Category: Shenward

Although Britain left the EU in January 2020, its relationship with the EU has remained the same until the final cut-off date, December 31st.

With Covid-19 dominating the news agenda and Brexit feeling somewhat pushed into the background, the final cut-off date is quickly looming, and the government’s negotiation skills are still working towards better trade deals for UK businesses. 

Currently, there are no UK-EU trade deals reached, but the UK and EU agree in a couple of areas:

  • Workers’ rights
  • Competition 
  • Environmental policy 

These areas have become level playing fields, which the EU is adamant that the UK must stick to, however the UK wants the freedom to move away should it please – this is where the UK and EU are clashing heads resulting in a no-deal.

What does Brexit mean for EU and UK trade, if a deal isn’t reached?

If the EU and UK can’t make a formal agreement it would mean UK businesses would have to trade under rules set by the World Trade Organization (WTO). These rules are basic and would affect UK businesses in a number of ways, including:

  • Tariffs would be applied to most goods when UK businesses send goods to the EU
  • UK goods would be more expensive and harder to sell in Europe
  • WTO rules would also mean more border checks for goods, causing greater delays
  • The UK service industry would also lose access to European markers

What Brexit means for non-EU trade deals?

The government has continued to push forward talks with non-EU countries, securing trade deals with Japan, seeing 99% of UK exports there being free of tariffs. Trade with Japan amounts for around 2% of the UK’s total market value. 

The government is also in trade talks with the US, Australia and New Zealand. 

How does Brexit affect business planning for 2021?

With Brexit still very much in the air and negotiations still under review, you’re probably asking yourself what can I do now? 

Good business plans must account for different potential scenarios and outcomes, so there are a few areas you can start to think about and plan around to get you off to a good start come the Brexit deadline. 

Business planning, here are a few areas you can start to think about:

Get to know how Brexit affects your sector. 

If you work in hospitality for example, employing EU employees may become more difficult once the deadline hits. Be prepared to plan for additional costs should your business have to cover visa or additional admin costs. 

Those who import and export may experience delays on goods entering and leaving the country. Put in place a plan that acknowledges these potential issues and how you will look to overcome them, the aim is for the end user of your business to feel as little impact as possible

Be prepared to adapt. 

If you’ve always traded in a specific region and this area has now become affected by additional taxes and is no longer profitable, your business model may need to adapt so that it’s more fluid and can be slot into new territories easily. Look into the government’s established trade deals and see where a good opportunity for your business may be to explore and start to think and plan around different potential scenarios, now. 

Understand the rules put in place to date. 

If your business requires regular travel, there are already new rules in place that you can learn about and plan for. Gathering an understanding information on the new rules now, will allow you to acknowledge any potential cost implications, adding these into your 2021 budget will allow for you to forecast more accurately. 

Preparation is key. 

Make sure that you consider cash flow impact on paying VAT and duty tax when importing goods, being aware of potential new costs will help you plan better for the year ahead and remember to register for EORI number to clear goods as they come into the country.

For more business planning advice, you can get in contact with us here.

How much do you know about quarterly Corporation Tax payments?

Written by Michael Gough, Senior Accountant at Shenward, Leeds.

For small companies, corporation tax is payable by nine months and one day after the end of your accounting period. For example, if your company’s year-end is 31 December 2019, the corporation tax, if you are a small company, would be due by 1 October 2020. 

You might not be aware but ‘large’ companies as defined by HMRC are required to make quarterly Corporation Tax payments. It is noteworthy that HMRC’s definition of a ‘large’ company is not the same as the definition set out in the Companies Act 2006. 

Put simply, if you’re classed as a large company by HMRC – your company’s profits for an accounting period are expected to top £1.5 million a year – you must pay the tax due electronically and in four instalments.

Confused? Let’s explore.

HMRC characterise a large business as one with an annual profit of between £1.5 million and £20 million. 

Under Corporation Tax self-assessment large companies must pay in quarterly instalments if they expect their annual profits to be above the £1.5 million threshold. This threshold is known as the Upper Relevant Maximum Amount (URMA) and the current rate of Corporation Tax is 19%.

Most companies won’t fall within the quarterly payment regime, but the directors of fast-growing businesses need to be aware of their obligations as their companies expand and profits rise.

There are exceptions, of course, and that is where taking specialist advice from your accountant is important – and can save you time and money. Tax rules can be complex, every business is unique, and it pays to have an expert on your side.

To help get you started, we’ve answered some of the most frequently asked questions regarding quarterly Corporation Tax.

What are the quarterly Corporation Tax exceptions for growing companies?

A company doesn’t have to pay by instalments for an accounting period even if profits go above £1.5 million if:

  • The amount of its total liability for the accounting period is less than £10,000, or where the accounting period is less than 12 months;
  • Its profits for the accounting period do not exceed £10 million and at any time in the previous 12 months it did not exist or did not have an accounting period; or for any accounting period in the previous 12 months either its annual rate of profit did not exceed £1.5 million or its annual rate of tax liability did not exceed £10,000.

