All posts by KFS

Changes to the Flat Rate VAT Scheme (FRS)

In the 2016 Autumn Statement, the Chancellor announced that changes are to be made to the existing flat rate scheme for VAT (FRS) in order to tackle perceived ‘aggressive abuse’. The changes, which will take effect 1st April 2017, are designed to ‘reduce the incentive for firms and agencies to move employees to self-employment to exploit VAT simplification aimed at small businesses’. The subsequent HMRC policy paper sets out the details of the changes, which will affect any users, or prospective users, of the FRS.

The FRS is a simplified VAT accounting scheme for small businesses, which currently allows users to calculate VAT using a flat rate percentage by reference to their particular trade sector. From 1st April 2017 a new 16.5% FRS rate will be introduced for businesses with limited costs. Interestingly, HMRC’s policy paper on this change comments that ‘many labour only businesses’ may be affected. Although not yet clarified, this may mean the adjustments will not apply to service-related businesses such as journalists, architects or engineers. Between now and 1st April 2017, anyone currently using the FRS for VAT, or thinking of joining the scheme, will need to decide whether they are a ‘limited cost’ business. For some businesses – for example, those who purchase no goods, or who make significant purchases of goods – this will be obvious. Other businesses will need to complete a simple test, using information they already hold, to work out whether they should use the new 16.5% rate.

A ‘limited cost’ business is defined in the draft legislation as one whose VAT inclusive expenditure on goods is either:
less than 2% of their VAT inclusive turnover in a prescribed accounting period;
greater than 2% of their VAT inclusive turnover but less than £1,000 per annum if the prescribed accounting period is one year (if it is not one year, the figure is the relevant proportion of £1,000).
Goods, for the purposes of this measure, must be used exclusively for the purpose of the business but exclude the following items:
capital expenditure goods;
food or drink for consumption by the flat rate business or its employees;
vehicles
If you need some assistance on checking whether you a ‘limited cost business’ please call us: 01672 624999

The Tax Burden on Small Companies

The corporate tax regime that is currently operating in the UK is one that has been designed for a traditional company. However, this is not necessarily well suited for smaller incorporated companies. Therefore, the Office of Tax Simplification proposes that there is an increasing need for a system change that accounts for the needs of the different types of small businesses.

Look-Through

This proposal moves away from the traditional corporation tax being paid, replaced instead with the company’s shareholders paying income tax on the profits directly. This will then make it simpler for the companies that distribute their profits.

Administration

It is acknowledged within the Office of Tax Simplification’s review that the system incurs a huge administrative burden on micro businesses, as they are subject to the same system as larger companies. The review suggests that there should be an analysis of ‘cash accounting’ for tax – although it is currently used by many unincorporated businesses, it is also thought to be a suitable option for incorporated ones.

Sole Enterprise with Protected Assets

This component of the review focuses on the process of the incorporation for small businesses, and the associated administrative strains that can result. This new approach would enable sole traders to protect their personal assets and limit their personal liability. It would then allow sole traders to retain their current accounting and tax benefits, and so continue to be far simpler. The review suggests creating an outline of this new trading vehicle, to evaluate its practicability.

For more tips, help and support, visit the KFS group website @ www.online.accountants

–  The KFS Group Blog Team

How to Be a Boss to Remember

A nightmare boss can not only impact an individual’s work life, but also their personal life and sense of self. If an employee respects you, they will be far more likely to want to go that extra mile to achieve a result. Furthermore, research has repeatedly shown that employees don’t leave companies, they leave bosses. So if you want a dedicated workforce that is going to put their everything into your company’s journey, then you need to help your employees realise all the great things they have the potential to accomplish.

Be Accessible

Effective communication is fundamental if you want to create a trusting and valuable relationship between yourself and your employees. Make sure that you are easy to reach, whether that be in person or digitally, and answer every email no matter how unimportant you believe the issue to be. This will allow you to collaborate with your employees on their projects, which will lead to a strong team-mentality. Equally, it will allow for any issues to be dealt with quickly and prevent a negative mindset developing amongst your employees.

Setting Goals

Make sure your expectations are reasonable and achievable. A sense of accomplishment makes coming to work feel worthwhile, as well enabling employees to feel as if their role is a valuable asset to the company. Use short-term goals to motivate your employees in regularly reaching a target, and longer-term goals to establish a vision for them to strive towards.

Time Off

You should strive to be understanding with time off, both in terms of weekends and holidays. In highlighting to your workforce that you value their priorities outside of work, you are showing that you respect them not only as an employee but as a person. This will build a sense of mutual understanding, and will likely lead to your employees being more motivated in the time that they are working.

For more tips, help and support, visit the KFS group website @ www.online.accountants

–  The KFS Group Blog Team

Could You Be in Need of an Accountant?

