Taxation without representation was one of the key elements of the American War of Independence in the 1700s. America was being taxed by Britain, but it had no electoral say …
Nobody in America could vote, or otherwise influence things, and we are getting to a similar point with regard to HMRC’s rules on IR35 here in the UK. Or, to use its more official, but boring, title: ‘Off-Payroll Working in the Public Sector’.
The issue with HMRC’s rules is that, if you are caught out by them, you have all of the taxation of being an employee, that is you are taxed as if you were an employee and both income tax and national insurance are deducted on payments to your business.
But you have none of the protections and nice bits of being an employee. In fact, HMRC’s rules explicitly state that you have none of the protections of being an employee, no holiday pay, no sick pay, no employee rights at all.
“To my mind this is just
If HMRC is going to demand that you are treated as an employee for taxation purposes, then you should also be an employee for the protections it brings. You should not just have the nasty bit (the taxation) and not the nice bits of the holiday pay, etc.
However, it gets worse than that. It is normal that anyone who is caught by the Off-Payroll Working rules is actually running a small limited company. So they need to deal with VAT, bookkeeping, pensions, annual accounts, carry indemnity insurance, etc.
All of which incur hassle and costs that the Off-Payroll Working rules ignore … and the practical impact of this is that the company has no money from which to pay these costs.
Why am I talking about this now, six months after the rules changed in April 2017? Well, it is about now that the rules are starting to bite and people up and down the UK are beginning to see what is going on.
Here are my top 4 tips, if you are caught by the Off-Payroll Working rules:
If you are in extremis over this consider changing contracts! In fact, early indications are that a significant number of subcontractors did just that and left the public sector.
The first thing you should do to check your situation is to ask for a copy of the detailed decision pertaining to your individual circumstances. Your end client, the public sector department you work for, must have carried out a review and come to a decision about the individual status of your business and what you do for them. They might have got this wrong! So find out what they said … and challenge it if necessary.
If you are caught by the rules, but don’t want to change contracts, then is your limited company needed anymore? Well, actually yes! Just because you are being paid as if you were an employee doesn’t make you an employee. Changing to be an ordinary employee might not be available or available on the same terms.
The cashflow impact of the new rules can be dramatic and you end up taking home far less money. All of which makes contract negotiations more important and you should consider asking for considerably more money to make up for the shortfall.
If you would like to find out more about how the Off-Payroll Working rules and IR35 affects you and what you can do about it, do call me on 01234 752566.
E-commerce is, of course, a great way to start a business or for a bricks and mortar business to develop a wider reach. But you also have to be careful not to get e-commerce wrong and land yourself with an unexpected bill …
The great thing about an online business is that you can reach out to customers anywhere, but that also gives you a problem. Because your business can reach out to customers in other countries, other tax and legal jurisdictions.
“Size isn’t everything! A startup or small business can be just as visible as a big one!”
E-commerce accounts for around 10% of all UK sales, so there is plenty of business out there. Interestingly, a 2014 statistic was that women made up of 60% of all online shoppers.
My top e-commerce business tips:
You need to think about how you are going to record your e-commerce sales. Ideally with a link between your website and your accounting system so that information is automatically shared between the two.
This can easily be achieved with accounting systems like Xero as that software will link easily with a range of e-commerce website software. What you don’t want to have to do is re-enter or duplicate entries from your e-commerce system into your accounting system.
Getting paid without hassle is important for any business, but especially for an e-commerce business.
There are plenty of payment solutions, but again you need to have that link between your payment solution and your accounting system to share information.
Again, Xero is useful here, and the key is to be able to connect the money received to the individual sales made automatically. Otherwise, this can get very confusing, and you end up not knowing who owes you money!
UK businesses have to account for UK VAT, but also you might have to account for VAT in other European countries if you sell into them.
One key is to track the address (including country) of your customers, so you know if you have a problem.
The second point to note here is that the VAT MOSS system will help to deal with some of the complexity of liaising with each of the VAT regimes in the rest of Europe.
