw.

Why? Well, it removes the need for a costly physical office space for a start – and as we are constantly faced with the increased cost of living, keeping overheads low is a priority.

Furthermore, using a virtual office allows you to maintain professionalism and manage people’s perceptions of your company size because you’re provided with an actual business address, not a residential one.

Of course, there’s more to it than meets the eye. But, if you’re interested in finding out more about using a virtual office for your registered business, read on as we guide you through it.

What is a virtual office service?

A virtual office is basically what it says on the tin. An office which exists virtually. That means you get the office address, the telephone line, and office related services, without the need of having to pay for a physical office.

How does a virtual office service work?

A virtual office service is usually offered by a company which exists to provide a mailing address and registered office location for businesses who don’t have a physical office.

It’s usually a company which owns its own building and offers the address out legally for businesses who want to have a registered address.

You usually pay a small monthly fee to the company and in return, benefit from the use of the address, mail hub and sometimes even a telephone line. You are then legally allowed to register your business at that address with Companies House and across all your socials and website.

Beyond this, some companies even offer professional meeting spaces for virtual office customers – this is mostly provided by coworking spaces who have a virtual office service.

What are the benefits of using a virtual office service?

The biggest benefit, as we’ve already alluded to, is the cost reduction. No more large office overheads. No more large electricity and internet bills. It’s a no brainer.

However, there are also many other lesser-known benefits to using a virtual office service.

Professional image

Despite remote working becoming the norm, having a physical office address that isn’t residential still holds weight in the business world.

It’s perhaps something which may change over time, but right now, businesses looking to do business with other businesses still perceive those with actual office addresses to be more credible and trustworthy.

It’s a point for debate as to whether this should be the case, but we can’t ignore the fact that it’s a perception many hold. With a virtual office service, you’re given an official business address rather than a residential, but without the cost.

On hand receptionist

When running a business, you already wear multiple hats. Why also take on the role of a receptionist?

Most virtual office services offer call and mail handling. This means, you can focus on other areas of the business with the peace of mind that a professional is answering your calls and dealing with important mail.

It supports SEO

An often-forgotten key advantage of using a virtual office is the address – as the registered address of the business is an ‘SEO geolocation’.

This may seem obscure, and tech nerdy, but it is important. Because many online services still benefit from the ‘near me’ feature in internet search engines. Therefore, this allows prospective clients or business partners to seek out targets based on where they are located.

So, with a virtual office location, a business will appear to be located in a particular address, surrounded in turn, by potential clients. As all forms of business are becoming increasingly digital, the value a well-placed SEO geolocator pin brings should not be overlooked.

Professional meeting space

When meeting new clients, you are unlikely to want to hold a meeting at your home. Yet meeting up at a Starbucks or Pret is not always attractive either. In some virtual office situations, you can access formal meeting spaces, where clients will feel comfortable and relaxed. And it gives you the opportunity to get out of the house into a change of scenery.

Virtual Office Service for Overseas Businesses

Virtual office services are popular amongst business outside of the UK who wish to do business in the UK without purchasing an office.

You see, it’s a legal requirement to have a registered business address in the UK if you wish to do business in the country. This must be displayed on Companies House.

The reason virtual office services are popular therefore, is because foreign businesses can pay for a UK address without having to invest in and open a physical office space.

Shenward Virtual Office Service

When it comes to choosing the right virtual office package for your business, there is much to consider It’s important you understand what services and facilities your company needs to support day-to-day operations. For example, a manned reception desk to handle any administrative tasks, such as signing for mail or answering phone calls.

Here at Shenward, we meet the challenge companies face by offering a unique provision, extending our Company Secretarial Service to offer a virtual office service. This means, in short, offering businesses the opportunity to reduce business costs permanently through a professional virtual office service. It is a clear win-win proposition.

Our virtual office service comprises of a smart and professional UK office address, a local telephone number and a personal receptionist to handle calls and take messages and mail handling. Local telephone numbers with any UK area code and even international can also be arranged.

