If you are self-employed or run your own business, you are liable for submitting tax returns. Making sure you’re tax complaint is essential as the fines for not doing so could be hefty.

A recent global analysis undertaken by PwC concluded that the UK has the second most effective tax system of the G20 countries. Whilst this sounds like good news, when compared with all countries, we’re a lot further down the list at number 23. Researchers concluded that Qatar has the simplest system which required a medium-sized company to spend only four hours on completing their tax return. In the UK, the average is 110 hours!

HMRC tax compliance

If HMRC is unsure you have submitted your return correctly, they will do a compliance check to make sure you are paying the right amount of tax. It could just be someone calling you to double check a figure if they think there’s been a simple error or to undertake a more thorough check on your return, or even a major investigation.

According to the HMRC website, if they intend to do a compliance check, you or your accountant will be contacted and asked to make certain information available for checking. This could be your accounts, tax calculations, your personal or business tax return, or PAYE records. Once they have been checked, you will receive notification and will be either asked to pay any additional tax due within 30 days or if it turns out that you have paid too much tax, you will receive a rebate.

There is a possibility that you may be asked to pay a penalty depending on the reason for the check and how helpful you’ve been.

Deadlines and period covered

The tax year runs from 6 April to 5 April the following year.

HMRC has two deadlines for filing your tax returns. If you are completing your tax return on paper (form SA100), you must return it by midnight on 31 October following the end of the tax year in point. If you are completing your return online, the deadline is midnight on 31 January following the tax year. If you are up to 3 months late, you will incur a penalty of £100 – and the longer you leave it, the greater the fines.

Any taxes owed must be paid by 31 January following the relevant tax year.

The advantages of using an accountant

By asking an accountant to complete your tax return, you will not only be saving yourself valuable time which could be better devoted to doing what you’re good at, i.e. running your business, but also less likely to need a compliance check because it will be completed accurately.

When choosing an accountancy firm to manage your tax services– look for one with a good reputation for high-quality work, great customer service and long-term relationships with clients.

Auditing is legislation-driven, which means there are very few businesses that voluntarily initiate one without being required to! Companies are required to undertake an audit when they meet certain criteria as regards turnover, gross assets and an average number of employees. If they are a UK subsidiary of a global firm, then these same criteria apply to the worldwide group.

If your company has been asked to set up its first audit, there are two main advantages to coming to a medium-sized company like ours rather than one of the better-known national or multinational firms.

Service and price

It will probably be no surprise that the cost of using a local auditing firm will be less than the fees charged by companies headquartered in London. But because we can do the work cheaper does not mean our service levels will be lower – quite the opposite in fact, and we pride ourselves on our high customer service levels.

The other main advantage for our clients is that we are local. This means that geographically we are easily accessible, enabling us to have quick, ad hoc meetings that answer questions and resolve issues before they have a chance to become a problem. The ease of being able to meet whenever needed ensures a much better level of client support.

Continuity

You are much more likely to see the same faces for every audit, offering greater continuity. Whilst audit teams are always headed up by a partner and a manager, the bulk of the onsite work is undertaken by our trainees. We take on school leavers who train with us for seven years before they qualify. This means there is a very high likelihood they will undertake audits for the same clients throughout their training. When they get to know your company better, they will not need to spend time learning about you and the way your company works, enabling them to get on with the work more quickly and efficiently.

The large companies tend to exclusively employ graduate trainees on a three year training period, with long periods of study time away from the office. It is usually impractical to send the same trainees to do the same company’s audit on a regular basis, meaning there is little continuity and new audit staff will need to spend time getting to know their clients on almost every audit.

In large accountancy firms, the partner and manager allocated to the account also tend to be more remote, meaning the client doesn’t get the opportunity to build up relationships with their accountants that are as close and supportive as we have with ours.

If you’d like to talk to one our accountants to discuss your auditing needs, contact us to make an appointment.

The new procedures under GDPR for businesses will come into effect on 25 May 2018, and there are unlimited fines for failure to comply.  Although this is EU legislation, it will not be affected by Brexit.

The procedures cover how you store and protect customer data, how long you retain such data, and what customers can require you to do in connection with that data.

In general, you will be treated as a data processor or a data controller, or both.

Personal data is a valuable commodity and can be used for criminal purposes or commercial marketing.  It, therefore, needs to be protected by all reasonable means.

