Checklist for keeping on the right side of HMRC

A small business owner may have three fronts to cover to keep HMRC happy. Tax can be a minefield for the unwary. Here is a checklist to help you through. Where your knowledge and experience is not enough, don’t hesitate to get professional help.

Business tax

1 Register for tax on start-up. You’ll be penalised if you haven’t done this within three months.
2 Decide when to register for VAT. Once your turnover reaches the current threshold, you have no option but to register. Before that, does your business need to look well established to penetrate the desired markets? Or will it help you get customers if you can keep prices down by not charging VAT? Looking at your start-up costs, how much VAT you could reclaim if you were registered? Consider all factors before deciding.
3 Get familiar with VAT rules. Always submit your quarterly returns and payments on time.
4 Depending on what kind of organisation you have set up, you may have to pay corporation tax. This payment will be due before the deadline for submitting your tax return. To be safe, complete the return and submit it early at the same time as the payment.

Employment tax

5 If you have employees, once they earn a certain amount, you have to deduct tax and National Insurance Contributions from their pay, and pass them on, together with any employers’ contributions due. Find out how to do this and make sure you pay on time, so you avoid interest charges.
6 Make the regular form returns on time, including the annual ones due by May 19th each year.
7 Issue P60s to relevant employees by 1 June each year.
8 Find out your responsibilities in regard to, sickness, maternity and other special benefits.
9 Check the tax aspects of company cars

Personal Tax

10 Always file tax returns and pay on time to avoid penalties.
11 Plan for the payments by putting money away. A special account is a good idea.

General

12 Check your tax bill. Human error can creep in, even from HMRC.

Debt Recovery Guide for Small Businesses

In any small business, cash flow is crucial. It definitely pays you to stay on top of the cash you are owed. If any of your debtors are slow to pay, you need to do something about it.

First look at your payment terms and make sure they have been clearly set out and cannot be misunderstood. This can go a long way towards ensuring that you get paid on time. In the UK, you can also make it worth while for your customers to pay on time by imposing a small extra percentage fee for late payers.

You need to have a policy about credit so that you don’t take on any risky customers. Run a credit check before handing out any goods or services to new customers that do not pay up front. Your policy should also make sure you set realistic credit limits for each of your customers and review them regularly.

Run debt management reports from your system weekly, so you can see where any problems lie. If your payment terms are not met, act quickly. Don’t let the debts build up or go on too long without your intervention. Get on the phone and remind them about it straight away.

With good communication in place, you should be able to judge whether the customer can make staged payments, as this kind of agreement is better than not getting paid at all. You also need to decide whether to continue to supply such customers. Find out the true reason for the delay and these decisions will be easier to make.

Once a payment is over 60 days late, it is time to get really serious. You might consider calling in a debt recovery agency. You will certainly need to review the credit status you allow the customer.

How to Prepare an Invoice: Another Useful Bulletin from Office Assistants

Clients often ask us the correct way to go about setting out an invoice so we thought we’d put together this useful guide to help you get it right first time and ensure you include all the required information.

If you ever encounter issues with non-payment, you’ll find that including the right wording on your invoices will make it much easier for you to state your case.

What Information is required on an Invoice?

Company Details
Your company’s name and trading address, telephone number, email address, registered office address, company number and VAT registration number (if VAT registered) must all be stated clearly on your invoice.

Agency/Client Details
The full name and address of the agency/client that you are invoicing should be included on the invoice.

Fees
List details of the services or products provided, the gross amount payable, any VAT amount due (if you are VAT registered) and then the final amount due. If you charge an hourly rate for your services, state that rate.

Purchase Order Number or Contact Reference
If your client or agency uses Purchase Orders, clearly state this number on your invoice so as to speed up the payment process. If Purchase Orders are not used, state the name of the contact that ordered the products or services.

Invoice Number
Each invoice should have its own individual invoice number. The number can also include letters which may help you identify particular clients.

Dates
Include the date the invoice was produced and the payment due date. Usually the due date will be 30 days after the invoice was raised although terms do vary from between 7 and 60 days.

Payment Terms
Confirm how you would like to receive the payment, either by cheque or bank transfer and clearly state when your invoice should be paid.

With a cheque payment, clearly set out who the cheque should be made payable to and advise the client to write the invoice number on the back of the cheque to aid you in identifying the payment once received.

For bank transfers, state your bank account details: account name, sort code, account number and payment reference (usually the invoice number) to enable the agency/client to forward the money to the right account.

Late Payments
To help protect yourself from late payments you may quote the Commercial Debts Act which allows you to charge a late payment fee of £40 once your stated terms are exceeded. Include the following wording:

“We understand and will exercise our statutory right to claim interest and compensation for debt recovery costs under the late payment legislation if we are not paid according to agreed credit terms.”