How does having a group of companies apply to paying quarterly Corporation Tax?

Where a company owns at least 51% of other companies in a group the URMA is calculated by dividing £1.5 million by the number of companies in the group. This includes the parent company so if a company has another three in the group then the URMA is divided by four.

Group companies can choose to offset an amount overpaid by one company against an amount unpaid by another company in the group.

HMRC also offers Group Payment Arrangements, which allow groups to make instalment payments on a group-wide basis. You can nominate one company in the group to pay the instalments on behalf of the group, rather than company by company.

When do quarterly payments have to be made?

Four equal instalments should be paid for a 12-month accounting period, two within the 12 months and two afterwards.

The dates are: 

  1. Six months and 13 days after the first day of the accounting period
  2. Three months after the first instalment
  3. Three months after the second instalment (14 days after the last day of the accounting period)
  4. Three months and 14 days after the last day of the accounting period.

For example, using the same example as earlier, a company with a year-end of 31 December 2019:

  1. 14 July 2020
  2. 14 October 2020
  3. 14 January 2021
  4. 14 April 2021

How are quarterly payments worked out?

A company must estimate its current tax year liability, taking into account net reliefs and set offs, and make payments based on that assessment. The estimate is just that, an estimate, and will vary over time. 

Companies are allowed to top-up payments at any time. It may also be possible to claim back over-payments if they shouldn’t have been made or were shown to be excessive. Alternatively, HMRC will set any over-payment against future liabilities.

What should growing companies be aware of? 

If a growing company is defined as a large company for two consecutive years, the quarterly instalments payments regime will apply for the second of those years. If for example, a company’s accounting period ending on 31 December 2019 is the first accounting period where profits exceed the URMA, it will be required to make payments on account for the accounting period 31 December 2020. Its tax payments will be as follows:

  1. First payment on account (2020): 14 July 2020
  2. Corporation tax liability (2019): 1 October 2020
  3. Second payment on account (2020): 14 October 2020
  4. Third payment on account (2020): 14 January 2021
  5. Fourth payment on account (2021): 14 April 2021

By 14 October 2020, the company will have paid its corporation tax liability for 2019 and potentially up to 50% of its upcoming tax liability for 2020. Therefore, it is absolutely essential that companies plan ahead when budgeting for cash flow. 

How should payments be made?

All payments must be made electronically. This can be by direct debit, debit card, credit card, company credit card or your own bank or building society’s internet banking service.

Alternatively, you can use BACS direct credit, your own bank or building society’s telephone banking service, CHAPS or Bank Giro.

What are the penalties for failing to pay Corporation Tax?

HMRC may charge penalties if a company deliberately fails to pay quarterly instalments or doesn’t pay enough. The amount will vary. Interest can also be charged on overdue or under-paid instalments.

Tax can be complex so if you need help with Corporation Tax please speak to one of our experts here Shenward – your leading independent firm of accountants and business advisors. Email michael@shenward.com

Tell us about your role at Shenward?

My responsibilities vary from day to day, but one that never changes is exceptional customer service for clients. I support a range of clients who fall within many different sectors; some are individuals, and some are bigger businesses. Service to these clients includes preparing financial accounts, VAT returns, personal tax returns and general bookkeeping. I love the variety that the role brings with it.


What inspired you to train as an accountant?

I achieved a master’s in chemistry at university, and after that decided to try a variety of roles within the hospitality sector. After doing that for a while, I decided it was time to focus on my career and knew I wanted to get back to working with numbers again. There were plenty of roles in and around Leeds, many of which liked, but given that I was a science graduate I was offered this role with Shenward and jumped at the chance.

How have you found working at Shenward?

I love it! I work in the Leeds office, which is quite small compared to the Bradford one, but we have all been working together for a few years with no personnel changes and so we are like a family.  We each know our clients inside out and work together to get things done.

What support has the team given you?

So much support. I came into the office with no previous experience working as an accountant and the team really helped me to get to grips with everything in the early days. The nice thing is that they’ve been around through my entire journey, and I’ve been able to lean on them for support when I’ve needed it. Shenward has also helped out with the financial cost of my studies, which has been a huge help.

How have you found studying and working?

I’ve found it very easy. I used to make plans of what I wanted to achieve and by when and carry it out by breaking it down into smaller parts and setting myself deadlines for finishing them. It helps that I only live 10 minutes away from work, so I get plenty of time in the evenings to get things done.

What qualifications have you obtained?

I successfully passed my AAT professional level 4 and have since signed up for the ACCA qualification. I can’t wait to get started.

What advice would you give to other aspiring accountants?

My advice would be to start as early as possible as your earning potential increases as you gain the necessary experience and qualifications; within 3 years you could be earning £30k instead of owing £30k from going to university. Looking back, I wish I had found this role before enrolling at university as I would have been further along in my career.

Tell us a little bit about yourself outside of work.

I play a lot of guitar. I’ve been playing for a long time now and have built up quite a collection – I’m not a materialistic person at all apart from when it comes to guitars. I like to play chess a lot as well and play in tournaments online quite a bit. I find it passes the time especially during the current lockdown.

