Confirmation of Income for Mortgage Purposes

Many mortgage lenders are now requesting a copy of the official HMRC tax calculation (SA302) as confirmation of income for mortgage applicants; Previously, they would have accepted income confirmation by the borrower’s accountant. There is thus a conflict between planning to minimise income for tax purposes and declaring a higher level of income to support a mortgage application.

A further problem is that the SA302 HMRC calculation cannot be downloaded from the HMRC website when third party software has been used to submit tax returns, and copies are not routinely sent out by HMRC. To obtain a SA302 calculation you are required to phone HMRC and ask for the form to be sent out by post. This usually takes about 14 days.

Income for Mortgage Purposes

The accountancy bodies are calling for HMRC to allow accountants to download and print off the SA302 for their clients to support their mortgage applications.

Subscribe to our monthly tax newsletter designed to keep you informed of the latest tax issues. Contact us if you need further information on any Taxing, Accounting or Bookkeeping issues.

Limited Company vs.Sole Trader or Partnership

Are you thinking of operating as a limited company against partnership or the vice versa? Choosing the option depends on a lot of factors like your investment, revenue, taxes, etc. and mainly on what your needs are. Opting the wrong option could impact your business negatively.

Limited Company vs. Sole Trader/Partnership

Here are some basic differences listed between Limited Company and Sole Trader/Partnership:

Company	Sole Trader/Partnership
A company must be formally incorporated with a written constitution in the form of a Memorandum and Articles of Incorporation. There is, therefore, an initial setup cost.	There are no formation costs, but a written partnership agreement is advised.
Companies are governed by the Companies Acts. A company must:- - Keep accounting records - Produce audited accounts (if turnover > £6.5m) - File accounts and an Annual Return with the Registrar of Companies. This information is available to the public. - Keep Statutory Books	Sole traders and partnerships are not required by law to have annual accounts nor to file accounts for inspection. However, annual accounts are necessary for the Inland Revenue tax returns.
Companies may have greater borrowing potential. They can use current assets as security by creating a floating charge.	Sole traders and partners are unrestricted in the amount and purpose of borrowings but cannot create floating charges.
Incorporation does not guarantee reliability or respectability but gives the impression of a soundly based organisation. Personally, there may be prestige attached to directorship.	The unincorporated business does not carry the same prestige.
Tax is payable on directors’ remuneration paid via PAYE on the 19th of the following month. If applicable, higher rate tax is paid by shareholders on dividends under the self-assessment rules. Corporation tax is payable 9 months after the year-end.	For a sole trader or partnership, tax is generally paid by instalments on the 31 January in the tax year and the 31 July following the tax year. For an ongoing business tax for 2012/13 is payable:- first payment on account on 31 January 2013, second payment on account on 31 July 2013, with any final balance due on 31 January 2014. For a start-up business this is slightly different and covered in more detail later in this publication.
First year losses in a company can only be carried forward to set against future profits.	Losses generated by a sole trader or a partner can be set against other income of the year or carried back to prior years.
For profits up to £300,000 tax is charged at 20% (2013/14)	Profits are taxed at 40% on taxable income in excess of £32,010 and at 45% over £150,000 (2013/14)
There is both employers’ and employees’ national insurance payable on directors salaries and bonuses. The NI charge is greater than that paid by a sole trader/partner, but there is no NI charge on dividends.	A partner/sole trader will pay Class 2 NI of £2.70 p.w. (2013/14) and Class 4 NI dependent on the level of profits.
Shares in a company are generally transferable –therefore ownership may change but the business continues.

Know the differences and wisely choose the best option not only fulfilling your short term needs but also your long term business standing.

Still can't figure out what to choose? Contact us and Arrange Your FREE No-Obligation Meeting to know more. Call us at ✆✆ 020 89310165 ✆✆

APJ Accountancy - We are a team of Chartered Certified Accountant regulated and monitored by The Association of Chartered Certified Accountants (ACCA).

Beginning the Marketing Journey!

Marketing plays a key part in business development. Are you a small business venturing into marketing for the first time, here are some simple tips on what do you do and how do you do it?

First of all, remember the golden rule – “If nobody knows who you are, what you do and the how they could benefit from your product or service, the phone will never ring and you will fail to win new business”. 

Know your market

You need to identify who your potential customers are. Do your research, identify the socio-economic groups who are likely to need your product or service. Now educate them – aim to demonstrate to your potential customers what your product / service offering is, the benefits to them of purchasing from you and let them know how to get in contact with you should they wish to do business.

Avoid copying others

Learning from your competitors is one thing. “Me-too” marketing is another. Simply copying your competitors will not win new business for you. Instead, observe what is working for your competitors and tweak the strategy in order to develop a new marketing message which is unique to you and your business and differentiates you from the competition.

If in doubt, ask for help

Many business people will spend time, energy and lots of money doing the wrong thing and getting poor results before deciding to buy in a little help. Be honest with yourself, if you don’t have the expertise in-house, commit a little bit of budget to getting advice from a marketing agency or consultant.

Invest in marketing materials

Decide what marketing materials are most appropriate for your business. Do you need a website, business cards and brochures? Ask yourself, how do your customers find out about you and your competitors. If the answer is “online”, then you need a website. If the answer is “through referrals” then you need to embed yourself into the local business community by joining local interest groups, the chamber of commerce, etc.

