Christmas is fast approaching as I write this blog.  As business owners, we may want to give our staff, customers and suppliers a Christmas gift or party, but what are the tax impacts of this?  Firstly, we need to consider the nature of the gift.  Generally speaking, gifts to customers or suppliers are not allowed to be deducted from profits for the purposes of calculating taxable profits, unless they clearly and prominently show your company name, cost less than £50 and are not temporary in nature, eg food or drink.  You may make trivial gifts to staff, such as a bottle of wine, or a Christmas Turkey, and these will be allowable costs for the purposes of calculating your taxable profits and will not be assessed as a benefit in kind for the individual.  So if you are a company director operating alone, go and treat yourself to a trivial gift this Christmas!

Christmas parties for staff are also fully deductible for taxation purposes.  You can spend up to £150 per head on a Christmas party for staff without it being assessed as a benefit in kind, as long as the event is open to all staff.  Again, if you are a limited company director, then you are staff and this limit applies to you even if you are the only one working in the company.  So go on, treat yourself this Christmas!

If you would like any advice in any areas of accounting or tax, please contact me on 01767 260282 or amy@tayloraccountancy.net, www.tayloraccountancy.net.

Amy Taylor Accountancy takes every care in preparing material to ensure that the content is accurate and up to date.  However no responsibility for loss to any person acting or refraining from acting as a result of this material can be accepted by Amy Taylor Accountancy You should always ask your accountant to give you specific advice which is tailored to your personal and business circumstances and properly implemented.

However, there are some rules to watch out for regarding whether the place where you carry out your duties is a permanent, rather than a temporary, workplace, and whether the travel to that workplace constitutes ordinary commuting.

If the place where you are working would qualify as a temporary workplace, then a set of further rules apply, the most relevant being the 24 month rule.

Section 339(3) ITEPA 2003 states that “A workplace is a temporary workplace if an employee goes there only to perform a task of limited duration or for a temporary purpose. So even where an employee attends a workplace regularly, it will be a temporary workplace and so not a permanent workplace, if the employee attends for the purpose of performing a task of limited duration or other temporary purpose.”

Section 339(5) and (6) ITEPA 2003 goes on to state that “there is a further rule that prevents a workplace from being a temporary workplace where an employee attends it in the course of a period of continuous work that lasts, or is likely to last, more than 24 months.

A period of continuous work is defined by Section 339(6) ITEPA 2003 as a period over which the duties of the employment are performed to a significant extent at that place. To apply this rule you should treat duties as performed to a significant extent at any workplace if the employee spends 40% or more of his or her working time at that place.

If you attend a few different clients within the same geographical area, then this area could be your permanent workplace, subject to it meeting the rules above.  This means that if you are an employee or director, working for 40% or more of the time, for more than 2 years, at different client’s premises within the same geographical area, then your commuting expenses may not be corporation tax deductible.

If you would like any advice in this area, please contact us on 01767 260282 or amy@tayloraccountancy.net, www.tayloraccountancy.net. Amy Taylor Accountancy takes every care in preparing material to ensure that the content is accurate and up to date.  However no responsibility for loss to any person acting or refraining from acting as a result of this material can be accepted by Amy Taylor Accountancy. You should always ask your accountant to give you specific advice which is tailored to your personal and business circumstances and properly implemented.

The crackdown is expected to affect around 500,000 individuals engaged in cash in hand type trading. This could include people who teach traditional academic subjects, fitness and dance instructors, musical instrument teachers, art teachers and life coaches among others.

If you would like any help in declaring your income to HMRC if you have not already done so, please contact us on 01767 260282 or amy@tayloraccountancy.net, www.tayloraccountancy.net. Amy Taylor Accountancy takes every care in preparing material to ensure that the content is accurate and up to date.  However no responsibility for loss to any person acting or refraining from acting as a result of this material can be accepted by Amy Taylor Accountancy. You should always ask your accountant to give you specific advice which is tailored to your personal and business circumstances and properly implemented.

