Category: News

Making Tax Digital (MTD) has been removed from the Finance Bill 2017, along with other clauses due to the forthcoming General Election. Public Bills cannot be carried forward into a new Parliament so they must either be scrapped or passed before the General Election takes place.

The Finance Bill cull has been nothing short of shambolic, leaving taxpayers in limbo and important provisions being dropped at the last minute, despite all the work that has gone into finalising the legislation.

It is very likely that this is only a temporary measure and I do not believe that it is the end of MTD. The dropping of MTD from the Finance Bill may not even delay its implementation date of 1 April 2018, we will have to wait and see if it will be pushed back. Whatever the outcome, I am confident that MTD will resurface in the near future and that the UK will move to a fully digitised tax system sooner rather than later.

Sarah

Looking to cut down on your accountancy costs? Here are our Top Tips on how to avoid more than you need to!

1. Go Paperless by Using Cloud-Based Accounting

There are a number of cloud based products and apps available to reduce the bookkeeping burden, making it easier for you to keep on top of your finances wherever you are. Cloud accounting increases efficiency for both you and your accountant. At AO we only use Xero, just because it’s really great.

2. Keep track of your expenses.

Always obtain a receipt for every purchase you make. If you can’t get a receipt for any reason, make a note of the purchase details and the reason why a receipt isn’t available. When entering your expenses into your accounts, make sure each item is categorised correctly, i.e. telephone, rent, stationery etc.

3. Keep Personal & Business finances separate.

Wherever possible, avoid mixing the two up because it can make the accounting more difficult. It’s easier to keep track of what you’re spending within your business if you only have one type of expenditure going through your accounts.

4. Avoid cash wherever possible.

With the technology available today, it is easier to make payments electronically from literally anywhere. It is harder to keep track of cash spending and often records of purchases are missed. By using a debit or credit card you can keep track of the amount spent, where it was spent and what it was spent on. This makes tracking your expenses far easier.

5. Set money aside for your tax bill.

Keeping on top of your financial records efficiently and in a timely manner can help you prepare for your tax bill early on so that you know exactly how much you need to pay later on. It’s good practice to set aside some money every month towards paying your tax bill so that you’re prepared for the payment.

6. Update your records regularly.

For most small businesses, updating your financial records is only a 5-10 minute job each day. Enter your sales and purchase invoices as you generate/receive them. Reconcile your bank account daily or at least weekly so that you know exactly what funds are available and what transactions have taken place.

7. Financial Agreements.

If you take out a bank loan, finance or hire purchase, make sure you keep a copy of the agreement and pass a copy to your accountant so that they can account for the purchase correctly and ensure tax relief is claimed.

8. Check your Books before handing over to your Accountant.

Always check your financial records before you hand them over to your accountant. As a taxpayer, you have a personal responsibility to ensure that your records are correct. Have you included all of your purchases, including cash transactions? Often regular standing order or direct debit payments are overlooked. Have you included receipts wherever possible? Are all of your bank transactions accounted for? Are all of the documents that your accountant requires available? If your accountant has to chase you for outstanding information it may cost you more in fees. Your accountant can work far more efficiently if they receive all that they need in one go rather than receiving varying amounts of paperwork sporadically.

9. Hand over your documents in plenty of time!

Make sure you give your accountant plenty of time to prepare your accounts and tax return and let them have all of the relevant information as early as possible. Most accountants will have a deadline for receiving your financial records in order to complete your tax return in advance of the filing deadline. If your tax return is filed late you will receive a £100 late filing penalty from HMRC.

10. If in doubt, ask.

Your accountant should be approachable and willing to help with any query that you may have. Ask them for assistance if you are unsure of how to process a transaction, it’s what you pay them for.

With over a million subscribers, Xero is a leading online accounting system designed for small business owners. It’s easy to use and the ultimate hassle free way to run and grow your business. With real-time access to your financial information, you’ll always have the numbers whenever or wherever you need them.

Here are our favourite ten reasons why you should invest in Xero:

 

1. Dashboard

The dashboard displays a snapshot of your organisation’s financials and transactions entered in Xero. So if you are sat on the train or waiting to go into a meeting, you can log in and see what money you have and what is due to come in or go out of the business account. You can customise the dashboard to suit your needs.

