Goodbye Abbreviated Accounts…..

Welcome to the second of our series of blogs on accounting changes. 

All companies have to file their accounts at Companies House each year. Micro, small and medium companies have the option of submitting a little, or significantly, less than their full accounts.

Currently, small companies have two alternative options, if they don’t want to file their full accounts.  They can file either:

  • full accounts but remove the directors’ report and/or profit and loss account, or
  • abbreviated accounts

For most of our small company clients, we file abbreviated accounts – these are a simplified set of accounts, with no directors’ report, no profit or loss, a stripped-back balance sheet, and a limited number of notes.

For accounting periods starting on or after 1 January 2016 (for full years, this means 31 December 2016 year ends onwards), this option of filing abbreviated accounts disappears.  What this means for a small company is that, while the directors’ report and profit and loss account still don’t need to go to Companies House, the full balance sheet and all the notes will be filed – this is more disclosure on public record than this size of company will have had before.

This could mean that companies that qualify as “micro” but have previously prepared “small” accounts may wish to prepare “micro” accounts in future.  However, there are differences between small and micro accounts which make it more appropriate for your business to prepare small accounts, even if it does qualify as micro.  These differences will be explained in a future blog, so watch this space…. (Alternatively, if you are so excited about this that you can’t wait, just give us a call on 0116 242 3400!)

Coming soon….. “What’s Changing for Small and Medium Companies?”Katie Kettle Colour Katie Kettle, Technical Manager 

Autumn Statement & Spending Review

On Wednesday 25 November the Chancellor George Osborne presented the first Autumn Statement of this Parliament along with the Spending Review.

His speech and the supporting documentation set out both tax and economic measures, however the primary focus seems to have been on the Spending Review, rather than the Autumn Statement, which will hopefully make this blog short and sweet. Our summary concentrates on the tax measures which were few and far between!

Just a note here….. Draft legislation relating to many of these areas will be published on 9 December and some of the details may change as a result.  The Government has a history of making a Budget or Autumn Statement announcement that says one thing, and then when the measures are put into law, they’ve been tweaked to say something slightly, but potentially fundamentally different.

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Employer Provided Cars

Currently when an employee has private use of a car provided by their employer, where that car is a diesel there is a 3% supplement on the benefit in kind.  This was expected to be abolished from April 2016 in line with the fact that diesels have become kinder to the environment than historically.   However the supplement will now be retained – perhaps as a result of the emissions scandal that has engulfed the motor industry over the last few months and the evidence that diesels may not be quite as clean as they have been made out to be.

Apprenticeship Levy

A new apprenticeship levy will be introduced in April 2017 at a rate of 0.5% of an employer’s paybill, excluding benefits in kind.  Before you panic though, each employer will get an allowance of £15,000 and doing the sums shows that this will only affect employers with a payroll over £3m per year….. phew!

Capital Gains Tax (CGT) Payment Dates

The Chancellor has introduced yet another measure in his apparent crusade against residential landlords!  Currently, capital gains tax due for the tax year is payable by 31 January following the end of the tax year, along with income tax.  However from April 2019, a payment on account will be required within 30 days of completion for CGT due on disposal of residential property.  Here’s a few examples of CGT payment dates based on before and after April 2019:

Completion Date Payment Date
April 2018 January 2020
March 2019 January 2020
April 2019 May 2019
December 2019 January 2020

You will see that the tax payable on disposals a month later would have to be paid eight months earlier!

While the measure is a huge cash-flow disadvantage compared to the system we have in place now, it does make sense to pay the tax when you have the money.  This is in line with the Government’s wider strategy and approach towards a real-time tax system.

This will inevitably put on pressure with regards to calculating the tax due; it is not yet clear if the tax will be deducted as part of the completion process and paid over to HMRC on your behalf by the solicitor (as is the system in other countries).  If this is the case, we will work closely with the solicitor involved to ensure that our clients pay the correct (and hopefully lowest possible) amount of tax.

Stamp Duty Land Tax (SDLT) on Additional Properties

George Osborne deals another blow to residential landlords….

From 1 April 2016 SDLT will be charged at a higher rate (3% higher than the standard rate) on the purchase of additional residential properties, including buy-to-lets and second homes.  This won’t apply to caravans, mobile homes or houseboats, or purchases by companies.

