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Bookkeeping Myths – IAB

Article written for http://www.cloudbookkeeper.co.uk/ by IAB

Bookkeeping myths

Regardless of where you stand within the business world, bookkeeping can prove to be a difficult task. Involving the likes of keeping a track of finances, enduring that paperwork is organised, and –ultimately – many more tasks which a busy worker may find difficult to perform.

It just so happens that these performing these tasks are vital to having a business which runs properly. One way to ensure that all bookkeeping talks are completed with little detrimental effect to you and your business is to hire a bookkeeper – be it from a firm or an independent individual.

Oddly enough, there are several misconceptions and myths that surround hiring a bookkeeper for your business – luckily, we’re here to tackle them.

Only big businesses need help from a bookkeeper

Many imagine that a bookkeeper is something that only large, prestigious businesses and corporations need. This couldn’t be further from the truth, we’ll assure you. When you first start your business, you may find yourself feeling a tad overwhelmed at the wealth of tasks that need to be performed – anything from finding office space, to sorting out any legal affairs. Hiring a bookkeeper during this time can help to lighten the load a little – even more so if you aren’t confident in your math or organisational abilities.

Never be afraid or feel ashamed to contact a professional bookkeeper, regardless of your businesses size – be it a still- blooming start up to a sizeable success story.

My business doesn’t make enough money to hire a bookkeeper

You may have to shop around a tad to find a professional bookkeeper that allows you to live and work comfortably within your personal budget, but as a whole, hiring a bookkeeper can help you to save money in the long run.

Think of it like this; all of the time you may spend trying to organise paper work, doing sums, and trying to keep everything together could be better spend growing your business in a wealth of ways. Hire a bookkeeper, and you’ll find that all of this time is magically freed up – meaning you’ll most likely more of a profit in the process!

Bookkeeping is just about maths

This is one of the most common misconceptions about bookkeeping – besides that it’s all about collecting books, too.

In reality, bookkeepers are involved more in the numerical side of your financial issues. As well, they can also assist you with communication, which is ultimately how they help you to save time and money in the long run.

For example, you may have difficulty expressing what you want from an insurance package from your business, or you may be struggling with a difficult aspect of the maths behind your money. Hire

the correct bookkeeper, and you’ll have everything explained to you in a way that you understand, as well as being a lot more organised.

Anyone can do bookkeeping

There’s tons of knowledge needed to be a bookkeeper, and not knowledge that can be gained overnight or after a quick course. Bookkeepers can go through years of training, working, and assessments before they can become qualified. This ensures that you’ll only ever hire a bookkeeper that knows everything needed to correctly understand transactions, collating, and analysing accounts without any error.

‘I don’t need a bookkeeper, I’ve been okay so far!’

It may have been smooth sailing for you and your business so far, but one just remember that the business world is one that is constantly changing, which makes it likely that your business will have to adapt accordingly. It may not necessarily be in a negative way, it may be that you have to learn how to use a popular new social media site, or that you decide to upgrade to a bigger office space – whatever it may be, plenty of work may be required!

The point is; no business stays the same forever. Hiring a bookkeeper to take care of your accounts and paperwork can be all the help in the world when you have a growing business to take care of. As well, a bookkeeper can offer you expert advice in regards to what the best path for your business to take best would be.

Hopefully, you can now see that hiring a bookkeeper is one of the best – and easiest – ways to ensure that your business doesn’t begin to fall behind. Get hiring, and you can then begin to focus on the most important thing of all – running your business.

For further if formation about bookkeeping, hiring a bookkeeper, and anything else regarding bookkeeping, don’t hesitate to contact the International Association of Bookkeepers (IAB).iab-cloud-bookkeepers

Budget Highlights March 16th 2016

The chancellor has presented his budget to parliament, we’ve outlined some of the highlights below.

 

Lifetime ISA: a new £4,000 ISA that you can use to save for retirement or to buy your first home

From April 2017, any adult under 40 will be able to open a new Lifetime ISA. Up to £4,000 can be saved each year and savers will receive a 25% bonus from the government on this money.

Money put into this account can be saved until you are over 60 and used as retirement income, or you can withdraw it to help buy your first home.

The total amount you can save each year into all ISAs will also be increased from £15,240 to £20,000 from April 2017.

 

Personal Allowance will increase to £11,500, and the higher rate threshold will rise to £45,000 in April 2017

The Personal Allowance is the amount of income you can earn before you start paying Income Tax. This is currently £10,600 – it will already rise to £11,000 in 2016, and will now increase further to £11,500 in April 2017.

