How an Association can work for you

Jono Wilson of Barnett & Turner in Mansfield, Notts, explains the benefits of choosing an accountancy partner that is well connected. If you’re a business owner, selecting the right accountancy firm can often be a daunting prospect. Is there any real way of distinguishing one from another? What criteria can you use to make an informed choice?

And if you’re running an SME, your instincts might well be to go with a small, independent partner. They will, after all, have an intuitive understanding of some of the issues you face, while also offering a level of personal service you might assume a bigger firm can’t provide.

But at the back of your mind, there’s an understandable question mark. Will they have the depth of knowledge, resources or training of the ‘big boys’?

That’s where a Associated firm can be the perfect compromise.

Ask if the practice is a member of HCWA. If the answer is yes, that should give you a lot of reassurance. It’s an association that has grown steadily in recent years and provides individual member firms with a wide range of resources.

First of all, the association helps to organise audits, which are conducted by peers and specialists. These ensure that each member firm is performing to the correct standard and embracing the latest thinking on best practice.

It helps develop the partners, accountants and support staff within a business – ensuring they have the training to keep right up to date with changes in regulation and the provision of professional services.

Members of the association will have access to survey information, technical support and online tools. They’ll get to meet regularly with their peers in forums and conferences to discuss the latest issues impacting clients.

One further advantage is that different firms will, of course, have expertise in particular areas of accountancy or operate in specific jurisdictions. So if your own professional adviser doesn’t have the necessary expertise to help you with a particular issue, they are likely to be able to refer you to someone who does.

The message is that you can still think small in terms of personal service, while drawing on a support network that is many times bigger.  So that HCWA question really can be all-important.

If you would like to discuss anything related to this article please do not hesitate to call Barnett & Turner on 01623 659659 or email Jonathan at jwilson@barnettandturner.co.uk

Has flat rate fallen flat?

Accountant Jonathan Wilson of Barnett & Turner explains why the new flat rate regime may have effectively spelt the end of the flat-rate scheme for many small businesses. For a number of years now, many businesses with a turnover of less than £150k have opted to make use of the flat-rate VAT scheme.  Rather than balance the VAT they charge with the VAT they incur through purchases, they are given a percentage figure to apply to the gross sales over a three-month period. This rate will depend on the industry they are in and can vary quite considerably. In compensation for the beneficial repayment rate, they are not allowed to claim back VAT they have been charged, the only exception being capital items above £2,000.

In December 2016, the government entered into consultation on the flat-rate scheme which makes it much less attractive to many small businesses. Originally, it was effectively possible for small companies to gain from the charging of VAT, by retaining a proportion of the money collected as taxable profit. HMRC seems determined to close off what is now seen as a loophole, but which may have been presented originally as a benefit to encourage registration and growth rather than supressing sales to stay below the VAT threshold.

From 1^st April 2017, a large proportion of businesses on the flat-rate scheme have had to apply the figure of 16.5% to their gross sales. So with £100,000 in sales and £20,000 in VAT on top, charged out to customers, the payback rate becomes £19,800. As a result, many small business owners currently on the flat-rate scheme may have chosen to opt out and record VAT in the traditional way.

There is, however, one way in which you can stay on the flat-rate scheme and retain its more favourable terms. That is if you can prove you are not a ‘limited cost trader’.

The definition of the limited cost status is that your expenditure on goods is less than 2% of your VAT-inclusive turnover. In some circumstances, it may be more than 2% but less than £1,000 per annum.

The issue giving accountants sleepless nights is over the precise definition of goods. We know that it excludes capital expenditure, food and drink and any type of vehicle maintenance or fuel (unless you’re running a taxi service). Where things become more complex would be, for instance, over the purchase of something like a software subscription. It seems that if the software is bespoke to your business, it will probably count as a service not goods.

