What does your accountant know about property investment and tax? 3

To Let

Property Investment is probably one of the most complicated tax and accounting activities that exists, it can involve:

  • Stamp Duty (SDLT)
  • Income Tax
  • Corporation Tax
  • ATED
  • Capital Gains

And some activities also involve Pensions, Capital Allowances, VAT, CIS…. the list goes on and on

The internet is full of experts but often their advice is conflicting and some of the advice is actually wrong!

Experience gained from working with investors is the key to knowledge and continuous training and updating is vital. We have written hundreds of blogs on tax and accounting.

One of the biggest recent changes is Section 24 restricting interest relief

Landlords will no longer be able to deduct all of their finance costs from their property income to arrive at their property profits. They will instead receive a basic rate reduction from their income tax liability for their finance costs.

Landlords will be able to obtain relief as follows:

  • in 2017 to 2018 the deduction from property income (as is currently allowed) will be restricted to 75% of finance costs, with the remaining 25% being available as a basic rate tax reduction
  • in 2018 to 2019, 50% finance costs deduction and 50% given as a basic rate tax reduction
  • in 2019 to 2020, 25% finance costs deduction and 75% given as a basic rate tax reduction
  • from 2020 to 2021 all financing costs incurred by a landlord will be given as a basic rate tax reduction

The rules don’t apply to companies

I also think that having actual property and construction experience is beneficial.

Back in 2003, we started investing in property with a group of friends and colleagues.

We started by forming a limited company and our first purchase was 3 shops (eastern Eye, Maximum and LMJ) with 8 HMO’s above, there is a picture below

510

We then went on to buy 6 shops with flats above on long leaseholds, we did a title split and put 3 of the shops into SIPP Pensions

691

We then formed another company and purchased a block or 7 HMO’s.

We also bought an Office Block, Industrial Unit and Shops into SIPP and SSAS pensions.

We sold our investment in the companies and focused on commercial property investments in pensions.

steve@bicknells.net

If your accountant prepares your self assessment return is there a taxable benefit? 2

Tax Return Mailing Income Envelope 3d Illustration

Over the years I have heard lots of comments on this, some say a tax return is a personal expense some say its a business expense if the cost is incidental to the accounting work.

For example, lets consider a sole trader, he has to prepare accounts and the only way to report the tax due is on a self assessment return. In many cases the only entries will be the self employed boxes.

Company Directors are probably only doing self assessment returns because they are directors and only the Salary and Dividend boxes will be completed.

We actually specify on our engagement letters to clients who have a businesses that we will complete the Self Assessment Return for Free (FOC) as part of an overall package of fixed fee services.

HMRC guidance states [BIM46450]

There is, however, a longstanding practice of allowing normal recurring legal, accountancy etc expenses incurred in preparing accounts, or agreeing the tax liability, see Statement of Practice SP 16/91 reproduced at EM3981. This has been approved by the courts as a reasonable response to the practical difficulties of apportionment…

It is the practice to allow, in computing profits assessable under Part 2 Chapter 4 of ITTOIA 2005 and under Case I & II Schedule D for companies, the normal accountancy expenses incurred in preparing accounts or accounts information and in assisting with the self assessment of tax liabilities.

So having just started working with Croner Taxwise for client tax investigation insurance, I gave them a call to check the rules and in summary, if the Self Assessment is incidental to the main accounting and tax work then it isn’t a benefit in kind and a separate fee does not need to charged (or assessed) to the business owner.

However, if the client doesn’t have a business, or has complicated tax affairs including capital gains, then they should pay a fee personally.

Equally you can’t claim accountants fees if you are an employee who has to do returns as these are clearly standalone costs and not required as part of your employment as explained in this case – Peter Figg v HMRC TC03703 16th June 2014.

On another note Tax Investigation Insurance is not a tax deductible expense, the reason for this is that you can only claim it as an expense if you are successful in any investigation, if HMRC are successful the fee is non deductible for tax. As you don’t know when or what you might be investigated for its impossible to say whether you will be successful so the best advice is not to deduct the cost against taxable income.

steve@bicknells.net

 

Accountants are the key to small business success 1

Stick Figure Series Blue

Last week the ICAS reported based on IFAC research..

SMEs were shown to traditionally rely on accountants as a main source of business advice. One study identified an 8.1% average increase in sales growth and a 29% decrease in likelihood of failure for businesses using an external accountant.

Also last week smallbusiness reported that 1.3 million britons want to start their own business.

So when would a business need to contact an external accountant?

