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Administration Centre

There are many simple processes that can ease your bookkeeping administration and relations with the tax authorities. Why not have a browse through these resources which are taken from my experience with our clients over the years?

1. Starting Up

  • To create a New Business
  • Incorporation
  • Business Stationery
  • Companies House
  • Registering with HM Revenue and Customs

2. Registering with Simple Accounting

  • Authorisations
  • Identity checks

3. Financial Procedures

  • Financial Controls
  • Authorising purchases and invoices
  • Banking
  • Hire Purchase (HP) versus Purchase
  • Legal Protection
  • Credit Checks

4. Personnel

  • Self Employed Staff
  • Advertising, Applications and Appointments
  • Employing your Spouse or Children
  • Statutory Maternity Pay (SMP)
  • Payroll

5. Staff Benefits and Expenses

  • Tax-Free Benefits
  • Tax Advantaged Benefits
  • Taxable Benefits
  • Simpler Accounting for Staff Expenses
  • Staff Expenses Spreadsheet
  • Mileage
  • Petty Cash Voucher
  • Mobile Phones for Family employees
  • Overdrawn Directors' Loan Accounts
  • Charging your Company Rent for your Home Office 
  • Staff Suggestion Scheme

6. Tax

  • Paying PAYE, NI contributions, Corporation Tax, VAT and self assessment electronically
  • Businesses face penalties by HMRC
  • Late filing penalties - Companies House and HMRC
  • Late Payment and VAT
  • Construction Industry Scheme
  • Corporation Tax
  • Inheritance Tax Planning
  • Pensions
  • Intrastat

7. Selling Your business

  • Accounting Needs
  • Due Diligence

8. Useful Links


1. Starting Up

To Create a New Business

There are tax and legal advantages if you run your business through an incorporated body like a limited company. Try our incorporation calculator to check some of these potential gains for yourself. We are here to help you through the process. This is a list of the things you will need to do to create a limited company. This is not for the faint-hearted. If you are already operating as a firm, some of the following will not apply.

What You Will Need to Create a Company (Word)

For a more detailed guide to starting a new business have a look at our New Business Start-up guide. You will need to login/ register to access this special business report.


New Business Start-up Guide 

Incorporation

If you would like to create a company then you could set it up yourself or we could do it for you. We would charge about £100 +VAT (but note that this would be freely included as part of our Business Companion Service). You could also choose to use a formation agent.

Business Stationery

The rules regarding business stationery have changed.  The following rules applies to business stationery whether in hard copy, electronic or any other form.

Simple Accounting Helpsheet on Business Stationery Rules (Note: you need to log in to access this)


Companies House

In order to preserve your incorporation you will need to submit regular information to Companies House.

0303 123 4500
enquiries@companies-house.gov.uk
www.companieshouse.gov.uk/

Key Companies House Forms are provided on the Companies House Website.

Registering with HM Revenue and Customs

If you are self employed/ in partnership for the first time you only have three months to register with HM Revenue and Customs (HMRC). Failure to meet this requirement will mean an automatic £100 fine. So file Form CWF1 with the tax office straightaway. This form is your official gateway into starting off on the right track for tax purposes and is required to alert HMRC to your business's existence. This form can be found at Self Employed Registration: https://www.gov.uk/log-in-file-self-assessment-tax-return/register-if-youre-self-employed

2. Registering with Simple Accounting


HMRC - Authorising Simple Accounting Limited as your Agent (HMRC Form 64-8)

Before Simple Accounting can fully handle all your tax matters efficiently and effectively, HMRC requires you to complete an Authorising your Agent form 64-8 (pdf file). This gives authority to people like us who deal with your company's and personal tax affairs. We will also need to get authorisation to act for you through HMRC's online services. This requires us to instigate generation of an authorisation code which is sent to your office in the post.   

This authority allows HRMC to exchange and disclose information about you with us. It also allows them to deal with us on matters within the responsibility of HMRC. This overrides any earlier authority given to them. HMRC will hold this authority until you tell them that the details have changed.