It’s these kinds of assessments that small businesses will need to make and it’s important to take professional advice, as the situation is still fluid and everyone is racing to interpret what exactly the new regime will mean. HMRC will be writing to all affected companies in due course, but as April has come and gone, it may be worth having another conversation with your accountant if you haven’t already.

If you would like to discuss anything related to this article please do not hesitate to call Barnett & Turner on 01623 659659 or email Jonathan at jwilson@barnettandturner.co.uk

Sole trader or limited company? Some points to consider.

Changes in legislation make the choice more complex today, argues Jonathan Wilson, Chartered Tax Adviser at accountancy firm Barnett & Turner. If you’re setting up a business for the first time, one of the key choices you’ll make is over how you choose to structure it. The simplest option is often to become a sole trader or, if there are two or more individuals in business together, a partnership. Many businesses start life in this way.

Alternatively, some might set-up in business as a limited company, appointing themselves as company director. There is no right or wrong answer here, but the way in which a business is structured will probably depend on a number of factors including possibly the business owners’ personal circumstances and the likely profits of the business.

It’s worth remembering that the Taxes Acts and the Companies Act are vast and complex, which means it’s important to get support from those who have knowledge and experience of the rules.

Limited liability

If you are a sole trader, you do not benefit from ‘limited liability’ and as a result are potentially at risk of losing your own personal assets if the business fails. A company is a separate legal entity and therefore it is possible for the business owner(s) to benefit from ‘limited liability’.

 Administration and formalities

If you run an unincorporated business, you prepare annual business accounts and a Self-Assessment tax return. The accounts are not filed at HM Revenue & Customs or Companies House, although some of the information contained within the accounts is declared on the tax return.

If you run a limited company, you are required to prepare accounts in a specific Companies Act format. Company accounts are filed at HM Revenue & Customs and at Companies House. You need to observe certain formalities before taking profits from a company, including the necessary recording of board meetings. It’s possible to pay salaries and bonuses, provided the company operates a payroll scheme.

 Rates of tax and national insurance contributions

As an unincorporated business owner, your tax and national insurance contributions on profit are at rates of 20% (basic rate), 40% (higher rate) and 45% (additional rate).

In addition, class 4 national insurance contributions are due on profits falling between £8,060 and £43,000 at 9% and 2% on profit over £43,000. Class 2 national insurance contributions of £145.60pa are due if profits exceed £5,965.

Regardless of the value of the amount you draw, tax and national insurance contributions are due on the taxable profit of the business.

As a company owner, you are able to control the level of income on which you pay tax by drawing only the level of income required to fund your lifestyle. Depending on circumstances, it is also possible to control the type of income on which you pay tax by voting yourself a tax-efficient remuneration package.

Companies are currently subject to corporation tax at 20%, although this rate is set to reduce slightly in the years ahead.

Should I review my existing business structure?

The Finance Act 2015 introduced major changes to the way in which business owners are taxed on profits extracted from a company - in particular by way of dividend. These included:

• the abolition of the notional 10% tax credit on dividends;
• a new 0% tax rate on the first £5k of dividends;
• and a new rate of taxation on dividends of 7.5% (basic rate taxpayers after the first £5k).

For most small business owners the result of these changes will be an increase in taxation.

In light of the changes introduced in the Finance Act 2015, business owners should consider whether the vehicle through which they trade is still appropriate for them and, if trading as a company, whether they are extracting profits in the most tax efficient manner. That’s why it is always worth having a discussion with your accountant or tax adviser about the most appropriate option for you.

If you would like to discuss anything related to this article please do not hesitate to call Barnett & Turner on 01623 659659 or email Jonathan at jwilson@barnettandturner.co.uk

Have they paid us? The critical question every business needs to ask.

The most important task for any business is making sure that they get paid for their work. Here are some top tips from Jono Wilson of accountancy firm Barnett & Turner on how to ensure that the cash flows in.