The purpose of the regulation is to ensure that customers can find out quickly what data you hold on them and can require you to amend or delete that data.  Most importantly, you have a responsibility to keep the data safe and to notify any affected customers and the Information Commissioner’s Office (ICO) of any security breach within 72 hours of becoming aware of that breach.

It will be important to educate all personnel by publishing a statement of best practice and preparing a risk assessment to demonstrate that you have taken reasonable steps to comply with the legislation and so far as possible to prevent security breaches from happening.

In view of the administrative and reputational costs of cyber security breaches, particularly if you hold information for a large number of customers on your computer system, it may be worth considering insuring against this risk.  Bear in mind, however, that this type of insurance is probably best purchased on a bespoke basis, because generic policies are likely to contain exclusions which could render them worthless.

It will be sensible to ensure that regular backups are taken of computer data files and that these backups are kept for an appropriate period and are securely stored so that they will not be tainted if the main system is hacked.  It is also important to ensure that employees do not open e-mail attachments unless they are absolutely certain that the e-mail is genuine.  There have been cases where the sender’s e-mail address is very slightly different from a genuine address you might expect.  A recent version of this sort of scam involves attaching an “invoice” and asking you to check it is correct.  By doing so, you may infect the entire system, possibly with ransomware which asks you to pay a fee or lose all your data.  Even if there is no apparent immediate effect, some infiltrations can lay dormant for months or even years gathering valuable information.

You should also consider encryption of outgoing e-mails in case these are intercepted.

Although this article refers to “customers” the regulation also applies to any other personal data you may hold.  It does not appear to be restricted to information held on computer or “in the cloud” so you could be at risk if an employee leaves personal files in an unlocked car and they are stolen, for example.

In this blog we will outline some of the tax implications that individuals who own a buy to let property, or are considering purchasing a buy to let property, should be aware of.

Changes to the level of interest relief available

• From the 6 April 2017 onwards, the level of interest that can be deducted from rental income received from the let of a residential property will be restricted, this measure will be introduced gradually over three years

• Finance costs include mortgage interest, any payments that are equivalent to interest, and incidental costs of obtaining finance, such as fees and commissions, legal expenses for negotiating drafting loan agreements or valuation fees required to provide security for a loan

• From the 2017/18 to 2019/20 tax year, landlords will be able to deduct a certain percentage of the total finance costs from the rental income received, the remainder of the finance costs will then be deducted as a tax credit from the overall tax liability. The specific percentages for each tax year are highlighted below:

• During the 2017/18 tax year the deduction from property income will be restricted to 75% of finance costs, with the remaining 25% being available as a basic rate tax reduction

• During the 2018/19 tax year, the deduction from property income will be restricted to 50% of the finance costs, with the remaining 50% being given as a basic rate tax reduction

• During the 2019/20 tax year, the deduction from property income will be restricted to 25% of the finance costs, with the remaining 75% being given as a basic rate tax reduction

• From 2020/21 all financing costs incurred by a landlord will be given as a basic rate tax reduction

• The tax reduction works by taking the mortgage interest suffered during the tax year and multiplying it by 20%, this amount will then be deducted from your overall tax bill

• If your adjusted total income does not exceed the basic rate band (currently £32,500 for 2017/18, plus personal allowance of £11,500) you will not be affected by the changes

Replacement of Domestic items relief

• From April 2016, landlords will no longer be able automatically to deduct 10% of their rental profits as notional wear and tear. They will be able to claim tax relief only on costs they have incurred, such as if they have bought a new sofa or bed for the property

• Landlords will also have to start to keep receipts. Previously, landlords could write off the 10% even if they had not spent a single penny on repairs or replacements

Stamp Duty Land Tax

• Stamp duty land tax (SDLT) rates for buy to let and second properties changed on 1 April 2016, and now include a 3% additional surcharge on top of the normal SDLT rates

Capital Gains Tax (‘CGT’)

• CGT will be levied when you sell a property that is not your home

• If you have lived in the property for some time prior to it being let before you may be entitled to principle private residence relief and lettings relief. For this relief to be in point, you must have treated the property as your ‘only or main home’ for a period of time

• CGT has been increased for residential properties recently, and is now charged at either 18% or 28%

If you would like any further advice regarding buy to let properties, or any other assistance on tax matters, please do not hesitate to contact Amy Armitage (Tax Manager), John Neighbour (Tax Director) or any other member of the HB team on 01992 444466

It’s always interesting to have a peek behind the scenes, so we’ve asked members of the team to let us know what a typical day in the office is like for them. It’ll help you to get to know us better and give you a better understanding of the work we do. This time, we’d like to introduce you to one of our Directors, Karen Chase.

