MYOB 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 my clients? I have also included some links to websites that I recommend.

1. MYOB Tricks of the Trade

  • Guidance on using MYOB and Mamut AccountEdge for small businesses.

2. Starting Up

  • To create a New Firm
  • Business Stationery
  • Incorporation
  • Companies House
  • Registering with HM Revenue and Customs
  • Board Minutes
  • Dividend Vouchers

3. MYOB Bookkeeping

  • Cashflow Monitoring using MYOB and Mamut AccountEdge
  • Charity Accounting

4. Financial Procedures

  • Financial Controls
  • Authorising purchases and invoices in MYOB and AccountEdgeBanking
  • Purchases and Invoices
  • Financial Glossary
  • Hire Purchase (HP) versus Purchase
  • Legal Protection
  • Credit Checks

5. Personnel

  • Appointments
  • Dismissals
  • Employing your Wife
  • Statutory Maternity Pay (SMP)
  • Payroll

6. Staff Benefits and Expenses

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

7. Tax

  • Authorising Simple Accounting Limited as your Agent
  • Paying PAYE, NI contributions, Corporation Tax and VAT electronically
  • Businesses face new penalties by HMRC
  • Late Account filing penalties - Companies House and HMRC
  • Business Link tax Deadline Reminder
  • Bad Debts and VAT
  • Construction Industry Scheme
  • Corporation Tax
  • Inheritance Tax Planning
  • Intrastat

8. Selling Your business

  • Accounting Needs
  • Due Diligence

9. Useful Links


1. MYOB Tricks of the Trade

Guidance on using MYOB and Mamut AccountEdge for small businesses.

This manual is intended to offer guidance on some key aspects of the use of MYOB and AccountEdge for small businesses accounts. It is written for UK small businesses with issues like stock, VAT, foreign exchange, dividends and expense claims to deal with.

Have a look at this set of procedures for common accounting or taxation problems within MYOB. If you are looking for a procedure that isn't covered please let us know and we'll see if we can help, or perhaps even write you something specifically for you.

Tricks of the trade

2. Starting Up

To Create a New Firm

This is a list of the things you will need to do to create a firm. This is not for the faint-hearted. If you are already operating as a firm, some of the following will not apply. There is a significant potential tax saving if you do incorporate. We are here to help you through the process.

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 

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.

Business Stationery Rules (Business Link Website)

Incorporation

There are tax and legal advantages if you run your business through an incorporated body like a limited company. If you would like to create a company to run your business from then you could try these companies (details provided without recommendation). They generally charge about £80 +VAT to set up a company for you.

Companies House

In order to preserve your incorporation you will need to submit regular information to Companies House at the following address.

Companies House
Crown way
Maindy
Cardiff
CF14 3UZ
0870 33 33 636
enquiries@companies-house.gov.uk
www.companieshouse.gov.uk/

Key Companies House Forms are provided at:
http://www.companieshouse.gov.uk/forms/generalForms/..

Registering with HM Revenue and Customs

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: http://search2.hmrc.gov.uk/kbroker/hmrc/forms/viewform.jsp?formId=490

Board Minutes

If your business is run through a limited company, it is important that you have proper board meetings to decide matters such as dividend payments. The Inland Revenue may challenge dividends as a potential form of remuneration and therefore subject to PAYE.

Directors must agree the dividend with a minuted vote. You should attach draft accounts, profit and loss and balance sheet. This shows that the decision was taken in line with actual profits. You should issue a fax or email. These are dated and so they show that a decision was taken at the time, not retrospectively.

Get it right - minute your decisions! We can help with this process if you prefer.

Draft Board Meeting Minutes (Word)

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 MYOB 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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3. MYOB Bookkeeping


Many details of how to do bookkeeping using MYOB or Mamut AccountEdge are covered in

Tricks of the Trade

Cashflow Monitoring using MYOB

MYOB has functions which can assist you control your cashflow. The full cashflow monitoring functions can be time-consuming to setup and maintain. Therefore most businesses do not use these areas.  For more complex businesses, however they can be a help.  They reduce your need for unnecessary credit and help you avoid unauthorised overdrafts. 

