FAQs

We hear what you ask us

Straight answers

When our clients ask questions, we listen. Here are all the Q&As we’ve compiled over the years.

They’re all in plain English and designed to help you understand how we work, how the tax system works and what you can do to help your business grow. If you’ve got a question that isn’t covered here, drop us a line – we’re always interested to know what information people find useful.

 

Joining Accountspoint

How do I sign up to Accountspoint?

We would normally arrange an initial meeting to get to know you and your business and to answer any questions you may have. Alternatively, as this may not always be suitable, we can communicate via telephone, email or Skype.

You will be provided with a quote and if you decide to sign up, we will forward you details of initial information we would require from you.

Take the first step by calling 01332 650226 or 0115 8244005 or requesting a call back.

How are your quotes worked out?

This depends on your business and which of our services you require.

At Accountspoint, we do not waste time and money having unnecessary meeting at expensive offices. You will find our charges comparatively inexpensive, though quality of our work is in no way compromised.

 

You will be provided with a quote and if you decide to sign up, we will forward you details of initial information we would require from you.

Take the first step by calling 01332 650226 or 0115 8244005 or requesting a call back.

Which services are included?

We will carry out as much or as little work as you require. Typically, we would include bookkeeping, VAT returns, Payroll, Year end accounts, corporation tax and self assessment returns.

You are of course free to contact us at any time should you have any questions or require tax advice.

How can I contact my accountant?

You will be provided with a direct telephone number and email address.

Is there a minimum contract period?

No. You will not be tied into a minimum contract period; should your circumstances change you are free to leave at any time without penalty. If you require your company to be closed down you will not be charged any extra fees.

How do I change my existing accountant?

… it couldn’t be easier.

Step 1
We will collect any information we require from you.

Step 2
For any outstanding information, we write to your existing accountant and ask them for a copy of your file. Before we do this, you would need to sign an authorisation letter which we send to you.

Step 3
Once we have received the response from your accountant we are good to go.

When should I move from my current accountants?

Unlike other accountants, you can switch to Accountspoint whenever you want. You do not have to wait until the end of your company’s year.

HMRC authorisations

When you join Accountspoint, we will complete agent authorisations with HMRC in order to allow us to discuss and manage your taxes with HMRC.

 

 

 

 

 

You will be provided with a quote and if you decide to sign up, we will forward you details of initial information we would require from you.

Take the first step by calling 01332 650226 or 0115 8244005 or requesting a call back.

Starting Up in Business

Free Initial Consultation

Want to be sure that Accountspoint is right for you? When you contact us for a free, no-obligation consultation, we will answer all your questions and show you how much your business can benefit by working with us.

We pride ourselves on giving our clients the highest level of service.

We can meet with you to explain how best to manage your business.
Explain which expenses you can claim for through your business.
Explain how you will be financially affected.
Advise on and help set up your accounting system.
Answer any questions you may have.

Free Company Formation

We can form your new limited company at Companies House for you, usually within the same day. If you sign up with one of our monthly accountancy packages we don’t charge for the company formation. In fact, you will only start paying us when you start trading.

The directors and shareholders will be registered by us and we’ll take care of issuing the share certificates for you.

Advice on company structure

We will advise on how to ensure your new company is structured for maximum tax efficiency.

You are of course free to contact us at any time should you have any questions or require tax advice.

Free until you start working

We will help with the set up of your business, provide advice on your business structure and have everything in place prior to you starting to trade; and you’ll receive our services free of charge until to start trading.

Free accounting software

We can advise on how to keep your accounting records in order – and for our monthly fee clients provide you with free accounting software to help you with your business.

Our current software partners are QuickBooks and FreeAgent.

 

Do I need a separate bank account?

If you manage a limited company, as a legal entity it needs a separate bank account to handle financial transactions related to the business. It’s also common sense to keep your business’s financial affairs separate from your own.

For this reason, we also advise non-corporate businesses to operate through a separate bank account.

Unlimited accountancy advice

We understand that when you are starting out in business, you’ll need a little more assistance, so we don’t put limits on how often you contact us for advice.

You’ll get the same quality support from us to help you and your start up business, liaise with HMRC on your behalf and much more.

HMRC authorisations

When you join Accountspoint, we will complete agent authorisations with HMRC to allow us to discuss and manage your taxes with HMRC.

