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BOOKKEEPING

It’s our job to get your books straight and keep them that way. We will collect all the receipts, bank statements and other papers and make sure that they are filed correctly to meet the requirements of HMRC and other interested parties and all at a competitive price and convenience to you.

USMAN & CO. ACCOUNTANTS take pride in keeping the accounting records up to date, making sure the analysis is right and that the accounts balance, so, if you want to concentrate on running your business, allow us to concentrate on what we do best, which is managing your accounts.

 

PAYROLL

Any business that has employees will need to run a payroll and submit RTI (Real Time Information) Returns to HMRC on each pay day. Unfortunately penalties starting at £100 per missed RTI return are payable to HMRC and any underpaid tax and NI due will also accrue interest.

This means it’s essential you have a good payroll provider in place straight away to avoid costly penalties and to ensure a smooth process when paying your employees.

If you run a business and employ staff then you will have to complete payroll. Payroll is the term used to describe records and calculations for the pay and deductions of employees under the PAYE (Pay As You Earn) system.

PERSONAL TAX

Tax can be a very complex subject, so unless your tax affairs are very straight forward it is almost always better to seek advice from a professional than attempt to complete your own tax return.

Some of the benefits of using Usman  and Co. Accountants to handle your tax affairs are:

Peace of mind. By using professionals you know that your tax calculations will be correct and accurate.

Investigations. You are less likely to be investigated by HMRC if you use an advisor, as HMRC have ways of knowing if figures submitted on a return are likely to be incorrect. This is a common trigger for a tax investigation.

Save time. In most cases it will take you a lot longer to complete your own tax return than it would for an advisor. This time could be better spent running your business!

Claiming everything you’re entitled to claim. It is a very rare occasion that we take on a new client and are not able to find areas to reduce the tax owed. This is usually in the form of under declared expenses. Most business owners are not aware of all the different types of expenditure that can be claimed and how best to claim them, which is where we come in!

COMPANY TAX

Why does a business need to submit a tax return?

Whatever type of business you have, be it a sole trader, partnership or limited company, a tax return must be completed to declare your income to HMRC and to let them know how much tax is due.

Unfortunately, not submitting your tax return on time can result in considerable penalties and interest being accrued by HMRC. This is why it’s so important to put arrangements in place early on to ensure everything is completed on time.

Another huge benefit to being organised with your tax affairs is that you will know how much tax is due in advance with a good amount of time to pay your balance to HMRC.

Why not download a copy of our free business guide which will outline all of the necessary dates, deadlines and penalties regarding tax for businesses?

CIS RETURNS
What is CIS tax and does it apply to?

CIS applies to most workers in the construction industry. If you are a contractor you will need to deduct CIS tax from your subcontractors and submit CIS Returns to HMRC. If you are a subcontractor you will need to complete a tax return and claim your CIS refund (if applicable).

We offer our accounting service to both contractors and sub-contractors.

Construction Sub-contractors

If you are a sub-contractor in the construction industry you are required to complete a personal tax return each year. The tax return tells HMRC how much you have earned, how much expenditure you have incurred and how much CIS tax you have already paid.

As a sub-contractor it is likely you are entitled to a tax refund each year as you will have paid more in CIS tax than you owe to HMRC.

If you ask us to act on your behalf you can expect the following benefits:

-Completion of a full set of accounts for your business
-Submission of your tax return
-Overseeing the process for your repayment
-Your own dedicated accountant
-Representation in the event of a tax enquiry from HMRC
-Unlimited help and advice throughout the year from your accountant

What is the process?

If you ask us to take care of your tax return we follow a thorough process that ensures that your tax return is accurate and that as a sub-contractor you receive the biggest tax refund possible.