The point at which you pay the higher rate of Income Tax will increase from £42,385 to £43,000 in 2016 and to £45,000 in April 2017

 

tax allowances for money earned from the sharing economy

From April 2017, there will be two new tax-free £1,000 allowances – one for selling goods or providing services, and one income from property you own.

People who make up to £1,000 from occasional jobs – such as sharing power tools, providing a lift share or selling goods they have made – will no longer need to pay tax on that income.

In the same way, the first £1,000 of income from property – such as renting a driveway or loft storage – will be tax free.

 

Making sure large companies can’t artificially shift profits out of the UK

Some large companies use excessive interest payments to reduce the tax they pay on their profits in the UK. Relief on interest payments will now be capped at 30% of UK earnings, with exceptions for groups with legitimately high interest payments.

Over the next 5 years, the government will raise nearly £8 billion from large companies and multinationals through changes to the rules on interest and other measures, including:

  • introducing rules to prevent multinational companies avoid paying tax in any of the countries they do business in, a technique called hybrid mismatches
  • taxing outbound royalty payments better – these are fees for using intellectual property like patents and copyrights – meaning multinationals pay more tax in the UK
  • making sure offshore property developers are taxed on their UK profits

 

Tax support worth £1 billion for the oil and gas industry

This includes effectively abolishing Petroleum Revenue Tax (a tax on profits from oil fields approved before 1993) and dramatically reducing the supplementary charge on oil and gas extraction.

 

Cutting business rates for all rate payers

From April 2017, small businesses that occupy property with a rateable value of £12,000 or less will pay no business rates.

Currently, this 100% relief is available if you’re a business that occupies a property (e.g. a shop or office) with a value of £6,000 or less.

There will be a tapered rate of relief on properties worth up to £15,000. This means that 600,000 businesses will pay no rates.

 

Capital Gains Tax rates will be cut from 6 April 2016, but residential property will still be taxed at current rates

Capital Gains Tax is a tax on the gain you make when you sell something (an ‘asset’) that has gone up in value. It is paid at a basic or higher rate depending on the rate of Income Tax you pay.

From April 2016, the higher rate of Capital Gains Tax will be cut from 28% to 20% and the basic rate from 18% to 10%.

There will be an additional 8 percentage point surcharge to be paid on residential property and carried interest (the share of profits or gains that is paid to asset managers).

Capital Gains Tax on residential property does not apply to your main home, only to additional properties (for example a flat that you let out).

 

Employers will pay National Insurance on pay-offs above £30,000 from April 2018

From April 2018 employers will now need to pay National Insurance contributions on pay-offs (for example, termination payments) above £30,000 where Income Tax is also due.

For people who lose their job, payments up to £30,000 will remain tax-free and they will not need to pay National Insurance on any of the payment.

 

Corporation Tax will be cut again to 17% in 2020

The main rate of Corporation Tax has already been cut from 28% in 2010 to 20%, the lowest in the G20. It will now be cut again to 17% in 2020, benefitting over 1 million businesses.

 

Class 2 National Insurance contributions (NICs) for self-employed people will be scrapped from April 2018

Currently, self-employed people have to pay Class 2 NICs at £2.80 per week if they make a profit of £5,965 or over per year. They also pay Class 4 NICs if their profits are over £8,060 per year.

From April 2018, they will only need to pay one type of National Insurance on their profits, Class 4 NICs.

Paying Class 2 NICs currently enables self-employed people to build entitlement to the State Pension and other contributory benefits.

After April 2018, Class 4 NICs will also be reformed so self-employed people can continue to build benefit entitlement.

 

Digital records to be compulsory

The government expects every business to keep its accounting records in a digital form.

This key requirement will under-pin Making Tax Digital (MTD), as was made clear in the MTD for business event held on 3 March. What’s more “digital form” doesn’t mean an Excel spreadsheet. Each business and landlord will have to use some form of accounting software which has a capability to communicate with HMRC’s systems. We expect further details on this software requirement to be included in one of the five consultation documents on MTD to be released shortly after the Budget.

However, moving to a commercial software package will mean extra costs and data transfer problems for many businesses who have created their own bespoke accounting software, or who rely on Excel spreadsheets. Della Hudson of Hudson Accountants agreed that new businesses can keep adequate records on a simple spreadsheet. She said: “We run basic bookkeeping workshops based on Excel for about 40 businesses per year.”