1. GET YOUR INVOICE IN QUICKLY

It’s easy to forget to invoice clients in a timely fashion, but it inevitably will lead to a delay in the ultimate payment date. So be prompt and don’t let things slip. This can be a particular issue if you’re an owner-manager, who gets bogged down in the day-to-day work.

2. USE TECHNOLOGY

If you invoice electronically, use software which allows you to see whether your client has opened and viewed your invoice. It’s a great way of keeping on top of payments.

3. SUBMIT THE RIGHT DOCUMENTATION

Make sure you reference the relevant purchase orders and, if applicable, customer approved timesheets, as there’s then much less wriggle room for your customer. And less chance they’ll tell you to go back and resubmit your invoice. You can even attach your paperwork to the invoice in a cloud platform such as Xero and ask your client to approve it.

4. INTRODUCE PROPER CREDIT CONTROL

If your customers haven’t paid you within the time you stipulated – usually 30 days – then you need to know and be prepared to follow up.

5. BE CONFIDENT

Some businesses are reluctant to chase an invoice because of the potential repercussions and effects on the relationship. But how good can that relationship really be if you’re not actually getting paid?

6. PUT SOMEONE IN CHARGE

Businesses which get paid promptly are often those with dedicated staff responsible for chasing debts. As soon as your company reaches a size to justify it, you may well find that the investment in staff makes a real difference.

7. CONSIDER INVOICE DISCOUNTING FACILITIES

These are not right for everybody, so consult your accountant, but there are options out there in which funders may agree to pay you, say, 85% of the debt you’re owed. Banks prefer these types of facilities to overdrafts as they have security over the debtors. Some funders provide integration with platforms, such as Xero, which make it easier to administer.

If you would like to discuss anything related to this article please do not hesitate to call Barnett & Turner on 01623 659659 or email Jonathan at jwilson@barnettandturner.co.uk

Why honesty is always the best policy

Preventing bribery should be the concern of every business, writes David Wilson of Barnett & Turner. It’s also a legal requirement. It may well be that you’re familiar with rules regarding money laundering, which apply to businesses in a number of specific sectors. There’s an associated set of rules, however, connected with the 2010 Bribery Act. In my experience, people tend to be less aware of them, but they are just as important.

Essentially, the Act covers situations in which your staff might be induced or coerced into doing something which is fraudulent, illegal or unethical in return for an incentive.   This could, of course, include money laundering and tax evasion, but actually extends far beyond.   It is essential that your staff are aware of such potential scenarios and are not put into difficult situations, where they inadvertently accept a gift or incentive which would be deemed unusual or excessive and which could later be used as a form of bribery.

Therefore, from a business perspective, it’s important that members of staff are trained to identify situations when an approach or a particular pattern of behaviour looks strange and needs to be reported either under the Money Laundering Regulations or within the terms of the Bribery Act itself. My recommendation is that you consider introducing such training as part of an induction process.

If you fail to prevent or report bribery, you’re committing an offence, so it’s in everybody’s interests that you have proper procedures in place. Of course genuine hospitality – if it’s reasonable and proportionate – doesn’t fall foul of the rules.  So the context and nature of the relationship is absolutely critical.

Here are the six key principles that you need to observe, according to government guidance:

Proportionate Procedures – these need to be appropriate ‘to the nature, scale and complexity of the commercial organisation’s activities’.

Top-level Commitment – the management of your organisation needs to foster a culture in which bribery is never acceptable.

Risk Assessment – commercial organisations must assess the nature and extent of their exposure to potential external and internal risks of bribery.

Due Diligence – you must take ‘a proportionate and risk based approach’ in respect of persons who perform or will perform services for, or on behalf of, the organisation.

Communication (including training) – your bribery prevention policies and procedures need to be embedded throughout your organisation.

Monitoring and Review – it’s essential to review your policies and make improvements where appropriate.

