THE TAX YIELD derived from HM Revenue & Customs investigations into the affairs of small- and medium-sized companies rose by 31% over the last 12 months, according to UHY Hacker Young.
Compliance investigations into SMEs generated £565m for HMRC in 2012/13, up from £434m in 2011/12, with the year ending March 31. Accountancy Age
Some investigations are random and some as a result of HMRC task forces, but many are triggered by risk profiling.
What can you do to reduce your chances of being selected:
1. File your tax returns on time and pay what you owe – If you file late or at the last minute HMRC will think you are disorganised and as such there are more likely to be errors in the return
2. Declare all your income – HMRC get details of bank interest and other sources of income, sometimes they test them and match them to returns
3. Use an accountant – Unrepresented taxpayers are more likely to be looked at, mainly because many of them don’t know what they are doing
4. Trends – if your business doesn’t match the profile of similar business in the same sector or your results suddenly fluctuate it could raise concerns at HMRC, for example, if you suddenly request a VAT refund
5. Tax Avoidance Schemes – if you are using a tax avoidance scheme I am sure HMRC will be looking closely, if they can find a way to challenge the scheme then at some point they will
Under the Regional Employers NICs Holiday scheme, new businesses could have qualified for a deduction of up to £5,000 from the employer NICs that would normally be due – for each of the first ten employees they take on.
The National Insurance contributions (NICs) holiday was available to new businesses that started up during the period from 22 June 2010 to 5 September 2013. So it has now ended.
But from April 2014 the good news is that every employer will save up to £2,000.
To take advance of the allowance, firms will simply have to inform HM Revenue & Customs, and the Treasury says it will be “delivered through standard payroll software”.
Up to 450,000 small businesses will no longer pay national insurance contributions from April 2014.
The allowance will cost almost £6bn over five years.
When George Osbourne announced it in the budget he said:
“For the person who’s set up their own business, and is thinking about taking on their first employee – a huge barrier will be removed. They can hire someone on £22,000, or four people on the minimum wage, and pay no jobs tax,”
So we look forward to claiming our £2,000 next year.
There are 3 sizes of companies to consider when preparing your accounts; small, medium or large. There are thresholds for turnover, balance sheet total (meaning the total of the fixed and current assets) and the average number of employees, which determine whether your company is small or medium-sized. Any companies that do not meet the criteria for small or medium are large companies and will have to prepare and submit full accounts.
A small company can prepare and submit accounts according to special provisions in the Companies Act 2006 and the relevant regulations. This means that they can choose to disclose less information than medium-sized and large companies.
The Thresholds are:
Sales must be below
£6.5m net or £7.8m gross
Balance Sheet Total
£3.26m net or £3.9m gross
Average no. of employees
A small company must meet at least two of the conditions above.
Generally, small company accounts prepared for members include:
a profit and loss account
a full balance sheet, signed by a director on behalf of the board and the printed name of that director
notes to the accounts
group accounts (if a small parent company chooses to prepare them)
And they should be accompanied by:
a directors’ report that shows the signature of a secretary or director and their printed name
an auditors report that includes the printed name of the registered auditor (unless the company qualifies for exemption from audit and takes advantage of that exemption)
For financial years ending on or after 1 October 2012 a small company only needs to qualify as small to be exempt from Audit.
Even if a small company meets these criteria, it must still have its accounts audited if a member or members holding at least 10% of the nominal value of issued share capital or holding 10% of any class of shares demands it; or – in the case of a company limited by guarantee – 10% of its members in number.
A medium company must meet at least two of the conditions above for medium companies.
Medium-sized accounts must include:
a profit and loss account
a balance sheet, showing the printed name and signature of a director
notes to the accounts
group accounts (if appropriate)
And should be accompanied by:
a directors’ report including a business review showing the printed name of the approving secretary or director
an auditor’s report that includes the name of the registered auditor unless the company is exempt from audit
Medium-sized companies may omit certain information from the business review in their directors’ report (that is, analysis using key performance indicators so far as they relate to non-financial information). Also a medium-sized company which is part of an ineligible group can still take advantage of the exemption from disclosing non-financial key performance indicators in the business review.