And, if you are an overseas business looking for further support to remain compliant, you can choose to benefit from a full finance function: this includes a dedicated bookkeeper to take care of the management accounts and tax, as well as a virtual company secretary to ensure the legal requirements of the Companies Act are met. Virtual working may well be the future of work and with a virtual office the future of business could be even brighter.  

Making Tax Digital might seem like just a buzzword, but with the shift to mandatory digital accounting coming in April 2022 for all VAT-registered businesses, the doors are closing in fast. Now is the time to ensure you’re fully equipped with the right software.

Why the rush? If your business fails to comply within the required time, penalties will be put in place, such as:

  • Having a default recorded which is also included when missing a filing.
  • Entering a surcharge period for 12 months if you fault again.
  • A point system in which we later discuss if further faults occur within the twelve months.
  • Lastly to which the points translate into an increased percentage of surcharges for each accumulated default. (Starting from 2% – 15%)

There is still time to get prepared, however, and we’re here to guide you through what you need to know about Making Tax Digital and how to find the right software for your business.

What is Making Tax Digital?

Making Tax Digital (MTD) is a regulation brought in in April 2019 and is a key focus of the Government’s plan to make it easier for businesses – as well as individuals – to keep track of their affairs and taxes.

Currently, the regulation states that all VAT-registered businesses who have a turnover of £85,000 or more are required to keep all VAT and business records digitally and by law have to submit their tax returns via a software which is MTD compliant.

However, changes are coming. As of April 2022, all VAT-registered businesses, regardless of their turnover, will be required to follow the same rules under MTD for their first return. That’s why any VAT-registered business needs to get ahead and choose the right MTD compliant software before this date.

The Importance of Choosing the Right Software

There is a whole host of accountancy software to choose from, each which provides different features. Aside from the cost implication of choosing the wrong one, choosing the right software is vital when trying to get your head around a new process like this.

When exploring, you need to properly assess and evaluate the software to understand which meets your business needs and still meets the MTD requirements.

HMRC won’t allow for just any software to be used, so it’s better to find out as soon as possible whether the software you’re considering is MTD Compliant.

Here are the compliance regulations the software needs to meet in order to meet MTD regulations:

  • The software needs to be able to record your business’ details and all your VAT-related transactions for up to six years.
  • The software also needs to include the date and additional information regarding any VAT paid or withheld for each transaction.
  • It also needs to calculate what VAT you owe based on your incomings and outgoings.
  • Lastly the software needs to be able to submit your VAT return directly to HMRC via an API also known as an application programming interface.

HMRC has also created a list of MTD compliant software which is worth a read.

Key factors to consider when evaluating MTD software

Flexibility & Adaptability

Both factors are vital when it comes to the software you choose for your business as it can affect how your business functions.

You should always consider how the product can adapt to your business and how it meets the needs of your businesses tax requirements both now and in the future.

Consider also any global transactions and whether the software would meet international criteria. Rules surrounding this change from time to time and you need software which can quickly adapt.

Implementation Speed

As the deadline is creeping up, you need to be looking at what the turnaround time for implementation is. How quickly can your solution to MTD be deployed and integrated within your current business infrastructure?

Many businesses tend to have their own unique process already in place and when looking into new software you’ll need to make sure that the software vendor you are going with has the expertise to ensure the transition goes smoothly.

User Experience

Choosing a software that is easy to grasp and navigate shouldn’t become a major barrier for your business. That’s why when it comes to choosing any software for your business, always question if the software is easy enough for not only you to understand but also the employees that will be utilising it.

A good way to look into the user experience of software is to see how customisable it is to your business and how well it can integrate into the existing software you use.

With tax technology the main idea is to simplify your role as much as possible whilst still meeting legislative requirements. Due to the pandemic many of us still work from home or have a hybrid work style which means that the software should be able to offer the same experience and functionality from home as it does from the office.  This is where cloud technology and its security come into play.

Maintenance

When dealing with software there are always small bugs or issues that may appear at some point later down the line, and so before committing to any software you should always look and assess at how much IT support it will require during and after the implementation.

In order to do this effectively, it’s best that you inform your IT department and ask for their guidance on software which doesn’t require a mass amount of work or money to maintain.