You need to anticipate when money is likely to be paid out to suppliers or receivable from customers. To track these payment dates, you need to use the ‘Terms field’ in either Purchase Invoices or Sales Invoices. These need to be set to the date on which the customer is expecting to pay or date on which the supplier is due to be paid.This simple cashflow procedure doesn't involve using the MYOB cashflow report. 

Make sure the defaults are set accurately across the board under preferences. You can  specifically alter customer defaults or individual sales invoices. You can generate the reports necessary to show when receipts are going to actually come in.  You need to run a ‘Debtors Reconciliation’ [Detail] report. Critically you need to alter the ‘Options’ under ‘Customise’ to show the days overdue, rather than according to sales invoice days. To show the month in which the receipts are expected you should switch your preference to work on month ends rather than by banding by number of days. 

When you run the ‘debtors reconciliation report’, run it for four months in advance of the current date. This will give you a column breakdown showing you the date by which the invoices are expected to be paid. Thus you will be able to see the receipt dates under total receipts, due in by month across the whole firm. You can add these into a spreadsheet planning your cashflow.

Similarly you can create a report by payment date by supplier month by month, by post dating the ‘Creditors reconciliation’ [Detail] report.  To get the best out of these two report, it maybe advantageous to set the payment terms on the date by which you absolutely have to pay a supplier, or the date on which you definitely expect a receipt from the customer. This is better than using the formal payment terms that have been agreed or offered with the customer or supplier.   

Charity Accounting

This is a short review of how charity accounts must be regulated following the introduction of SORP (Statements of Recommended Practice) 2005.

SORP (Statements of Recommended Practice) 2005 (Word)

4. Financial Procedures

Financial Controls

The following documents help you set up your procedures:

Glossary of Terms

Authorising purchases and invoices in MYOB and AccountEdge

This is an authorisation flowchart showing you how to make a purchase and pay an invoice in MYOB.

Flowchart for Purchases and Invoices (Word)

Banking

I recommend:

The Federation of Small Businesses and the Co-operative Bank

The Federation of Small Businesses (FSB) offers free banking with the Co-operative bank for FSB members. Tel: 0800 141415 (Co-op bank). FSB website: www.fsbbusinessbanking.co.uk

Alliance and Leicester

The Alliance and Leicester offers a free Business Current Account Tel: 0800 5870800
Website: www.free-not-fee.co.uk

Co-op business Visa card: www.co-operativebank.co.uk/

I recommend you use a card supplier that provides a quarterly transaction report. This can be entered directly and can save time with bookkeeping.

See 'simple accounting for Staff expenses' below under Staff Benefits and Expenses.

Authorising purchases and invoices in MYOB and AccountEdge

This is an authorisation flowchart showing you how to make a purchase and pay an invoice in MYOB.

Flowchart for Purchases and Invoices (Word)

Hire Purchase (HP) versus Purchase

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

Legal Protection

I 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: www.fsb.org.uk/

Credit Checks

CheckSURE is a complete online commercial credit checking service:

Checksure

5. Personnel

Appointments

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

Employing your Wife

Mixing business and pleasure can cost you dearly if you don't stick to the rules – so 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)

Dismissal

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 less than £45,000 then you can get 100% of the SMP and 4.5% more as compensation against your National Insurance bill.

Payroll

6. 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

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's open to all staff
  • some staff parties
  • free parking at, or near, your work
  • an interest free loan to buy a season ticket to travel to work
  • relocation expenses up to a certain limit

Staff Rewards and 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 rewards and benefits that we can advise you on are as follows.  

