Archive for the ‘General Business’ Category

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June 2010 Budget Update

Tuesday, June 22nd, 2010

Today’s first coalition budget was a mixed bag of good and bad news.  We still need to await the detail on exactly how a few of the initiatives will impact on your business.  In the meantime, we’ve highlighted below the changes to the major business taxes and how they will affect your business

 Personal Income Tax Allowances

 From April 2011, the personal allowance will be increased by £1,000.  This means that for an individual aged between 18 and 65 they will be able to earn £7,475 per annum before having to pay any income tax.  The Chancellor also stated that it is his longer term aim to raise the threshold to £10,000 per annum before an individual pays tax.  This increase will be worth around £200 a year to a basic tax rate payer.

 The higher threshold for income tax (the 40% rate) remains unchanged.

 Corporation Tax Rates (Tax charged on Limited Company Profits)

 The headline rate of corporation tax (For Companies making over £300,000 profits per year), will drop by 1% in 2011 and then by a further 1% per year in each of the next 3 years.

 For companies making less than £300,000, the rate (known as the small companies rate) will be reduced to 20% from 21% from April 2011.  This is an important change as in the previous Labour budget the rate was set to rise to 22%.

 Annual Investment Allowances (AIA)

 AIA allowances were introduced two years ago to encourage business to spend on capital.  Up to £100,00 of equipment can be bought in the 2010/2011 tax year and be written off in full against the businesses tax liability in the year.  From April 2011, this level will be reduced to £25,000 per annum.  So, if you are planning a major capital project, such as moving premises or introducing new machinery and it’s likely to cost more than £25,000 then you should consider ensuring that the project is complete before next April.

 Capital Allowances

 Any capital expenditure not covered by the AIA rules is written off against tax bills under capital allowances rules.  The current rules state that this type of expenditure is written off at a rate of 20% per annum.  From April 2011, this rate will change to 18%, meaning that it will take additional years for you to get full tax relief on any capital expenditure that falls under these rules.

 Furnished Holiday Lets

 The previous budget indicated that the favourable tax rules for owners of furnished holiday lets would be removed.  Today’s budget reverses that decision.

 VAT

 VAT rates will increase to 20% from 4th January 2011.  There is no change to the items that are exempt from VAT.

This will particularly impact businesses who are not VAT registered or who work directly with consumers.

 Capital Gains Tax

 The rate of Capital Gains Tax (CGT) will remain at 18% for basic rate tax payers, but will increase to 28% for higher rate tax payers from midnight tonight.  The annual exemption allowance of £10,100 will remain in place.

 National Insurance

 Both the planned employers & employees 1% increases will still be introduced from April 2011.  To mitigate the employers increase, the threshold for paying employers NI will be increased by £21 above indexation.  Some of the employee increases will be offset

 Regional Employer NIC Holidays

 The Government are keen to encourage employment outside London.  They are looking to implement a new scheme, at the latest by September that will allow new businesses which start up in these areas to get a substantial reduction in their employer National Insurance Contributions (NICs).

Within the qualifying period, these employers will not have to pay the first £5,000 of Class 1 employer NICs due in the first twelve months of employment. This will apply for each of the first 10 employees hired in the first year of business.

 Whilst  this scheme won’t be in place until September, any new business set up after 22nd June will qualify.

 The regions which will benefit will be Scotland, Wales, Northern Ireland, the North East, Yorkshire and the Humber, the North West, the East Midlands, the West Midlands and the South West.

 As we get more details of the scheme we will issue an update.

 Summary

 As always with budgets, more details are issued over the next few days.  We will issue any relevant updates as we receive them.

If you’d like to discuss how today’s budget will impact on you in more detail, please give us a call

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Posted in General Business | 2 Comments »

Working on your business – Whats that all about?

Friday, June 11th, 2010

Here at Accountancy Extra we are huge fans of Michael Gerber and the book E Myth Revisited.  So much so, that we provide new clients with a copy of the book.

In the book, one of the concepts discussed is “working on your business, rather than in it”, but what does that really mean?