As a Director, my job involves: managing, training and helping the audit/accounts team, overseeing and reviewing audits and accounts, dealing with clients, preparation of accounts, personal and corporate tax returns. I also help to run the office and oversee Charlotte, our business administrator, as well as attending networking meetings and seminars.

A typical day

5.45 am – Woken up by the alarm. I had enough time to get ready before I woke the kids up to get them ready for school. Mum arrived at 7 o’clock to look after my daughter Brooke, then take her to school, and I left with my son Keaton at 7.15. After dropping Keaton off, I got a peaceful half hour drive to work.

7.50am – The first thing I did when I arrived at work was check my emails, then I drew up a list of things I had to do and work I needed to delegate, e.g. analysing figures in a different format for a client with a German parent company. I then reviewed the work our trainee accountants Ryan, Ben and Angelo had done the previous day, and set them new tasks. Our manager Catherine Hill usually helps me with these things, but she’s just started maternity leave – I’m already missing her loads!

When the rest of the team arrived, we discovered that Brad, another trainee accountant, had passed his exam and had brought in cakes to celebrate. However, there were none for me as I’d just started a 12-day detox – Karen with no coffee is not ideal!

9.00am – I had a meeting with one of our accountants, Barrie, about a current audit. They had a new provision in their accounts, so we needed to talk about what the audit approach would be.

9.30am – I then reviewed a client’s audit files and emailed them to arrange a post-audit meeting.

10.45am – I spent a few minutes setting up a new client on our system who I’d had a meeting with the previous day, making sure we had all the correct documentation on file and asking for any we still needed.

11.00am – I reviewed a small accounts file that our manager Karen had done, then passed it back to her so she could send final accounts to the client for signature.

11.30am – I had a quick catch-up with Charlotte about all the events HB Accountants are involved in: the Ambition 2017 sales and marketing conference for SMEs; the Teens Unite stall at Hoddesdon Loves Christmas (25 November); the Hertfordshire Business Awards evening (23 November); and also to check on the progress of our office Christmas lunch and Secret Santa.

Getting the payroll right every month is crucial for any company, however large or small. A recent survey has identified Europe as the most complex payroll region in the world, with 65% of professionals saying that managing legislative, HR and payroll updates is their number one challenge, with issues such as GDPR, Working Time Regulations, IR35 and the gender pay gap adding to the complexity.

If you run your own business and have been struggling with managing your own payroll, or your payroll manager has just handed in their notice, then it’s time to think about the benefits of outsourcing your payroll to a specialist company.

Reduces errors

Mistakes will be costly in terms of time and money to put right. Vitally, they will inconvenience the member/s of staff concerned, possibly even leading to them having problems paying their rent or mortgage. This will not only be very stressful for them, but it could result in reduced motivation and loyalty. And if payroll mistakes happen on a frequent basis, you could end up losing staff.

By outsourcing the work to payroll specialists, the likelihood of errors becomes minimal.  

You benefit from their years of experience

When you outsource your payroll to a specialist, you get the benefit of the combined experience of every expert in their company. They will also be in a much better position to stay up-to-date with developments and make sure you are compliant with employment laws and implementing changes in legislation, e.g. auto-enrolment and GDPR.

Allows you time to do what you do best

Why would you want to struggle with a task that you’re not familiar with when the success of your business depends on you concentrating your time on doing what you do best? That’s exactly what payroll specialists are doing!

By outsourcing payroll to a specialist, you can concentrate more of your time and energy on running your business, secure in the knowledge that all your staff will be paid what they’re due, on time.

You save on the costs of staffing

If you employ a dedicated member of staff to deal with your payroll, then you will be responsible for their recruitment and training. But if you are not a payroll specialist, how well do you understand what you’re looking for in terms of skills and experience when recruiting a new member of staff? And if that person doesn’t work out and leaves your company at short notice, where will that leave you with regards to getting the payroll done? By outsourcing your payroll to an accounting specialist, you are also relieving yourself of these worries.

You will also be saving on the costs of having another member of staff in the office, including overheads, equipment costs and other resources, recruitment costs, contributions, perks etc.

Peace of mind

Essentially, by outsourcing your payroll, you are giving yourself peace of mind, enabling you to concentrate your time and energy on running the business. With no margin for error and real time reporting to the Inland Revenue, our payroll specialist team can help you fulfil your payroll needs accurately and on time, every time.