 

 

 

 

 

Company Accounts & Tax

What are a company’s annual accounts?

Registered companies in the UK are required to prepare annual accounts for Companies House and HMRC every year. The purpose of these accounts is to report the financial activity of the company and work out how much corporation tax it has to pay to HMRC.

The directors of a company are legally responsible for making sure the annual accounts are completed accurately and submitted by the statutory filing deadline. Copies of the accounts must also be given to shareholders.

Full statutory accounts should include the following:

  • A profit and loss account
  • A balance sheet
  • Notes about the accounts
  • A directors’ report
  • An auditors’ report (unless the company qualifies for exemption)
  • Name and signature of company director
What is Corporation Tax?

Basically, it’s the company equivalent of income tax but for registered companies. Corporation Tax is based on the profits your business makes, and the rate depends on how much profit is generated. It is normally charged on the taxable profits for a 12-month accounting period that matches your company financial year.

In terms of corporation tax rates, the UK rate is relatively low – significantly lower than personal income tax. This can provide beneficial tax planning opportunities.

When do company accounts have to be submitted by and when is corporation tax due?

HMRC requires your Company Tax Return and full Company Accounts.

Deadline: 12 months after the end of the accounting period. If Corporation Tax is due, this is required to be paid to HMRC within nine months and one day after the accounting period. If your business earns more than £1.5m, you’ll have to pay in instalments.

Companies House only requires an abbreviated set of Annual Accounts (these will be made public on Companies House website).

Deadline: Nine months after your year end (within 21 months of your registration date if it’s your first return).

What are the penalties for late filing of accounts?

The following penalties will be charged to the company if you miss the deadlines.

Late filing penalties issued by HMRC
1 day £100
3 months £100
6 months HMRC will estimate your Corporation Tax bill and add a penalty of 10% the unpaid tax
12 months Another 10% of any unpaid tax
If your tax return is late three times in a row, the £100 penalties are increased to £500 each.

Late filing penalties issued by Companies House
Up to a month late £150
1 to 3 months late £375
3 to 6 months late £750
Over 6 months late £1,500
If you file late two years in a row penalties double

Company’s accounting records

Keeping accurate corporation tax records of your income and expenses is essential – and a legal requirement.

Please note, limited companies are legally required to keep accounting records for at least 6 completed years. These records include all receipts, invoices, bank statements, workings and tax-related paperwork.

Who is responsible for filing a company’s Accounts and Corporation Tax returns?

The director or directors of the limited company are ultimately responsible for keeping a company’s books and tax records in order. If you engage an accountant, then this will be one of their key jobs.

Get more time to file your accounts

Companies House may allow a company to extend the accounts deadline if:

  • an event you couldn’t control stops you from sending your accounts
  • you apply for more time before the filing deadline
What is a dormant company?

A dormant company is a company that has been registered with Companies House but is not carrying on any kind of business activity or receiving any form of income. For this reason, HMRC considers it dormant (or inactive) for corporation tax purposes.It can remain dormant for any length of time, but the directors must inform their local corporation tax office as soon as possible.
While a company remains dormant, no accounts or corporation tax returns need submitting to HMRC. However, statutory obligations for Companies House are still required. These include dormant company accounts and confirmation statements.

Self Assessment Tax

Who needs to submit a self assessment tax return?

The most common reasons that a tax return may be required are as follows:

  • You are self employed or a partner in a partnership
  • You are a company director
  • You have untaxed savings or investment income
  • You own land or property that is being let
  • Your household receives Child Benefit and you have income in excess of £50,000
  • You have income from overseas
  • You have sold or given an asset away
  • You’ve lived or worked abroad or aren’t domiciled in the UK
Tax return submission deadline

HM Revenue and Customs (HMRC) must receive your online tax return for the preceding tax year by 31st January. Paper tax returns have a deadline date of 31st October. A tax year runs from 6th April to the following 5th April.

Penalties for late filing
  • If you miss the filing deadline date of 31 January (for on-line submission), you will be charged a penalty of £100, even if no tax is owing.
  • If you are three months late, you will be charged a daily penalty of £10 per day, up to a maximum of £900; i.e. from 1st May.
  • If you are six months late there will be a penalty of £300 (or 5% of the tax owing if this is greater).
  • If you are 12 months late, you will be charged another £300 (or 5% of the tax owing if this is greater). In exceptional circumstances a higher penalty of up to 100% of the tax due is possible.
Penalties for late payment
  • 5% of tax unpaid after 30 days
  • Another 5% of tax unpaid after 6 months
  • Another 5% of tax unpaid after 12 months
When should I notify HMRC?