Picture 1

  • Business Plans
  • Budgeting and Forecasting
  • Cash Flow Management
  • Buy or Rent decisions
  • Capital Investment Appraisal
  • Accounting Procedures and Systems
  • Business Strategy
  • Busines Funding and Investment
  • KPI’s

For start ups its particularly important to ask your accountant to help with:

  • Choosing the right business structure for your business – most businesses start out as sole traders but once they start making profits convert to limited companies, this is because sole traders pay more tax than company structures
  • Choosing the best VAT Scheme you might be better off with Flat Rate or Cash Accounting
  • Choosing the most suitable accounting software
  • Creating a business plan and cash flow forecast – research shows that business that have a business plan make 20% more profit

steve@bicknells.net

 

Things an accountant should do every day 2

junge frau lernt für eine prüfung

Things are changing fast, we now live in a cloud based technology driven world.

Accountants are changing too, clients now:

  • Use cloud based systems to enter transactions
  • Raise invoices online and get paid online
  • Connect their bank accounts to their software
  • Attach copies of receipts to transactions

Accountants should be working on a daily basis with their clients in areas such as…

Business Strategy

Your accountant should be a trusted advisor to your business. Accountants are often aware of business trends, legislation and new technologies so they can work with you to find the best ways to achieve your goals.

Tax Planning

Just processing the numbers isn’t enough, your accountant should be exploring the tax consequences of your proposed decisions, for example

  • the tax payable on an overdrawn Directors Loan Account
  • the benefits of low CO2 emission cars
  • the tax differences between buying and leasing equipment
  • owning investment property personally or in a company
  • Business Acquisition and Disposal tax issues

Regular Calls, E Mails and Meetings

Accountants haven’t been good at this in the past but they need to become accessible to clients. Its no good just having contact once a year to sign off the accounts. For accountants to become business partners clients need to be free to ask them anything whenever they need help or advice. Providing a personal tailored service is a priority and clients now expect it.

Accountants need to respond quickly to clients requests, waiting days for a reply won’t do!

 

steve@bicknells.net

What do you expect from an accountant! 1

Time for the Expert!

The world of accountancy is changing quickly and the days of the dull lion tamer are running out fast

We aren’t all as extreme as the ‘The Accountant 2016’, we definitely don’t work for criminal gangs!

This is the image that I think a modern accountant should have, someone who can solve your problems

There are 2 key reasons why small businesses expect more from their accountant.

  1. In recent years we have seen a huge growth in Cloud Accounting Systems such as Sage One and Xero and automation of payments and bank feeds, its no longer enough for accountants just to provide book keeping or year end accounts and tax.
  2. Business owners want personalised, tailored partnerships with their accountant who need to be true business experts

As Paul Surtees MD of Capitalise says…

Rather than simply easing their professional burden, leading accountants are using technology to go beyond their core proficiency and provide value-added services to their clients.

“Technology is shaping the future of the profession”

This is particularly pertinent to those practitioners with SME clients, where technology is really shaping the future of the profession.
Previously technology had simply increased efficiency and decreased the margin of error.  Now, however, rather than just creating more time in the day to concentrate on value-add services, technology is also helping to actually deliver these new service areas.

For example, accountants are taking on the challenge of SME finance and using online funding comparison services to offer advice and funding matches for clients.

Not only do online marketplaces make it easier to find finance, they also allow accountants to give more thorough counsel on a full range of choices, from indepencent to alternative sources.

Suddenly a business, that would have otherwise just gone to their bank, is now turning to their accountant for advice on suitable peer-to-peer lending platforms.

Another great example of this shift is the use of collaborative software.  As accountants become more like an ‘acting CFO’ for a SME, so too must they become more integrated into the business.

“Changes are being made in real time”

The use of collaborative software allows accountants, and SME owners, joint access to the likes of balance sheets and sales pipelines, for example.  Not only does this allow changes to be made in real time, it also increases transparency for both parties.

Many businesses require the skills of professionals to oversee and direct financial operations. These professionals are referred to CFOs, chief financial officers, or financial directors (FD).

So what should your Chief Financial Officer be doing for your business…..

  1. The CFO should be able to look into to future to see what the future financial needs of the business will be
  2. He/She should negotiate funding facilities to ensure the business can manage its cash flow needs
  3. The CFO should be able to foresee the future tax consequences and risks of decisions
  4. He/She should help the business to achieve the best possible credit scores
  5. Identify ways to reduce costs and improve profitability
  6. Understand the business owners objective and focus the business on achieving those objectives
  7. Ensure financial and regulatory compliance
  8. Ensure accurate and timely reporting of management information
  9. Evaluate growth opportunities
  10. Apply corporate governance

What key questions should you regularly ask your CFO…..