What this authority means for VAT:

HMRC will continue to send correspondence to you rather than to Simple Accounting. If we have a 64-8 the HMRC can deal with us in writing or by phone on specific matters. If we are able to submit VAT returns online on your behalf, you will need to authorise us to do so through the HMRC’s website. We can guide you how to do this over the telephone. 

What this authority means for Corporation Tax:

HMRC will continue to send correspondence to you rather than to Simple Accounting. If we have a 64-8 the HMRC can deal with us in writing or by phone on specific matters. This authority allows us to submit your Corporation Tax returns online.

What this authority means us generally

HMRC will start sending letters and forms to your agent (that’s us). They also will allow us access to your account information online.Usually the HRMC may need to correspond with you as well as, or instead of, your agent. You will not receive your Self Assessment Statements of Account if you authorise us to receive them instead. Paying any amount due is your responsibility. HRMC do not send National Insurance statements and requests for payment to us unless you have asked the HMRC if you can defer payment. Companies do not receive Statements of Account, but they do receive corporation tax demands - which will be sent together.

Identity Checks

We also require identity evidence to meet our obligations under the Money Laundering Regulations 2007.  Ownership of key business assets will have to be confirmed.  As our relationship develops we shall also monitor your cashflow to verify that your income is legitimate. In proving our clients' honesty we are protecting all our clients from false accusations.

Companies House - Authorisation for Simple Accounting Ltd  

In order for us to submit Final Accounts and your Annual Returns to Companies House please give us your 6 digit authentication code.  This will also allow us to make changes to your Company set up on your behalf (web-filing).  

Where to send these forms

When you have completed these forms and details please return them to us: Simple Accounting Ltd, 95 Bridge Lanes, Hebden Bridge, HX7 6AT.


3. Financial Procedures

Financial Controls

If you are a large organization the following documents help you set up your procedures:

Authorising purchases and invoices

This is an authorisation flowchart showing you how to make a purchase, authorise it and pay the bill in a controlled way.

Flowchart for Purchases and Invoices (Word)

Banking

We recommend the Yorkshire Bank.

We've also heard good reviews of Metro Bank.

We no longer recommend the Federation of Small Businesses (FSB) offer of free banking with the Co-operative Bank We have had too many complaints about their quality of service.

See 'Simple Accounting for Staff expenses' below under Staff Benefits and Expenses.

Hire Purchase (HP) versus Purchase

A Comparison of the Benefits of HP versus Purchase (pdf)

Legal Protection

We recommend that my clients join a legal protection scheme. Small companies tend to be particularly vulnerable to employment and trading disputes or Inland Revenue investigations. You can get a whole series of insurance and membership benefits by simply joining the Federation of Small Businesses - call them on 08705-133307.

Federation of Small Businesses Website

Credit Checks

We use CheckSURE which is a complete online commercial credit checking service:

Checksure

4. Personnel

Self Employed staff

It is vital that you make it clear to the HMRC that there is a separation between your firm and any self-employed workers that you engage. The first defence is simply to make sure that you have some sort of contract. The contract need not be complex .... but it must have been signed by both participants. Here is a model that you can use. 

Model Consultancy Contract (Microsoft Word)

Advertising, Applications and Appointments

you shoukd advertise your job vacancy using all the tools available.

When you have chosen your recruit it is vital that you contract with your employee correctly. Your firm needs to state the 'key particulars' in a statement to the new employee.  The compulsory elements of an employment contract that you need to cover are explained well on this Government website.

The following documents (all in Microsoft Word) are drafts which you may like to amend for vacancies within your own business:

Employing your Spouse or Children

Mixing business and pleasure can cost you dearly if you don't stick to the rules. If you are thinking of employing your spouse, consult this top ten checklist of ways to keep your house in order (It was written by accountants and business advisors PKF).