Employee rates and thresholds for 2016 to 2017

 

The amount of Income Tax you deduct from your employees depends on their tax code and how much of their taxable income is above their Personal Allowance.

For the tax year 2016 to 2017, the Income Tax information below applies to both Scotland and the rest of the UK (England, Wales and Northern Ireland).

 

The figures quoted below apply between 6 April 2016 and 5 April 2017.

Cloud bookkeeper rates tables

Integrate your WooCommerce store with your Xero account

Xero is beautiful software that handles all of your business accounting functions from bank reconciliation and financial reporting to inventory tracking and payroll.

Xero for WooCommerce gives you the ability to set up automatic creation of invoices in Xero for ecommerce sales. After the module is installed and configured, each order placed in your WooCommerce store is securely sent to your Xero account to keep records up to date.

All product, shipping, discount, and tax data is sent to Xero. When payments are made, they are applied to the appropriate invoice to keep everything in balance.

email us today for help creating a website with Xero integrated

VAT reclaims on lease cars

If you leases a car, you can usually only claim 50% of the VAT.  Although you may be able to reclaim all of the VAT if the car is used only * for business and is not available for private use, see some examples below.

  • will be used exclusively for the purposes of the business and is not available for any private use; or
  • is intended to be used primarily as a taxi, driving-instruction car or self-drive, that is daily rental, car.

* Exclusively for business use

To qualify as being available exclusively for business use, a car must be used only for business journeys and not ‘made available’ for the private use of anyone, including employees.

The phrase ‘made available’ has been given a very broad meaning by HMRC, and so a car is available for private use if there is nothing preventing its private use by anyone, including employees, which means that if HMRC were to look into these transactions then if 100% of the VAT has been reclaimed and they feel that your client does not meet the criteria the VAT will need to be repaid.

http://www.cloudbookkeeper.co.uk/2969/

Tax Simplification for Individuals

New method of assessment

A new, simpler process for paying tax will take effect from 2016-17. The new system will be used for self-assessment taxpayers who have simple tax affairs where HMRC already hold all the data needed to calculate the tax liability, and where existing payment processes are not available. Taxpayers will be sent a calculation which will be a legally enforceable demand for payment, although taxpayers will be able to challenge and appeal the calculations.

Digital tax accounts

At the Spring Budget 2015 the government announced proposals for the introduction of personalised digital tax accounts to replace the current annual tax returns system. The government has now announced that companies, unincorporated businesses, self-employed people and landlords will all be required to keep track of their tax affairs digitally and update HMRC at least quarterly via their digital tax account. HMRC will ensure the availability of free apps and software that link securely to HMRC systems and provide support to those who need help using digital technology and will include features which will prevent errors and promote compliance. The measure will not apply to employees, or pensioners, with a secondary income source from self-employment or property and whose gross income from this secondary source is under £10,000 per year.

The measure will be implemented for income tax and NICs from April 2018, VAT from April 2019 and corporation tax from April 2020. The roll out will be staggered and there will be testing before the reporting becomes mandatory.

Self-assessment time limit clarification

The government is to publish draft legislation clarifying the time allowed for making a self-assessment, making it clear that the time limit is four years from the end of the relevant tax year. (This will be legislated in Finance Bill 2016).

Stamp Taxes Update

SDLT on acquisition of additional properties

From 1 April 2016, higher rates of stamp duty land tax (SDLT) will be charged on purchases of additional residential properties (above £40,000), such as buy to let properties and second homes. The higher rates will be 3 percentage points above the current SDLT rates.

The higher rates will not apply to purchases of caravans, mobile homes or houseboats, or to corporates or funds making significant investments in residential property given the role of this investment in supporting the government’s housing agenda.

The government will consult on whether an exemption for corporates and funds owning more than 15 residential properties is appropriate.

SDLT payment

A consultation is to be undertaken on possible changes to the SDLT filing and payment process, including a reduction in the filing and payment window from 30 days to 14 days. It is expected that any changes would take effect from 2017-18.

ATED and 15% higher rate SDLT

From 1 April 2016 the reliefs available from Annual Tax on Enveloped Dwellings (ATED) and from the 15% higher rate of SDLT will be extended to equity release schemes (home reversion plans), property development activities and properties occupied by employees.

SDLT and Authorised property funds

A seeding relief will be introduced for Property Authorised Investment Funds (PAIFs) and Co-ownership Authorised Contractual Schemes (CoACSs) and changes made to the SDLT treatment of CoACSs investing in property so that SDLT does not arise on the transactions in units.