Accounting for VAT on non-UK online sales can be different if you are selling to businesses or to individuals, and if you are selling goods or services.
Part of your sales process is to identify what sort of customer you are selling to and what the VAT rules are on the goods or services you sell.
VAT and European wide sales also bring further reporting complexities. If your sales are big enough you will have a monthly reporting requirement to HMRC. That is easy to deal with if you have properly integrated sales and accounting systems. Not having a good system brings problems.
Having a great website isn’t as important as having great marketing to make people aware of your website.
With over 1.8 billion websites, the internet is a huge and crowded place. Make your site more visible through better SEO and good social media marketing. If you are going to spend money on starting your business, this is one of the places to spend it!
You many not need a great website, but you still need a good one. By all means, have something inexpensive and DIY to begin with, but remember your website is your shop window, so it needs to be attractive and easy to use.
Make sure you understand the Distance Selling Regulations as they give rights to your customers and responsibilities to businesses.
It’s horrible to be landed with a big tax bill just because you’re unsure of the rules or you’re not recording your transactions correctly. The right e-commerce software linked to an accounting system such as Xero can make a real and positive difference to your success.
“Would you like to know more?”
If you need help with starting your e-commerce business or with understanding your taxation responsibilities then call me on 01234 752566 or email firstname.lastname@example.org.
This summer, there will be teachers, life guards, nurses, all sorts of other people, who are going to leave the United Kingdom and go work somewhere else in the world …
In 2016, some 336,000 people left the UK to live and work elsewhere in the world, with around a third going to EU countries and another third to Australia and other Commonwealth countries.
“Don’t forget that you also need to think of the long term issues of moving abroad!”
There are lots of things that you might be considering, but one of them should be, what happens if I want to come back? Make sure that you have an exit route to get back to the UK.
There are lots of other things that you need to think about, for example, mail redirection, medical insurance, pets, bank accounts, credit cards, pensions, to name just a few. Ex-pat pension planning is a particular issue to think about, but this article is all about tax.
If you are leaving or thinking of leaving the UK, then what do you need to think about for tax purposes?
Complete HMRC form P85. This form is used to inform HMRC that you are going abroad. If you have very simple tax affairs, then you can use it to claim a tax refund. If your tax affairs are complex, then you will probably also need to complete a tax return.
If you have a house that you are renting out, then complete form NRL1. This form registers you as a non-resident landlord with HMRC and, in exchange for promising to complete a UK tax return every year, you can be paid the rents without deduction of tax at source.
If you have UK income that requires you to complete a tax return, then register to do that using HMRC form SA1.
If you are self-employed, and this will continue once you are abroad, then you have two sets of complications. Firstly, bringing your UK self-employed tax affairs to an end and secondly, registering as self-employed in the country you are moving to. It is sometimes advantageous to set up a limited company, either in the UK or the country you are moving to, in this circumstance.
If you are going to sell something that will make a capital gain, then consider waiting to sell it while you are abroad. However, this will only save you tax if you stay abroad for a long time. At the date of writing, the rule is that you need to be abroad for 5 complete tax years before your capital gain is not still taxable in the UK.
Note that if you are non-resident when you sell a house in the UK, then you will have to complete a special tax return within 30 days of sale.
If you are a shareholder in a company and can vary the timing of when dividends are paid, it might be advantageous to have those dividends paid after you have left the UK rather than before. It all depends on the tax rules of the country you have moved to.
If you have ISA’s then they stop being tax free in the UK when you move abroad. However, if you intend to come back to the UK, it may be worth keeping them going rather than changing to a different sort of account.
Consider registering and paying UK National Insurance whilst you are abroad. You can find out from HMRC if you have paid enough NI to get a full state pension, if not then you can register and pay NI contributions so that you do qualify. To do this, you will need HMRC leaflet NI38 and form CF83.
Moving abroad can be complex, and a frequent mistake is not doing enough research and planning to make it all happen smoothly and hassle free.
“Would you like to know more?”
If you would like some help and advice about moving abroad and how it affects your tax position, then do call me on 01234 752566.
