Tax returns

Preparing for your Accountant

Posted by Kath Docherty on October 16, 2017  /   Posted in Book keeping, Business start ups, Getting started in business, Tax returns

Whether we are producing your accounts or carrying out your annual audit, being prepared for us will ensure our work is carried out smoothly and efficiently and with the minimum disruption to yourselves.

You may also be able to help by preparing some of the routine schedules for us. This will mean our time can be better spent advising you on the running of your business.

We highlight below many of the ways in which you can help.

It is however important for you to discuss these ideas with us since all of the suggestions may not be applicable.

Setting the scene

Keeping us informed

We will be better prepared ourselves if we know of any changes within your business which could affect our work. These could include changes in your:

  • product or market
  • business strategy eg pricing policy
  • bookkeeping system
  • key personnel.

What we need

If you know what information we need to be able to complete our work you can make sure it is available.

We can decide together what you can prepare for us and what we will need to prepare for ourselves.

Better communication between us will help to minimise misunderstandings and avoid unnecessary work.

Timetable

We need to agree a suitable timetable in advance. This gives us both a chance to be properly prepared.

However, if you find yourself behind schedule let us know as soon as possible so that the timetable can be rearranged if necessary.

How you can help

Books and records

Setting up and maintaining your books in an organised manner will help us to extract quickly and easily the information needed to prepare or audit your accounts. It will also enable you to see at a glance the state of your business.

Consideration of the following points may improve the organisation of your records:

  • totalling and balancing your books at regular intervals will help you spot and correct any mistakes
  • analysing your payments and receipts so that information can be easily extracted
  • filing your invoices in a logical order (numerical, alphabetical or date) to make it easy to find any one of them.

Procedures

By establishing and maintaining certain procedures you will be able to keep a better control over your records and your business. It will also mean we can cut down on the work we need to do which may save you some money.

We can help you set up these procedures initially and once established you will be able to carry them out yourself. These procedures will include control accounts, reconciliations and stocktaking.

Control accounts

Control accounts record the movements of cash, debtors and creditors by using the monthly totals from your cash book and sales and purchases summaries.

The cash control account will show how much cash the business has at the end of each month.

The debtors or sales ledger control account will show how much your customers owe you at the end of each month.

The creditors or purchase ledger control account will show how much you owe your suppliers at the end of each month.

Reconciliations

Reconciliations help to ensure that the figures in your books are complete and accurate. Therefore if produced on a regular basis they will help you spot any errors which can then be corrected before we examine your records. Some of the records which will need reconciling are:

  • bank accounts
  • control accounts
  • suppliers’ statements.

Stocktake

If your business carries any stock you will need to count it at least once a year. To ensure that the count is carried out efficiently and accurately you should consider the following points:

  • stock items should be stored neatly and logically to make counting easier
  • all staff involved in counting should be given clear instructions
  • try to minimise the movement of stock during the count. If possible deliveries in and out should be withheld until the counting has finished
  • spot checks should be performed during the count.

If you hold large amounts of stock we may need to attend the stocktake and perform our own checks.

Schedules

There are a number of schedules which have to be produced in order that the accounts can be prepared and/or audited. We can prepare all of these schedules ourselves but obviously if you were to produce them it would save time and money.

You may wish to consider the preparation of some of the following schedules:

  • a detailed list of additions and disposals of fixed assets with a copy of the appropriate sales and purchase invoices attached
  • schedules showing each item of stock held, the quantity, unit value and total value. Indicate any stock items which are old or damaged
  • a list of your debtors at the year end including how much they owe you and how long they have been outstanding. Indicate any which are unlikely to pay you
  • a schedule of all bank and cash balances at the year end, together with all the bank statements for each bank account
  • a list of creditors which should include HMRC as well as the usual business suppliers.

Not all of these schedules will be applicable to your business and therefore before doing anything you may wish to discuss this with us.

How we can help

There are undoubtedly many advantages to be gained if you are better prepared before we commence our work.

We will be able to complete our work in less time. This will mean less disruption to you and your staff. In addition we will be better placed to provide you with useful and constructive advice regarding the development of your business.

However, perhaps the most rewarding of all these advantages will be the fact that your books and records will provide you with more useful information which will help you make better informed business decisions.

If you would like to discuss these procedures any further or would like us to provide further assistance with your monthly or quarterly accounts please contact us.