  1. What is our cash cycle and how can we improve it – Cash Cycle Blog
  2. What Key Performance Indicators should we use and what are they telling us – KPI Blog
  3. How can we improve profitability – 15 ways to improve profitability Blog
  4. What is our Business Plan and is it the right plan – Business Plan Blog
  5. Can we reduce Overheads – 10 creative ways to reduce overheads Blog

Picture 1

Many smaller businesses and SME’s can’t afford a Full Time (or even in some cases a Part Time CFO or FD) but they need help with:

  • Business Plans
  • Budgeting and Forecasting
  • Cash Flow Management
  • Buy or Rent decisions
  • Capital Investment Appraisal
  • Accounting Procedures and Systems
  • Business Strategy
  • Busines Funding and Investment
  • KPI’s

Virtual FD’s fill this gap because:

  1. You only pay for what you need
  2. There is no employment contract
  3. It provides access to higher level of expertise (in theory)

But be careful who you choose. There is no law preventing anyone from calling themselves an accountant, and that as a result small businesses could be unknowingly paying someone without the necessary skills to handle their finances and help their business grow, who isn’t regulated or insured against risk.

So what experience does your accountant have to show that they have the skills to be your Virtual FD?

I am sure that in theory they have the technical skills but is that enough?

With the exception of CGMA (CIMA) accountants many accountants in practice have never worked in business let alone been a Finance Director!

The ACCA issued a warning back in 2014 after research from cloud accounting software provider ClearBooks showed just 8 per cent of small businesses considered an accountant’s qualifications when choosing one.

CIMA (Chartered Institute of Management Accountants) Members in Practice are monitored by CIMA for:

  1. Continuous Professional Development
  2. Anti Money Laundering Compliance
  3. Professional Indemnity Insurance
  4. Continuity Agreements
  5. Letters of engagement
  6. Ethical conduct

CIMA operates a Masters degree standard scheme of qualifying examinations for prospective members. It is active in promoting local education, training and management development operations, the promotion of new techniques through its research foundation and the dissemination of management accounting practices through publications and other media related activities. WIKIPEDIA

So what do you expect from your accountant!

steve@bicknells.net

Why doesn’t my accountant remind me to do things? 3

Calendar with thubmjacks

Every business has important dates to remember!

VAT Quarterly (or Monthly), filed one month and 7 days later paid by one month and 10 days later

PAYE/CIS Monthly – tax period to 5th of the month, filed by 19th paid by 22nd (you should remember monthly tasks without reminders)

RTI/FPS/EPS everytime you pay employees (you probably don’t need to be reminded to do this)

Company Accounts – due 9 months after year end, corporation tax payable 9 months and 1 day after year end

Self Assessment payments on account in January and July

Annual Returns on the 12 month anniversary of when the company started

Late Filing Stats

HMRC and Companies House apply tough penalties for filing late!

Its a common problem area, the fine comes in and then accountant and client blame each other

businesswoman is very multitasking

Its easy to understand how very large accounting practices simply lose track of when things need to be done

But it doesn’t have to be like this.

There are lots of ways your accountant could keep track of all the deadlines

Here is a list that I found on accountingweb posted by Howard Marks http://www.accountingweb.co.uk/anyanswers/question/practice-management-ultimate-list

AffinityLive (not accountant specific)

BTC PM Solution

Capium Practice Management

CCH Practice Management

CentreCRM

Digita Practice Management

Firmzen

Glide

HQ4A

Iris Practice Management

Logical Office

MB Practice Manager

OMS

Practice Flow

Practice Launchpad

Work etc (not accountant specific)

WorkflowMAX

My personal favourite is PracticeFlow, I have started using it for Bicknell Business Advisers.

Its not just dates you need to keep track of, if you are going to send out client reminders you will need UTR’s and amounts due. You Also need to track tasks and who has been allocated the work. PracticeFlow helps us do all of this and you can set sub-tasks and have 3 dates – start, planned to complete and deadline.

So why isn’t your accountant reminding you of important dates?

Last minute panics or penalties can be very stressful, makesure you know your deadlines or get reminders so that you can relax!

Working by the sea

 

steve@bicknells.net

Why your SME needs a CGMA CFO! 1

Flying Superhero

Many businesses require the skills of professionals to oversee and direct financial operations. These professionals are referred to CFOs, chief financial officers, or financial directors (FD).

So what should your Chief Financial Officer be doing for your business…..