2.Bank Feeds

Direct bank feeds automatically import account transactions into Xero from your bank on a daily basis. This is a fantastic feature which simplifies the process of reconciling money coming in and out of your bank.

3. Bank Rules

Bank rules are a great tool which can really help to speed up the bank reconciliation process. They’re perfect for recurring payments such as standing order or direct debit for which there is no invoice to enter into Xero. Simply specify the amount and what the payment relates to and Xero will process this entry for you each time it appears in the bank account.

4. Expenses

There is no easier way to keep track of your expenses! You can record and claim expenses online or snap receipts on the go with the mobile app so nothing is missed. All done in a couple of clicks and no need to keep the paper receipt.

5. Xero App

Work while you’re on the move with the Xero mobile app. Reconcile, send invoices, capture expenses and look up contact details wherever you are.

6. Recurring sales invoices

If you’re invoicing customers on a regular basis for the same amount, you can set up a repeating invoice and let Xero do the hard work for you. Xero will automatically create and email the invoice to the customer for you whenever you need it to.

7. Payment Services

Accept online payments by adding a payment service to Xero. When you email an invoice, your customer can view it online and use the payment button to pay you securely using your payment service. This is great for speeding up customer payments!

8. Xero to Xero

If your customers and suppliers also use Xero, invoices and bills can be sent directly to each other’s Xero account by sharing your Xero network key. Xero really does simplify the invoicing and billing process and with over a million subscribers, it’s likely you’re already dealing with another Xero user!

9. Customer Invoice Reminders

This is great for keeping on top of your cash flow. Invoice reminders allow you to automatically send your customers an email reminder about their invoice, speeding up the payment process.

10. File Upload

You can scan and upload invoices, purchase orders and more, all of which will be securely stored in the Cloud. You can upload documents or email them directly to your Xero account. The documents can then be attached to your accounting transactions in Xero so you’ll always have easy access to the information without the need for storing paper copies.

6 July is the deadline for filing the P11D to HMRC but what is it?

The P11d is a statutory form required by HMRC from UK based employers to detail the cash equivalents of benefits and expenses that they have provided during the tax year to directors and employees.

The basic rule is that if you provide an employee with anything other than pay it may count as an expense or benefit, and you will need to check whether you need to report it to HMRC and pay any tax or national insurance on it.

Who completes the P11d?

The company, as an employer, is responsible for preparing a P11D. When completing form P11d you must enter the total value of the expenses and benefits in various categories that you provided to your employee during the tax year.

What sort of expenses and benefits are included?

• Company cars
• Company car mileage allowances and fuel
• Company vans provided for private use
• Private car mileage allowances and fuel
• Motorcycles provided for private use
• Payments for use of home telephones
• Mobile telephone usage and reimbursements
• Private medical insurance
• Subscriptions and professional fees
• Living accommodation
• Credit Card payments
• Interest-free and low interest loans
• Assets transferred
• Assets placed at the employee’s disposal
• Employer supported childcare
• Other benefits or expenses such as childcare costs, spouse or partner expenses on business trips etc

Key dates

You must make sure that you give your employees a copy of the information from their P11D or P9D no later than 6 July. Payment of any Class 1A NICs owed on expenses or benefits you’ve provided must reach HMRC’s bank account by 22 July.

Exemption

You don’t have to report some routine employee expenses to HMRC. This is called an ‘exemption’ and business expenses such as travel and subsistence, business entertaining and professional fees and subscriptions do not need to be reported on the P11D. However, these expenses can only be reimbursed at the actual cost incurred or repaid using an approved HMRC rate.

Penalties

If you fail to meet the filing deadline of 6 July, you won’t incur penalties straight away. However, if the P11D isn’t filed by 19 July the employer will incur fines of £100 per month (or part month) per 50 employees.

YES. Sorry to be the bearer of bad news! As an employer, any staff you employ in your hairdressing salon will have to pay income tax on tips they receive, and national insurance sometimes too, it depends on who actually receives the tip and how it is actually received.