For a self-assesssment return for income tax you will need to have the following information to hand:

1.  Personal details, including address, date of birth and Unique Taxpayer Reference

2. Details of all your various sources of income so you can tick the relevant boxes and get the correct supplementary pages in your return

3. For any employment income, you will need your latest P60 or P45 and P11D if applicable, to complete the employment page.

4.  For any self-employed income, you will need a copy of your profit and loss account and details of any losses you are bringing forward to offset.

5.  For any other income, such as property, savings or capital gains, you will need to read the relevant pages to assess the details required and ensure you have completed all the relevant boxes.

6. Other areas of the tax return depend upon your circumstances.  Don’t forget to record pension contributions, gift aid, student loans and bank details if you are due a refund.

This list is not exhaustive and if your circumstances are complex, or you are unsure what boxes to complete, you should consult an accountant.

Come and like me on facebook to get more tax tips, special offers and discounts www.facebook.com/amytayloraccountancy.   Or contact me now on 01767 260282 or amy@tayloraccountancy.net, www.tayloraccountancy.net.

Amy Taylor Accountancy takes every care in preparing material to ensure that the content is accurate and up to date.  However no responsibility for loss to any person acting or refraining from acting as a result of this material can be accepted by Amy Taylor Accountancy. You should always ask your accountant to give you specific advice which is tailored to your personal and business circumstances and properly implemented.

As a sole trader or partner, you will be taxed on the profits you make from your self-employment.  In a partnership, you would be taxed on your share in the partnership profits.

The good news is that the first £7,475 you earn (2011-12 rate shown) is tax free.  This is known as your personal allowance.  The next amount of income you earn, up to £35,000 (2011-12 rate shown) is taxed at 20%, and anything above that is taxed at 40%.  There are some special rules for high earners (over £100,000), but these are outside the scope of this blog.

You are also required to pay Class 2 National insurance of £2.50 per week, and this is collect in bi-annual instalments on 31st January and 31st July of each year.

Class 4 National insurance is due on your prpfits from self-employment and this is 9% of all profits over £7,225 (over £42,475 you will pay 2% Class 4 NICs).

Your income tax and class 4 national insurance payments are due on 31st January following the end of the tax year, and if you are making payments on account, you will have additional payments to make on the 31st July following that.

Taxes you pay as a limited company

As a limited company, you will be required to pay corporation tax on the profits of the company.  Broadly this is the income you make less the expenses you incur, but you may need an accountant to ensure that the profits are correctly calculated.

Companies do not have a personal allowance, so tax is payable on all your profits.  The rate for small companies (with profits under £300k in 2011-12) is 20%.  In addition to this, you will have to pay tax personally on any money you have taken out of the business.  Directors often take a mix of salary and dividends as this is considered to be the most tax effective method of withdrawing funds from a company, and your accountant will be able to advise you on the best amounts to take out.

If you would like any advice in this area or any other areas of accounting or tax, please contact me on 01767 260282 or amy@tayloraccountancy.net, www.tayloraccountancy.net.

Amy Taylor Accountancy takes every care in preparing material to ensure that the content is accurate and up to date.  However no responsibility for loss to any person acting or refraining from acting as a result of this material can be accepted by Amy Taylor Accountancy. You should always ask your accountant to give you specific advice which is tailored to your personal and business circumstances and properly implemented.

Accountants use the UK GAAP (UK Generally Accepted Accounting Principles) to prepare accounts which includes adopting the accruals basis.  This means you record transactions as the liability or asset falls due or is receivable.  The benefit of accounting in this way is that you bring expenses incurred but not yet paid for into your allowable expenses, and the amount that is yet to be paid is recorded in your balance sheet as creditors.  However, you must also bring in the value of any work in progress that has not been billed before the end of the year, and record any work not yet paid for in your debtors figure.

Financial statements

A set of financial statements will typically include a Profit and Loss Account which records the income and expenditure for the year, and a balance sheet, which shows the historical cost of any assets used in the business, and other assets and liabilities.  Financial statements can be used as a basis for completing your tax return, as well as showing potential investors something of the financial standing of your business.