The process is as follows:

We will ask you to complete a short client registration form which authorises us to act on your behalf

We send out automated reminders that let you know when to send your records to us. If your records are electronic they can be emailed to us or if you keep paperwork it can be sent to us through our free, pre-paid mail service

We will then complete your accounts and tax return within 14 days of receiving your records

Before completion, the work will be double checked by another Senior Accountant who will ensure that every possible expense is claimed to ensure you get the maximum tax refund available to you

We send a copy of your accounts and the resulting tax return for you to review and approve

Your refund will then be paid to you on the same day that we receive it from HMRC

We realise that you probably want your tax affairs to be as hassle free as possible which is why we have developed our industry-leading streamlined way of working. It couldn’t be easier.

VAT RETURN


Why does a business need VAT Returns?

If your turnover is more than the current VAT threshold then you may have to register for VAT. If this is the case then you will have to complete and submit a VAT return to HMRC, usually each quarter.
However, even if you are not required to register it can sometimes be beneficial to register voluntarily. Deciding whether you have to or should register can be confusing but don’t worry, help is at hand. We can talk this through with you and ensure that you receive the best advice possible based on your circumstances.
Completing your VAT Returns
If your VAT Returns are relatively simplistic then in certain circumstances it may make sense for you to complete them yourself. We can advise you on whether you should feel comfortable filing your returns on your own.

If you use a bookkeeping software package then more than likely it will have the ability to submit your VAT returns electronically based upon the bookkeeping you have completed.

However, VAT can be a very complex area and sometimes it can be worth outsourcing the completion of your VAT returns to professionals. This is where we come in!

What is the process?

When we complete your VAT Returns we do not just take the figures from your bookkeeping and submit them to HRMC. We start by reviewing your bookkeeping, because if there are any inaccuracies then this will mean that the VAT Return may also be incorrect.

We pay particular attention to ensuring that we are claiming for all VAT your business has incurred, ensuring you pay as little VAT as possible to HMRC. Once we are happy that the bookkeeping is accurate we will review your businesses circumstances to see if any recommendations can be made to you.

These recommendations range from advising you to de-register for VAT if you fall below the threshold, to ensuring you are on the most beneficial VAT scheme for your business. So for example, if your customers tend to take a while to pay you after you raise your invoices but you pay your suppliers straight away then we may recommend cash accounting for your VAT as this would vastly improve your cash flow.

Once the recommendations have been considered, another Senior Accountant will be given your work to double check that everything is accurate. Once confirmed, you will be sent the figures to review and once everyone is happy we will submit the VAT Return to HMRC.

This thorough process ensures that there is a vastly reduced risk of errors, keeping you and HMRC happy! It also ensures that you do not pay a penny more in VAT over to HMRC than you have to!

COMPANY SECRETARIAL AND ADVISING


USMAN & CO. ACCOUNTANTS offers a comprehensive Company Secretarial service to ensure that you meet your statutory obligations. We can advise you of all of the duties required of you under company law and assist you in performing these duties.

We can advise and assist with all the legal requirements under Company Law including:

-Company formation
-Registered Office informationActing as the company’s Registered Office
-Annual Returns
-Company Register entries
-Changes and amendments for Directors and Company Secretary
-Preparation of dividend paperwork for shareholdersAdvising you on the appropriate legal procedures to change the officers of the company, changes in shareholdings, amendments to the accounting reference date, dividend declarations, etc
-Advising you of Director’s responsibilitiesMaintaining your statutory Minutes
-Maintaining your statutory Registers
-Attendance of Board and General Meetings to advise you on procedure
-Filing all necessary accounts, forms, returns and resolutions on the public record at Company’s House
-Advising and assisting you with your tax affairsWhen all your company secretarial duties are performed correctly, you can rest assured that you will be kept out of trouble with the authorities and reduce the business and personal tax burdens.

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Set up a business

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Setting up a business for the first time can often be a daunting experience. Engaging an experienced accountancy firm at this stage will not only ensure you make well-informed choices but will also ensure you receive the support you need to glide through the process with ease.