If you are looking at purchasing a buy-to-let residential property, please get in touch beforehand so we can discuss your options with you.  This, together with accelerated CGT payment measure above and the removal of higher rate tax relief on interest payments may mean you wish to reconsider how to structure the purchase.

Making Tax Digital

I hinted at it earlier in the blog, but the Government are committed to “transforming HMRC into one of the most digitally advanced tax administrations in the world” at a tiny cost of £1.3bn!  The Government will consult on the details, which have so far been pretty thin, in 2016.  They have however said that most businesses, self-employed people and landlords will be required to keep track of their tax affairs digitally and update HMRC at least quarterly via their digital tax account. 

This is a huge transformation in the tax system and theoretically could spell the end of the tax return season as we know it! Could this mean no more 31 January deadline? We will keep you informed when we know more.

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This is just a quick roundup of a few of the tax measures from the Autumn Statement, but you can view our full summary, including a reminder of other key developments which are due to take place from April 2016 on our website, just click here.

As always, if you have any questions on the above, please get in touch on 0116 242 3400.

What is an Annual Return?

An Annual Return is a document that all limited companies must prepare and deliver to Companies House once a year.  It is the responsibility of the directors to ensure that this happens.

It is different from your company’s annual accounts or tax return and usually won’t be completed at the same time.

Companies House will send a reminder letter to your company’s registered office address notifying you of when the next return is due.

The due date is usually a year after either the:

  • Incorporation of your company, or
  • The date of your last annual return

You can file your annual return up to 28 days after the due date.

Please note that if the annual return is filed late it is possible that you can be fined up to £5,000, and your company struck off if you don’t send Companies House your annual return at all.

Your annual return must include:

  • Details of the directors and company secretary (if it has one)
  • What your company does – including its standard industrial classification (SIC) codes
  • The type of company it is e.g. private or public
  • The registered office address
  • The ‘single alternative inspection location’ (SAIL) – the address where the statutory records are kept if not at the registered address

You may also need to include:

  • A ‘statement of capital’ if your company has shares
  • Details of shareholders, if required and depending how long since you last reported on them.

Please note that you must file an Annual Return even if your company is dormant or your details remain unchanged from one year to the next.

Please remember that it is the responsibility of the directors to complete the Annual Return accurately and on time.  Once submitted to Companies House it is available for public inspection.

If you would like some further information or how we can help your business, contact us for a no obligation meeting

Heather Waterfield, Company Secretarial & Administration team_DSC3430.JPG

Times are Changing! (Well, Accounting Standards are Anyway…)

When we prepare a set of accounts for a limited company, one of the first things we do is work out what size the company is.  This will determine how we prepare the accounts, and which set of rules (standards) we will follow.  The general rule is that the smaller the company is, the smaller the accounts can be – you wouldn’t expect a one director/shareholder company’s accounts to be in the same format as those of a large listed company!  Previously we had small, medium and large companies, but recently a new size has been added…. micro companies.  Micro, small and medium companies get certain exemptions from the full accounting standards (known as UK GAAP – or generally accepted accounting practice) in terms of how certain items are treated, how the accounts look, and how much information there is in them.

Whichever size your company falls into, there are changes ahead, but there may be options and opportunities too!

In a series of 5 blogs, we will explore some of the key changes, when they happen, and how they might affect you and your business.

What size is my company?

While this might appear to be a straightforward question, with a straightforward answer, you’ve guessed it…. it’s not!

In order to qualify for the exemptions available by being a smaller company, the company has to meet two out of three criteria for two successive years.  It follows that in order to no longer qualify, the limits have to be breached for two successive years.   There is always that “year of grace”.  Of course if it’s the first year, you only have to meet the criteria for that year in order to qualify for the reduced rules.

Some of the size criteria in place now will be changing (for the most part, the limits are increased) for accounting periods starting 1 January 2016 onwards.  They are:

Micro Small Medium
Turnover £632,000
(unchanged from Jan 16)
£6.5m

(£10.2m from Jan 16)

£25.9m

(£36m from Jan 16)

Gross Assets £316,000

(unchanged from Jan 16)

£3.26m

(£5.1m from Jan 16)

£12.9m

(£18m from Jan 16)

Average Employees 10

(unchanged from Jan 16)

50

(unchanged from Jan 16)

250

(unchanged from Jan 16)

So what are the implications of a company being a different size?