Have you had a great summer? Or not? Being a business owner is meant to make life better not worse, so how’s that working out for you? Have you had a sun-kissed holiday, or have you not managed to get away?
If you got away, were you counting the pennies or taking that expensive helicopter ride and enjoying that great view, just because you could?
Do you have a better life as a business owner than you did as an employee? Are you having more holidays, more money and less stress, or is everything the wrong way around? A lot of business people get one or two out of three, but have yet to get all three.
“So how do you get some or all of these desirable advantages of being a business-owner?”
All great businesses have things in common; profitable work, organised systems and processes, teams and leaders. Of the three, profits is the key. Without profit, you don’t have the cash to achieve anything. So profit is the first thing to review in your business.
Well, saying all this is hardly rocket science, is it? But stating the obvious is actually important, because quite often going back to the basics of business is necessary.
For example, cash is king, and profits produce cash. So how profitable is your business? Is it generating enough cash to pay for that helicopter ride over the Grand Canyon, or not?
If your answer was ‘not’, then fix it. Start by looking at how much you charge, your true level of costs and profits (or losses!) … and review what is a reasonable charge. Frequently, I find that the answer to making enough profit is to start charging more.
“Change is always hard, but if you want more from your business than you have got previously, then you have to change!”
And that’s where I can help you. If you want change in your business and need help making it happen then give me a call on 01234 752566.
Most people I meet have loads of things to do, including myself! They have diaries filled with appointments, inboxes stuffed with emails and to do lists that feel like they are never ending. How do successful people succeed in their busy lives?
The answer is pretty simple. As the ancient sage Confucius said, “the dog who chases two rabbits catches neither“. The point is you can’t successfully do two things simultaneously.
Ok, so you can probably drive and talk at the same time, but neither of these tasks will have your full attention! In business, it becomes even more important to focus on one thing in order to fully achieve it.
“Let me explain!”
Lots of people experience days when they feel they have not accomplished anything. Usually, this is because they started something, were interrupted and, consequently, never finished it.
If this resonates with you, then you can appreciate the frustration that results from not getting stuff done. But as a business person, you also have to bear in mind the frustration your customer feels if you don’t get back to them quickly or complete their job on time (or a hundred other frustrating things). Gaining focus and achieving your ‘one thing’ is actually really important.
What does this all mean? Well, the surprisingly simple truth for your business is to focus on ‘one thing’. Really focus on it; give it your full attention and concentration … complete it and then choose the next thing to do. Then, as you tick things off your to do list, your success in getting stuff done is like a falling domino.
You get better and faster at completing your tasks because you spend less time flitting between several tasks and not actually concentrating on one thing!
Several business books have been written about this; one of them is called The One Thing: The Surprisingly Simple Truth Behind Extraordinary Results. In this book, the authors take this ‘one thing’ approach a bit further, and their core message is to find that key task … “What is the one thing I can do such that, by doing it, everything else will be easier or unnecessary?“. This is a simple question, but not an easy one to answer.
It provides both an overview and a laser focus on what you must do today to achieve your ‘one thing’. The point of asking this question is to propel you to go beyond simple tasks on your to-do list. By finding the answer to this question, you will identify what your most important task is; that ‘first domino’ that will make everything else fall into place.
“Of course, if it was really simple, everyone would be doing it!”
It’s not easy to be self aware and analytical where your own business is concerned. Most people need help in finding their ‘one thing’ so if you would like some help with that for your business, call me on 01234 752566.
What can you do if you have both cash and lots of shares in your business, or an exiting shareholder has lots of shares in your business? The answer could be a purchase of own shares or a capital reduction …
A fairly common situation in a private company is where there are several shareholders, and one wants to sell their shares and the others are unwilling or unable to buy them.
“So why not get the company
to buy them?”
Firstly, remember that this is a technical area and there are a variety of issues, both legal, tax and accounting that need to be dealt with.
The Companies Act allows for a reduction in share capital, and the basic legal steps are to pass a special resolution, together with a statement of solvency.