Timesheets
If your client or agency requires a timesheet to back up the invoice then remember to include one. Don’t forget to take a copy before submitting it!

Sending your Invoice
You can send your invoice by email, fax or post and normally your client will advise you of their preferred method. If sending by email, always convert it into PDF format so that the document cannot be altered. PDF printers can be downloaded free of charge from PDF 995: http://www.pdf995.com/

New Premises for Office Assistants

We have recently moved into new, larger premises!

The modern offices, based in Rainham, Essex are centrally located and easily accessible with ample parking.

The move falls in line perfectly with our expansion. Our new offices at 82 Rainham Road are welcoming and make it much easier for clients to visit. With more space we can comfortably grow and continue to take on new staff to cope with our expanding client base.

An office warming-come networking event was held at the new premises on 2 December and was a great success. It was good to see all our clients and contacts at our offices enjoying some wine, cheese and good company. A big thank you to everyone who attended!


A second event is planned for spring 2010.

Any business in Essex or London looking to benefit from professional bookkeeping services can now contact us on 01708 524 800 or info@officeassistants.org.uk. For more information on our range of services, visit http://www.officeassistants.org.uk/.

Pre-Budget Report: What News for the Small Business?

As usual, there is both good and bad news for small businesses in the Chancellor's 2009 Pre-Budget Report.

The first bad news is that VAT goes back up to 17.5% on January 1st. The only concession because of the date is that any business that is still open at midnight on New Year’s Eve will be exempt from the change up to 6am, or until they close if it’s before then. But everyone will be liable to cough up 17.5% of relevant income to HRMC after that time. You’ll have to add 2.5% to prices or take a hit.

The bad news on National Insurance contributions doesn’t kick in until 2011, but you need to factor this in to your planning. An extra 1% on the wage bill each month from April 2011 may mean shelving planned projects and not taking on extra staff.

There are a few rays of sunshine, though. A feared excess of public spending cuts is not in the pipeline yet.

The small companies’ tax rate will remain at 21% for another year. And you can continue to arrange deferments of some tax payments under HMRC’s Business Payment Support Service. The continuation of this scheme seems to be open ended at the moment.

The relief from business rates for certain empty property will also continue for the next year. Any business in the low carbon market will have clear tax advantages.

Indirectly, the roll out of high-speed broadband, especially in the currently poorly provided areas, will also make it easier for many SMEs to do business.

So, good news or bad news for the small business? Or is it a case of balancing the very bad with the not so bad?

Making a Claim on your Insurance: Hidden Rule Warning

What do you think about when you are deciding whether to make a claim on your home contents insurance? How much you can get and whether you can claim more than the excess is probably about the extent of your thinking.

But there is something else you need to think about and it involves a hidden rule that could affect your ability to obtain insurance cover in the future.

Think: have you made any other home insurance claims in the last three years?

If you claim more than twice in three years, most insurers will consider you a high risk because your rate of claims is unusual. When you apply for a quote to a new insurer, if you divulge that you have made three or more claims in the last three years, most of them will decline to quote.

And when your current renewal comes around you will be horrified at the hike in your premium. If any of your claims were for small amounts, they could be completely negated by the price you now have to pay.

Suppose your house was burgled in year one and you made a claim. Then in year two a storm damaged your garden shed, which was also covered by your policy. Although it did not cost that much to repair, you decided to claim again. Then the burglars returned so you made another claim.

This could be expensive in more ways than one. Do remember this hidden rule and think before you make a smaller claim: you never know what might be round the corner.

The Tax Benefits of Working from Home

If you run your business from your home, you will not only save on overheads, there are also a few tax perks to be had. You do, of course, need to know the rules. HMRC is strict about what constitutes legitimate expenses that can be claimed and deducted from the taxable income of the business.

If you use a part of your home as an office, you can claim a percentage of your lighting and heating utilities as expenses. Likewise you can claim for business telephone calls and broadband internet use. When you use a car for work, you will not have dead mileage that you cannot claim for, as your work base is at your home. You can claim for the regular supplies you need just as you would in bespoke business premises.

If you employ people working from their homes, be sure that any expenses you pay them are completely work related, otherwise over and above a tax free amount of £3 a week, they cannot be claimed.

When you first set up an office at home, the fixed assets you need to purchase will go into your business accounts.

There are complex rules about what you can set against tax for these items, and how to depreciate them when your year end accounts are completed. You may need to get professional help so that you do not fall foul of HRMC rules, treating the fees for this as expenses of course.

Taking professional advice is vital to ensure you are maximising your taxable expenses as a business; it could mean the difference between breaking even, and making a profit.