Reporting To HMRC Every Quarter To Go Ahead In 2018!

The Government and HMRC remain committed to the "Making Tax Digital" project with more information being sent online to HM Revenue and Customs (HMRC) by employers, pension funds, banks and other institutions.

The next big step will be the introduction of quarterly reporting of income and expenditure by businesses and landlords from 2018. HMRC are currently consulting on a number of proposals to make radical changes to facilitate the introduction of the new regime. We accountants have serious concerns about the timescale; HMRC say “you will not need an accountant to fill out the information on the new system.” They are expecting businesses to use new Apps on their Smart phones and Tablets to transmit their data to HMRC.

OVERVIEW OF MAIN PROPOSALS

Small businesses and landlords will be encouraged to prepare their accounts on a cash basis with the threshold for using the basis significantly increased.

The current basis period rules for unincorporated businesses to be reformed.

A new voluntary Pay As You Go (PAYG) system to be introduced to help businesses budget for their tax payments.

EXTENDING THE CASH BASIS

About 1 million small businesses currently prepare their accounts on a cash basis. The present threshold for using the cash basis is the VAT registration limit £83,000 and HMRC are consulting on the limit being significantly increased, possibly double the VAT threshold of £166,000, the current limit for leaving the scheme.

WHAT IS THE CASH BASIS?

The current cash basis for preparing accounts was introduced as a simplification measure from 6 April 2013. Using the cash basis means that businesses merely need to calculate their profits based on receipts and payments.
There are no adjustments at the end of each period for accrued expenses and amounts prepaid, and no adjustment for stock or bad debts at the end of the period.
Another simplification is that the cost of equipment bought for the business, except for motor cars, can be deducted directly in arriving at the profit without the need for a capital allowances claim. One disadvantage of the current cash basis rules is that interest on money borrowed to finance the business is limited to £500 a year and a similar restriction is likely to be incorporated into the new rules.

PROPOSALS TO SIMPLIFY BASIS PERIODS

The current basis period rules are complex, and many unincorporated business owners find them difficult to comprehend.  Where the business makes up accounts to a date other than 5 April the accounts and profits have to be made to “fit” into the tax year. There are particular problems at the commencement of trading as some of the initial profits are taxed twice and the “overlap” profits are then deducted on cessation.

One proposal is for businesses to prepare accounts for a period that aligns with the tax year (6 April - 5 April) or even prepare accounts for shorter periods such as each quarter to align with their VAT quarters and submissions to HMRC.

PAY AS YOU GO

Another complication of the current self-assessment regime is that where tax has not been collected under PAYE or at source, primarily on self-employed profits and rental income, the taxpayer is required to make payments on account.

These payments on account are due on 31 January and 31 July based on 50% of the outstanding liability for the previous tax year with a balancing payment the following 31 January.

This can make budgeting cash flow for the self-employed and landlords difficult for some to manage.
The government is proposing to introduce a new voluntary Pay as You Go (PAYG) system for the self-employed and landlords to make payments towards their income tax, national insurance and VAT liabilities monthly with a reconciliation at the end of the year.

Many of these proposals may have significant implications for your business. We will update you on further details once we see the outcome of the various consultations. We can then discuss how we can assist you with your quarterly obligations.

Contact us for more:
PJ | ☎ 020 89310165 | ☏ 07900537459 | ✉ info@apjaccountancy.com

Importance of Gaining a Competitive Edge!

Competition is a fact of life. The best businesses set the pace and aren't afraid to go their own way. How do you and your firm respond to competition? Are you leaders, differentiators or do you follow the pack?

If you want to move ahead of your competitors, you need to change how your business positions itself within its sector of the market. After all, doing the same thing over and over again and expecting a different result is a definition of madness.

Being in business is about running your own race and doing it your way. Have a plan and execute it the way you want and at the pace you want to. Running after the competition is no good if they are running in the wrong direction.

Many businesses struggle to identify their competitive advantage and even those that do manage to define it, tend to be ineffective at communicating that advantage. Consider what it is that makes your business unique. What is it that sets your business apart from the competition?

Identify, clarify, and communicate to your prospects and customers why they should buy from you instead of from someone else. Some firms will focus on being the highest quality provider, others will choose to offer the better service or the lowest price.

If you don’t focus on your competitive advantage and communicate that to your clients and targets, you could lose customers. If you don’t try to differentiate your firm, they could mistake your competitors as being the same as you.

Tell your clients why you are different and what that difference means to them. Create a marketing message which explains the benefit that using your firm provides. It is important to “sell the benefit” of the service rather than to sell the service based on its features.

Liquidating A Company - Is It A Capital Gain?

One of the anti-avoidance measures being introduced by the latest Finance Bill potentially changes the way that certain payments to shareholders will be taxed. This may result in payments following some company liquidations being taxed as dividends instead of capital gains.

The Government is concerned that the new  higher rates of income tax that have applied to dividends since 6 April 2016 may tempt some shareholder / directors to extract value built up within their companies in a capital form, rather than paying out the retained profits as dividends. This is because capital gains are generally taxed at a lower rate than income, possibly as low as 10% where entrepreneurs relief is available.