Personal Tax – Self Assessment

Posted by Kath Docherty on October 16, 2017  /   Posted in Tax returns, Taxation

Under the self assessment regime an individual is responsible for ensuring that their tax liability is calculated and any tax owing is paid on time.

The self assessment cycle

Tax returns are issued shortly after the end of the fiscal year. The fiscal year runs from 6 April to the following 5 April (thanks to switch from the Julian to the Gregorian calendar in 1752), so 2018/19 runs from 6 April 2018 to 5 April 2019. Tax returns are issued to all those whom HMRC are aware need a return including all those who are self employed or company directors. Those individuals who complete returns online are sent a notice advising them that a tax return is due. If a taxpayer is not issued with a tax return but has tax due they should notify HMRC who may then issue a return.

A taxpayer has normally been required to file his tax return by 31 January following the end of the fiscal year. The 2018/19 return must be filed by 31 October 2019 if submitted in ‘paper’ format.  Returns submitted after this date must be filed online otherwise penalties will apply.

Penalties

Late filing penalties apply for personal tax returns as follows:

  • £100* penalty immediately after the due date for filing (even if there is no tax to pay or the tax due has already been paid)

* Previously the penalty could not exceed the tax due, however this cap has been removed. This means that the full penalty of £100 will always be due if your return is filed late even if there is no tax outstanding. Generally if filing by ‘paper’ the deadline is 31 October and if filing online the deadline is 31 January.

Additional penalties can be charged as follows:

  • over 3 months late – a £10 daily penalty up to a maximum of £900
  • over 6 months late – an additional £300 or 5% of the tax due if higher
  • over 12 months late – a further £300 or a further 5% of the tax due if higher. In particularly serious cases there is a penalty of up to 100% of the tax due.

Calculating the tax liability and ‘coding out’ an underpayment

The taxpayer does have the option to ask HMRC to compute their tax liability in advance of the tax being due in which case the return must be completed and filed by 31 October following the fiscal year. This is also the statutory deadline for making a return where you require HMRC to collect any underpayment of tax through your tax code, known as ‘coding out’. However if you file your return online HMRC will extend this to 30 December. Whether you or HMRC calculate the tax liability there will be only one assessment covering all your tax liabilities for the tax year.

Changes to the tax return

Corrections/Amendments

HMRC may correct a self assessment within nine months of the return being filed in order to correct any obvious errors or mistakes in the return.

An individual may, by notice to HMRC, amend their self assessment at any time within 12 months of the filing date.

Enquiries

HMRC may enquire into any return by giving written notice. In most cases the time limit for HMRC is within 12 months following the filing date.

If HMRC does not enquire into a return, it will be final and conclusive unless the taxpayer makes an overpayment relief claim or HMRC makes a discovery.

It should be emphasised that HMRC cannot query any entry on a tax return without starting an enquiry. The main purpose of an enquiry is to identify any errors on, or omissions from, a tax return which result in an understatement of tax due. Please note however that the opening of an enquiry does not mean that a return is incorrect.

If there is an enquiry, we will also receive a letter from HMRC which will detail the information regarded as necessary by them to check the return. If such an eventuality arises we will contact you to discuss the contents of the letter.

Keeping records

HMRC wants to ensure that underlying records to the return exist if they decide to enquire into the return.

Records are required of income, expenditure and reliefs claimed. For most types of income this means keeping the documentation given to the taxpayer by the person making the payment. If expenses are claimed records are required to support the claim.

Checklist of books and records required for HMRC enquiry

Employees and Directors

  • Details of payments made for business expenses (eg receipts, credit card statements)
  • Share options awarded or exercised
  • Deductions and reliefs

Documents you have signed or which have been provided to you by someone else:

  • Interest and dividends
  • Tax deduction certificates
  • Dividend vouchers
  • Gift aid payments
  • Personal pension plan certificates.

Personal financial records which support any claims based on amounts paid eg certificates of interest paid.

Business

  • Invoices, bank statements and paying-in slips
  • Invoices for purchases and other expenses
  • Details of personal drawings from cash and bank receipts

How we can help

We can prepare your tax return on your behalf and advise on the appropriate tax payments to make.

If there is an enquiry into your tax return, we will assist you in answering any queries HMRC may have. Please do contact us for help.

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