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Period End Procedures
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Many companies have a year end of 31st March, this conveniently coincides with the personal tax year. This makes it clear what a proprietor will have received from their firm or business in a personal tax year. So many businesses are currently planning how to improve their tax position with both personal and business taxes. How should you prepare for the imminent year end?
There are several sources of information about the year end:
Guidance on Tax matters on the SAL website
Have a look at our Tax Busting Checklist.
How to prepare your business for year end
To prepare for each year end a full set of period end and year end procedures are given in the online guide, Tricks of the Trade that we provide for MYOB and AccountEdge users.
The period end usually run as either a quarter (or as a month) is covered in section 20. You should prepare for the year end itself at section 21.
Acclivity
Another source of information is from Acclivity. Go to ‘Help’ on the top right of your accountedge screen. Hit the first option (‘Accountedge Pro Help’) on the list. You will find an option on the left for ‘Period End Procedures’. You can click this link in your browser: http://help.acclivitysoftware.com/ca/ae13/endofperiod.028.10.htm#1087749
This has a full up to date briefing on end of period procedures which you can guide you. Bear in mind that some of the nomenclature is aimed at the North American market rather than the UK. However, all the procedures are more or less the same. Their seven stage procedure though is quite comprehensive.
The main difference between the Simple Accounting procedures and the Acclivity guide is Task 3 ‘Providing Information to your Accountant’ is usually best done with print outs and pdfs of the final balances and some of the control reports. These reports then should confirm the balances on the control reports.
Simple Accounting uses the whole datafile. Any corrections that we make are fed back into the database that you use. This is why we need unfettered access to your raw data at every year end.
Tax Tricks
If you want to deflate your profits legitimately in the current year and so reduce your corporation tax, make sure you do the following.
1. Do a thorough stocktake. However be very careful to devalue all of the items that can be legitimately valued at lower than they originally cost
2. Incur Expenditure. You need to at least make commitments to pay in advance of the year end to allow a proportion of the cost to be regarded as incurred in the current year
3. Deferred income. If you’ve received money that is in the nature of an advance or a deposit from a customer make sure you notify your accountant that you wish to defer it until the following year.
4. Bad Debt provision. Make sure that your debts are all current. Those that aren’t can be subject to a provision for the following year in case they are not paid.
5. Advancing capital expenditure
6. Accruing any bonus pay
7. Accruing any holiday pay due but not yet taken at the year end
8. Allowing for Class1A Insurance on P11d benefits that haven’t yet been declared to the HMRC.
9. Committing money for recruitment commission, advertising and promotional expenditure before the end of the year.
Capital Expenditure
One longer-term opportunity this year end relates to those spending larger amounts on capital equipment. From the beginning of January 2016 you are only entitled to claim 100% tax relief on £25,000 worth of capital expenditure per year. For the year end 31st December 2015 you could claim £500,000. It is therefore better to incur capital expenditure (or at least commit incur capital expenditure) before the end of this calendar year. If the £25,000 limit is going to be exceeded next year you should take particular care to advance your capital expenditure into 2015 that otherwise might be incurred in 2016.
More Information
You can get more information from our tax briefings. Note: you do need to login to access some of our helpsheets (note that when you registered your password was initially set as accountant).
If you need advice on period end procedures please feel free to call us on 01422 847500.
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Salary, dividend or pension contribution? |
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Child benefit claw-back |
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When you work for
your own company you can decide how much salary to pay yourself, how
much to pay into your pension fund, and what proportion of the remaining
profits to take as a dividend. The split is important as it will affect
the tax and national insurance payable by you and your company.
A salary just sufficient to be covered by your personal allowance
(£10,600 for 2015/16), will be tax free, assuming you have no other
income. However, if your company has more than one employee (including
directors), a salary of over £10,000 (for 2015/16) will mean the recipient has to be automatically enrolled in the company’s pension scheme, under the auto-enrolment rules.