If you have a business which holds stock, you should conduct a stock take at each year end.  The amount of stock you have should be valued at the lower of cost or net realisable value, and the increase in stock year on year will be deducted from your purchases figure before you include it in your tax return.

A balance sheet will also include your fixed assets, prepayments, other liabilities and the amount of capital and drawings you have contributed or taken out of the business.  It can provide a useful snapshot of the financial health of your business.

Calculating taxable profits

The profit that your business has made for the year will be shown as the total of your income minus your expenses and many accounting software packages will allow you to report your own profit and loss account.  However, this profit figure will not always be the same as the one you will put on your tax return because of certain adjustments required to reach your taxable profit.

For example, in your accounts, you would want to reflect the total assets being used in your business which would include the written down value of any fixed assets.  This could be different to the amount you offset in capital allowances.  Also, your accounts may include the full value of stationery, but actually, you may have used some of that stationery for your own personal use, in which case an adjustment for personal use is required to reach your taxable profit.

Getting your profit right depends on a multitude of factors, such as making sure your records of income and expense are complete, making sure you don’t forget to include items you’ve bought out of your own personal funds, etc.  Another key area to consider when preparing your accounts, and your taxable profit, is the accruals basis.  Fundamentally, this means getting your income and expenses into the right year end.

If you have a service based business, such as a Virtual Assistance business, it is very likely that you will have ongoing projects where you may even take the money up front (good for your cashflow too if you do!).  When you get to the year end, we’ll assume this is 5 April, you may have projects where you have completed say 50% of the work, but have billed them already for 100%, or you may not have even billed them at all.

Where this is the case, you should make sure that the income you include in your accounts is the true reflection of the proportion of work completed and billable, often referred to as Work In Progress.  So in the example above, you should include 50% of the income regardless of how much you have actually billed your client.

The same principle applies to your expenses.  If you know you have received a good or service before the year end but haven’t paid for it until after the year end, you should make an accrual in your expenses for it.  So for example, a VA did some work for me which was completed by 30th March, but I did not receive her bill until 15th April.  When preparing my accounts, I made sure I included the expense in the earlier year end.

If you are paying for insurance, and other lump sum annual expenses, you will also need to adjust your figures to make sure you only include the amount relating to the appropriate year end.  So if you took out annual insurance for £240 on 5th March, you would include only one month’s worth of expense, £20, in the first year end.

Come and like me on facebook to get more tax tips, special offers and discounts www.facebook.com/amytayloraccountancy.   Or contact me now on 01767 260282 or amy@tayloraccountancy.net, www.tayloraccountancy.net.

Amy Taylor Accountancy takes every care in preparing material to ensure that the content is accurate and up to date.  However no responsibility for loss to any person acting or refraining from acting as a result of this material can be accepted by Amy Taylor Accountancy You should always ask your accountant to give you specific advice which is tailored to your personal and business circumstances and properly implemented.

Here are some other recommendations to get you started sent to me by one of my younger techie friends (thank you, Glenn!):

Milebug – for tracking mileage | export function | report function

Invoice2go – for invoicing | cloud sync | export function | dashboard with graphs and tables.

XpenseTracker – for expenses | optional cloud sync | export function | filter and categorising feature.

2Do – for tasks | optional cloud sync

Evernote – for notes | cloud sync

Dropbox – for file storage | cloud sync

What apps do you recommend?  Do you find it useful to do your accounts and tax in this way?  What apps would you like to see developed for owner managed businesses?

Come and like me on facebook to get more tax tips, special offers and discounts www.facebook.com/amytayloraccountancy.   Or contact me now on 01767 260282 or amy@tayloraccountancy.net, www.tayloraccountancy.net.

Amy Taylor Accountancy takes every care in preparing material to ensure that the content is accurate and up to date.  However no responsibility for loss to any person acting or refraining from acting as a result of this material can be accepted by Amy Taylor Accountancy.  Amy Taylor Accountancy takes no responsibility for any links to extenal websites. You should always ask your accountant to give you specific advice which is tailored to your personal and business circumstances and properly implemented.