If you would like to talk to us about the possibility of outsourcing your payroll, please contact us to make an appointment.

If you own shares in a family trading company they are treated as business property for inheritance tax (IHT) purposes and can pass to your heirs tax-free on your death.

If the next generation are not interested in carrying on the family business, you may decide to sell the shares.  The problem with this is that the money you receive will not be business property and will therefore be charged to IHT (probably at 40%) if you still have it when you die.  You will also be charged capital gains tax (CGT) at 10% or 20% when you sell the shares.

If, within the period beginning one year before the sale and ending three years after the sale, you reinvest some or all of the proceeds in a qualifying Enterprise Investment Scheme (EIS) investment, you can hold-over the capital gain.  If you reinvest within two years after the sale you will also retain the IHT business property relief.  Whether or not you claim to defer the capital gain, you will also be able to claim 30% of the amount invested against your income tax liability.  That income tax relief can be split between the tax year during which you acquire the EIS investment and the previous tax year.  There will be no capital gains tax payable on the sale of the EIS investment if held for at least three years (any deferred gains tax would, however, be payable on that occasion), but any losses can be set off against gains arising in the same or future years (including the deferred gain).

The income tax relief is restricted to an EIS investment of £1 million.

EIS investments are regarded as high-risk and your investment would not be protected.  However, some qualifying investments are asset-backed and some can even provide an income-stream.

With the ever-growing public awareness of their impact on the environment, the labour market, societies and small businesses around the world, more and more companies are being scrutinised about their attitude toward the way they operate. In fact, your company’s ethical stance is increasingly important, with customers wanting to see proof that your company takes care of its staff, the local community, and the environment.

Why is Corporate Social Responsibility (CSR) so important?

There are some compelling business reasons for your company to adopt a CSR policy. According to the UK Small Business Consortium: “88% of consumers said they were more likely to buy from a company that supports and engages in activities to improve society.”

Sharing and promoting your CSR policy will gain you more clients and customers and also a lot of positive PR. Use social media to let people know what you’re up to and to post news of staff who take part in fundraising activities. If you’re doing something special that is benefiting the community (e.g. corporate sponsorship, fundraising, providing work experience for vulnerable members of society), send a press release to your local newspaper, business magazines and organisations your company is a member of (e.g. the local Chamber of Commerce) in the hope of getting editorial coverage.

And if you are thinking of entering business awards, being able to show evidence of a strong CSR policy can really help your submission – indeed, it could mean the difference between being a finalist and being a winner.

CSR is as important on a global basis as it is in first world countries. The United Nations Industrial Development Organization (UNIDO) actively supports SMEs in developing countries with environmentally and socially responsible entrepreneurship. “Ensuring that CSR supports, and does not undermine, the development of small and medium-sized enterprises (SMEs) in developing countries is crucial to meeting the goal of improving the impact of business on society.”

Hoddesdon companies and their CSR policies

In Hoddesdon, Pindar Road is a hugely important commercial area in terms of industry and business. Out of interest, we looked at the websites of companies based on Pindar Road to see how they promote their CSR policies.

Our findings reveal that few companies publicise their CSR policies on their websites, but this isn’t to say that they are not doing anything in this area – indeed they are; references are made to staff taking part in events to raise money for charities on social media – they just need to make more of it.

To encourage you to think about highlighting elements of CSR your company excels at, here are examples of Pindar Road companies who talk about aspects of Corporate Social Responsibility on their websites.

Enterprise Document Solutions UK

One of the main selling points for a document management company like e-docs UK is that it works towards a paperless office, and this is going to have an obvious environmental impact. However, e-docs has gone further, with an active environmental

policy to lessen its own environmental impact, incorporating objectives and targets for the future, promoting environmental awareness, ensuring its operations are socially responsible, recycling wherever possible and using reputable waste carriers.

Affvs UK Limited

Affvs UK salvages vehicles that have been written off by insurance companies. It has turned a business requirement to be compliant with Environmental Agency guidelines into a CSR promotional tool. It provides information about the salvage process and guidance about buying used car parts which creates a good impression of a trustworthy company that cares about the customer.

In addition, it donates 10% of vehicle scrap value to Essex & Herts Air Ambulance Trust.