There are plenty of things to consider when first setting up a business & moving forward to register a company in the UK. You need to understand what type of business structure is best suited to your needs, as well as the financial requirements and legal obligations that will result. At Usman and C-o. Accountants, we offer expert advice that helps you to consider all your options.  Once you are equipped with all the facts and have made a well-informed decision, we provide you with the practical support you need to set up your business and get up and running in-line with company registration law.

The company formation services we offer include:

  • Help you decide what type of business structure best suits your needs
  • Support you with setting up a bank account (if required)
  • Advise you on what financial requirements are involved to register a company in the UK
  • Help with the compliance for your business and any administration involved including secretarial services
  • Complete any registration procedures with Companies House and HMRC to comply with
    company registration law
  • Help you decide on the best software to manage your records
  • Support you with Bookkeeping Services, payroll, VAT and other accounting requirements
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Owning More than One Company: Benefits & Drawbacks

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Company owners often think about setting up a second company, to keep a new venture separate from an existing business.

Often there are sound commercial reasons for using more than one company, including to:

  • Limit liability
  • Involve different shareholders
  • Enable a stand-alone sale of the new businessFor example, someone who owns an ecommerce business and a restaurant chain may wish to keep them separate so that each company can be sold more easily in the future.Someone who owns a software company and a property rental business may wish to keep them in separate companies so that the ‘trading’ business (the software company) is not contaminated by the ‘non-trading’ business (the property rental business).

    Companies that own non-trading assets, like rental property, can lose important tax reliefs, including Entrepreneurs’ Relief, Holdover Relief and Business Property Relief.

    Business owners used to be punished for owning more than one company. This is no longer the case (since April 2015).

    What happened was the £300,000 small profit band (where the lower corporation tax rate was payable) had to be divided up among associated companies. For example, in the case of two companies, each company would start paying corporation tax at the higher rate when its profits exceeded £150,000 (instead of £300,000).

    The associated company rules prevented the profits of one business being artificially spread over more than one company to avoid the higher rates of corporation tax.

    The associated company rules have become largely redundant with the                    introduction of a single flat rate of corporation tax for all companies, currently 19%. You are no longer penalised for owning more than one company – they all pay corporation tax at the same rate.

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Accounting Periods vs Financial Years

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A company’s own tax year (also known as its ‘accounting period’) may end on any date, for example 31 December, 31 March etc.

Corporation tax, on the other hand, is calculated according to financial years. Financial years run from 1 April to 31 March. The 2017 financial year is the year starting on 1 April 2017 and ending on 31 March 2018.

This matters when it comes to calculating how much tax your company will pay if the corporation tax rate has changed.

For example, on 1 April 2017 the corporation tax rate fell from 20% to 19%. A company whose accounting period runs from January 2017 to December 2017 will therefore pay corporation tax as follows:

  • 3 months to 31 March 2017 20%
  • 9 months to 31 December 2017 19%The practical effect is that the company will pay 20% corporation tax on approximately one quarter of its profits and 19% tax on three quarters of its profits. (It doesn’t matter at what point during the financial year the profits are actually made.) This means the company’s effective corporation tax rate will be 19.25%.

    A company whose accounting period runs from 1 August 2016 to 31 July 2017 will pay corporation tax as follows:

  • 8 months to 31 March 2017 20%
  • 4 months to 31 July 2017 19%Thus the company will pay 20% corporation tax on two thirds of its profits and 19% tax on one third of its profits. This means the company’s effective corporation tax rate will be 19.67%.

    A company whose accounting period runs from 1 April 2017 to 31 March 2018 will simply pay 19% corporation tax on all of its profits.

     

     

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Accommodation expenses

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Accommodation costs are an allowable expense if incurred in relation to qualifying business travel.

So if a limited company contractor works for a client in a temporary location for 9 months and they stay in a hotel during the week, going home to their permanent home at the weekends, the hotel costs are allowable as long as the location remains a temporary workplace with the travel allowable.