Support

With software vendors, support is vital. If there is lack of support or no support provided, it could potentially cost your business a substantial amount of time and money if anything was to go wrong.

In order to get the best support, especially when dealing with tax software, it’s best to audit the vendor. Due to the complexity of tax it’s good to see if their team is a balance of software engineers and tax experts. If their employees are mainly all software engineers, do they work in partnership with tax experts to provide the support needed for your business? The better support the vendor has the better it is for your business in the long run.

Does KashFlow fit your MTD needs?

If you are in the current process of looking for a fast, efficient and reliable solution for Making Tax Digital then why not check out our software KashFlow.

KashFlow is a Making Tax Digital compliant accounting software that is designed for small businesses and is developed here in the UK.

Its simple layout makes it easier for your employees to use, saves time and reduces training costs, thus allowing your accounting to run as smoothly and efficiently as possible.

From generating VAT returns quickly to generating email invoices, it provides the flexibility many businesses need. It even has a mobile app for iOS and Android for on-the-go management.

Speak to us at hello@shenward.com for more information.

2022 is set to be a year of financial changes, particularly where tax and national insurance is involved.

As always, we want you to be as prepared as possible and have instant access to digestible information. Below, you’ll find a list of all upcoming changes planned this year, with insight into how it may impact you.

National Insurance Changes

From April 2022, the National Insurance threshold and rates are due to change. This is in line with the government’s plan to introduce a health and social care levy – an effort to help tackle the NHS and social care crisis.

This means that the increase will be included in National Insurance from 2022, but the government plans to make it a separate payment as of 2023.

National Insurance Contributions (NIC) rates are set to rise an extra 1.25% from 6 April 2022. Thresholds are also set to change, with the lower earnings limit increasing 3.1% in line with inflation (at the time of the Autumn Budget).

See the table below to see how this change will affect you.

Dividend Tax Rates

The dividend is subject to a similar increase as National Insurance. Dividends will also be increased by an extra 1.25% from April of this year. If you are subject to dividend tax, see below how the changes may affect you.

Income tax band2021/22 rates2022/23 rates
Basic7.5%8.75%
Higher32.5%33.75%
Additional38.1%39.35%

Inheritance tax changes

At the start of the year, new rules came into force for reporting inheritance tax.

The rules around what can be classed as an excepted estate have changed for the estates of those who have passed away on or after 1 January 2022.

The new rules aim to reduce the reporting that excepted estates are required to do, extending the definition of an excepted estate.

The new rules include:

  • Raising the threshold value to £3million, up from £1million.
  • Raising the limit of specified lifetime transfers to £250,000, up from £150,000
  • Raising the time limit for HMRC to request additional information from personal representatives to 60 days.
  • Allowing cases where available IHT threshold was used when the first partner in a marriage or civil partnership passed away first, being able to claim for the unused percentage to be made available with the current estate.

Vehicle Excise Duty (VED) changes

Vehicle Excise Duty, more commonly known as road or car tax, is set to rise from April 2022 in line with inflation.

The cost of this tax is dependent upon your vehicle, such as its age and how environmentally friendly it is.

Vehicle Co2 emissions produced per KMCurrent ratesRates from April 2022
Over 255g /KM£2,245£2,365
Between 226g – 255g /KM£1,910£2,015
Between 76g and 90g / KM£115£120

Remember some vehicles are not subject to the charge of VED. This includes vehicles that produce zero emissions, cars registered between March 2001 and March 2017 with Co2 emissions of 100g/Km or less, and cars that are over 40 years old. It is important to note that these vehicles still have to keep paperwork up to date every year, just minus the charge.

Capital gains tax changes

This change actually came into effect following the Autumn Budget in October 2021.

The new rule is in regard to the reporting of capital gains tax. With properties sold on or after 27th October 2021, those who make a capital gain after selling a second home, or a buy-to-let property will now have 60 days to submit a residential property return to HMRC of the gain. Previously, the allotted time to submit the return was within 30 days of the gain being made. 