Working on the business includes activities such as

  • Networking meetings
  • Researching a new product
  • Working on your cashflow
  • Putting together a business plan
  • Reviewing your gross margins, or
  • Systemising your business

How often do we start to do one of the above and then abandon it as a customer calls wanting something, or we need to attend to an urgent e mail from a client?

I often think about running a business a bit like preparing for the World Cup.  A top class footballer doesn’t just turn up 10 minutes before kick off and expect to be brilliant on the pitch.  Instead they invest years of training for their big moment, and, once they’ve made it into the international team, they continue training in between matches.  If they don’t, their performance will not improve – in fact it’ll probably go backwards and their place in the team will be taken by another player.

So what does that mean for your business?

Well firstly, it’d be great if you could do your preparation before starting your business.  Sadly, this is rarely possible.  However, constant investment in improving your business should be high on your list of priorities, if for no other reason than to stop you slipping backwards!  A lot of business owners start off with the right intentions and then let them slip as they get busier, i.e. they revert to Technician Mode.

You should set time aside each week to work on your business, think about the footballer in training each day.

Working “on” your business is exactly that – setting time aside each week to do all of the things mentioned above and more. Taking the time to look at how your business is performing and how you can improve. The main reasons why most Business Plans and Budgets don’t work for you is because they have no clear action plan broken down into what you need to do on a monthly and weekly basis (We’ll cover this area more in future posts).

 How much time have you scheduled into your diary in the next few weeks to look at how your business is performing?

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Posted in Business Development, General Business, Profit Improvement | No Comments »

Take Care Of The Details

Thursday, May 6th, 2010

How many times have you heard the phrase “the devil is in the detail”? and how many times do you consider the impact of details on the performance and image that your business portrays to potential and existing customers?

When we are in our businesses 24/7, we often lose sight of the small details that actually have a major impact on the people we need to impress most – our customers or clients.

Have you ever been to a networking event where someone has passed you a “dog eared” business card or one of those poor quality cards that you get free?

Have you ever visited your solicitors office to see files and paperwork scattered randomly across their desk?

The president of an American Airline once said “coffee stains on our flip trays tell our customers that we don’t service our engines properly”. OK, it’s unlikely that if you are reading this you run an airline, but can you see the point?

The state of your business cards or desk gives an impression about the standard of service he can expect from you, however right or wrong that is.

Step Back

Take the opportunity to step back from your daily grind and look around at your workplace, your marketing materials, your website and the way you are dressed.  Decide whether each of those things are up to scratch and if they aren’t, then do something about it before you  lose any more business.  Make sure everyone in your team is aware of how important detail is and ensure they know and apply your new business standards

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Posted in General Business, Profit Improvement | 1 Comment »

Boost your Profits – instantly

Wednesday, February 24th, 2010

Business owners are always looking for ways to increase their profits, or to keep more of what they earn. 

There are two common ways that a business uses to try and generate more profit, which are:

• Increasing their sales volume
• Cutting costs

But there is a third and much more successful way

Consider a small retail business which turns over a modest £100,000 a year, with a gross profit margin of 40% (The gross profit margin is calculated as sales less cost of goods bought divided by sales) and other expenses of £20,000.  The profit statement for his business would read:

Sales                                        £100,000
Cost of goods bought                    £60,000
Expenses                                    £20,000
Profit                                           £20,000

If we follow our two most common profit improvement strategies mentioned above and change the figures by 10%, we’d get:

• An increase in sales of 10% would generate additional profits of £4,000
• A decrease in costs of 10% would generate an increase in profits of £2,000

Our two favourite strategies would add some bottom line benefit but involve a lot of hard work.  After all, how hard is it to increase your sales by 10%, or cut your costs by the same.

As a third option, why not consider putting your prices up by 10%?

Just by putting your existing prices up by 10%, you could generate an additional £10,000 in profits.  That’s 5 times the benefit of cutting costs and 2 ½ times the benefit of selling 10% more

I can hear the voices of dissent already saying “yes, all very well and good, but my customers would leave if I put the price up”.  Ok, so maybe a proportion will, you’ll always have a price sensitive section of your customer base.  BUT, if you increase prices by 10%, you can afford to lose 20% of your volume before you are back in the same profit position as you are today.