Employing your wife(pdf)

Statutory Maternity Pay

Statutory Maternity Pay (SMP) is recoverable against your National Insurance bill. If you are paying on gross National Insurance contributions Class 1 of £45,000 per annum or more you can get 92% of your SMP back.  If you are paying less than £45,000 then you can get 100% of the SMP and 3% more as admin compensation against your National Insurance bill.

Payroll

Payroll is becoming even more complex with the HMRC's requirements for 'Real Time Information' (RTI), the requirements of the Student Loan Company, attachments of earnings orders, Working Time and Sick Pay monitoring requirements,and the arrival of Compulsory Autoenrolment pension contributions. 

We recommend our Business Companion Service, which provides free payroll calculations, payslips and returns along with full telephone support.  We include Personal Tax Returns for the directors. We include auto enrolment when appropriate.

Alternatively:

5. Staff Benefits and Expenses

Not all employers provide benefits. If you decide to, some benefits can be given to employees (including yourself) tax-free, while others are taxable at beneficial rates.

Do not think you can use all kinds of expenses to lower the tax bill. The reality is that tax relief is due only for expenses which are incurred wholly and exclusively for the purposes of the business. In practice HM Revenue and Customs (HMRC) does allow proportionate claims to be made for assets like cars, which are used partly for business and partly for private purposes.

Tax Free Benefits and Expenses

The following are completely ignored in working out an employees personal tax. Common examples are:

  • free or subsidised meals in a staff restaurant (so long as it is open to all staff)
  • staff parties up to £150 pa
  • free parking near your workplace
  • fuel maintenance, insurance on a pool car
  • parking costs for work visits
  • interest free loan to buy a season ticket to travel to work
  • gifts up to £50 per staff member or £200 per director each Christmas
  • relocation expenses up to a certain limit
  • Employer pension contribution
  • training courses
  • relevant magazine subscriptions

List of Staff Benefits (Microsoft Word)

Tax Advantaged Benefits


During these difficult times you may feel you want to reward staff.  However you may wish to avoid giving an across-the-board salary increase, which some of your staff may appreciate less than the alternatives.

Some of the possible tax advantaged staff rewards and benefits that we can advise you on are as follows.  
  • Bicycles for commuting
  • Childcare vouchers
  • Enterprise Management Incentives (ie share options)
  • Expenses
  • Gift to a director of up to £300 for Xmas
  • Gift to a member of staff of up to £50 for Christmas.
  • Gym membership
  • Home computers
  • Loans
  • Medical insurance
  • Mileage and travel expenses
  • Mobile Phones
  • Moto Bikes
  • Parking
  • Pension contributions made by employees
  • Permanent health insurance
  • Salary sacrifice
  • Scale rate meals and accommodation
  • Staff Suggestion Schemes
  • Subsistence
  • Telephone calls (not line rental)
  • Travel Expenses
  • Unpaid holiday
  • Use of home as office

Of these bicycles, mobile phones, business computers used at home, mileage subsistence and training get VAT relief as well. Zero/low emissions company car.

Very often you need a staff policy on expenses.  Here are two drafts.

General Expenses Policy (Word)

Travel and Subsistence Policy (Word)


Unpaid Holiday
Let us consider one of these options in detail. What are the benefits and savings from giving unpaid holiday?

Say you offer your employees the option of taking extra unpaid leave as part of your flexible benefits scheme.  How does this work?  An employee can effectively “buy” more holiday days. By doing this, the company saves one day’s gross pay plus 13.8% employer NI.  Meanwhile the employee has an extra day’s holiday which effectively costs them only 79% (if a basic rate taxpayer) or 59% (if higher rate taxpayer) of their gross daily pay rate.

How do we calculate the cost of a day’s holiday?
The cost of a day’s holiday depends on the employee’s salary and the number of days a week they work. If an employee works a five-day week, then they have 261 working days a year (365 less 52 x 2). The employee’s salary (after any pay rise) is divided by the number of days to work out their daily pay.