The change to 60 days was announced following the recommendation made by the Office of Tax Simplification who warned many people were not aware of the reporting requirement until after their property had sold, meaning many were acquiring unfair fines. Doubling the allotted time allows for people to have an appropriate amount of time to submit their return.

Be Prepared

It’s always important to stay aware of upcoming changes so you have plenty of time to prepare for any increase in your liabilities.

If any of these upcoming changes affect you, it is important to ensure you have the right kind of cash reserves in place to feel less of an impact when that time comes.

If you need to discuss these changes in further detail, or have any further questions, do not hesitate to contact hello@shenward.com. We are always happy to provide support. 

Managing a business means you probably have 101 things on your to-do list every day, and organising your business finances usually takes a back seat until there is a need to.

Running a business is hard and staying organised can be difficult, but organising your business finances can actually take the pressure off, making other areas of your business run a lot smoother.

Why? The correct management of your money is what ultimately secures your business’ success, and that’s why we’re giving you eight tips designed to get you started with organisation today.

Separate business and personal bank accounts

This is the number one priority when it comes to business finance. Keeping organised is difficult anyway, but when your business transactions are mixed with your personal ones, you’re making things more difficult than they have to be.

Having a separate bank account for your business makes it easier when it comes to working out your taxes. Not only that, but the monthly bank statements you receive from your separate business account will enable you to get a clearer picture of cash flow.

Track your income

Tracking your income means keeping a note of all incoming business related revenue – that’s received and due to be received income. Knowing how much money you will have coming in will allow you to understand the limitations and opportunities of your budget, as well as supporting forecasting.

Many smaller businesses begin tracking their income on spreadsheets, but with the advancements of cloud accounting software, there are many apps that can make your life much easier (and organised!).

Apps such as Xero and Quickbooks, or our own app KashFlow, allow you to view your income and cash flow over different periods. These apps can also be useful as your accountant (should you have one), can be granted access to your accounts.

Track your expenses

It’s never a bad idea to keep a track on where your money is going. If you are not aware of your outgoings, it’s very easy to become disorganised and overspend.

Tracking your expenses isn’t only an organisational tactic, but a money-saving one too. Some of your expenses will be tax-deductible, such as travel expenses, so it’s always a good idea to have a clear structure for expenses organisation.

You can track your expenses with all the apps previously mentioned, so it doesn’t have to be a manual process.

Be strategic with how you receive payments

Ultimately your business, beyond your overall purpose, was set up to generate revenue for either a cause or for yourself.

That’s why deciding on the most efficient way to receive payments can help to ensure revenue continues to come in as expected.

If you sell a service, for example, it is important to sort out how often you will invoice your clients, and what methods of payments they can use. Direct debit payments for regular clients are a fantastic idea and can help keep you on track with your forecast.

Set aside money

We’re sure you’re aware of the importance of budgeting when it comes to organising your finances, but are you aware of the various tools you can use to set aside money for various outgoings?

Banks like Starling have created spaces within your account where you can separate money from your general balance to account for things like VAT, Tax, and even bonuses for your team at the end of the year.

If you don’t bank with Starling, that doesn’t mean you don’t have options. Check with your bank to see what’s available – you may just be surprised.

Make time to organise

The problem with running a business is that there is always something more important to be doing, and setting aside time to do admin is a mean feat.

However, setting aside even a small amount of time each week to get on top of your finances will work out better in the long run.

Spending half an hour to an hour every week sorting out receipts and invoices means you won’t become overwhelmed.

Not great with planning time? Try time blocking  https://todoist.com/productivity-methods/time-blocking.

Go digital

Having loose papers everywhere can put even the most organised of people at risk of becoming disorganised.

Digitising your financial records and accounts makes it much easier to access and organise your documents, and reduces the risk of things slipping by the way.

We understand many business owners like to keep hard copies in case of emergency or fault, but unless it’s vital, it’s just an additional thing to manage. If it is vital to keep copies, make sure these are filed strategically and stored in a safe place.

Seek Help

Sometimes, the best way to stay organised is to seek the support of an expert who lives and breathes organisation.