1. The CFO should be able to look into to future to see what the future financial needs of the business will be
2. He/She should negotiate funding facilities to ensure the business can manage its cash flow needs
3. The CFO should be able to foresee the future tax consequences and risks of decisions
4. He/She should help the business to achieve the best possible credit scores
5. Identify ways to reduce costs and improve profitability
6. Understand the business owners objective and focus the business on achieving those objectives
7. Ensure financial and regulatory compliance
8. Ensure accurate and timely reporting of management information
9. Evaluate growth opportunities
10. Apply corporate governance

What key questions should you regularly ask your CFO…..

1. What is our cash cycle and how can we improve it – Cash Cycle Blog
2. What Key Performance Indicators should we use and what are they telling us – KPI Blog
3. How can we improve profitability – 15 ways to improve profitability Blog
4. What is our Business Plan and is it the right plan – How can you create a Business Plan
5. Can we reduce Overheads – 10 creative ways to reduce overheads Blog

Many smaller businesses and SME’s can’t afford a Full Time (or even in some cases a Part Time CFO or FD) but they need help with:
• Business Plans
• Budgeting and Forecasting
• Cash Flow Management
• Buy or Rent decisions
• Capital Investment Appraisal
• Accounting Procedures and Systems
• Business Strategy
• Busines Funding and Investment
• KPI’s

Expert Advice Fotolia

Virtual FD’s fill this gap because:
1. You only pay for what you need
2. There is no employment contract
3. It provides access to higher level of expertise (in theory)

But be careful who you choose. There is no law preventing anyone from calling themselves an accountant, and as a result small businesses are unknowingly paying someone without the necessary skills to handle their finances and help their business grow.

So what experience does your accountant have to show that they have the skills to be your Virtual FD?

I am sure that in theory they have the technical skills but is that enough?
With the exception of CGMA (CIMA) accountants many accountants in practice have never worked in business let alone been a Finance Director!

I happen to think that time served experience as a CFO does make a difference because it greatly improves your insight and skills.

Would you get on a plane with a Pilot who in theory knew how to fly but had never actually piloted a plane before?

When you choose a Virtual FD you are trusting them with the success of your business. Choose wisely!

CIMA operates a Masters degree standard scheme of qualifying examinations for prospective members. It is active in promoting local education, training and management development operations, the promotion of new techniques through its research foundation and the dissemination of management accounting practices through publications and other media related activities. WIKIPEDIA

Chartered Global Management Accountant™ (CGMA®) is the global designation for management accountants. It’s powered by the resources and expertise of AICPA and CIMA, two of the world’s leading accounting organisations.

steve@bicknells.net

 

Why it’s good to be an accountant in Bournemouth Reply

Bournemouth Beach Dorset

Bournemouth is a fantastic place, 7 miles of lovely beaches, the UK’s largest shopping park – Castlepoint, close to Poole Harbour, the New Forest and Purbeck, what more could you want.

I love Bournemouth, I have lived here all my live.

According to the 2011 census, the town has a population of 183,491 making it the largest settlement in Dorset. The mid-2014 estimate was 191,400. It is predicted to reach 225,000 by 2037, according to the Office for National Statistics’ 2012 (ONS) projections.

It has quite a few accountants too, if you search for Accountant Bournemouth on Google you get a list of 80 practices to choose from, but there are probably many more. There are also hundreds who work in Businesses.

According to Manta there are 5,433 companies based in Bournemouth, there will be many more businesses when you include Sole Traders and Partnerships.

The Local Economy is dominated by

Finance

Banking, Finance and Insurance are the most valuable sectors in Bournemouth’s economy.

JP Morgan established their Global Technology Hub in Bournemouth in the 1980’s and during the late 1980’s I worked as an Assistant Management Accountant in their Financial Management Group. RIAS, McCarthy & Stone and Liverpool Victoria all have their Head Quarters in Bournemouth.

Creative & Digital

According to the Telegraph

Bournemouth, coming from a very low base, has become the UK’s fastest-growing city in the digital economy

 

Digital Companies

Bournemouth Council states that there are over 400 digital agencies across Bournemouth

These business are among the most suited to use Cloud Based Accounting for example Sage One and Debitoor.

Service Sector

Since 1991 there has been major growth in services up 25.6% in Public Administration, Education and Health.

Tourism

Bournemouth is famous as a seaside resort and 6.88 million visitors came to Bournemouth last year and spend £501 million in the town.

We also have the Bournemouth International Centre – BIC – run by BH Live – BH Live also runs a range of leisure facilities in Bournemouth.