Micro companies can prepare very small accounts, with a simplified profit or loss and balance sheet, no directors’ report and very few notes.  The profit or loss account is not filed at Companies House.

Small companies are required to have a full balance sheet and profit or loss account directors’ report, plus more notes than a micro company.  At the moment, small companies have the option of filing abbreviated accounts at Companies House, which are an abridged version of the full accounts – there’s no directors’ report, no profit or loss account and less notes.

Medium companies’ full accounts include (in addition to the above) a strategic report, a cash flow statement and even more notes.  When filing at Companies House, medium companies file their full accounts, but without the detailed profit and loss account – the main statutory profit and loss account is filed.

As you can see, the increase in the small company thresholds will mean that more companies can take advantage of the exemptions that are afforded to them.  There is more to the story however, as the size limits aren’t the only things that are changing…..

If you have any queries on the above, please get in touch on 0116 242 3400.

Coming soon….. “Goodbye Abbreviated Accounts…..” Continue reading

CASHFLOW AND CASHFLOW FORECASTING

What is cashflow?

Cashflow is the flow of money in and out of your business.

Receipts from customers, refunds from suppliers and refunds of tax are all cash inflows.

Wages, supplier payments and tax payments are all cash outflows.

Managing cashflow is key to ensuring that you can pay wages, make payments to suppliers and meet tax liabilities. This will keep your business running.

Why forecast your cashflow?

Trading is unlikely to result in a steady flow of cash; customers may want payment terms of 30, 60 or 90 days; net wages, PAYE and National Insurance will need to be paid during each and every month.

If a new business started trading it may well sell its goods and services on credit and show a profit, if the business didn’t receive the cash for the sales in time to pay the wages it is unlikely that the staff would be around to service the sales or generate future sales!

A growing business that has to wait for customer receipts may also find cashflow a problem; the business will need to increase cash outflows as the wages and goods purchased increase, but the timing of cash inflows may be some time after the costs have to be paid for.

The above scenarios are often known as overtrading and can cause very profitable businesses to struggle to meet demand.

Forecasting your cashflow will enable you to identify problems.

How to forecast cashflow

There are many tools that can be used to forecast cashflow; the principles in each case are the same. You will need to plan out the dates that you expect to receive a cash inflow and the dates to pay a cash outflow. It is then a simple case of taking your starting cash balance, adding the expected inflows and taking off the expected cash outflow on the expected dates.

Any negative balances will need addressing, a loan or overdraft from a bank could bridge the negative balance, requesting extended supplier credit could also help to keep cash positive; invoice discounting or factoring are also options to consider.

In summary

A business needs a positive cash balance to trade; planning and managing the cashflow is key.

If you would like some further infrmation on cash flow or how we can help your business, contact us for a no obligation meeting

Alistair Ferris, Client Manager

Alistair Ferris 2 April 2012.JPG

Help – I’ve received a letter from The Pension Regulator

If this is you don’t panic!

My name is Becky and I am the Payroll Manager and this is what I get asked all the time.

So what does the letter mean for you?

The Pension Regulator (TPR) has been advised by HMRC that you have a payroll scheme and the government insists that you operate a pension scheme. Have you seen the “Workie” adverts? You know the one I mean, that great big cute purple monster:

Pension Monster

First you need to check who is on your payroll. If you employ anyone then you will need a pension scheme. It doesn’t matter if they are too young, too old, are casual or part-time.

There are a few situations where you don’t need a pension scheme but please contact me if you think this applies to you.

So how do you choose a pension scheme? You can ask your financial adviser, if you have one, or I can introduce you to an adviser who will be pleased to work with you.  Alternatively, you can go and have a look at the vast array of information on the TPR website.

Once you have a pension scheme then auto-enrolment becomes just another stage in your payroll process after your routine submission to HMRC. You will need to submit pension information to your pension provider and then tell your employees what you have done.

So what are you waiting for? If you have received a letter, you need to act now so that when the time comes (known as your Staging Date) your systems are all setup and ready to go.

If you would like more advice and assistance in any stage of the above process please get in touch.

Becky Edwards

Payroll Manager