Non-profit accounting – Three Things to Consider When it Comes to Compliance

Non-profit organisations are required to carry out several activities by law when it comes to accounting and financial management in order to stay compliant.

However, the various laws surrounding non-profit organisations such as the Charities Act 2011, the Charities Act 2016 and the Companies Act 2006, can make even the most basic accounting requirements seem like a complex task.

In order to reduce the panic and allow you to focus on the goals that drive the charity forward, below we explain three key areas for non-profits to consider that will help them stay compliant and avoid any legal repercussions.

 

Your business structure

The first step to understanding what is legally required of you to stay compliant is obtaining a clear understanding of what type of legal entity you are. Non-profit organisations can be structured in many ways, so it’s vital that you understand how your activities, objectives, and overall income will determine your legal structure.

As a non-profit organisation, you could be registered as a charitable company or a community interest company with Companies House, a charity with the Charity Commission or even as a co-operative organisation. Each entity has its own laws surrounding the financial information you need to record and submit.

Let’s say that you are registered as a charity with the Charity Commission; you are required to prepare a set of accounts, an annual return, and a trustees’ annual report which summarises the work that your organisation has carried out throughout the year.

On the other hand, if you’ve foreseen a risk of incurring financial liabilities, you could be registered as a charitable company. In that case, Section 8 of the Companies Act 2006 states that your subscribers must sign and authenticate a Memorandum of Association in addition to the above, showing that they wish to form a company and agree to become members. This document MUST to be sent to the Charity Commission, or you could incur a fine.

Requirement to pay tax

As a non-profit organisation, you are eligible to apply for certain tax exemptions and reliefs such as corporation tax, and income tax for trustees, but you must be recognised by the HMRC to benefit. 

HMRC states that the types of income that are exempt from tax are:

  • donations
  • profits from trading
  • rental or investment income, eg bank interest
  • profits when you sell or ‘dispose of’ an asset, like property or shares
  • property purchases

However, you’re not going to be exempt from all taxes, particularly if your non-profit organisation has used its income on ‘non-charitable expenditure’ or made significant purchases. 

The types of income that non-profits are required to pay tax on according to HMRC are:

  • dividends received from UK companies before 6 April 2016
  • profits from developing land or property
  • purchases – but there are special VAT rules for charities

If any of these apply, your organisation will need to fill out a tax return and send it to the team at HMRC.

How you keep your records

Although profit won’t be your overall metric for measuring success, you are legally required to keep accurate and up to date records of your non-profit organisation’s donations and income.

The length of time you keep records will vary and depends on the type of record (e.g. cash books, invoices, receipts, Gift Aid records, etc.).

Although we would recommend that you confirm the exact length of times with your accountant or business adviser, the government says that you must keep financial records for at least six years from the end of the last related financial year.

Some non-profits are also legally required to be audited. Charities with a gross income of more than £25,000 in their financial year are required to have their accounts independently examined or audited.

An organisation with a gross income between £25,000 – £1 million will require an independent examination, whilst one with a gross income of £250,000 and assets exceeding £3.26 million, will be required to have an external audit carried out by a qualified team.

Audits are an important tool in preventing fraud and reassuring trustees and fundraisers that your non-profit is being managed responsibly.

Our specialist team are always at the other end of the phone if you are ever unsure or need some reassurance from an approachable accounting partner. 

Or, you can arrange an office consultation with one of our friendly experts here at Shenward LLP Chartered Accountants and Business Advisors. 

Why not call either our Bradford office on 01274 722 666 or our Leeds office on 0113 246 1006. Or, if you prefer, you can simply email hello@shenward.com and we’ll get back to you within 24 hours.

‘Shenward’ acquires Cox Costello (Yorkshire) Limited

Bradford-based chartered accountancy firm, Shenward, are delighted to announce the acquisition of Cox Costello (Yorkshire) Limited, a Leeds based accountancy practice, effective from 12 November 2018.

Shenward has enjoyed strong growth over the past several years and the acquisition supports their ambitious plans for expansion across the North of England.

Headed by Zak Iqbal and supported by his team, the Leeds based firm has quickly grown their presence in the region.

Speaking earlier today, our Managing Partner, Sherad Dewedi said ‘Over the last few months, we have worked closely alongside Zak and have built a strong working relationship which we look forward to develop further. Zak brings a wealth of experience and knowledge and has a fantastic team supporting him. The acquisition enables us to expand and enhance our geographic reach in Leeds and the North.’

Zak Iqbal of Cox Costello (Yorkshire) Limited commented, ‘I am delighted to have worked with Sherad over the last few months. Shenward is an ambitious firm with a long history in the Yorkshire area with growth, client services and delivery being at the forefront of its business model. I am sure that Sherad will lead the firm to achieve its goals, where commitment to excellence is their primary objective.’

Shenward are very much looking forward to welcoming the new team and valued clients to ensure they continue to receive exceptional client service and build a stronger working relationship going forward.

Chadwick Lawrence, Yorkshire’s Legal People, advised Shenward on the transaction.

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