If you are away for a period of time in the same location it may be cheaper for the limited company to rent temporary accommodation rather than paying for a hotel.

This is fine as long as the cost of the accommodation is at an appropriate level for the needs of the business. It must not be excessive and should represent better value to the company than hotel accommodation.

You should make sure that the rental agreement / invoices are made out to your limited company rather than you personally.

What if you stay at relatives or friends and pay them a fee for providing temporary accommodation?

You can pay them a fair market rate for providing the accommodation. It must still be in relation to travel to a temporary workplace and it should represent better value to your company than a hotel.

You also need to ask them to give you invoices, made out to your company, for the rental costs.

In order to be able to claim these accommodation costs you must have a permanent principal residence elsewhere which will be your main home address – i.e. the accommodation costs should not represent your main place of living.

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Limited company tax – the basics

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In this post, we take an overview of the main taxes you will be liable to pay (or collect) as a limited company, and when you have to pay them.

When you set up a limited company, your personal and business finances are kept entirely separate (unlike the sole trader route). Unlike life as a salaried employee, you are now responsible for overseeing your obligations, by registering to pay tax on your company income, and ensuring that any liabilities are paid to HMRC on time.

Appointing an accountant

After incorporating your new company, most people appoint an accountant to take care of their tax affairs on an ongoing basis.

Some company owners prefer to take care of day-to-day accounting duties themselves, and just use a professional accountant at year-end, to prepare their company accounts.

For the majority of company owners, however, choosing the right accountant from the start is an important step, as you are likely to have quite a few questions following the initial start-up process.

Once you have appointed your accountant as your ‘agent’, they can then deal with HMRC on your behalf.

Corporation Tax

All limited companies must pay Corporation Tax on their profits, and one of the first things you will do as a new company owner is to register your new company to pay Corporation Tax.

Each year, your company must complete its company corporation tax return (CT600).

You must also pay any Corporation Tax owed within 9 months and 1 day of your company’s ‘normal due day’, which is typically the anniversary of when the company was formed.

Value Added Tax (VAT)

If you are likely to turnover £83,000 or more during any 12 month period you must also register your company for Value Added Tax (VAT).

Essentially, you collect VAT on behalf of HMRC, but adding the prevailing rate to your invoices (the standard rate is 20%). Once you deduct any VAT your company may have spent during a VAT quarter, you pay the balance to HMRC.

There are several types of VAT scheme available: the ‘cash’ scheme enables you to only repay VAT to HMRC once payment has been received by you, and the Flat Rate VAT scheme provides a simpler way of calculating tax, by allowing you to apply a flat VAT percentage when calculating your liabilities.

At Usman & Co. Accountants we will be able to work out which scheme is most likely to suit your business.

PAYE / National Insurance Contributions

The other initial task you (or your accountant) is likely to do is to set up your company payroll. If you and any employees receive a salary, then income tax and National Insurance Contributions (NICs) are deducted at source, and paid to HMRC on a monthly or quarterly basis.

Even if you don’t pay any salaries which breach the lower threshold for tax or NICs, you must still notify HMRC that no tax is due for that period (this is a simple process).

Other taxes you may encounter

Alongside the main taxes your limited company is liable to pay, you will also have to pay tax on any income your receive personally, typically in the form of salary or dividends drawn from your company.

You settle your personal tax liabilities via the self assessment process each year. You must submit your personal tax return, together with any taxes owed, by 31st January in the year following the end of the tax year in question.

You may also be liable to Capital Gains Tax on any assets you have disposed of during the tax year (such as shares, investments, or property). The current standard CGT rates are 18%, or 28% (applied to higher rate tax payers).

If you sell your own company, and have owned the shares for at least 12 months, then you may be eligible to pay Entrepreneurs’ Relief on the proceeds – at a flat rate of 10%.