Here’s our 5 Top Tips all about…wait for it…tips!

 

1. Cash tips paid directly to your staff

Here’s a little good news! If your staff receive cash tips directly from customers, they have to pay tax on them but not national insurance. If they complete a Self Assessment tax return, they need to include the tips on it. If they don’t fill out a tax return then HM Revenue and Customs (HMRC) will estimate their tips based on information from you as their employer.

HMRC will give you a tax code so that any tax is collected through the payroll and deducted from staff wages before they get them.

 

2. Tips included in card payments

If your customers include a tip when paying by card, which is intended for the member of staff who provided the service, the tip is paid directly to you, the employer. You, as the employer, are then responsible for making sure income tax is paid through the PAYE system.

Sometimes the tips are pooled together and shared out – this is called a ‘tronc’. The person who looks after it is called the ‘troncmaster’ and they are responsible for making sure income tax is paid. You have to tell HMRC if there’s a tronc and who the troncmaster is.

As the employer, if you decide how the tips are shared out, national insurance is due as well as tax. You’re also responsible for making sure it’s paid through PAYE.

 

3. Bonuses

You’ve had a really busy month at the salon and you’ve decided to reward your staff with a bonus as a sign of appreciation for their hard work. Bonus payments are treated as part of your member of staff’s pay and they will pay tax and national insurance on the amount paid to them through PAYE.

 

4. VAT

Tips are outside the scope of VAT when genuinely freely given by customers. It doesn’t matter if they’re paid by cash or card, they’re not subject to VAT.

 

5. Tax Credits

Any tips received by staff will be considered as income for tax credit purposes. HMRC now uses the information provided by employers on their Real Time Information PAYE submissions as part of the tax credits renewals process. These submissions do not show cash tips, so unless staff declare these themselves, it is possible that their tax credits award will be too high which could result in recoverable overpayments and possibly a penalty.

We love working with hairdressing and beauty salons, helping them achieve their goals and setting them on a secure and tax efficient road for the future. You’re a creative and enthusiastic bunch, just like us, that’s why we’re a great fit. If you’re operating your salon through a limited company, then we’d love to work with you!

You can benefit from our wealth of experience within the industry, whilst we take care of all of the financial aspects of your salon. We know you want to focus your efforts on growing your salon and serving your clients so we’ll free up your time and make life easier for you.

We embrace modern technology. It’s clever stuff and helps us do our job better but it makes running your salon much simpler for you too. We’ll work with you closely throughout the year, using the very latest software and the financial data that we have at our fingertips, to help you make better decisions about the future, so you can grow your hairdressing salon and your profits. That’s what we do, it’s what we love!

Let’s chat

If you think we could be what you’re looking for or you’d simply like to find out more about us, please contact us to arrange a Discovery Call. It’s the first opportunity to get to know each other.

We’ll ask you a few important questions to make sure we can provide you with the service you’re looking for. Having a think about the following questions, they might seem a little intrusive but it’s to make sure we really understand your goals and challenges, so that we can maximise the value provided to you:

• What is important to you in your life?
• What would make this year a great year personally?
• What would you need to achieve in your business to achieve those goals?
• How can we help you to get there faster?
• What information would you need from us to know you’re on track in reaching those goals?
• How can we best help you to stay on track?

We’re sure you have lots of questions for us too and we’d be delighted to answers any queries you may have.

If after our initial conversation you wish to proceed further, we can arrange a Proposal Meeting, this can be done via video call or face-to-face, whichever suits you best. At our Proposal Meeting, we will agree the level of service to be provided, make recommendations and of course confirm the cost of those services.

If you wish to sign up, you can do so there and then at the Proposal Meeting using our slick proposal system. It’s that simple and hopefully this is the start of a great partnership with exciting times ahead!

Onboarding

Once you’re all signed up, we’ll begin working with you straight away. We’ll be in touch on a regular basis to make sure you have a smooth and efficient introduction. We’ll be finding out as much as we possibly can about your business and identifying where we can add most value. We’ll also take care of the set up of your new software and provide you with any hands-on training that you may need in order for you to get to grips with the range of apps we offer. You’ll have lots of opportunities to ask any questions that you may have.