If you have a new source of income on which there is a tax liability, you should notify HMRC by 5th October following the end of the tax year in which the income arose.

If HMRC is not notified in time ‘failure to notify’ penalties can apply.

Payments on account

Payments on account are advance payments towards your tax bill. You have to make 2 payments on account every year unless:

  • your last self assessment tax bill was less than £1,000
  • you’ve already paid more than 80% of all the tax you owe, for example through your tax code

Each payment is half your previous year’s tax bill with payments due by 31st January and 31st July.

If you still have tax to pay after you’ve made your payments on account, you must make a balancing payment by 31st January next year.

Example

Your bill for the 2016 to 2017 tax year is £3,000. You made 2 payments on account last year of £900 each (£1,800 in total).

The total tax to pay by 31st January 2018 is £2,700. This includes:

  • your ‘balancing payment’ of £1,200 for the 2016 to 2017 tax year (£3,000 minus £1,800)
  • the first payment on account of £1,500 (half your 2016 to 2017 tax bill) towards your 2017 to 2018 tax bill

You have to pay your second payment on account of £1,500 by 31st July 2018.

Paying your self assessment tax

You can arrange payment of your self assessment tax to HMRC with this link: Pay your self assessment tax

Managing your Business

When do company accounts have to be submitted by and when is corporation tax due?

HMRC requires your Company Tax Return and full Company Accounts.

Deadline: 12 months after the end of the accounting period. If Corporation Tax is due, this is required to be paid to HMRC within nine months and one day after the accounting period.

Companies House only requires an abbreviated set of Annual Accounts (these will be made public on Companies House website).

Deadline: Nine months after your year end (within 21 months of your registration date if it’s your first return).

What are the penalties for late filing of accounts?

The following penalties will be charged to the company if you miss the deadlines.

Late filing penalties issued by HMRC
1 day £100
3 months £100
6 months HMRC will estimate your Corporation Tax bill and add a penalty of 10% the unpaid tax
12 months Another 10% of any unpaid tax
If your tax return is late three times in a row, the £100 penalties are increased to £500 each.

Late filing penalties issued by Companies House
Up to a month late £150
1 to 3 months late £375
3 to 6 months late £750
Over 6 months late £1,500
If you file late two years in a row penalties double

What business expenses can I put through my business?

Here is a list of some of the common business expenses you may be able to claim through your business:

• Accommodation
• Annual health check
• Bank charges
• Bonuses
• Broadband
• Business insurance
• Capital allowances
• Childcare regulations
• Christmas annual events
• Clothing
• Company cars and vans
• Company formation
• Computer equipment and software
• Course fees
• Employers’ national insurance contributions
• Eye test
• Food
• Health insurance
• Hire purchase agreements
• Home office
• Incidental overnight expenses
• Marketing
• Mileage expenses
• Mobile
• Office rental
• Office supplies – stationary, postage and printing costs
• Parking spaces
• Pension contributions
• Professional indemnity insurance
• Professional memberships
• Public transport
• Salaries
• Subscriptions and professional fees – accountants, solicitors etc
• Subsistence
• Telephone
• Training fees
• Travel

For more information on claiming expenses through your business, please don’t hesitate to contact us.

How long should I keep my business records?

All self-employed individuals and limited companies whether trading or not must keep accounting records for at least 6 completed years.

What company documents do I need to retain as hard copies?

The simple rule is that you should keep hard copies of any documents that you are required to sign. Includes the following documents:

  • Share certificates
  • Dividend vouchers and minutes
  • The first minutes when the company was formed
What is a Confirmation Statement and when is it due?

As a director of a limited company, you are required to submit a Conformation Statement with Companies House once a year. The Confirmation Statement includes official company information such as the registered office address, company’s’ officers, business description and shareholdings.

Failure to file a Confirmation Statement can result in directors being fined personally in criminal courts, and companies being struck off the register.

You need to file your Confirmation Statement at least once a year, and within 14 days of its due date. The due date is normally a year after your incorporation or the date you last completed a Confirmation Statement. You must submit a Confirmation Statement even if the company is dormant.