Consulting with an accountant, financial advisor or a VA for example will not only save time and money in the long run, but it will also help you to develop the right level of organisation specific to your financial needs and concerns. As always, if you require our assistance here at Shenward, do not hesitate to get in touch. Email hello@shenward.com

Thinking of hiring an Accountant? Want to understand how to navigate the hiring process? You’re in the right place.

It’s no longer satisfactory to conduct a google search for your nearest accountant and make the call. It’s vital you dig deeper into whether they are the right match for your business. Not only does your accountant need to be a fit professionally, but also personally.

Here, we help you understand exactly what to look for in an Accountant when navigating the hiring process, and why Chartered is the first box to tick.

Choose Chartered

Choosing to hire a chartered accountant gives you guaranteed peace of mind over the quality of service you will receive.

Chartered accountants must be accredited by a professional body. This means they must undertake further exams and practices to ensure they meet the correct standards.

Chartered accountants usually become members of professional bodies such as the Institute of Chartered Accountants in England and Wales (ICAEW), or the Association of Chartered Certified Accountants (ACCA).

Being a member of these groups means the accountant must adhere to their ethical and professional codes of conduct. You know that they are doing the right thing by you as if their working practices aren’t up to the respective standard, they may lose their accreditation. Chartered Accountants are required to have professional indemnity insurance, which means both you and the accountant will be covered if a mistake occurs and causes you financial or reputational losses.

Check if they have the relevant experience

Is it enough for your accountant to only have the capabilities to submit your taxes on time? Accountants are capable of helping you with so much more, especially if they have prior knowledge that is relevant to your business.

It’s always worth asking what kind of clients the accountant works with so that you can establish what their capabilities are to recommend the right course of action for you. Sometimes, it can be beneficial to also know what size businesses the accountant usually works with – it clarifies that they are more likely to be aware of your needs.

Check the Service Offering

This is an important one, for obvious reasons. Before hiring an accountant, you need to be aware of not only the services, they offer, but the services you require.

Many Accountancy firms offer a great deal more than the typical accounting services you would expect. The question is, what kind of services do you need? Are you only looking for assistance with your paperwork and Tax or VAT submissions, or would you benefit more from working with a multi-disciplinary firm?

Multi-disciplinary firms generally also offer services that complement your accounting needs. This could be anything from HR and payroll to health and safety or even marketing.

Ask if they are up to date with the latest technology or software

You don’t need us to tell you the business world has become predominantly digital, so when we say it’s important to make sure your accountant is up to date with the latest technology and software within financial services, you get it.

With VAT now being digital, and Tax following suit by 2024, you need to ensure your accountant has the technical capabilities to facilitate digital accounting. If an accountant has trepidation around new practices, they probably won’t be the most helpful going forward.

Asses their communication styles

This is less about the accountant’s expertise and more about how their working styles will suit your own. After all, alignment of values and workstyles plays a part in helping you decide whether an accountant is right for you.

When researching and talking to different accountants, asking how much contact they prefer to make with their clients and their preferred modes of communication – this will help you gain an understanding as to whether they value communication and the commitment they have to keeping you up to date with changes.

Final thoughts…

There’s a lot of consideration when it comes to hiring an accountant. Remember, you’re essentially hiring an integral part of your team – the fact they work externally makes no difference – so treat the process as you would if you’re taking on a new employee.

Staying on top of your tax is not the reason you got into business. We get it, it’s not fun. But unfortunately, it is a vital aspect of running and ensuring you’re on the right side of the law.

Whilst getting to grip with business tax won’t bring you immediate joy – it may leave you laughing. By following our handy tips, you can make sure you’re making the most out of your time and correctly managing tax.

Get your calendar in order

When it comes to tax, time really is of the essence. There are deadlines for payments, submissions and information updates, all of which if missed can have an impact on your business.

Keeping a calendar with all of your dates for payment (tax-related or not), ensures you won’t fall behind. Whilst you may have an accountant who takes care of your payments – you should still be aware of deadlines, as it is you as the business owner who will receive the late penalty charges.

Save time with the cloud

Cloud accounting is becoming common practice in today’s business world. Adopting online platforms within your business will save hours of time for both you and your accountant.