With over 2.5 million visits a year and over £31 million turnover, BH Live is changing lives – placing it at the heart of the UK’s growing social economy. Last year, BH Live hosted 423 shows, sold over half a million cultural, sporting and entertainment tickets, clocked up 1.8 million leisure centre visits and welcomed 88,000 conference and exhibition delegates which contributed over £45 million to the local economy.

Bournemouth Airport

Over 600,000 people use our Airport which has flights to over 35 destinations

Bournemouth University

The University has 18,000 students and 2,000 staff

It’s great place for accountants to study and their courses are accredited by the relevant accounting professional bodies – Chartered Institute of Management Accountants (CIMA), Association of Chartered Certified Accountants (ACCA), Institute of Chartered Accountants in England and Wales (ICAEW), Association of International Accountants (AIA), Chartered Institute of Taxation (CIOT)

According to the local Recruitment Agencies, for example CMA, demand for accountants is high and so are salary levels, take a look at the 2014 CMA Salary Survey

So why is it good to be an accountant in Bournemouth?

Bournemouth is a dynamic and growing business hub, with a high demand for accountants, it’s a fantastic place to live and has endless opportunities for accountants both in business and practice.

Can you think of a reason why you wouldn’t want to be an accountant in Bournemouth?

Do you know an accountant like this one…

 

BCTC-proud-to-be-members-logo

www.bicknells.net

steve@bicknells.net

Contact Us

More than just accountants – Clients expectations are changing 1

Expert Advice Fotolia

There are 2 key reason why small businesses expect more from their accountant.

  1. In recent years we have seen a huge growth in Cloud Accounting Systems such as Sage One and Debitoor and automation of payments and bank feeds, its no longer enough for accountants just to provide book keeping or year end accounts and tax.
  2. Business owners want personalised, tailored partnerships with their accountant who need to be true business experts

So what are accountants doing differently?

The Virtual FD

According to Accounting Web….

Half the firms entering the Practice Excellence Awards this year (PEA15) offer management information as part of their service for business clients – up from 33% in 2014. One reason for this jump is that the approach has been shown to have a very beneficial effect on client satisfaction and practice profitability. Probably because it serves a fundamental client need.

Many smaller businesses and SME’s can’t afford a Full Time (or even in some cases a Part Time FD) but they need help with:

  • Business Plans
  • Budgeting and Forecasting
  • Cash Flow Management
  • Buy or Rent decisions
  • Capital Investment Appraisal
  • Accounting Procedures and Systems
  • Business Strategy
  • Business Funding and Investment
  • KPI’s

Virtual FD’s fill this gap because:

  1. You only pay for what you need
  2. There is no employment contract
  3. It provides access to higher level of expertise (in theory)

But here is the key question you should ask your accountant – Have you actually ever worked in business or been an FD?

It seems bizarre to me that so many accountants offer this service and yet have no experience as an actual FD

Weekly Management Reports

Accounting Web reports…

While many practices are becoming the finance team that puts together monthly reporting packs for company managers, Receipt Bank founder and CEO Alexis Prenn argues that monthly management accounts are not the future of accountancy. Cloud technology has changed the dynamic of accounting so much that advisers should be thinking more creatively about what they could do with this information.

What if accountants and businesses could get their hands on transactional data even more quickly and efficiently? Why not produce weekly management accounts?

In a scenario that is familiar to accountants on the Australian accounting conference circuit, specialist bookkeepers are now doing this for Antipodean coffee houses and eateries. “Cafés can run up costs very quickly – if you have three unprofitable weeks, you’re sunk. With online tools and transaction capture, the café can close its books on Sunday and get the weekly management accounts by Tuesday,” Prenn said.

I can see this being of great value in some businesses and cost effective with cloud accounting.

Business Planning and Forecasting

Sage suggest

Sage Planning

steve@bicknells.net

Contact Us

Are you too busy to do your accounts? 1

businesswoman is very multitasking

When you start a business its because you have a skill or product that clients want and most small businesses put off the accounting because they find it boring, time consuming and unproductive. This often causes huge problems with tax, cash and business management.

What if it wasn’t boring, what if it was easy and quick to do?

  1. Apps for invoicing
  2. Available every where all the time on all your devices
  3. Automatic bank feeds to reduce data entry
  4. Dashboards of key data
  5. Easy access for you and your accountant

That’s why cloud accounting systems are the future. Take a look at this infographic produced by Sage.

 

https://sage-exchange.co.uk/image/528f785dccea4_sage-infographic-guide-to-cloud-accounting.png?transform=max&width=427

Obi Wan Kanobi might not be you’re only hope, cloud accounting could save your business.

steve@bicknells.net