There will be a defined seeding period of 18 months, a 3 year clawback mechanism, and a portfolio test of 100 residential properties and £100 million value or 10 non-residential properties and £100 million value.

These changes will take effect from the date of Royal Assent to Finance Bill 2016.

Deep in the Money Options

Shares transferred to a clearance service or depositary receipt issuer as a result of the exercise of an option will be charged at the 1.5% higher rate of stamp duty based on either their market value or the option strike price, whichever is higher.

HMRC will prevent avoidance using ‘Deep in the Money Options’, which are options with a strike price significantly below (for call options) or above (for put options) market value. Share transfers made other than to a clearance service or depositary receipt system as a result of exercising an option will be unaffected.

This change will apply to options entered into on or after 25 November 2015 and exercised on or after Budget 2016.

HMRC to close 137 Local offices

In a controversial move, HMRC is to close 137 local offices and replace them with 13 larger regional centres in a bid to save £100m by 2025.

Lin Homer, HMRC’s chief executive, explained: “HMRC has too many expensive, isolated and outdated offices. This makes it difficult for us to collaborate, modernise our ways of working, and make the changes we need to transform our service to customers and clamp down further on the minority who try to cheat the system. The new regional centres will bring our staff together in more modern and cost-effective buildings in areas with lower rents.”

But the move has been criticised in some quarters, with the Public and Commercial Services Union (PCS) saying that 11,000 full-time equivalent staff posts had been cut from HMRC since 2010 and any further cuts would be “absolutely devastating”.

PCS general secretary Mark Serwotka said: “Closing this many offices would pose a significant threat to the operation of HMRC, its service to the public and the working lives of staff, and the need for parliamentary scrutiny of the plans is undeniable and urgent.

The plan comes as HMRC faces criticism of its call centres, with its record of answering calls being described as “staggeringly bad” at the Commons Treasury committee earlier this month. Only half of calls were answered successfully between April and June, although performance has improved since.

Amazon to Xero a2x

Agreat new plug in has been developed by A2X to feed transactions from Amazon through to Xero.

When Amazon creates a new settlement file A2X automatically fetches it, crunches the data and generates a summary of the income and expenses charged or received from Amazon.

You can configure A2X to summarize sales by SKU, Product Type, or to group all Sales together. You can also optionally group sales by country.

 

George Osborne has delivered his final Autumn Statement before the General Election next year

Stamp Duty Land Tax (‘SDLT’) has been changed and a progressive tax rate will apply to residential sales completed after midnight on Wednesday 3rd December. The ‘break even’ point is £935,000, purchases below that will be subject to lower SDLT than before whereas purchases above that will be subject to higher SDLT.

Research & Development Tax Credits paid to small and medium sized companies will increase from 125% to 130% of ‘qualifying expenditure’ incurred after 1 April 2015. The credit for large companies will also increase from 10% to 11%.

Income Tax Personal Allowance will increase to £10,600 for the 2015/16 tax year – this is higher than previously advised by the government.

Resident non-domiciles will see an increase in the annual charge payable if they wish to retain the remittance basis of taxation. A new scale will apply from £30,000 for those resident in 7 out of 9 tax years up to £90,000 for those resident 17 out of 20 tax years. A consultation is also being proposed to make the election apply for a minimum of three years.

Diverted profits tax is a new tax to counter the use of aggressive tax planning techniques used to divert profits away from the UK. The tax will be levied at 25% from 1 April 2015 although exact details on how this will be applied have not yet been released.

Air Passenger Duty is being scrapped on economy flights for those under 12 years old with effect from 1 May 2015. The relief will extend to under 16’s from 1 March 2016 and tickets will be expected to display the amount of duty payable to ensure that the savings are passed on.

The amount held in an ISA at the time of death of an individual can now be used by a surviving spouse to invest into their own ISA. Although no IHT was payable on the transfer of assets between spouses on death the funds can now be reinvested in full into an ISA.

Entrepreneurs’ Relief will be removed for individuals in respect of the transfer of goodwill to their own company and Corporation Tax reliefs will be restricted for payments in respect of these intangible assets.

National Insurance employers contributions are abolished for apprentices under 25 with effect from 1 April 2016 (unless the apprentice earns more than circa £42,000).

A new ‘aggravated’ penalty loading of 50% will apply in addition to existing behavior related penalties for individuals who move hidden funds to circumvent tax transparency agreements