Many of us experience dread when it comes to managing our taxes, afraid that we will make innocent errors that will appear illegal and result in hefty fines. Despite the difficult relationship you may have with managing your accounts, they are a necessary component of any business. However, as your business grows, you may find that you do not have the time or knowledge to effectively manage your business finances on your own – are you in need of being rescued by an accountant?

Confusion

You’ve set up a business – the concept you have so passionately devoted your time and money to has successfully come into being. However, all of the accounting terms and creating of reports are completely overwhelming –  perhaps your kitchen table is covered with financial statements that you’ve spent all weekend attempting to put into some sort of order. Improper bookkeeping can restrict your ability to budget soundly and forsee future gains or losses. Not to mention that failing to complete correct and informative tax returns can result in heavy fines from HMRC. An accountant could be your knight in shining armour- they can assist you with all aspects of business finance, construct a tidy set of accounts that can be presented to investors, and ensure that the right forms are complete accurately and on time.

Growing Business

Your business is rapidly expanding – this is fantastic, but from a financial point of view there is an overwhelming increase in paperwork that is now taking you away from more important tasks. Finances that were previously balanced with ease have now evolved to become much more complex, or the hiring of employees has led to a whole new set of rules that you are struggling to get your head around. One helpful method we use at KFS is receipt bank, so that bookkeeping can be mobile and up-to-date. Accountants are not limited to only assisting with numbers; they can also be utilized as a sounding board as they will come to know your business almost as well as you do.

Cash Flow Issues

Cash flow is the backbone to any company, and any problems can quickly make your business financially vulnerable. Hiring an accountant could also be a strategic way to save money by then paying the minimum tax necessary, as well as helping you to reduce susceptibility to any spiraling financial issues. Completing forms correctly is one thing, however doing them in a way that takes advantage of the ever-changing tax laws is another. This can ensure that you get the most out of your tax and capital allowances. Additionally, it is always beneficial to get an extra pair of eyes to assess where you could potentially cut costs or make adjustments to increase your profit margins.

For more tips, help and support, visit the KFS group website @ www.online.accountants

–  The KFS Group Blog Team

Thinking of Setting Up a Limited Company?

Overview

Following on from our previous blog post, we now want to motivate those of you who are considering beginning your own limited company. We’re not denying there are some drawbacks that you will need to consider moving forward. However, as it’s Motivational Monday we’re going to focus on the great aspects to get you inspired.

A limited comapny is an organisation that you set up to run your business and there are three types of company that you can choose from. One limits the financial responsibility of shareholders to the value of the shares that they own (limited by shares). Another allows shares to be traded publicly on a market (public limited company). The final option has the director or shareholders back the company up to a specific amount if something goes wrong (limited by the guarantee).

Why is it Beneficial?

A crucial reason for why limited companies can be so appealing is that they allow the business finances to be separate to personal ones. This then removes the risk of you losing all of your belongings if the business goes into debt or liquidation. By the same token, the organisation has a separate legal identity to the owner. This allows it to survive the loss of this owner- allowing your business to be passed down in generations. Under a limited company you will also be able to claim on a wider range of expenses, which will in turn lower your personal costs!

How We Can Help!

We would be delighted to assist you in process of establishing a limited company, and can connect you to business support advisors so that your business has the best chance of success. The KFS group has a wide range of services, such as completing your corporate tax computation for you, that can really make all the difference.

For more tips, help and support, visit the KFS group website @ www.online.accountants

–  The KFS Group Blog Team

Tax Tips for Company Directors

There are different methods by which the director of a company can withdraw payment without owing more tax than is necessary. Below are some tips that will hopefully help you to achieve this.

Preserve Employment Allowance

From 2016/17, companies where the director is the sole employee will be unable to claim The Employment Allowance. Unfortunately, it is not enough to appoint another director, despite the company then no longer being a single-company. The regulations dictate that earnings need to be paid to another employee at the company who is not a director.

In order to preserve your EA, there are two options you can use. You could choose to resign as the sole director whilst remaining as an employee, and appoint a new director (this could be a spouse or family member). Alternatively, you could employ another individual, so that there is more than one earner.

Whether this option is going to be financially beneficial can only be determined on an individual basis, however it is definitely something to consider.

Executive Pension Scheme

The general rule of pensions is that you receive tax relief each year for the contribution you make into the scheme. The main incentive is the income tax relief on ‘net relevant earning’ yet, for many directors, they draw the minimum salary – making the pension unworkable as dividends are not counted.

One way to overcome this problem is to establish a ‘Director’s Pension’. The company will make contributions on the behalf of the director, with the payments being considered business expenses.

Bonus

A bonus is subject to income tax and Employees NIC for the recipient, as well as Employer’s NIC for the company. It is tax deductible in the corporation tax calculation of the company – saving 20% of corporation tax. In order for the bonus to be tax deductible, it must be paid within 9 months of the year end of the accounts it relates to.