DW Windsor

DW Windsor is a designer and manufacturer of lighting solutions. This company’s main angle is that it supports British industry by sourcing components and raw materials from UK companies and, in doing so, supports the employment and skills of the country’s workforce. They are a member of the ‘Made in Britain’ campaign.

In addition, the company has also been a sponsor of Isabel Hospice’s Bubble Rush this summer, news of which was covered on its social media channels.

MISL

Three years ago, document management company MISL gained publicity for a recruitment drive that resulted in the employment and training of 20 previously unemployed new members of staff. Sadly there have been no updates about how the 20 have progressed as this could have provided extra publicity for the company.

Ambition Broxbourne Business Centre

The Ambition Broxbourne Business Centre is part of a nationwide chain run by Basepoint Business Centres. The Centre’s success as a business in its own right relies on the success of the start-ups and small businesses that rent office space. The company therefore provides free business support and mentoring for its members, and many Basepoint centres have regular networking meetings. Charity is at the heart of Basepoint’s CSR. The company is owned by The Act Foundation, a grant-funding charity, with all the profits going to people in need. Each centre also supports a local charity with fundraising activities, though there is no mention of Broxbourne’s chosen charity on the Basepoint website.

National Windscreens

Another company that is part of a nationwide group which understands the importance of informing consumers about its CSR policy. National Windscreens takes its environmental policy seriously, recycling 100% of its glass. And like many large companies, it also adheres to the Modern Slavery Act which means a commitment “to ensuring that there is no modern slavery or human trafficking violations in our supply chains or in any part of our business”.

Our own CSR policy

Here at HB Accountants, we take our own responsibilities seriously. We play an active role in the local community, with fundraising events for local charities and networking events to support other local businesses.

Our staff regularly take part in fundraising activities for the official HB charity, which this year is Teens Unite.

We are also a finalist in the Supporting Young People category at the forthcoming Hertfordshire Business Awards.

If you would like to talk to us about how we can help your business, contact us for more details. We would also be very happy to talk about all our CSR policies and activities at the same time!

In the old days, all your accounting was done on a disc. You would buy the software on a disc and install it onto your computer. It was self-contained, which meant that as long as your computer was working, everything would run smoothly.

Unfortunately, there were downsides. What if something went wrong? The system may well not have been supported, so if something did go wrong, you had to bring in outside experts to sort things out. Every two to three years, you’d have to make a decision about whether or not to buy an updated disc. And when it came to submitting figures to your accountant, you had to download the information and send it on a separate disc, risking it being damaged or lost in the post.  And if your accountant only ever saw your figures once a year and you’d been inputting them wrong, it wouldn’t be picked up until there was a year’s worth of corrections to make to the annual accounts. The downsides of disk-based applications have led to the introduction of cloud accounting.

These days, more people are switching to Cloud accounting, but mainly because there is no disc alternative any more! The switch happened fairly seamlessly and most people have adopted the new system quite happily. However, there are some people who are still wary of the Cloud; if you’re one of them, it might help to understand the advantages.

How the Cloud has simplified the accounting process

How you input your figures hasn’t changed at all, but the fact that the software is hosted remotely has revolutionised the process, making things a lot easier for all the parties involved for a number of reasons:

• All information is updated in real-time, enabling a number of users to work on the same file without having to send each other different versions every time it’s updated. The people who need to see the figures, e.g. bookkeeper, MD, can access it whenever they need to. This can save a lot of confusion about what changes have been made as it’s always up-to-date in real-time.
• It simplifies the year end processes. As your records are updated simultaneously, all your accountant needs to do to access your figures is to log in. They can work on your data, print reports, raise queries and make any adjustments they need to do there and then, speeding up the process considerably. Accountants can also log in at any time to check that everything’s all right, giving companies the reassurance that they’re on the right lines, and for any errors to be picked up early. With permission, we like to check our clients’ figures on a quarterly basis which gives us and you peace of mind.
• The software is automatically upgraded meaning you’re always working on the latest version.
• You no longer have to worry about the expensive and bother of security and maintenance as the host companies take care of backups, updates and cyber security. In fact,your data is probably safer on the Cloud as it is encrypted and password-protected, meaning that even if your computer is stolen, all your information remains secure.
• Cloud accounting is very cost-effective. Although you will have to pay a monthly fee to use the software, in the long run you could still end up saving money on the old system where you simply bought a disc. Your office will spend less on hardware as all your data storage is taken over by the Cloud company, with the added bonus of that hardware not taking up valuable office space; and you will no longer need to employ or outsource IT experts to look after it.