•    Bicycles
•    Childcare vouchers
•    Enterprise Management Incentives
•    Flexible benefits schemes
•    Home computers
•    Loans
•    Medical insurance
•    Mileage and expenses
•    Mobile Phones
•    Parking
•    Pension contributions
•    Permanent health insurance
•    Salary sacrifice
•    Share transfer
•    Staff Suggestion Schemes
•    Unpaid holiday
 
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.  The employee has an extra day’s holiday which effectively costs them only 69% (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 which he can either take as cash or select from a list of benefits which includes additional holiday. Adam works five days a week and has an annual holiday entitlement of 25 days. The cost of a day’s holiday is £80.46 (£21,000 / 261 days).
For each day Adam will lose £55.52 net pay.   If Adam decides to take an extra five days’ holiday, Adam will only lose £277.59 from his net annual pay.  The company will save £402.30 in gross pay plus £51.49 employers’ NI. This leads to an overall saving of £453.79.  However, the employee, Adam, will still receive £597.70 of the £1000 pay increase.

If you have to pay for a replacement when an employee takes leave, you could persuade them to accept a reduction for additional holiday at a premium, e.g. 20%, to cover the additional cost.

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).

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
 Motor bikes
  24p  24p   n/a
 Bicycles  20p  20p n/a

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 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
  • loans beyond £5000

These have to be declared on a P11d and a P11dB every April/May

Here is a brief advising against paying fuel costs on company- owned cars used by employees:

Free fuel (Word)

Expenses Dispensation

A P11d expenses dispensation simplifies the process at the end of your payroll tax year. No longer are you forced to declare expenses as taxable income and then forced to recover the tax from the Inland Revenue for legitimate company expense. Below is a typical letter that you can write.

Expenses Policy (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 Co-operative Bank or MBNA:

MBNA Business Credit Card: https://wwwn.applyonlinenow.com/UKBCapp/Ctl/....

Co-op business Visa card: www.co-operativebank.co.uk/

A typical activity statement lists out all of the transactions on all of your company Visa cards every quarter. Then there follows a very useful analysis based upon the sort of supplier that you paid with each transaction. Thus your quarterly meal costs are added up under the 'restaurant' heading, accommodation under 'hotels', and consumables and other expenses under'other'. The total costs can therefore be booked in aggregate every quarter using this statement and the appropriate VAT codings given.

It may be that some lines may need to be split (for example 'other expenses'). But entering this summary every quarter is far more straightforward than accounting for every single Visa payment on the date that it occurs and then reconciling the Visa card nominal account back to the amount that was paid off each month.

This method means that you still have to enter the bank transaction that pays off the Visa balance each month. The monthly transactions are simply posted, VAT free, to the largest nominal involved (e.g.accommodation). If your business incurs large Travel and Subsistence claims, the quarterly bookkeeping then becomes a 'spend money' transaction. This reverses the interim postings made to accommodation in the preceding months and allocates the costs off in line with the activity statement.

To use this method, you really need your accounting year, VAT quarter end and quarterly activity statement to align. There are workarounds if you don't manage to do this.

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, ‘1’ if the item bears reduced rate VAT (6.3% or 2.67 p per mile), '2' if the line bears higher mileage rate (9.3% or 3.83p per mileor ‘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 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 starting mileage and ending mileage in columns D and E (issue an employee with a record sheet to record starting and ending mileage, this can then be used to enter 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. Follow Instructions 5-6 as per General expenses above. (Note mileage bears VAT at 6.3% for petrol<2000cc or a diesel (2.67 p per mile), 9.3% for petrol> 2000cc (3.83p per mile).

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 HMRCc 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? 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.

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? So why not combine the two and have company phones for those of your family who work for the business?

Mobile Phones (Microsoft Word)

Overdrawn Directors' Loan Accounts

There are two 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 20% of the amount outstanding on the loan.  That will repaid nine months after the 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?  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 loan account.  One of two things have to happen. You could declare a benefit in kind based on the official rate of interest 6.25% 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 - 6.25%.

Charging Your Company Rent for your Home Office

Getting your company to pay rent for use of part of your home for office accommodation still works as a tax efficient way of extracting income from the business. The company will get a tax deduction for the rent paid (provided it’s not excessive).