For more tips, help and support, visit the KFS group website @ www.online.accountants

–  The KFS Group Blog Team

Hiring for a Start-Up

Your business is something that you have invested in both emotionally and financially, therefore you owe it to yourself to recruit the very best. The team that you create should be people that push you and your company forward, that are just as committed to your vision as you are. However, establishing the ‘dream team’ can be a confusing process, so we have compiled a few tips to assist you with the process.

Passion

This should be a compulsory requirement- passion drives hard work. When you are suffering from a lack of inspiration or feeling overworked, you need to be surrounded by people that believe in what you are trying to achieve. This is unlikely to shine completely through in a CV, so make sure that your recruitment process allows people to be creative. Look for individuals that have a desire to grow themselves – these are the people that will push the company’s boundaries in all the right ways.

Small Business Experience

There are definitely benefits attached to hiring people who are experienced in operating within a smaller firm. Firstly, they will be equipped to deal with a small team; from taking on more responsibility to being flexible within the role they have. Additionally, it is likely that they will be more independent in how they manage their workload, which relieves some of the pressure of you needing to micro-manage your employees.

Believe in Your Judgement

When hiring for the first time, it can be tempting to obsess over every profile that you consider and analyse every component of the CV. Yet it will save you a lot of time to have faith in your judgement and make snap decisions. Even those that you decide not to hire can be used to build a network for the future, and so make an effort to consolidate any valuable connections you make during the process.

Consider Remote Workers

Studies have repeatedly shown that those who work from home may in fact be more productive. With less distractions and chatty coworkers, it has been found that the freedom leads to them investing heavily in the work they produce. It will also allow you to remove the costs associated with investing in an office space, which in turn gives you the opportunity to pick from a far greater talent pool that isn’t geographically restricted.

For more tips, help and support, visit the KFS group website @ www.online.accountants

–  The KFS Group Blog Team

Post-Brexit: a positive outlook

The news appears to be an endless flow of the economic crises we are facing due to the shock exit from EU. However, rather than wallowing in the uncertainty and shocking statistics, there are some exciting opportunities that equally deserve attention.

Global Trade Deals

Chancellor Phillip Hammond recently made a trip to begin discussions on an ambitious free trade deal with China, one of the UK’s greatest inward investors. This trade deal could potentially see an increase in access for major Chinese banks and businesses, in exchange for reduced barriers to Britain’s service industries and goods. Earlier this month BBC news also reported on Australia’s offer for a free trade deal, which politicians are noting as extremely encouraging. These developments highlight the potential of exploring new opportunities across the world, which could lead to exciting long-term benefits.

Rebooting of the Economy

Although the uncertainties incurred from Brexit are daunting, many officials argue that they are motivating a close analysis of the economy and a heavy investment of resources. This allows any structural weaknesses to be addressed, as well as much effort being devoted to creating a strong foundation from which a truly global market can be accessed.

Technology

The technology sector is one that thrives from innovation – something that is heavily emphasised within the strategies stemming from Brexit. It is extremely adaptable and, with the new generation of digitally skilled workers, it will underpin the extension of Britain’s economy into a global market. This is likely to result in an increase in inward investment, enabling the sector to evolve and flourish.

For more tips, help and support, visit the KFS group website @ www.online.accountants

–  The KFS Group Blog Team

Thinking About Becoming a Sole Trader?

The #MotivationalMonday blogs this month all focus on empowering readers to start their own business and create their own opportunities. Today’s focus will be on the benefits of setting up as a sole trader, with this granting you complete control over the business and its finances. We’re not denying there are some considerations of being a sole trader that you will need to assessed moving forward. However, as it’s Motivational Monday we’re going to focus on the great aspects to begin with to get you inspired.

Overview

As a sole trader you will run your business as an individual. This does not mean that you are necessarily working alone, as you can employ staff if you want to operate your business as a team, but you are the decision-maker.

Why is it Beneficial?

There are a wide range of reasons as to why business owners decide to set up as sole traders. One of the key ones is that it is the simplest way and you can begin trading immediately- which is fantastic when you’re full of enthusiasm! Once you have set your business up it is also easy to control, which allows you to direct its course of growth in a way that suits you individually. Additionally, as your circumstances evolve, it is easy to change the legal structure so you’re not signing your life away.

How We Can Help!

The KFS group have all of the resources that you need to get started. We are so excited by the prospect of new entrepreneurs realising the potential of their ideas, and it is always such a pleasure to be part of the process. Services such as your own personal accountant, and the preparation/submission of your self-assessment, leaves you with more time to be creative.

For more tips, help and support, visit the KFS group website @ www.online.accountants

–  The KFS Group Blog Team

Resources

http://www.middlesbrough.gov.uk/CHttpHandler.ashx?id=6512&p=0: HRMC 10 step guide to setting up as a sole trader