Private companies, as opposed to PLC’s, can a) redeem or purchase their own shares or b) reduce their share capital. And yes these are two different things that achieve the same objective.
The selling shareholder does need to think about tax though. Depending upon the way the company structures the deal, the shareholder will be taxed on either Income tax or Capital Gains Tax, both of which have entirely different tax outcomes.
The good news is that typically the tax rules apply to make it a capital gain, but there are conditions that need to be adhered to. The company needs to make a special tax return to HMRC about this.
The accounting rules vary slightly depending on the shape of the transaction. If the company is purchasing its own shares, then it does this by reducing its retained earnings or accumulated profit and loss reserve and creating a capital redemption reserve. A reduction in capital, as the name suggests, actually reduces the value of the company’s balance sheet.
“Would you like to know more?”
If you are in this situation then remember you need to take professional tax and accountancy advice before going ahead, so get in touch on 01234 752566.
If the road to hell is paved with good intentions, then so is the road to a better business! I meet a lot of business owners, and only a few do things to continuously upgrade and improve their knowledge of what they are doing …
However, lots of them say that it would be useful and probably important to go on more courses and read more business books, or even get a mentor.
“So what are you doing to improve yourself? What are you doing to improve your business?”
How many courses have you been on in the last 6 months? How many personal improvement books have you read? How many webinars, seminars and workshops have you been on? Do you have a business coach or mentor?
Put simply, what are you doing to improve you, because you – the business owner – are probably the most important aspect of the business that needs to be improved.
Sure you may have a technical skill, but that may need freshening up from time to time. But what about all the other skills you need to run a business? What about the stuff you don’t know yet?
In the past the UK’s education system has not provided training on how to run a business; the majority of schools still don’t. Certainly, there are MBA courses available at University, but not enough general learning about how to run a business.
So if you are one of the approximately 5.5 million self-employed, or 3 million company directors of small businesses, how do you deal with this?
One solution is your trusted accountant. I need to add a caveat that not all accountants are the same and therefore you may want to check out several different ones. Some accountants are great bean counters, but not great at giving you business advice.
Another solution is to find a business coach. Well, like accountants, there is usually plenty of choice. Before you say yes, what can you do to check them out? Obviously, you can browse their websites and social media for all sorts of information. One critical part of checking is looking at testimonials and maybe even following up one or two of them with a phone call.
If you are looking to improve your business, then start off by considering working with Jonathan. We provide the peace-of-mind that comes from being looked after by a professional, full-service firm of advisors.
For positive, pragmatic help and advice to enable you to get more from your business, call me on 01234 752566.
Being the boss of your own business is a pretty lonely place to be. Whether you have staff or not, you need to take all of the decisions; decisions that your life partner may not understand much about …
And if you don’t have the support of a husband or wife then it can become even more lonely. You become stuck in the ‘boss trap’. You literally get into a rut, a way of working that can be lonely and depressing.
“If you work from home, this can compound your feelings of loneliness!”
A survey by Aldmore Bank showed that around 40% of self-employed people feel lonely. Loneliness is a strange thing. Although it is ‘only’ a feeling, it actually makes everything else worse. Even the common cold has worse symptoms when you are lonely. Loneliness is often linked to depression and even to heart disease!
Strangely, we can also be lonely even when working in an office filled with people. The point is you can choose to isolate yourself by focussing too much on your job and not enough on relationships.
Sometimes, as business owners, you are lonely just because you are the boss, other times you’re lonely because your pattern of work means you work at home alone. But before we all start getting depressed and feeling bad about being a business owner, the point of this blog post is to tell you how successful business owners deal with business isolation.
“Do something about it!”
What can you do? Well, actually there are plenty of support mechanisms out there, you just need to do something to join in with them. Most of them are straight forward and practical, and for ease of categorisation I have split them into two categories; the lonely boss and the home worker.
Being the Boss
Networking should have a social dimension. Yes, you go networking to build a network of contacts that will be useful for your business as either suppliers or customers. But it is more than that as most networking groups end up helping you to build a cohesive social support network as well.