Communicate

As per the golden rule – you need to make sure that people know who you are, what you do and what the benefits of purchasing your products or services are to them. Write articles for the local and online press, start an email marketing campaign, host seminars on industry topics and start communicating with your customers. If you are offering the right product or service and people know where to find you and that you are knowledgeable, the sales will come.

Please contact us if you need any help(back to point 3) or like to discuss any of the issues, please feel free to comment below or contact us at 020 89310165

. 

APJ Accountancy - We are a team of Chartered Certified Accountant regulated and monitored by The Association of Chartered Certified Accountants (ACCA).

 

Importance of Strategic Planning!

“A sailor without a destination cannot hope for a favourable wind”

As we move closer to summer, many of us are nearing our holidays – a time we can use to both reflect on the year so far and look towards the next few months and beyond.

It is a well-known fact that the businesses that plan tend to outperform those that don’t and yet many business owners fail to perform this important task. I am a great believer in the planning process; in my opinion, the time needed to create a proper business plan is worth its weight in gold.

Importance of Strategic Planning

The most important plan is the strategic plan as this helps to clarify key goals, facilitates the reporting of the most important performance indicators, provides the specific actions needed and  creates accountability.   These 4 areas significantly increase our chances of doing what is necessary to arrive at where we want to be.  Indeed, it is the “doing” that is the number one factor to a successful business.

If you are looking to undertake some strategic planning and would like any help, I would be pleased to show you how the process works.  I would also be happy to facilitate this process with all the key people in your team.

Please let me know if this is something you would like to know about.

How to close/shut down a limited company?

Do you run a Limited Company? There may be a time when you no longer want to run as a limited company. You might be to getting into other ventures, getting back as a full-time employee, or many other reasons. Whatever reasons, it is important to close your limited company.

The two main ways of ending a company in the UK depend on whether there is sufficient money in the company for it to be able to pay all of its debts. Shortly after it stops trading, these may include:

• Corporation tax for the final period
• VAT for the final period
• Outstanding PAYE and National Insurance on payrolls
• Final accountancy fees
• Any remaining amounts owed to trade suppliers
• Bank loans or overdrafts
• HP or lease agreements, or any other ongoing commitments
• Money owed to directors or shareholders.

If the company cannot pay its debts, it will ultimately enter into one of the different types of insolvency proceedings. This usually involves an insolvency practitioner either taking over the company in order to keep it running while its finances can be restructured, or selling off the company assets in an attempt to raise money to pay the creditors. The conduct of the directors may also be investigated. More information is available on the Insolvency Service website.

Assuming that the company is not troubled by any such debt issues, there is a simplified way of closing it down. In a typical case, the steps would be as follows:

The company should carry on no further business, and undertake no further transactions, except those which are necessary to wind it up.

Anyone that the company owes money to should be paid, otherwise they may object to the company being dissolved in this way. The company bank account should not be emptied or closed until all company debts have been paid. Any loans to or from any company directors or shareholders should be repaid.

If any vehicles or equipment have been bought on any form of hire purchase, leasing or finance agreement, then the finance company should be contacted to establish the options for ending the agreement early.

The company will apply to HM Revenue & Customs to have its VAT registration cancelled, using form ‘VAT 7′. A final VAT return will need to be completed, and there may be a VAT payment due.

A final payroll will be run for all of the staff. They will be issued with P45s. At some stage the company will need to make a final P35 return of payroll information to HM Revenue & Customs.

Any of the directors and the company secretary may wish to resign, though at least one director should remain in place to deal with the closure. Remaining as an unpaid director of the company should not affect their own personal taxes in any way.

Close/Shut down a limited company

 A final set of accounts will need to be prepared, and submitted to HMRC. They should be informed that the company has stopped trading and has no further taxable income, so that they do not object to the company being closed down.

It is not usually practical to prepare the final set of accounts immediately after the company has stopped trading, as there may be some final expenses in the following weeks or months that may need to be included.

Any corporation tax should be paid from the company bank account. The company generally has 9 months from the close of business to pay this tax, but the company cannot be closed down until it is paid.

It should be clear by now that it is rarely possible to have the process fully wrapped up within a few weeks of making the decision to close down the company. It is normal to leave the company almost dormant over a period of months, while all the formalities are dealt with.

Any money or equipment left in the company after all these expenses have been met should be paid out to the shareholders in proportion to their shareholdings, unless there are alternative provisions in the articles of association. The company should consider making an application to use the Revenue’s Extra Statutory Concession C16, which treats all such final payments as capital gains instead of dividends, as this may result in less tax being due.

Once 3 months have passed since the business closed, the directors will be able to make an application to Companies House under Section 652a of the Companies Act to have the company struck off. Companies House make a charge of £10 for this, and the 652a application form can be downloaded from their website.

As an alternative to the company being fully closed down, it can remain ‘dormant’ on the register. Leaving the company dormant typically costs less than £100 per year, and it means that it can be used again, for any other purpose, without any delay or set-up cost. It also serves to reserve the company name for future use, and an older company has slightly more financial credibility than one that has just been incorporated. If the company is not going to be used for at least 3 years, then it is usually more cost effective to close it down, and then incorporate another company if one is needed.

APJ Accountancy -  a team of Chartered Certified Accountant regulated and monitored by The Association of Chartered Certified Accountants (ACCA).
www.apjaccountancy.com