Example
Adam’s current salary is £20,000 and you have decided to give him a 5% or £1,000 pay rise this year.  He can either take this as gross pay or select from a list of benefits which includes additional holiday. Adam works five days a week and has an annual holiday entitlement of 28 days including bank holidays. The cost of a day’s extra holiday will be £90 (£21,000 / 233 working days).
For each day Adam will lose £61 net pay.   If Adam decides to take an extra five days’ holiday, he will only lose £305 from his annual net pay.  The company will save £450 in gross pay plus £62 employers’ NI. This leads to an overall saving of £512.  Adam, will now only receive £550 of the £1000 pay increase.

Are there any disadvantages?
The only real disadvantage is that the company loses the productivity of an employee for a day. To minimize this, specify a maximum amount of additional holiday that can be taken, e.g. five days, to avoid key employees from being absent for too long. And you still have to give your employees their minimum holiday entitlement which is 5.6 weeks a year (including bank holidays).

Taxable Benefits

You will have to pay tax if you give your employees these. Common examples are:

  • a car or van that your employee can use for private motoring
  • free fuel for their private motoring
  • free, or low cost, living accommodation, unless it is needed because of your job
  • tickets and vouchers that your employee can use to get free or cheap goods or services
  • staff loans beyond £10,000

These have to be declared on a P11D and a P11D(b) which is filed by 6th July each year. Naturally we tend to advise against these sorts of benefits.

Here is a brief advising the heavy tax costs of paying for fuel on company- owned cars used by employees:

Free fuel (Word)


Simpler Accounting for Staff Expenses

It is now possible to get company credit cards that do the bulk of the accounting work for you. Get a credit card that has a quarterly activity statement – a typical supplier would be the company Visa card issued by the MBNA:

For easier VAT bookkeeping, you really need your accounting year, VAT quarter end and VISA card statements to all align.

Staff Expenses Spreadsheet

Ensure that you have the right records to satisfy the HMRC should they come knocking on your door. To keep accounting discipline use the sample expenses spreadsheet below to record employee expenses.

You will be able to record costs incurred by staff (including directors) and have a record sheet to issue reimbursements from the supplied receipts.

Once the spreadsheet has been setup with your company name, the employees name and an incremental record number for each spreadsheet produced for your employee; you can begin to start inputting all the expense receipts. 

Example staff expenses spreadsheet

Staff Expenses Spreadsheet (Excel)

General expenses (excluding mileage).  Carry out the following tasks to ensure you have a good, clean set of records:

  1. Start by entering the date of the transaction in column A,
  2. Enter a small description of the item in column B,
  3. Enter the suppliers name if known in column C,
  4. Enter the amount in column F
  5. In column G enter ‘0’ if item zero rated VAT or ‘3’ if the item bears standard rated VAT (20%).
  6. Enter the corresponding expense account number to which the item relates to; e.g. stamps will be ‘6’ relating to MYOB expense account 6-6700.

You will now see the net cost shown under the relating expense account (columns M-T). This figure will be net of VAT. Any VAT corresponding to this amount will be shown separately in column U.

Mileage
Mileage expenses: To enter mileage in the expenses spreadsheets please enter as follows:

  1. Follow instructions as per General Expenses 1-3 above.
  2. Enter the mileage in column E (issue an employee with a Mileage Record Sheet {see below} to record starting and ending mileage, this can then be used to tot up the total miles from the mileage details).
  3. Column F then gets pre-populated with the figure total using the following sum [(ending mileage - starting mileage) x 0.45].  You can amend the rate of mileage you give employees by going into the first cell in column F by changing the figure from 0.45 to the required rate). Please remember to drag the cell down to copy the new formula into the rest of the column.
  4. In column G enter '1’ if the item bears reduced rate VAT (7.14% or 3 p per mile for petrol<2000cc or a diesel), enter '2' if the line bears higher mileage rate (10.6% or 4.3p per mile for petrol> 2000cc).