Why is this happening?  Experts suggest that our spending culture has changed significantly and that store cards may have led to a build up of debt.  It’s also possible that women were more prone to redundancy in the earlier part of the recession.  There is also the proposition that the change in the tax and welfare benefit system may be exacerbating the situation.

Further reports out this week by the Daycare Trust and Save the Children, suggest that parents are getting into debt over the cost of childcare.  Almost 67% of respondents to a survey said that they could not afford to stop working but the costs of childcare were becoming difficult to manage.

If you find yourself in this situation, there are many sources of advice to help.  It is important to face up to debt difficulties before they get out of control.  For tips and advice, call For more information contact www.cccs.co.uk or 0800 138 1111, www.nationaldebtline.co.uk or 0808 808 4000 and www.citizensadvice.org.uk.  For more information on the survey results for parents facing difficulties with childcare costs, visit http://www.daycaretrust.org.uk/. Note that Amy Taylor Accountancy is not responsible for the content of external websites.

Have you found yourself struggling with debt, more now than at any time in the past?  Do you have any recommendations for women or parents finding themselves in this situation?  Please leave your comments and thoughts.

A report out in the Daily Telegraph today (5th July 2011) has published the findings of the British Chambers of Commerce with regard to sole traders attitudes to taking on staff.  According to the report, one in three business owners considering expansion are deterred by employing someone due to the perceived costs of compliance with employment laws.  Further considerations include national insurance contributions, and the forthcoming change to pension provisions, which will make it mandatory for employers to offer staff a pension plan and pay a minimum contribution of 3% by 2015.  For me personally, the sheer volume of employment law ( I have a tome in my bookcase on the subject) which changes every year, is hard to keep up with, and the responsibilities to staff of providing paid sickness and holidays, is certainly a factor in using self-employed workers rather than employees.  Certainly, the vast majority of my self-employed sole traders are outsourcing various tasks, such as admin, to other self-employed professionals rather than actually recruiting permanent staff members.

What do you think about this?  Are employment laws too rigid and off-putting for you in your business?  Why have you made the choices you have with regard to human resources?  And can you give sole traders any advice based on your experiences?

1.  Wherever possible ask your customers to pay you in advance, thus reducing your exposure completely to late payment.

2. Make sure you agree terms in advance with your customer, so that they preferably sign up to your payment terms.

3. Invoice as soon as possible after completion of a job or certain stage in a job.  Don’t just wait until the end of the month or the job to send out invoices.

4.  Reduce your payment terms as far as possible.  There’s no need to set a standard 30 days, if you don’t have to.  Try for 7 day payment terms, keeping your invoice to the top of the pile.

5. Get positive feedback from your customer straight after completion of a job so that they have no cause to delay payment to you.

6. Wait as long as you can before paying your suppliers.  If they give 30 days payment terms, wait until Day 29.

7.  Make sure you create a cashflow forecast showing the timings of expensive outlays, such as tax bills, so that you can plan for investment opportunities or funding requirements.

8. Use HMRC’s guide to budgeting for future tax bills so you know how much you need to set aside.  Why not put it in a separate savings account so you know you are prepared.

9. Consider changing business structure to a limited company.  Instead of making payments on account, limited companies only have to pay their tax bills nine months after the year end.

10. Consider changing your accounting year end, again, this could help with cashflow in a period where your profits are increasing.

Come and like me on facebook to get more tax tips, special offers and discounts www.facebook.com/amytayloraccountancy.   Or contact me now on 01767 260282 or amy@tayloraccountancy.net, www.tayloraccountancy.net.

Amy Taylor Accountancy takes every care in preparing material to ensure that the content is accurate and up to date.  However no responsibility for loss to any person acting or refraining from acting as a result of this material can be accepted by Amy Taylor Accountancy. You should always ask your accountant to give you specific advice which is tailored to your personal and business circumstances and properly implemented.