Medium-sized companies preparing Companies Act accounts may omit disclosure with respect to compliance with accounting standards and related party transactions from the accounts they send to their members.
Abbreviated accounts of a medium-sized company must include:
the abbreviated profit and loss account (this must be full if preparing IAS accounts)
the full balance sheet showing the printed name and signature of a director
a special auditor’s report showing the printed name of the registered auditor
the directors’ report showing the printed name of the approving secretary or director
notes to the accounts
What is a dormant company?
A company is dormant if it has had no ‘significant accounting transactions’ during the accounting period. A significant accounting transaction is one which the company should enter in its accounting records.
When determining whether a company is dormant you can disregard the following transactions:
payment for shares taken by subscribers to the memorandum of association
fees paid to the Registrar of Companies for a change of company name, the re-registration of a company and filing annual returns
payment of a civil penalty for late filing of accounts
How long do I normally have to file my accounts?
The time normally allowed for delivering accounts to Companies House is:
9 months from the accounting reference date for a private company
6 months from the accounting reference date for a public company
You can submit the following accounts online:
dormant company accounts
small full audit exempt accounts
small audit exempt abbreviated accounts
Failure to deliver accounts on time is a criminal offence.
The date workers are enrolled depends on the size of the company they work for and is being rolled out over the next six years (this is called a staging date).
Large employers (with 250 or more workers), have started automatically enrolling their workers and will continue to February 2014 (some employers may choose to start earlier)
Medium employers (50 – 249 workers) will have to start automatically enrolling their workersfrom April 2014 to April 2015
Small employers (49 workers or less) will have to start automatically enrolling their workers from June 2015 to April 2017
New employers (established after April 2012) will have to start automatically enrolling their workers from May 2017 to February 2018
Employers who chose to use Defined Benefit or Hybrid Schemes can delay their staging date until 30 September 2017
You can postpone the start of Auto Enrolment for up to 3 months and then re-test for eligibility using this method could mean that Temporary Staff Agencies could avoid Auto Enrolment for their temps. This also means that many agencies will use NEST because other pension schemes will not want to sign them up as they many not actually receive any contributions.
Agency workers are different from other workers and so present particular challenges. Many are seeking work for only a short period. Many will register with a number of different agencies and will, in fact, only be ’employed’ by a particular agency for a short period. The auto-enrolment obligation applies to all workers who meet the age and earnings thresholds, but there are options which may assist those employing high churn groups of workers.
Employers can make workers wait up to three calendar months before enrolling them into a pension scheme. If the worker has left by the end of that three-month period, then there is no need to provide that worker with a pension.
If you do postpone, make sure you follow the rules otherwise there could be harsh penalties under the Pension Act 2008 Section 45
Offences of failing to comply(1)An offence is committed by an employer who wilfully fails to comply with—
(a)the duty under section 3(2) (automatic enrolment),
(b)the duty under section 5(2) (automatic re-enrolment), or
(c)the duty under section 7(3) (jobholder’s right to opt in).
(2)A person guilty of an offence under this section is liable—
(a)on conviction on indictment, to imprisonment for a term not exceeding two years, or to a fine, or both;
(b)on summary conviction to a fine not exceeding the statutory maximum.
SME’s often mis-understand the purpose of a Finance Director and the value they can bring to a business.
The job of a finance director is not just about producing regular accounts: they can help your company with strategy and development. If you want a small, stable business, then you can settle for a risk-averse book-keeper. But a good FD is key if you are growing your business because FDs develop future financial forecasts and push business growth. [Smarta]
So what should your Finance Director be doing for your business…..
The FD should be able to look into to future to see what the future financial needs of the business will be
He/She should negotiate funding facilities to ensure the business can manage its cash flow needs
The FD should be able to foresee the future tax consequences and risks of decisions
He/She should help the business to achieve the best possible credit scores
Identify ways to reduce costs and improve profitability
Understand the business owners objective and focus the business on achieving those objectives
Ensure financial and regulatory compliance
Ensure accurate and timely reporting of management information