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
•    any expense you incur at your companies 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, but if, for example, you can get £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

  • 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 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.

Backdating a Claim

Unfortunately it's not possible to backdate a rental agreement itself as it's a legal document, although 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 2010.

Based on Advice in Indicator – Getting the Company to Pay (2006-2007) with 2010 advice from their editorial team.

Staff Suggestion Scheme

Example Staff Suggestion Scheme (Word)

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7. Tax

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 matters other than VAT or Tax Credits

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.

Where to send this form

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

Paying PAYE, National Insurance Contributions, Corporation Tax and VAT Electronically

PAYE and National Insurance

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

Your payment reference:
To make your current monthly or quarterly combined PAYE/NICs payment 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.

Quote the reference number with no gaps between the characters. You can check your reference number at www.hmrc.gov.uk/payinghmrc/referencechecker.htm 

Avoiding Late Payment Penalties:
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 Due on or before:
 01 22nd May
 02 22nd Jun
 03 122nd Jul
 04 22nd Aug
 05 22nd Sep
 06 222nd Oct
 07 22nd Nov
 08 22nd Dec
 09 322nd Jan
 10 22nd Feb
 11  22nd Mar
 12 4 22nd Apr

Corporation Tax

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 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).

VAT

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). When you pay electronically, VAT is due a month and seven days after the VAT return quarter end date. VAT paid electronically is due two months and seven days after the end of the year for Annual accounting clients.

Deadlines

The Government have provided a helpful calendar of key tax deadlines by completing a simple questionnaire. Have a look at http://www.businesslink.gov.uk/bdotg/action/keydates . There is a simple questionnaire. Register and the system will email you the deadlines.

Businesses Face Penalties by HMRC

Many businesses are unaware of the new penalties introduced last year if their tax returns are late, have errors or underpay their taxes.

HMRC's new 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! From next year, 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 accounts and penalties - Companies House and HMRC

E.g. A company's year-end is 31st March 2011 and the company followed the timetable below then the penalties incurred are likely to be as follows:

Date of filing
 Companies
House
(£)
 HMRC

(£)
 September 30th
 nil nil
 October 31th
 nil nil
November 30th
nil nil
 December 31st
 nil nil
 January 31st
 150
 interest on tax only
February 28th
375 interest on tax only
 March 31st
 375
 interest on tax only
April 30th
750 100
May 31st
750
100
 June 30th
 750
 100
July 31st
1500
 200

These penalties are doubled if accounts are filed late in two successive years.

Failing to deliver annual accounts, annual returns (form 363A ) and other documents on time is also a criminal offence for which company directors may be prosecuted. Persistent late filing of the annual accounts or returns may also lead to the company being removed from the register.

New powers for HMRC

HMRC now 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!

MYOB has the facilities to keep the HMRC satisfied with 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.

Business Link tax Deadline Reminder

The Government have provided a helpful calendar of key tax deadlines by completing a simple questionnaire. Have a look at http://www.businesslink.gov.uk/bdotg/action/keydates. There is a simple questionnaire. Register and the system will email you the deadlines.

Bad Debts 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.

Customs 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.

Construction Industry Scheme

Here are some top tips to help you with the scheme.

Top Tips to Prepare for the CIS (Microsoft Word)

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)

Inheritance Tax Planning

Pavilion Row have produced a simple information sheet.

Inheritance Tax (pdf)

The following document provides useful information for setting up a will or pension.

Wills and Pensions (Word)

Pension Practitioner.com are a team of pension experts specialising in structuring and 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 ensures smooth administration.

Pension practitioner .com

Intrastat

Intrastat is a trade reporting requirement for companies turning over £250,000. We have produced an MYOB add-on to address this.

Intrastat (Word)

8. 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 MYOB 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.

A typical charge for preparing all the required documents along with any returns and liaison with the purchaser and your solicitors is £2000.

9. Useful Links

Visit our useful links page for further information:

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