The beauty is, most cloud accounting software allows you to enter key dates, set reminders, and even estimate the amount of tax you’ll need to pay and when.

Take it from us, it’s a worth investment.

Keep records – and keep them accurately!

Many have been there; a lost receipt, a misplaced invoice – it all happens too easily. Stay on top of your records, keep them in a safe file and get into the habit of storing them straight away.

Even if you use online accounting, everything can still be safely stored online and in a categorised way. NB: HMRC recommends you keep all business records for six years.

Know what to claim for

Remember that expenses incurred in business can often be tax-deductible. From office stationery and equipment to travel expenses, many can be claimed. Make sure you keep your receipts as your accountant will likely want to check.

Most expenses incurred in business are ‘allowable’, but make sure you can clearly state how they are a business expense and not used for personal reasons. Also, remember you can still claim on work from home expenses. Your entitlement is a flat rate of £6 per week – without providing any evidence of your costs. Or you can claim tax relief on the exact amount of extra costs you have incurred if it is above the £6 weekly amount – but evidence must support this claim, for example, receipts or utility bills.

Check whether your business structure is working for you

There are several different business structures, and all have different tax implications. Unfortunately, there is no one size fits all approach, and deciding upon a structure is a decision personal to you and your business.

Many businesses begin as sole traders or partnerships as they require less compliance than limited companies, for example.

However, once your business is earning a certain amount, it may be time to consider changing to a limited company. This means your business is a separate entity to you personally, so rather than paying income tax on all of your earnings as a sole trader, you pay corporation tax. This is, generally speaking, more tax-efficient – providing your business is earning over a certain threshold of roughly about £30,000.

Decide on the most efficient way to pay yourself

As a business owner, there are many different ways you can pay yourself. It all depends on your business structure and is a decision that is different for each individual.

A common way for business owners of a limited company to pay themselves is via both a salary and dividends. Usually, that salary does not exceed the Personal Allowance threshold and as such is not subject to income tax. NB: In the 2021/22 tax year, the threshold is up to £12,570.

Don’t be confused by VAT

When your business is turning over more than £85,00 you must become VAT registered. Despite being known as the ‘simple tax’, it can actually cause a lot of confusion. It is worth discussing VAT with an accountant or financial advisor to determine whether your business would benefit from the VAT Flat Rate Scheme or cash accounting, and to understand how VAT generally impacts your business costs and transactions.

Remember… We’re here to help

Running a business requires a lot of planning and strategy. We understand that it can be overwhelming to remember all the considerations needed to run at an optimum level. As always, we are here at Shenward to offer you unrivalled support and advice about any of your business concerns. Contact us at hello@shenward.com

When the word tax is mentioned, everyone who’s not an accountant cringes a little inside, but the matter of fact is, your tax liability is something you can’t escape from and sooner or later, you need to face it head on and figure our a way to manage it.

Yes, tax liability can be difficult to wrap one’s head around, especially when trying to determine the legalties but there are steps you can take to correctly manage the amount of tax you pay whilst also remaining compliant.

Here we offer seven tips to help you manage your tax liability, focussing particularly on corporate tax liability, with some reference to self-employment where necessary.

1 – Correctly Account for All Business Expenses

We all know running a business costs money, but it’s not just the business side of things that incurs costs. Simple things such as travelling to meetings, providing lunch for the team and investing in new stationery or equipment are all overheads which build up on a monthly basis but can slip through the net on your personal statement if you use your own card whilst out and about.

All of these business expenses can be tax-deductible – providing they are used solely for business use and the correct records are kept to claim on them – so make sure you correctly account for them.

2 – Optimise Your Salary Structure

For business owners, the key to saving on tax is paying yourself a salary in two parts. Part of your salary should be paid through PAYE with tax being paid only when you break the threshold of £12,570, and the rest should be paid as dividends.

The reason this is effective in reducing your tax liability is that dividends are only taxed at 19%, where as income tax increases the larger your salary is.

3 – Giving is Receiving (i.e. Charitable donations)

Companies are eligible for tax relief for qualifying donations made to charities. The donations are deductible from the company’s profits in the same tax year as the donation was made. This offsets the amount a company pays through Corporation Tax.