Find out more by speaking to your accountant and visiting https://www.justice.gov.uk/downloads/legislation/bribery-act-2010-guidance.pdf

If you would like to discuss anything related to this article please do not hesitate to call Barnett & Turner on 01623 659659 or email Jonathan at jwilson@barnettandturner.co.uk

Ten tips for keeping your business safe online

The government has identified ‘Ten Steps to Cyber Security’, which are essential for any business looking to protect itself online. Jono Wilson of Barnett & Turner Chartered Accountants talks us through the suggestions. There are plenty of simple and straightforward steps that companies can take to keep themselves safe in the digital world. As accompaniment to the support offered in their Cyber Essentials programme, the Government advises you to take action in the following key areas:

1. Network Security

It’s important to be aware of what’s on your network and to see that your hardware and software are properly configured. Make sure you act upon notices and warnings.

2. User Education and Awareness

Make sure you have a proper policy in place for using IT and that your staff members are told about it at induction. It’s also important to remind employees of good security practices on a regular basis.

3. Management of User Privileges

It’s critical to manage access to IT through a combination of user names and good, strong passwords. Remember not to write them down or share them and only give users access to what they need.

4. Security Configuration

This is about keeping your IT updated with relevant firmware and patches. Make sure to document your IT assets.

5. Removable Media Controls

This refers to devices such as USB sticks, SD cards and CDs. Make sure it’s safe to bring them on to your network. It may well be that using the cloud is preferable.

6. Home and Mobile Working

With more people working at home, you need to have a proper policy in place and install relevant passwords and authentication software. People are likely to be using mobile devices too, so make sure they’re not walking around with unsecured corporate emails.

7. Malware Protection

Make sure that you keep your anti-malware software up to date through one of the mainstream suppliers. It will scan and sweep on a regular basis, helping to protect you from threats.

8. Risk Management

Create a board of people who are responsible for risk within your business and ensure that they oversee the development of effective policies.

9. Monitoring

Keep track of your hardware and software and look out for unusual activities.

10. Incident Management and Business Continuity

It’s important to have an incident management team which is capable of dealing with any attack and acting upon it.

For more information, please visit https://www.gov.uk/government/publications/cyber-risk-management-a-board-level-responsibility/10-steps-summary

If you would like to discuss anything related to this article please do not hesitate to call Barnett & Turner on 01623 659659 or email Jonathan at jwilson@barnettandturner.co.uk

Protecting data day to day

Data security is often in the news at the moment, but not all businesses have taken the steps they need to protect themselves says Jono Wilson of Barnett & Turner Accountants Ltd. Hardly a week goes by without reports of businesses being hacked by criminals or negligence leading to data breaches. It’s easy to think that your own company won’t be affected, but the truth is that we’re all potentially vulnerable – particularly with the huge changes in technology we’ve seen in recent years.

More and more devices are now connected to the web, for instance. This allows us incredible flexibility in the way that we work, but also creates a large number of potential risks.  And as data gets stored in the cloud, we need to be ever-more conscious of how we protect information we consider to be confidential.

Often businesses fall at the first hurdle by leaving data lying around or failing to take simple steps, such as password and encryption protection.  It’s essential to have proper policies and protocols in place and communicate them effectively to members of staff.  Remember, many hacking attempts are now highly sophisticated, so if even the fundamental building blocks of security aren’t in place, you’re very much at risk.

Although there may well be cost implications to more sophisticated forms of protection, you need to weigh these up against the potential legal and reputational costs if your data were to be lost or stolen.

The Government has launched a new accreditation scheme called Cyber Essentials (https://www.cyberstreetwise.com/cyberessentials/), which is designed to help your business secure its systems by implementing appropriate frameworks.  Of course, your accountant may also be able to offer suggestions as part of their regular audit process, or you could ask their in-house IT expert. The important thing is to recognise the issues, address them and educate your team before it becomes an unwanted problem.

If you would like to discuss anything related to this article please do not hesitate to call Barnett & Turner on 01623 659659 or email Jonathan at jwilson@barnettandturner.co.uk