How should I pay myself?

If you’re a company director your earning may be a combination of a director salary and share dividends; your accountant can advise on the best way to reduce your overall tax liabilities.

Please note, bank payments for salaries and dividends should be kept separate.

If you’re a sole trader or partner of your business then you take your earnings as straight drawings from your business to your personal bank account.

How often can I make a dividend payment?

You can declare and pay dividends whenever you like; however we would recommend doing this quarterly or monthly to reduce administration. However, you must ensure company profits for the year can cover your dividend payments. Ongoing management a/c’s are an essential business tool to give you this information.

Note – There is a small amount of administration. You must keep a record of all dividends declared together with dividend vouchers.

Can I pay a family member a salary or dividends?

As long as your family member is carrying out a reasonable amount of work for their salary, then you can pay them as an employee. This would need to be done through the business’s payroll scheme.

To pay dividends your family member must be a shareholder of the company. Problems may occur if no or minimal work is carried out and the company is a “personal service company” (i.e. a contractor or freelancer). In this case it is advisable to contact us to discuss “income shifting” rules.

What is a director’s loan account?

If a director withdraws funds from a company, which are not salary or dividends, then a loan is formed. This is ok and quite common for small companies, but must be seen as a short-term measure.

If the DLA exceeds £10,000 at any point in the financial year or a DLA exists at the company year end there may be further tax implications.

Declaring a dividend can be used to offset an overdrawn DLA (as long as the company profits are enough to pay the dividend).

We advise discussing any potential issues of a DLA with your accountant.

Note – There is a small amount of administration. You must keep a record of all dividends declared together with dividend vouchers.

Does my business have to register for Vat?

A business is not required to register for Vat unless turnover is or expected to exceed the Vat registration threshold.

A business can however voluntarily register; there may be circumstances when this is advisable. There are various Vat schemes that can be used by businesses, contact us for further advice.

What is IR35?

IR35 is legislation that was brought in to stop workers who were employees of an organisation from resigning and providing the same services through a limited company; thereby benefiting from the significant tax advantages.

IR35 is aimed at contractors and freelancers and looks at the working practices for each contract they work on.

This is a complex area of tax law and if you require advice on this matter, please get in touch.

Note – There is a small amount of administration. You must keep a record of all dividends declared together with dividend vouchers.

Business Expenses Guide

Claiming Limited Company Expenses
As a company director you are required to maintain an accurate account of the business’s finances. One of the biggest challenges can be keeping track of all the expenses incurred in the business.

This guide will give you information on many of the various expenses you can claim. We cover most of the common business expenses, some you may never have thought you could claim.

What is tax relief?
The allowable business expenses you claim through a limited company reduces the amount of corporation tax charged on the profits of the company. Therefore, more allowable expenses results in lower taxable profit and a lower corporation tax charge.

HMRC will allow the claim if the expenses are defined as “wholly and exclusively” incurred in the performance of the business. If there’s a dual purpose for the expense (i.e. if the purchase is used personally) then it is unlikely to be accepted as tax deductible (unless the dual purpose is only incidental).

Your company’s expenses can be paid for in two ways, either directly through the company bank account or as a reimbursed expense when expenses are paid using a personal bank account or personal cash.

Accountancy Fees

Tax relief can be claimed on the full cost of your accountancy fees provided they are incurred on work for your company.

Accountancy services provided for personal use would not be allowable as a business expense.

Accommodation

Tax relief can be claimed on accommodation costs when traveling for business, provided the expense is “reasonable” and not excessive.

If staying overnight in accommodation then “overnight incidental costs” can also be claimed at the following rates:

  • £5 per night for travel within the UK
  • £10 per night for travel outside of the UK

(Meal costs are also claimable; see Travel and Subsistence below.)

Business Mileage

If you use your personal vehicle for business travel you can claim for the mileage covered at the following rates:

Cars and Vans

  • 45p per mile on the first 10,000 miles per tax year
  • 25p per mile on additional mileage

Motorbikes

  • 24p per mile

Bicycles

  • 20p per mile

(Other travel costs can also be claimed; see Travel and Subsistence below.)