Simple Mileage Record (Microsoft Excel)

Tax-Free Business Mileage Rates

The H M Revenue & Customs (HMRC) will allow the following amounts that can be claimed tax-free for business use.

  1st 10,000 miles pa
 Each mile over 10,000
 Extra passenger making same trip
Cars and vans
 45p 25p 5p
 Motorbikes 24p 24p n/a
 Bicycles 20p 20p n/a


10,000 Mile Limit

If you travel over 10,000 miles in a tax year, your mileage rate drops to 25p per mile for the excess. The HMRC expects each employer to keep a running total of exactly what mileage each employee has done throughout the year. This is so that the employer can satisfy a potential HMRC audit that they are observing the 10,000 mile limit for each employer.

As usual the HMRC are making life difficult for us. Our advice is do not keep a cumulative mileage log. Instead, periodically check 'find transactions' in MYOB. Look for a top driving staff member. Has the employee been paid more than £4500 in mileage expenses this tax year (1/4/16 - 31/3/17)? If not, continue to pay 45p per mile.

Petty Cash Voucher

I recommend using an imprest system to administer petty cash. Don't try to book every transaction into MYOB, it is too easy to get confused. Instead, enter a weekly or monthly summary.  Treat the Petty Cash as a member of staff that periodically claims their staff expenses from the firms current account.

Example petty cash voucher:Petty Cash (pdf)

Mobile Phones for Family employees

Could your family live without their mobile phones? And did you know that the provision of a mobile phone to an employee is exempt from both income tax and NI? A company can potentially reclaim the VAT you all incur on your phones? So why not combine the two and have company phones for those of your family who are employed by the business?

Mobile Phones (Microsoft Word)

Overdrawn Directors' Loan Accounts

There are several consequences of leaving an overdrawn director loan;

a) Leave it as a director loan.  If we carry it forward at the year-end you have to declare it.  You have to pay tax to the UK authorities of 25% of the amount outstanding on the loan.  That will repaid nine months after the corporation accounting period in which the loan is repaid or written off.  Is it worthwhile paying the tax leaving the loan overdrawn until we have sufficient reserves to pay a dividend legally?  If there is going to be enough profit in forthcoming year then an overdrawn DLA becomes a business tax cash flow issue.

b) There is also a personal tax effect of an overdrawn director loan account.  One of two things have to happen. You could declare a benefit in kind based on the official rate of interest 4.0% on the outstanding loan (on a P11d) - and the director pays income tax broadly of 2% (higher rate tax payers). Alternatively we must get the company to charge the director the historical interest equivalent to what would have been the benefit - 4.0%.

c) The loan has to be specifically mentioned on the company accounts.

Charging Your Business Rent for use of your Home Office

Getting your company to pay rent for use of part of your home for office accommodation can works as a tax efficient way of extracting a modest income from the business. The company will get a tax deduction for the rent paid (and provided it’s not excessive), you don't pay personal tax on the receipt.

You need to decide what expenses are properly attributable to the provision of (furnished) accommodation to your company. The total of these is then used to set the level of rent received from the company. The rent can be lower than market value, but must not exceed it.

Expenses would include:
•    an appropriate proportion of heating and lighting costs
•    maintenance and repair costs
•    a proportion of mortgage interest or rent
•    any expense you incur at your company's specific request

Back this up with a formal rent agreement between the company and the property owners (ie you), just stating what has been agreed. 

Provided you are not being visited by clients, business rates will not be due on your use of your home office. To avoid any ‘exclusively-used for business challenge’ state in the rental agreement that the facilities are only let to the company for designated hours each week, for example 9.00am to 5,00 pm, Monday to Friday.

You will have to declare rental income on your personal tax return.  If you can get, say, £50 a week treated as rent, but matched with £50 of expenses, there will be no tax to pay.  