So, that’s 20% less work for the same money that you are earning now! That effectively frees up a whole day a week to do something else.  Of course, you could use that day to bring in more business and be even better off!

The extra twist

What’s quite frightening is that during a recession, many businesses are looking at cutting selling prices, rather than putting them up.  Did you realise that (using the example above) if you cut prices by 10%, you’d have to sell 33% more to make the same money as you do now.  That’s a massive extra volume!

So how can you put prices up and stop customers leaving?…..differentiate, be different in your market place and price almost becomes an irrelevance

What are your experiences of changing your prices in the last couple of years?

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Posted in General Business, Profit Improvement | 4 Comments »

Tax and the Christmas party

Tuesday, November 17th, 2009

Christmas is drawing in on us at an ever increasing pace and at this time of year we, as business people, think about how to reward our teams for a hard years work.  A great way to do this is to throw a Christmas “bash” free of charge to attendees.

Employers can spend up to £150 a head annually on staff events, without HMRCE treating it as a taxable perk.

However, there are a few things that you need to be aware of and, if they aren’t followed, could cost you or your staff dearly.

  1. The allowance is £150 – on the nose. Go just £1 over this and the entire event becomes taxable, not just the excess.  The taxable benefit becomes £151, which means that tax and national insurance must be added on top.  This would make the event very expensive, either for the employer or the employee.
  2. You can spend the £150 on virtually anything you like, but make sure you keep the taxi fares and hotel accommodation within the £150
  3. The £150 also includes VAT, so be aware of including VAT in your budget
  4. The event must be open to all employees, not just a select few (although not all have to attend).  You can also extend the invitation to partners/ spouses and they too can benefit from the £150 allowance
  5. You don’t have to limit yourself to just one function a year.  You may decide to have two events a year at a cost of £75 each.  Be aware though, if the second event costs £76, then the whole £76 becomes a taxable benefit.
  6. Only annual events qualify, so going to the pub on a Friday teatime is out.  HMRCE have been known to pursue tax on an event which, despite it being within the limits, was to celebrate the companys 40th birthday.  Whilst this is an extreme interpretation of the rules, you need to weigh up the risk against the benefit

The HMRCE approach is to aggregate the cost of the event and divide it by the number of attendees, so there’s no need to worry that John in Marketing ordered the fillet steak!  Do make sure, however, that you keep accurate records of the costs of the event, and whatever you do – Don’t forget to close the free bar in time!

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Posted in Corporation Tax, General Business, Tax | No Comments »

Entering into a Partnership – Make sure you get it right

Thursday, September 3rd, 2009

A partnership is created when two or more individuals come together to form a business.  Partnerships can be a great way to run a business and using one as a trading vehicle can result in some significant tax savings.

However, a partnership needs to be created properly and should not be entered into lightly.  If your partner should go bust then you could easily find that you are “jointly and severally” liable for each others debts….ouch!!  That being the case, you need to be very careful who you choose as your business partner.

What can go wrong and how to prevent it happening to you

Apart from going bust, he main issue with partnerships occurs when relations between partners start to break down. This could be because one partner thinks they do more within the business than the other but still takes an equal profit share, or it could be that life partners have entered into a business together and their life partnership breaks down.  Either way, each partner needs to be clear of their obligations.

The easiest way to achieve this is through the introduction of a written partnership agreement.  This document, which can be drawn up by a good corporate solicitor, will lay out the responsibilities and obligations of each partner, so, if the worst should happen, there is something to fall back on which explains the steps to be taken in such a case.

Don’t leave it to chance – make sure you are covered!

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Protect Your Business against fraud

Tuesday, September 1st, 2009

Most of us are aware of the US scandals regarding the “missing Madoff Millions” earlier in 2009.  The scandal particularly underlines the danger of thinking you know someone and, in consequence, perhaps not being as careful as you should be.