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Differences of Sole Trader vs Limited Company 2017/2018

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What are the key advantages and disadvantages of trading as a self employed sole trader vs a limited company for the 2017/18 tax year?

Making the decision as to which structure your business operates as can be crucial, whether that be in terms of tax savings, perception to the outside world, keeping things simple or future plans you may have.

In this article we will review some of the main differences between trading as a self-employed sole trader compared to a limited company, in terms of the tax consequences, administration and other non-financial aspects with regards to the 2017/18 tax year.

Our advice in this article about the topic of sole trader or limited company is geared towards freelancers, contractors and modern small business owners as that is our main area of expertise.

Tax

For this article we will focus only on the 2017/18 tax year.

Our tax comparisons assume a simple position where the only income being earned by a person is either their sole trader income or their salary and dividends from their limited company i.e. there is no other personal income to consider, such as rental income.

 

Sole Trader Tax

As a sole trader an individual must pay tax on all profits over and above their personal allowance, for most tax payers the personal allowance is £11,500 for the 2017/18 tax year.

Once the personal allowance has been breached tax is paid at the rate of 20% in the basic rate of tax (up to £45,000 income), 40% as a higher rate taxpayer (over £45,000) and 45% in the additional rate band (over £150,000 income).

There are now slightly different tax rates for Scottish taxpayers which are not covered in this article (for 17/18 Scottish taxpayers have a higher tax band of £43,000, not £45,000 like the rest of the UK).

There are also further personal tax issues to consider such as child benefit starts to be withdrawnonce your income goes over £50,000 and the personal allowance begins to be withdrawn once your income is over £100,000.

As well as tax, for a sole trader there will be two forms of national insurance to consider, Class 2 and Class 4.

 

Limited Company Tax

A limited company, on the other hand, pays corporation tax on profits at a rate of 19% from 1 April 2017 (previously 20%), over and above this there can be personal income tax to be paid with regard to dividend extractions from the business.

In order for the extractions to be as tax efficient as possible the director normally would draw a small salary from the company within their personal allowance but not above the point at which national insurance becomes payable, this salary would be an allowable business cost for corporation tax so 19% corporation tax is saved on the gross salary.

The remainder of their withdrawals would be in the form of dividends, these are paid out of post-tax profits and are not deductible expenses for corporation tax purposes so offer no tax saving, however there is no national insurance to pay on dividends.

In the 2017/18 tax year dividends are taxed at 7.5% in the basic rate of tax, with rates of 32.5% & 38.1% in higher and additional rates respectively.

The first £5,000 of dividends that would otherwise be taxable at the above rates are currently subject to a tax free allowance (called the ‘dividend allowance’).

There is no requirement for the owner to withdraw all profits from the business if they do not want to, and indeed it can prove tax efficient to leave some profits retained in the company for extraction at a later date or to re-invest in the company (e.g. to invest in equipment or staff).

In the table below we outline the tax savings of a limited company compared to a sole trader for different levels of profits based on the 17/18 tax year.

We have assumed an optimum level of salary and dividends in the scenario of a limited company and the figures include national insurance payable as a sole trader.

The profits are on a like-for-like basis so do not include the directors salary for the limited company.

 

Tax differences of a sole trader vs limited company for 17/18:

 

So for example looking at this table, comparing the tax rates on sole trader or limited company, you can see that for profits of £40,000 the tax and NI for a sole trader totals £8.7k compared to the combined tax of a limited company (corporation tax on profits and income tax on dividends) totaling £7.4k, so there is a £1.3k saving by using a limited company.

The above table shows that where all post-tax profits are withdrawn from the limited company the savings do not continue to increase as profits rise past £55,000, the optimum level in this scenario is approx. £54,000 of profits.

Whilst there are tax savings at all levels of profitability the extra administration costs (discussed further in this article) can exceed the tax benefits at lower profit levels.

Focus on what you do best while we take care of your accounts!