Example Office Rental Policy (Word)

 

Paperwork for home rent

  • Get a formal board minute drawn up to state the arrangement and that it has been agreed.
  • Prepare a rental agreement setting out formal terms and conditions.
  • On the company accounts include payment for rent under ‘Rent and Rates’.  
  • On your personal tax return, record the rent received from your company as rental income  - but if the rental income equals your own costs you will have a zero tax bill.

We can help with all this bureaucracy.

Example Office Rental Agreement (Word)

 

Backdating a Claim

Unfortunately it's not possible to backdate a rental agreement itself as it is a legal document. However the terms of the agreement can specify an earlier date from when rent first became payable. We wouldn't recommend this being any earlier than the beginning of this tax year, i.e. April 6 2016.

Staff Suggestion Scheme

A simple way of paying staff free of tax is to create a staff suggestion scheme.

Example Staff Suggestion Scheme (Word)

See our Staff Suggestion Scheme guide (you will need to login to see this page)


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6. Tax

 

Paying PAYE and National Insurance electronically 

All payments should be made to the Accounts Office Cumbernauld account

Bank account details (Accounts Office Cumbernauld):
Sort Code: 08 32 10
Account number: 12001039
Account Name: HMRC Cumbernauld

PAYE/ NIC payment reference:
To make your current monthly or quarterly combined PAYE/NICs payment just use the Accounts Office reference shown on your payslip booklet cover or on the letter HMRC send you in place of the booklet, for example 123PA00012345.

If your payment is not for the current month or quarter you need to tell HMRC the year and month - add this as an extra 4 digits to the reference in the form YYMM eg 1301 for a payment to cover the period up to end of April 2013. Quote the reference number with no gaps between the characters.

Quarterly payment option for small employers:
If you estimate over the full tax year that your total payment will be, on average, less than £1,500 per month, you can choose to make quarterly rather than monthly payments. You must still submit your Full Payment Submission (FPS) on or before the date you pay your employees.

Class 1a National Insurance/ P11d:
To pay your Class 1A National Insurance/ P11d use your 13 character Accounts Office reference followed by the year and month 13. For example, to make a payment in July 2018, for the year 2017-18 (the previous year) add 1813 to your Accounts Office reference to give 123PA000123451313 1813. Please note by using 13 as the final 2 digits you are letting HMRC know that this payment is intended for Class 1A NIC. Do not use 13 as the final 2 digits if you are paying any other Employer/Contractor liabilities.

Check your reference using HMRC's reference checker

 PAYE Month
 Quarter If unpaid : Penalty  Due on or before:
 01     22nd May
 02     22nd Jun
 03  1   22nd Jul
 04     22nd Aug
 05     22nd Sep
 06  2   22nd Oct
 07     22nd Nov
 08     22nd Dec
 09  3   22nd Jan
 10     22nd Feb
 11      22nd Mar
 12  4    22nd Apr

Payment Penalties on PAYE
Now the HMRC is much tougher on payment dates, it is important that people instigate payment at the right date.  Note: all these dates are cleared funds dates. You will typically need to arrange a transfer three working days before this for your payment to clear on time. If you pay less than £4500 per quarter on average in NI and PAYE then you can instead pay quarterly. 

 PAYE Month
 Quarter If unpaid : Penalty  Due on or before:
 01    22nd May
 02    22nd Jun
 03 1   22nd Jul
 04    22nd Aug
 05    22nd Sep
 06 2   22nd Oct
 07    22nd Nov
 08    22nd Dec
 09 3   22nd Jan
 10    22nd Feb
 11     22nd Mar
 12 4    22nd Apr


Paying Corporation Tax Electronically

Corporation Tax Bank Account Details:
Sort Code: 08 32 10
Account number: 12001039
Account Name: HMRC Cumbernauld

Your payment reference:
Quote your corporation tax reference (also called 'UTR') followed by the Accounting Period which you are paying. Corporation tax is due nine months after the end of the year to which it relates (the end of the accounting year).

