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?

Board Minutes and Dividend Certificates

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.

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 payment 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 is likely to face challenge from the Inland Revenue.

Model Dividend Certificate (Word)

Bookkeeping

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, these can be a help.  They reduce the demand for unnecessary credit and help you avoid unauthorised overdrafts. 

It is simple to track, is 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.

Make sure the defaults are set accurately across the board under preferences. You can also specifically alter customer 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. 

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)

Creating a Company

Business Stationary

The rules regarding business stationary have changed , but remarkably very little publicity has been given to the fact! From 1st January 2007 the following applies to business stationary whether in hard copy, electronic or any other form.

Business Stationary Rules (Word document)

List of things to Do

This is a list of the things you will need to do to create a company. This is not for the faint-hearted. However 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)

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 on: http://www.hmrc.gov.uk/partnerships/fagcwf1.shtml

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 £60 +VAT to set up a company for you.

Business Inc
Tel: 0800 3760641
www.business-inc.co.uk/
info@business-inc.co.uk

Formations Direct
FD Registrars Group Limited
Tel: 0800 0922813
www.formationsdirect.com

Hanover Company Services
Tel: 0800 0685362
www.hanovercompanyservices.com/

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/

Companies House - Form 288a Appointment of Director or Secretary http://www.companieshouse.gov.uk/forms/generalForms/..

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Financial Controls

The following documents help you set up your procedures:

Banking

I recommend:

The Federation of Small Businesses and the Co-operativeBank
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 willing to create a quarterly transaction report. This can be entered directly and can save time with bookkeeping.

See the section below under Staff Benefits and Expenses.

Purchases and Invoices on MYOB

This is a useful 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/

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 path 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 against your National Insurance bill. 

Selling Your Business

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)

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.

Tax Free Benefits

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, although 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.

These 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.

    Travel and Subsistence Policy

    Travel and Subsistence Policy (Microsoft Word)

    Tax-Free Business Mileage Rates

    With effect from 1 January 2008 H M Revenue & Customs (HMRC) has increased the amounts that can be claimed tax-free. The revised rates are as follows.

     Engine Size  Petrol  Diesel  LPG
     1,400cc or less  11p  11p    7p
     1,401 to 2,000cc  13p  11p    8p
     Over 2,000cc  19p  14p  11p

    (Petrol hybrid cars are treated as petrol cars for this purpose)

    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

      • Here is a specific brief on paying fuel costs to 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.

      Example staff expenses spreadsheet:

      Staff Expenses Spreadsheet (Excel)

      Petty Cash

      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 the Family

      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 all the family?

      Mobile Phones (Microsoft Word)

      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 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. Either you 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%.

      Tax

      VAT quarter ends

      We have outlined the procedure you should follow for VAT quarter or month ends.

      VAT quarter ends (Microsoft Word)

      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 new scheme.

      Top Tips to Prepare For the New 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)

      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)

      Accounting and Tax Deadlines

      The date for submitting accounts to Companies House is being brought forward to seven months after the Accounting Reference Date.

      Accounting and tax deadlines (Word)

      Useful Accountancy Links

      Wills and Pensions

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

      Wills and Pensions(Word)

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Please contact us if you need further advice.