There’s a huge focus on businesses giving back, so making the decision to donate to charity is recommended regardless of the implication it has on your tax liability.

4 – Pension Contributions

An employer can give decide on the size of the contribution they make to their registered pension scheme, regardless of the related salary. For tax relief to be granted on an employer’s contribution, it must be deducted as an expense when calculating the profits, which will therefore result in the company’s profit being reduced, as such lessening the corporation tax.

NB: An employer pension contribution will not be tax deductible if the contributions were made for non-business purposes.

5 – Review your VAT payments

Providing your company turnover does not exceed £150,000 per year, and you work for clients who are also VAT registered, applying for the VAT flat rate scheme could be beneficial for cutting costs.

Using the Flat Rate Scheme for VAT means you add up all of your sales, including any VAT you’ve charged to your customers, applying a fixed percentage to those sales. The flat rate can be between 6.5% and 14.5% depending on your business and industry. For the first year on the scheme, you also receive a 1% discount on your rates.

However, you cannot claim back the majority of the VAT on purchased goods and expenses for your business. This is except for capital asset purchases which are over £2,000 including VAT.

6 – Make Use of the Annual Investment Allowance

The Annual Investment Allowance (AIA) allows you to claim 100% tax relief for capital expenditure on plant and machinery. Qualifying expenditure applies from £200,000 to £1,000,000.

Assets that qualify for AIA fall into the categories as listed:

  • Office equipment, including PC hardware, software and furniture
  • Integral features of buildings (e.g. lifts and escalators)
  • Fixtures including air conditioning or fitted kitchens and bathrooms
  • Agricultural machinery
  • Machines for business purposes
  • Lorries or Vans for distinct business and moving purposes.

The AIA spending limit was temporarily increased to £1,00,000 between 1st January 2019 and 31st December 2021, it is assumed that it will go back to £200,000 after this period. Businesses therefore have just under a month to use the AIA scheme to maximum capacity before the temporary limit ends.

7 – Use Your Accountant Wisely

Making the most out of your accountant is key – especially when it comes to tax liability. Not only do you want to ensure you are reducing your costs, but you need to make sure you’re doing it compliantly.

The difficulty with looking at tax liability is there are a lot of tips, tricks and schemes to help you save on tax but questions and queries around eligibility make it hard to know if you can take advantage of the suggestions.

Always take your accountants advice. It’s not a matter of just saving the most – but a matter of being on the right side of the law. Your accountant is well prepared to make sure you’re running your business cost-efficiently and luckily for you, they are experts at ensuring you remain compliant.

We’re not limited to 7…

These are just seven of the ways to help manage your tax liability, but you are not limited to only these seven tips. There are always new schemes that you and your business can take advantage of, that is why it’s important to stay up to date with all the changes.

Whether it’s signing up to our monthly newsletter, or following us on social media – we are always sharing insights and the latest news and advice to help you along the way.

Shenward’s experts tuned in to listen to the budget announcement on October 27th – though a lot of what was announced had previously been shared with the media ahead of the Chancellor’s budget.

Thing is, with so much information offloaded via various channels, it’s easy to get caught up in a slurry of information overload. Between the different news outlets and channels, the actual information you’re looking for can become difficult to find.

In true Shenward style, our team has developed a round-up of the budget announcement, giving you insight into what changes have been made and what we can expect going forward.

Income Tax

Though the income tax rates have been announced to be unchanged, there are still some changes that will take place that are worth noting. Some of these were announced before the Budget, but in the interest of context and a full picture, we feel it’s best to inform you of all upcoming changes.

  • The personal allowance is set to increase to £12,570 in April 2022, alongside the basic rate threshold which will increase to £50,270. After which, both will be frozen to 2026.
  • The dividend allowance remains unchanged, however, it’s worth reminding that the dividend rates are set to increase by 1.25% from April 2022 – this is in line with the announcement of the Health and Social Care Levy previously announced.

A significant change announced in the Budget is the basis period reform, which changes the way trading income is allocated to the tax year.