As the boss, and therefore the decision maker, you need someone who can understand your role, your decisions and the pressures you face. A mentor is a great person to take that role. As an accountant I provide a mentoring service to my clients, but also I have spent time with several of my clients, usually with a glass of something to help lubricate the throat, just being a shoulder to lean on.
If you are home alone then networking really is the first thing to consider. Get out of those four walls and go meet people! Build your social relationships.
Don’t work from home!
If working from home ends up giving you cabin fever, then don’t do it. Find a serviced office or hot-desking suite. There are usually plenty of options.
Use online communities
If you are one of those people who live in a remote place, and for whom geography or lack of a car imposes a measure of isolation, then find an online community to interact with. Indeed, this is often a useful thing to do regardless of where you live.
As accountants and business advisers, we are here for our clients. Not just to do the number crunching, but also to give help and advice with your business and to alleviate the loneliness of the business owner.
“Would you like to know more?”
If you’d like some recommendations for networking groups, want to find a mentor or are looking for a new accountant then I’d love to talk to you! Call me on 01234 752566 and let’s see how I can help you.
Until next time …
It’s that time of year again – for Pimms O’clock, our annual networking and charity event. Friday 8th September 2017 12 noon to 3pm. Drop by for 10 minutes or stay and enjoy yourself!
If you are thinking of coming please RSVP and let the office know. #Pimmsoclock
2017 marks our 14th annual event and come along for a Buffet lunch, Pimms (other drinks are available!), networking, meet the team and, as ever, we will try and twist your arm to support our charity raffle. This year we are fund raising for the British Lung Foundation. On average someone dies from lung disease every 5 minutes and lung disease is responsible for 1 in 5 deaths! The BLF pays for vital research into lung disease as well as support for patients and their families. You can donate via our Just Giving page at https://www.justgiving.com/fundraising/jvca2017openday
If you are trying to appeal to everybody with your business marketing, you end up being middle of the road; just a bit average! Marketing works best when you target a niche or particular sector …
If you get to resonate with the people you are targeting, hopefully, those people will think you are amazing at what you do, and they will beat a path to your business’s door.
“Jack of all trades, master of none!”
It’s an old saying and none the less, it is important in lots of ways, especially when it comes to marketing! If you think about it, marketing to everybody really means marketing to nobody.
If you are a car mechanic, you might want to target people with a car because a lot of people own a car! But that is just too wide a definition to be useful. Which means you need to be more specific. Refine that to people who drive a VW car which is more than 3 years old in your home town and you have something specific.
More importantly, you now have a target market that you can identify at networking events and you can even get a marketing list from a reputable data source or target on social media. You have a clearly identifiable target audience to aim for!
There are a few points that flow from this; ‘who are you targeting’ and ‘might there be any negative consequences’ are two important ones. Well, if some people are going to love you, then inevitably there will be others who will ignore you. Or, worse, they will dislike you.
If you are a politician then this is a really important point to bear in mind as you will definitely polarise opinion into love and hate, which will result in both positive and negative reactions and social media posts!
However, for most businesses, targeting your marketing simply leads to you being ignored by the people you aren’t targeting, not to negative reactions. So, if you have several different sectors you are targeting, you need to have several different marketing campaigns and strategies.
“Different strategies that aim for different targets!”
Which leads back to the first question of ‘who are you targeting?’ Have you really defined your ideal customer? More importantly, can you describe your ideal customer in a way that can be linked to the available information so that you can identify how to market to them, through lists or social media? You might have several different products or services that appeal to several different markets, and thus have several categories of ideal customer.
“But you have to pick one at a time!”
If you are a start-up business, then you need to build this into your thinking right from the start and do research to identify who might be your ideal target. For an existing business, it is much simpler, as you have your customer records to data mine, which will then answer the really simple question of who are your best customers!
Until next time …
Many of my clients have regular business reviews with me to talk about just this sort of thing! If you are starting a new business, or are looking for an innovative accountant to work with, call me on 01234 752566.
Get In TouchJonathan Vowles
114 High Street
Tel: 01234 752 566
Fax: 01234 752 577
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