Christmas / Annual Staff Outing

You are entitled to hold annual events (such as a Christmas party) as a tax fee benefit providing the following conditions are met:

  • You may invite a partner, but the expense must not exceed £150 per head. So for a sole director company plus the partner, would give you a maximum budget of £300.
  • The event must be mainly for employees.
  • For multiple events over the year, note that the £150 budget is for the annual cost.
Company Formation Fees

Pre-trading expenses such as company formation fees and associated accountancy fees can be claimed.

 

Donations

Charitable donations made to a registered charity, provided they are “wholly and exclusively” for the purposes of trade are allowable.

For this reason, we also advise non-corporate businesses to operate through a separate bank account.

Entertaining – clients / suppliers

Although costs incurred on client or supplier business entertaining can be paid for through the business, these expenses are not tax deductible. The expenses will be added back to profits before calculating the corporation tax charge for the company.

(Staff entertaining is allowable; see “Christmas / Annual Staff Outing” and “Trivial Benefits”.)

Equipment

This covers items that are used in the business and have no or insignificant personal use. Items can include computers, printers, software and office furniture.

 

 

 

 

 

Eye Tests and Glasses / Contact Lenses

You can claim these costs provided they are necessary for using visual display equipment in your duties within the business.

If spectacles or contact lenses are also used personally, they have a dual purpose, and so would not be an allowable expense.

Gifts

A gift to someone outside of the company does qualify for tax relief provided it includes a conspicuous advertisement of the business, it does not consist of food, drink, tobacco or vouchers and is under £50.

 

Pensions

A company can make pension contributions to your pension and receive full tax relief on the cost, though there are restrictions on how much the company can contribute.

Please contact a financial advisor for more information on choosing the right type of pension scheme for your circumstances.

 

 

 

 

 

Printing, Postage & Stationery

Provided they are used in the business these costs are claimable.

Subscriptions

Professional subscriptions paid to HMRC approved trade bodies which are relevant to your employment are allowed.
A full list of HMRC approved bodies is available at the following link; Subsciptions List

Salaries

A salary paid to a director or employee is an allowable company expense as are employer national insurance contributions.

For small companies where a director does not earn employment income elsewhere, it is often tax efficient to pay a director’s salary up to the national insurance threshold.

Telephone and Broadband

A separate business telephone / broadband line is an allowable company expense, provided it is used “wholly and exclusively” for the business.

The business can also provide the directors and / or employees a mobile phone for work use. No issue will arise from personal calls from the mobile.

If however you use a personal home or mobile line for business then you cannot claim for the line rental or monthly contract. Though you can still claim for the extra costs of business calls on this line.

Training

Costs of training courses are allowable provided the training is aimed at improving the skills you currently apply in the business.

On the other hand, the costs would not be allowable if the training offered new skills and knowledge rather than building on existing skills.

Travel and Subsistence

All travel costs incurred for journeys to and from temporary workplaces are allowable for employees / directors. This includes journeys made between destinations during work.

Actual meal costs during worktime at a temporary workplace are also allowable.

Temporary workplace

A workplace is considered temporary if the following conditions apply:

  • Your contract with the client is less than or expected to be less than 24 months.
  • Up to 24 months if the contract is of an uncertain period.

Also, if you do breach the 24 month rule your workplace may still be considered temporary if:

Less than 40% of your working time is spent at the location.

Trivial Benefits

The rules around trivial benefits for employees were recently amended to allow companies a further way of incentivising employees.

In order to provide trivial benefits for employees / directors the following conditions must apply:

  • The benefit must not exceed £50, each time you provide the benefit.
  • The benefit must not be a cash payment, though gift vouchers are allowed (provided they can’t be exchanged for cash).
  • The benefit must not be part of an obligation for the company or pay for the services of an employee.
  • If the benefit is for a director, the annual limit is £300.

Examples of trivial benefits can include gift vouchers, flowers, wine and taking staff out for meals (in addition to the £150 annual staff entertaining allowance).

Use of Home

If it is necessary for you to work at home for your business, then you can claim for a use of home expense through the company.

HMRC will allow you to claim £4 per week without proof of expenditure, however if you think the claim should be higher than this, you can calculate an amount based on a percentage of actual home expenses.

Please note, claiming a percentage of your household costs for business purposes can result in unforeseen tax complications when selling your property; so care should be taken on how you calculate a reasonable home expense.

We’d love to hear from you today

Getting to talk to interesting people running businesses in and around Derby is one of the best things about what we do.

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