We’ll continue working closely with during the year and you’ll be invited to attend webinars and workshops specifically aimed at the hairdressing industry during the year. You’ll also have access to our dedicated Facebook community, where you can share experiences with like minded business owners.

 

If you think that we could be the right fit for your hairdressing salon, or if you’d simply like to find out a little more about us and what we do, please give us a call. We’re always here to help and we’d be delighted to hear from you!

“Rent a Chair” is common place across the hairdressing industry. The salon owner will rent or hire out one of the salon chairs to a self employed hairdresser for an agreed period, who then utilises that space to serve their own clients. It’s a very popular way for salon owners to grow their business but there are also plenty of pitfalls so it’s important to plan in advance to avoid these:

1. Confirm the arrangement

There are three main types of arrangement to consider:

• Charge a flat weekly rental rate
• Share a percentage of the takings i.e. 60/40 split.
• A combination of both of the above 

Failing to agree the basic arrangement properly can lead to lots of problems down the line. Also consider the employment status of the hairdresser using the chair, in HMRC’s eyes, are they really self employed?  If they are a disguised employee then you will be liable for tax, national insurance and a great deal of employment legislation.

2.  Get a Contract

It’s absolutely essential to get a legal contract in place from the start so that both parties know their responsibilities and what is included in the rental charge. There is so much to think about!

• agree what days/hours the chair can be used
• agree the length of the contract – 1 year, 2 years? Also agree what happens at the end of the contract period. Can the contract be terminated earlier?
• what happens to clients appointments if the chair hirer is ill?
• who provides the hair products, towels and equipment?
• who actually takes ownership of the client?
• who is responsible for equipment damages or breakages?
• who is responsible for marketing and attracting new clients to the salon?
• does the agreed rent include laundry, use of salon receptionist, heating etc?
• agree the pricing – if the chair hirer prices are significantly less than salon prices, this may be an incentive for existing salon clients to move across to the chair hirer.
• how are client payments taken and who is responsible for managing these?
• how are tips managed and distributed?
• can the chair hirer sell their own salon products to their clients?

3. Get the right person

Whoever rents the chair space within your salon will not be a employee, therefore you will have limited control over their performance compared to your usual employees. Make sure they’re the right fit for the salon.

The chair hirer may wish to choose their own products, dictate their own working hours, set their own prices and possibly even attract a completely different type of clientele to yours, which may have an impact on your reputation. Make sure the hairdresser fits your salon both now and in the future. Watch them at work, obtain references and consider an initial probation period to make sure the arrangement is suitable for both parties.

4.  Insurance

The hairdresser hiring the chair should hold their own public liability insurance as a self employed person. If providing products and equipment under the arrangement, the salon owner should also make sure that the chair hirer is also included under their insurance policy as a contractor. In case things go wrong, it’s essential to make sure both parties are adequately insured.

5. Speak to your accountant

We couldn’t forget this one, could we?! Have a chat with your accountant to make sure that both parties account for the income and expenses correctly. Rent a Chair has a big impact on VAT so it’s vital that you fully understand what you need to do and that you’re doing everything correctly from the start.

We’re rapidly heading to that time of year when school’s out for six weeks which realistically feels more like six months!

So what can we do to keep the kids entertained whilst keeping business disruption to a minimum? Clients’ regularly ask if they can employ their children during the school holidays. It’s a way of keeping the little darlings quiet (theoretically, at least) as well as them independently earning some pocket money. They also gain some valuable work experience! From a business perspective, the wages paid are a tax allowable expense, helping to reduce the tax bill. So, yes you can employ your children during the holidays but there are rules to be aware of before you break the good news to them:

General rules

• You cannot employ children under the age of 13
• During school holidays, 13 to 14 year olds can work a maximum of 25 hours a week. This includes a maximum of 5 hours on weekdays and Saturdays and a maximum of 2 hours on Sunday
• 15 to 16 year olds can work a maximum of 35 hours a week in the school holidays. This includes a maximum of 8 hours on weekdays and Saturdays a maximum of 2 hours on Sunday
• Children under 16 years of age are not entitled to minimum wage and they don’t pay national insurance. The amount you pay them must be justified by the amount of work which they actually do in your business
• Children aged 16 to 17 are entitled to at least minimum wage and if you’re a registered employer, you’ll need to record and report their pay as part of your payroll
• Between the ages of 13 and 16, children can’t work unless they have a child employment permit.  It is illegal for businesses to employ 13-16 year old children without one so you should contact your local council for information on applying for a permit. A young person is ’employed’ when they assist with any business which is carried out for profit, whether paid or not. This also applies to children assisting their parents or relatives in a family business.
• You should ensure that you hold the necessary insurance such as public and employers liability
• You must prepare a risk assessment for each set of duties, ensure that you adequately train the child for the job and make them aware of any risks which may be involved. You must also supply the child with any necessary safety equipment and clothing

Types of work allowed

Children can carry out light work in the following areas:

• agricultural or horticultural work
• delivery of newspapers/printed material
• shop work
• hairdressing salons
• office work
• private car washing by hand
• café or restaurant – but not in the kitchen
• domestic work – for example: in a hotel

Types of work not allowed

No child of any age can be employed in the following areas:

• cinemas or night clubs
• commercial kitchens
• collecting or sorting rubbish, rags or scrap metal
• any work more than three metres above the ground/floor level
• telephone sales
• fairgrounds or amusement arcades, as an attendant or assistant
• in the personal care of residents in a residential care or nursing home
• collecting money, selling or canvassing door to door

The above list is not exhaustive so always check beforehand!

Let’s chat

Need help? Want to know more? Please give us a call on (01386) 764741 and we’ll be delighted to help.

One of the most popular questions we’re asked by our clients’ is “What information do you need from me?” when they reach the end of their financial or tax year.

Whether you operate as a sole trader or limited company, many of the records required will be fairly similar. You will need to provide full details of your business income and expenses so that the business profit can be calculated. Here is our simple checklist and the documents typically required:

• petty cash records
• bank statements for your business accounts
• cheque books (if you’re still writing cheques!)
• stock value
• purchase invoices and receipts
• sales income records
• payroll records
• credit card statements
• finance agreements
• loan statements
• any other expenditure that wasn’t paid directly through the business
• assets and equipment purchased during the year
• assets that were sold, scrapped or disposed of during the year
• copies of VAT returns submitted during the year
• mileage records
• dividends paid to the shareholders or drawings paid

 

If you’ve prepared your own books for the year or you have your own bookkeeper who has done this for you, we won’t necessarily need all of the above documents. However, initially, we will require access to your online accounting system (if you have one) or your completed and reconciled accounts including trial balance, profit and loss and balance sheet. We will also need your payroll records and copies of VAT returns submitted, if applicable.

 

Personal information

We have a personal tax organiser available each year which acts as a useful checklist to understand what needs to be reported on your self assessment tax return. The list below indicates information typically required:

• P45 from your employment if you left a job during the tax year
• P60 from your employment if you continued to be employed during the tax year
• P11d from your employment
• Rental income – a summary of your rental income and expenses if you rent out property
• Details of any savings income
• Details of any pension income
• Details of any capital gains (sale and purchase of assets such as shares, antiques, property etc)

 

You can supply all of the above information electronically. Please note the above lists are not exhaustive and your individual circumstances need to be considered as to what information is relevant. 

It’s official – we’re the winners of the Accounting Excellence 2018 “Client Service of the Year” award. We’re absolutely delighted to receive such an accolade and thank all of clients for their support. We couldn’t have achieved this without you!

The Accounting Excellence Awards 2018 celebrate the achievements of ambitious growth-oriented firms and technology suppliers. Now in their 8th year, this year’s awards concluded at an awards evening on the 20th September at the InterContinental London, Park Lane.

We’re delighted to be bringing this award back to Evesham! This award is a huge achievement for a very small firm because we were up against much bigger firms from across the country. Of course, we will be celebrating this week with cake, what else?! We’ll be making sure that there’s plenty for our clients too!