For example, a higher rate taxpaying shareholder receiving £100,000 on the liquidation of his company would pay £32,500 (32.5%) if the anti-avoidance applies, whereas CGT would be just £10,000 (10%) if entrepreneurs relief is available.  Consequently, new stricter rules are being introduced to apply to transactions on or after 6 April 2016.

When is a liquidation taxed as income?

For the new anti-avoidance rules to apply, the company being wound up must firstly be a close company and the individual must have held at least a 5% interest in the company (ordinary share capital and voting rights).

A further condition is that the individual (or connected person) continues to carry on the same or a similar trade or activity to that carried on by the wound-up company within the two years following the distribution.

It must also be reasonable to assume, having regard to all of the circumstances that the arrangements appear to have a tax advantage as one of the main purposes.

Can we obtain clearance prior to the liquidation?

Accountants and tax advisors requested that the new anti-avoidance rules should provide a formal clearance procedure prior to the transaction, thus providing certainty as to whether or not the payment would be taxed as income or capital.  Unfortunately, there is no formal clearance procedure. HMRC have however received a number of clearance requests from taxpayers and have confirmed that it is not their general practice to offer clearances on recently introduced legislation with a purpose test.

HMRC have therefore drafted a standard reply that sets out a small number of examples and they are working on more detailed guidance, which should be published before the end of this year.

This is a very complex area and we suggest that you contact us before you consider liquidating your company.

Contact us if you need business help:
PJ | ☎ 020 89310165 | ☏ 07900537459 | ✉ info@apjaccountancy.com

The Art of Listening!

We all know that listening is an important business skill. However most of us are guilty of not listening to what our customers are telling us. Do you really want to understand what your customers want and why they buy certain products or services? Why not ask them for a customer feedback meeting and listen to what they have to say...

Before you start your feedback meeting with your customer(s), make sure that you have prepared for the session. It is helpful to run off a report that shows which products or services the customer has bought in the past. Write down what you want to achieve from the meeting. Do you want to understand why the customer bought from you? Maybe you want to understand more about their needs so that you can cross sell additional products or services to them (and to similar customers). Read through your list of questions before the meeting and be prepared to listen and to take notes.

If you are going to engage in client feedback make sure you are actively listening to what your customers are telling you during a session. Active listening means, as its name suggests, actively listening. That is fully concentrating on what is being said rather than just passively hearing the message of the person you are in engaged in conversation with.

Active listening includes things like making good eye contact, nodding / body language and saying things like, “I understand” or “yes, tell me more about that”. This type of feedback shows that you are engaged in the conversation and you want to hear more of what the other person has to say.

If you want to spend time listening to what your customers have to say about your firm’s products or services, do so in the right environment. It can be difficult to listen to another person when your phone is buzzing, there are lots of other people around or there is lots of traffic noise, etc. When you remove all of these distractions and find a quiet place to sit down and listen, it makes the whole process much easier and shows care and consideration towards your customer.

When asking customers to provide some feedback, it can be difficult to avoid interrupting. A little bit of self-control goes a long way. Avoid being defensive and try to take negative feedback as constructive criticism rather than a personal attack.

Remember, no business is perfect and you can’t improve if you don’t listen to the negative things that your customers might have to say about your firm. The aim of the exercise is to shine the spotlight on them, not you.

7 Tips to Manage Difficult Workplace Conversation!

Very often the only thing that is more stressful than having a difficult conversation in the workplace is the anticipation of that conversation.

Whether it’s a performance appraisal or a sales meeting to close a deal, here are a few tips to help you to manage difficult conversations:

1. Be prepared 

Spend some time considering what you want to achieve by having the conversation. Write down the key points you want to raise and list any further points in order of importance. What would your ideal outcome be for each point? If you would like the other person’s input, or if you have a proposal for a solution of your own, write these down next to each point. Picture yourself confidently raising the issues on your list and explaining your ideas for possible solutions.

2. Put yourself in their shoes

How would you receive this information? Anticipating their response will help you to consider carefully how you communicate and your body language.  This will enable you to be more prepared for their response, including the possibility of an emotional response.

3. Time and place 

Choose a time and place when you will both feel comfortable, will not be pushed for time and should avoid being interrupted. If necessary, reassure the person you're talking to that the conversation is confidential.

4. Stay focused on solutions 

It is better to ask “how can we do better next time?” than “why did it go wrong?” We cannot change the past but we can explore and identify the best way to learn from mistakes and move forward.

5. Don't skirt around the issue 

Be polite but stick to the preparation you did in advance of the conversation. Stay in control. If you find your tonality changing, either speeding up and getting louder (getting frustrated) or slowing and getting quieter (losing confidence), adjust your posture. Whether you are sitting or standing, change your physiology to be more relaxed or more assertive and your tone of voice and choice of words will follow suit.

6. Have a time frame in mind before you start talking

If it becomes clear that the conversation is going to take longer, don't be tempted to rush things through or run over time. The last thing you both want is to feel exhausted by the conversation and to make a poor decision. Instead, agree to meet again to continue the conversation at a suitable time.

Contact us if you need business help:
PJ | ☎ 020 89310165 | ☏ 07900537459 | ✉ info@apjaccountancy.com