Generally, businesses draw up annual accounts to the same date each year, which is known as their ‘accounting date’. Currently, a business’s profit or loss for a tax year is usually the same for the year up to the accounting date in the tax year, known as the basis period.

The current rule creates overlapping basis periods, which charges tax on profits twice, generating a corresponding ‘overlap relief’ which is usually given on cessation of the business.

The reform will change this to a ‘tax year basis’ from the tax year 2024 to 2025. This means that a business’s profit or loss for a tax year is the profit or loss arising in the tax year itself – regardless of the accounting date. This removes the basis period rules, preventing the creation of further overlap relief.

So, what will the transition involve?

On transition to the tax year basis in the tax year 2023 to 24, all businesses basis periods will be aligned to the tax year, with outstanding overlap relief given. Businesses with an accounting date other than the end of the tax year would need to apportion profits or losses from different accounting periods to fit in with the tax year.

This sounds complicated but may mean using provisional figures in tax returns if the accounts and tax computations for the later accounting period are not prepared before the 31st of January filing deadline. If this is the case, amendments will be required to tax returns once final figures are available.

Don’t let this information overwhelm you. At Shenward, we are on hand to ensure the new requirements are adopted seamlessly. The basis of this reform is to help simplify Make Tax Digital for Income tax, which will occur from 2024.

National Insurance

No changes were announced in the budget for National Insurance, but this is a good time to remind you that National Insurance rates are increasing by 1.25% for Class 1 Primary and Secondary as well as Class 4 from April 2022.

National Minimum Wage

The National Minimum is set to increase as of April 2022. See the table below for the current and new rates of pay determined by age group.

AgeCurrentApril 2022
23 +£8.91 £9.50
21 – 22£8.36 £9.18
18 – 20£6.56 £6.83
Under 18£4.62 £4.81
Apprentice Rate£4.30 £4.81

Capital Gains

Whilst there was no change to the Capital Gains annual exemption, a few other changes were announced.

The chancellor announced the extension to the Capital Gains Tax returns and payment on property disposal deadline from 30 days after completion up to 60 days.

Furthermore, there was clarification on mixed-use properties. The 60-day deadline for mixed-use properties applies, apportioned to residential proportion only.  

Capital Allowances

A super-deduction has already been announced, allowing companies investing in new plant and machinery assets to claim a 130% super-deduction capital allowance on plant and machinery investments. Furthermore, the super-deduction will allow companies to cut their tax bill by 25p for every £1 they invest.

The Annual Investment Allowance (AIA) increase to £1 million was due to end on the 31st of December 2021, has been extended to the 31st March 2023.

Corporation Tax

In terms of corporation tax, we have already seen some recent announcements ahead of the Budget. There has been an increase in corporation tax to 25% from 19% for non-ring-fenced profits over £250,000.

In the budget announcement, a 4% levy for property developers with profits over £25 million was announced. This is to help establish a fund to finance establishments with unsafe cladding.

In addition to this, as a result of Brexit, the group relief has been abolished for UK companies claiming losses from European Economic Areas (EEA) Resident subsidiaries.

Businesses

For businesses in the retail, leisure and hospitality sectors, the budget announced a 50% business rates discount from 2022 to 2023 for up to a maximum of £110,000.

For online businesses, there has been consultation on an online sales tax, amid the soaring rates of online sales consumption following the COVID-19 pandemic.

Welfare State

The Chancellor slightly reversed the taper of Universal Credit, reducing the 63% taper rate of £1 earned over the work allowance will now be 55%. This means for every £1 earned over the work allowance, the amount of Universal Credit will be reduced by 55p rather than 63p.

On the horizon, we have increased taxes looming with the increase in NI and dividends. Frozen personal allowances and thresholds will cause fiscal drag.

Our Advice…

We are aware this is a lot of information to take in. There’s no need to feel overwhelmed as it is more than likely only a few points above will affect you, but it’s best to include all information so everyone is informed of changes that may affect them.

Our advice to you is to liaise with your accountant so you can get on top of these changes as soon as possible. As always, if you need further guidance, do not hesitate to contact us at hello@shenward.com.