Paying VAT Electronically

VAT Bank Account Details:
Sort Code: 08 32 00
Account Number: 11963155
Account Name: ‘HMRC VAT’

Your payment reference:
Quote your nine digit VAT registration number (no spaces). VAT is due a month and seven days after the VAT return quarter end date. Alternatively it is due two months after the end of the VAT accounting year for VAT Annual Accounting.

Paying Self Assessment Electronically

HMRC Bank account details:
Sort Code: 08 32 10
Account number: 12001039
Account Name: HMRC Cumbernauld

Self Assessment Payment Reference:
Use your 10 digit Self Assessment number, followed by the letter K. This is sometimes referred to as a Unique Taxpayer Reference (UTR) for example 1234567890. Quote the reference number with no gaps between the characters and add a 'K' at the end eg. 1234567890K.

You can check your reference number at www.hmrc.gov.uk/payinghmrc/referencechecker.htm 

 

Deadlines

The Government used to have a helpful emailed reminder and integrated calendar of the key tax and compliance deadlines your business faces.  This was tailored just for you, by completing a simple questionnaire covering VAT, PAYE, P11ds, Companies House, personal tax etc.

In the manner of disconnected government the Business Link site which used to host this has been disabled and the deadlines are now in about five different places.  The compliance problems that this creates are obvious.  However we have a solution.  Join the Business Companion program - we track your deadlines in specialised software.  We then bear the responsibility that you meet them.

Businesses Face Penalties by HMRC

Many businesses are unaware of the penalties if their tax returns are late, have errors or underpay their taxes. HMRC's penalty regime affects business irrespective of their size, sector or structure. This is part of their policy to ensure businesses pay their dues in full and on time – or face the consequences.

So what are the penalties for incorrect tax returns?

If a tax return is incorrect and the tax is understated, your business could be fined up to 100% of the understated tax.

The penalty will depend on:

  • How much tax has been understated
  • Why you understated the tax and
  • Whether you then disclosed the error to HMRC.

If you make an honest mistake, there will be no additional penalty. But other types of behaviour can result in higher penalties:

Failing to take reasonable care 30% penalty
Deliberately understating the tax 70% penalty
Deliberately understating the tax and concealing the fact 100% penalty

Telling HMRC of your mistake can reduce the fine but penalties won’t be reduced if HMRC has to chase you up! The penalties regime will also apply if you don’t tell HMRC about new or altered taxable activities – for example, if you are late registering for VAT.

Late filing of accounts and penalties - Companies House and HMRC

E.g. A company's year-end is 31st March 2016 and the company followed the timetable below then the penalties incurred are likely to be as follows:

Date of filing
Companies
House
(£)

Companies House Reunion

HMRC
Corporation Tax
(£)
HMRC Personal/Self Employment Tax HMRC VAT
 2018:September 30th
nil nil nil nil nil
 October 31th
nil nil nil nil nil
November 30th
nil nil nil nil nil
 December 31st
nil nil nil
nil nil
2019: January 31st
150
nil interest
nil nil
February 28th
375 nil interest nil nil
 March 31st
375
nil interest nil nil
April 30th
750 nil 100
nil nil
May 31st
750
nil 100 nil nil
 June 30th
750
nil 100 nil nil
July 31st
1500
nil  200 nil nil

The Company House penalties are doubled if accounts are filed late in two successive years.  Meanwhile the HMRC penalties Corporation Tax increase to £500 and £1000 if they are late in three successive years.

Persistent late filing of the annual accounts or returns may also lead to the company being removed from the register.

Late Payments and VAT

Businesses that have not paid their suppliers more than six months after the invoice date lose the right to reclaim the VAT on the purchase. Unless the cash basis is used, a business will normally have claimed input tax in the period in which the invoice date fell. If the invoice remains unpaid six months later, the VAT must be repaid regardless of whether or not the supplier has claimed bad debt relief. Of course, if the business does eventually pay up, it can then reclaim the VAT.

HMRC is reported to be scrutinising aged creditors lists during VAT Inspections. A business that has not operated the rules correctly will be faced with a demand for the VAT plus interest. Where the amount is large, they will also charge penalties.