Of course, fraud isn’t just confined to large companies.  It can occur in the smallest of businesses, even where there are only two partners running and working within the business.  The risks escalate as you appoint staff, and for these reasons it’s important that you have sufficient procedures and controls within your business to prevent fraud happening.

Often, small business owners don’t find out about fraud and theft, until it’s too late.  Very few businesses are able to fully recover from an internal theft.  Having a good set of internal controls means that you can focus on what you do best, building your business.  With that in mind, we’ve listed below a checklist that you can use within your own business to ensure that your controls are up to scratch and to minimise the chances of fraud taking place.

Your 10 step checklist to reducing fraud and theft in your business

  1. Set an appropriate ethical example for employees to follow.  Treat them with respect and fairness
  2. Ask your employees to identify ways in which someone could commit fraud at your company and ways to avoid it
  3. Develop a code of conduct that prohibits employees from committing acts of conflict of interest etc.  Ensure all employees and suppliers are aware of it.  Consider having key employees provide annual confirmation of their compliance and have a clear company policy on time and expense reporting.
  4. Adopt a “trust but verify” code.  If you only need one bookkeeper, conduct careful background checks before hiring.  Take note of employees who appear to live substantially beyond their means.
  5. Verify the credentials of all new vendors, before they are authorised to supply the company.  periodically review vendors to identify improperties.
  6. Make sure all disbursements and expenses are properly approved
  7. Protect yourself against cheque alterations by adopting electronic transfers for large payments, use direct debits for payroll and place a financial limit on cheques.
  8. Review original bank statements before your bookkeeper does.  Keep an eye out for unexpected overdrafts or balance shifts
  9. Make sure bank statements are correctly reconciled every month.  Ask that your accountant undertakes a periodic review of the bookkeepers work.
  10. If something seems odd – it probably is!!  You need to consider the possibility of fraud.

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Posted in General Business, Risk Management | No Comments »

The Power of Benchmarking – aim to be the best

Sunday, August 9th, 2009

Sitting in front of a potential new client this week, I was reminded how sometimes business owners can become very inward looking and focus just on their business, without really being aware of what their competitors are doing.

The lady in question ran a pub, which had a reasonable level of turnover for the size and location.  However, her net profits were very poor and always had been.  She just blamed it on “well that’s how things are in this business”.  When I probed a little further and asked how she knew that, she just shrugged and replied “well I just presumed as all the Landlords I know are always moaning about being skint”

So in effect, she didn’t know that net profits should be poor, she just presumed it.  Even worse was the fact that her existing accountants had not bothered to sit down and discuss this with her.

She had provided me with her last set of accounts and from that I analysed the figures, both against existing clients and against benchmarking data that I have access to from across the UK.  We could quickly see what was wrong with the business and where the main problems and financial sticking points were.

If the lady in question puts only half of the suggestions we made to her into action, then she’ll be able to sustain a much better lifestyle in the future.

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Beware Tax Refund Scam

Friday, August 7th, 2009

There are currently a number of e mails being sent out containing the following message:

“After the last annual calculations of your fiscal activity, we have determined that you are eligible to receive a tax refund of 188.50 GBP. Please submit the tax refund request and allow us 2-3 days in order to process it.
Click Here to submit you tax refund request
Note : A refund can be delayed a variety of reasons, for example submitting invalid records or applying after deadline.
Best Regards
HM Revenue & Customs”

This is a scam and you should not click through the link under any circumstances.  HMRC would not inform you of a tax rebate via e mail, or invite you to complete an online rebate form to receive a rebate of tax.

More information can be found on the HMRC website

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Posted in General Business, Tax | No Comments »

31st July payment on account

Saturday, July 25th, 2009

the 31st July represents the deadline for paying your second payment on account towards your 09/10 tax bill if you are self employed.  If this payment is submitted after the 31st, interest will start to be charged by HMRCE.

If you are unable to make the full payment on time, I’d suggest calling the HMRCE payment support line, who are very helpful.  They’ll be able to help you put a suitable payment plan together, which will avoid you going into arrears.

You should be aware that they will only help you with a plan, if you are currently not in arrears already.

They can be contacted on 0845 366 1204

For more information, please see the HMRCE website

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