You must pay national insurance contributions (NIC) at 12% on your salary above £8,060. So if the company pays you £10,600, you take home £10,295 after NIC deductions. The company will also pay employer’s NIC of £343.34 on that salary. However, most companies are entitled to an employment allowance of £2,000 p.a. to set against NIC due for all the employees. This means the company doesn’t pay over employer’s NIC until the £2,000 allowance is used up.
You could pay yourself a salary just under the NI threshold of £8,060, so you receive an NI credit towards your state pension, but you don’t actually pay any tax or NI. However, at that annual salary level you will be “wasting” £2,540 of your tax free personal allowance, unless you have other income to cover it. The 1/9th tax credit attached to a dividend can’t be repaid even if the dividend is covered by your tax free personal allowance.
Finally, don’t forget your company can make contributions into your pension scheme and get a tax deduction for the cost.
The implications of drawing funds out of a pension scheme can be complex and irreversible, so you should take advice from a financial adviser registered with the financial conduct authority (FCA) before making any decisions concerning pensions.
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If you or your spouse/partner claim child benefit, and at least one of you has adjusted net income of £50,000 or more for the year, the highest earner must declare the benefit on their tax return in order to pay back part or all of the child benefit as a tax charge.
HMRC is writing to taxpayers who it thinks should have paid the child benefit tax charge for 2013/14, but didn’t. Unfortunately some people who have received such letters are childless, or haven’t claimed child benefit for decades.
If you have received one of those letters by mistake, don’t ignore it. HMRC can alter your tax return to collect the tax it thinks is due. You need to reject any such incorrect alteration to your tax assessment within 30 days, but we can help you do this.
Read More
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AccountEdge Printer Error
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March Questions and Answers |
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Printer Error #5 can be generated two ways:
1. AccountEdge requires you have a default printer selected on your computer system. If no default printer is selected, or no printer driver is installed, Printer Error #5 is displayed. To resolve this:
Windows:
Select a default printer in Windows by going to your Control Panel > Printers. Highlight your Printer and select Set as Default
Mac:
On the Mac, select Printers & Scanners in System Preferences, and set the default printer
If the correct printer is already set as the default, and you get Error #5, try setting another printer as the default printer. Then select and set the desired printer as the default, and reboot the machine. This sometimes clears the problem.
2. If the problem isn’t cleared on a Windows system, User Access Control (UAC) is being used on Windows Vista, Windows 7, and Windows 8. In cases where UAC is being used, you can run AccountEdge Compatibility mode. This compatibility mode will permit AccountEdge to run in XP Compatibility mode, and run with Administrator privileges.
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Q. In the February newsletter you said holiday pay was not a contractual right. I don’t understand how that can be the case. Please explain.Answer
Q. My company uses the flat rate VAT scheme, so we don’t reclaim VAT on the things we buy. When I set up the company it bought some office furniture for £1,500. I am now moving to new offices and selling the old furniture. Must the company charge VAT on the sale of the furniture even though it didn’t reclaim VAT when it purchased the items?
Answer
Q. I run a pub which has a cash machine (ATM) inside. I’ve just received an extra business rates bill from the local authority in respect of the cash machine for £3,600! They haven’t charged a separate bill for the ATM before now. Is there anything I can do?Answer
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19/22 – PAYE/NIC, student loan and CIS deductions due for the month to 5/3/2015
31 – Last minute tax planning for the 2014/15 tax year. Ensure you use up all exemptions to which you are entitled
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Please contact us if we can help you with these or any other tax or accounts matters.
In addition, if there’s anyone else who you think would benefit from the newsletter, please forward the email to them or ask them to contact us to be added to the newsletter list.
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If you are not already a client and are interested in becoming one, we would love to discuss how we can help and provide you with a competitive quote for our services.
See details of our Business Companion Service.
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Simple Accounting Limited offers a cost effective Business Companion service to business owners who use MYOB, Acclivity, Mamut, Solar Accounts, Quickbooks, Yodlee or Clearbooks.
‘All clients using these software packages can benefit from our support. Visit our website http://www.simpleaccounting.co.uk for a look at the resource on offer.’
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