VAT Inspectors may also check that businesses are repaying VAT bad debt relief that they claimed in cases where they eventually receive full or part-payment of the outstanding debt. For example, a supplier may have gone into liquidation and the liquidator may have eventually made a part-payment to the creditors. Businesses sometimes forget that VAT must be paid on such part payments if they had previously claimed bad debt relief on the original debt.

Corporation Tax

It is useful if you can make your chart of accounts straightforward for subsequent final accounts, tax and VAT calculations. To ease calculation of business tax it is important that you separately analyse all potential expenses that are disallowable and include those where expenses are allowed. Therefore try to design your chart of accounts so that it includes separate lines for all those expenses which have particular tax effects. The more bookkeeping you are willing to do the less your accountant charges you to do bookkeeping for you.

Information Required for Completion of the Corporation Tax Computation (Word)

Access Powers for HMRC

HMRC has the right of access to business records and information. This includes right to inspect any records relevant to working out a business’s tax position in advance of the business making a tax return or filing its accounts. HMRC is also be able to visit your business premises and inspect records and assets on site – and they only need to give you 24 hours’ notice of their inspection. An inspector is able to ask your accountant, solicitor or other business adviser to release your files to him, without your permission.

If you don’t comply with HMRC, there will be a base penalty of £100 with additional fines of £65 per day. There is the right to appeal but clearly the penalty regime is best avoided in the first place. 

Businesses need to be aware of HMRC’s tougher stance on mistakes on tax returns. Even if you think a mistake is an honest one, you may find it difficult to persuade HMRC of that!

AccountEdge is a digital record keeping system and can hold all the source information to justify your declarations. Businesses wanting to keep on the right side of the taxman are strongly advised to keep careful and up to date financial and tax records. Call us if you want help keeping your data in good order.

Inheritance Tax Planning

We have produced a simple information sheet. Inheritance Tax Briefing

'Auto Enrolment' Workplace Pensions

We are happy to recommend The Peoples Pension who are specialists administering small schemes for business and entrepreneurs. They make sure that small schemes can operate for a low cost, simply and efficiently. They achieve this by operating under low overheads, the structure of the schemes are simplified and in-house systems ensure smooth administration.

More Information on Workplace Pensions.

Intrastat

Intrastat is a trade reporting requirement for companies turning over £500,000.


Dividend Certificates

To verify that you are not receiving remuneration you need to prove that your dividend payments are exactly that... dividends. This is also evidence that will back up your personal tax return. Complete one for every decision you make.

The interim or final dividend must go into the AccountEdge books on the day it is due. This is best done through entering service purchases to each shareholder for the dividend due. If the dividends are put into the books retrospectively it could face challenge from the Inland Revenue unless minuted within 9 months of a year-end.

Model Dividend Certificate (Word)

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7. Selling Your Business

Accounting Needs

It is important when you sell a business, that you put matters in order and make the business look as appealing as possible to potential buyers.

Accounting needs if you are selling your business (Word)

Due Diligence

At the time you sell your business your records need to be complete. This is to allow the purchaser to be sure what he buying. Accurate and consistent documentation of the firm’s finances will help you get a good price for the work you have put into your firm over the years.

The buyer will conduct a process called ‘Due Diligence’ on your firm to establish whether the final accounts are consistent with the terms of the sale of the business. The list of documents required is intimidating. However most of them can be provided from your Accountedge system, if your records are accurate and up to date.

Due Diligence Documents (Word)

One service we offer is to prepare these documents for prospective sellers.

Our minimum charge for preparing all the required documents along with any returns and liaison with the purchaser and your solicitors is £2000 plus 2% of the sales price of your firm.

More information on Selling Your Business.

8. Useful Links

Visit our useful links page for further information:

http://www.simpleaccounting.co.uk/useful_links/
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Next Step:

Please contact us if you need further advice.


Ask an MYOB accountant

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