If you run a charity, you’ll know that when it comes to doing the accounts, there are more complications than a ‘for profit’ business. Charity Accountants do understand these complications and the most effective ways to address these without any interruption to your operation.
The accounting requirements for charities are onerous and apply to even the smallest charity. Visit the Charity Commission for England and Wales’ website for the rules around reporting, accounting and audits depending on the size and type of charity.
When it comes to finances, there is a basic requirement to submit accounts and returns to the Charity Commission, as well as a trustees’ annual report, a set of accounts and an annual tax return. The accounting process needed also depends on the type of charity, whether it’s a Trust, a Charity Incorporated Organisation (CIO) or a charitable company limited by guarantee.
We have for several years been reminding clients that “enjoying” free car fuel from their employer for their private mileage can often be a bad deal.
If, for example, you have a diesel car with CO2 emissions of 140 grams per kilometre, you pay 120 pence per litre for fuel, manage an average of 35 miles per gallon, and are a 40% taxpayer, you would need to drive more than 17,000 private miles during the current tax year before you were better off with the so-called benefit.
If, in the same situation, you are also the owner of the company, there would be the additional cost of Class 1A contributions on the benefit. After corporation tax relief this would cost the company an extra £758 so you would need to clock up private mileage of over 22,000 miles before you were ahead of the game.
Even with a petrol driven car with CO2 emissions of 105 g/km, you would still need to drive more than 11,500 private miles (or 14,500 private miles for the company owner) in order to really benefit from “free” fuel.
Under company law, all businesses must prepare annual accounts, as well as annual tax returns, to file with HMRC and Companies House. Many start-ups and small businesses hire an accountant to write these reports and leave it there, but when a company begins to expand, they tend to hire a management accountant to not only generate quarterly or monthly management accounts, but also to make the accounts more meaningful for the future success of the organisation. Below is a management accounting guide for small business owners:
With management accounting, the more frequent production of reports enables managers and directors to use the up-to-date financial information to help them make better-informed business decisions and maintain effective control over corporate resources.
After the production of each report, the accountant will help clients to analyse the figures in order to work out how well, or otherwise, the company is doing. The frequency of analysis can help flag up the products and services that bring in the greatest amount of money, and those that aren’t living up to expectations, as well as help, identify and control wastage, improve cash flow and reduce expenses.
The regularity with which management accounts are generated depends on the individual company. Most will only want quarterly figures, but larger companies tend to do theirs on a monthly basis.
Because of the forthcoming General Election, the Government have been forced to cut down the size of the Finance Act (to a mere 156 pages!) in order to get essential tax provisions into law before Parliament is dissolved.
One of the omissions is MTD, although it is widely expected that this will be reintroduced after the election.
However, there has been more criticism of the proposals. The Office of Budget Responsibility has said that HMRC’s estimates of the improved tax take from MTC were highly uncertain and the House of Lords Economic Affairs Committee has also cast doubt on the estimates.
The Federation of Small Businesses has estimated that the introduction of MTD could cost businesses around £3,000 per year in time, salaries and fees.
Some member of the Treasury Committee have suggested that the Government should delay any implementation until a full pilot scheme has been run and assessed.
As ever with MTD, we will have to wait and see!
As you drive across the border into the county of Hertfordshire, you’re greeted by a road sign which says “Hertfordshire. County of Opportunity”.
When Hertfordshire County Council (HCC) published its Corporate Plan for 2013-17, they explained why they came up with this slogan: “We want Hertfordshire to remain a county where people have the opportunity to live healthy, fulfilling lives in thriving, prosperous communities”.
In terms of prosperity, HCC stated it was working towards a “business-friendly environment where initiative is encouraged and celebrated” in order to create a strong, resilient and successful economy.
But the Corporate Plan went further than just making Hertfordshire a great place to do business, it also encompassed the community as a whole. The plan focused on giving residents the opportunity to maximise their potential by supporting those in difficulties, giving them a clean and green environment to live in, and tackling the overall health and wellbeing of everyone living in the county.
Knowing what your gross profit and net profit are is a fundamental part of running a business. In the simplest terms:
Gross profit – you calculate what your gross profit is by taking your total turnover, minus the costs of the goods sold.
Net profit – this is what’s also known as your bottom line. It’s what’s left after you’ve deducted all your costs from your total turnover, i.e. the costs to you of the goods as well as all your business overheads, staff costs, interest on any business loans etc.
At Budget 2016, the Government announced two new £1,000 allowances for property and trading income to take effect for income arising from 6 April 2017.
The Government also announced at Autumn Statement 2016 that the trading allowance may also apply to certain miscellaneous income to the extent that the £1,000 trading allowance is not otherwise used.
Further detail has now been released:
- Where the allowances cover all of an individual’s relevant income (before expenses) then they will no longer have to declare or pay tax on this income. Those with higher amounts of income will have the choice, when calculating their taxable profits, of deducting the allowance from their receipts, instead of deducting the actual allowable expenses. The trading allowance will also apply for Class 4 NIC;
- The new allowances will not apply to income on which rent a room relief is given; and
- The new allowances will not apply to partnership income from carrying on a trade, profession or property business in partnership.
From 6 April 2018 Class 2 NIC will be abolished and Class 4 NIC reformed to include a new threshold (to be called the Small Profits Limit).
Access to contributory benefits for the self-employed is currently gained through Class 2 NIC. After abolition, those with profits between the Small Profits Limit and Lower Profits Limit will not be liable to pay Class 4 NIC but will be treated as if they had for the purposes of gaining access to contributory benefits. All those with profits at or above the Class 4 Small Profits Limit will gain access to the new State Pension, contributory Employment and Support Allowance and Bereavement Benefit.
Those with profits above the Lower Profit limit will continue to pay Class 4 NIC.
From 6 April 2018 Class 3 NIC, which can be paid voluntarily to protect entitlement to the State Pension and Bereavement Benefit, will be expanded to give access to the standard rate of Maternity Allowance and contributory Employment and Support Allowance for the self-employed.
Changes from 6 April 2018 will align the rules for tax and employer NIC by making an employer liable to pay NIC on any part of a termination payment that exceeds the £30,000 threshold. It is anticipated that this will be collected in ‘real-time’.
In addition, all payments in lieu of notice (PILONs) will be both taxable and subject to Class 1 NIC. This will be done by requiring the employer to identify the amount of basic pay that the employee would have received if they had worked their notice period, even if the employee leaves the employment part way through their notice period. This amount will be treated as earnings and will not be subject to the £30,000 exemption.
Finally, the exemption known as Foreign Service relief will be removed and a clarification made to ensure that the exemption for injury does not apply in cases of injured feelings.
Legislation will limit the income tax and employer NIC advantages where:
- Benefits-in-kind are offered through salary sacrifice; or
- Where the employee can choose between cash allowances and benefits-in-kind
The taxable value of benefits in kind where cash has been forgone will be fixed at the higher rate of the current taxable value or the value of the cash forgone.
The new rules will not affect employer-provided pension saving, employer-provided pensions advice, childcare vouchers, workplace nurseries, or cycle to work. Following consultation, the Government has also decided to exempt Ultra-Low Emission Vehicles which have emissions under 75 grams of CO2 per kilometre.
This change will take effect from 6 April 2017. Those already in salary sacrifice contracts at the date will become subject to new rules in respect of those contracts at the earlier of:
- An end, change, modification or renewal of the contract; or
- 6 April 2018, except for cars, accommodation and school fees when the last date is 6 April 2021.