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In the digital age how can you make sure your business and accounts are safe?

It has been a busy few months in the world of cyber security. Earlier this year the NHS was crippled by a ransomware attack that saw computers taken over by a screen demanding money to access files. This was followed by a separate attack that saw MPs in Parliament unable to access emails and finally, in June, a number of global companies ranging from FedEx to Maersk across 60 countries were thrown into disarray by a severe attack originating in Ukraine.

All of these events raise fresh questions about how safe we are from cyber-attacks in the business world, and particularly in the world of accountancy and keeping your data safe. Here Jonathan Booty, IT Systems Manager at Chartered Certified Accountants and Chartered Tax Advisers Bulley Davey, speaks about how you can be cyber safe, and what to look out for when choosing your accountant.

“The role of an IT Systems Manager covers just about everything with a plug on it these days! We’re responsible for all IT systems, making sure they’re all operating correctly and are backed up safe and secure. As an accountancy firm we must be particularly vigilant as our client data contains payroll, bank account details and more.”

How can you be cyber safe?

“The most commonly ignored protection for every business is your firewall and broadband router. Your firewall is the connection between your building and the internet. If it’s old it will not be ready for the challenges that we currently face in 2017.

“If you do have an up-to-date firewall and router, it’s always worth checking that you’re using it to its fullest capacity. Lots of new routers and firewalls have security features included free of charge that can be accessed by using your admin log-in.

“Another crucial element to keeping your business safe is ensuring you have up to date software on your computers. Windows 95 was built to manage the threats of 1995, and similarly Windows XP was built to handle the challenges of the early 2000s. It was computers running Windows 95 that allowed the NHS to be so easily attacked this year, so while your computers may operate fine, they won’t be protected against the latest threats.

“One of my key roles as an IT Systems Manager, and most IT supporters will testify to this, is making sure our data is backed up, secure and separated. If your entire system goes down, you need to be sure that your backups won’t go down with it. Test your backups regularly to make sure you can restore your data should the worst happen. Having a good backup means you can delete ransomware safe in the knowledge your data can be restored.

“Finally, to be safe you have to educate the most vulnerable part of IT – the people! Unfortunately colleagues and employees are where you are most likely to see mistakes – it’s simple human error. It’s a story that has played out in every office; someone sees an email that they think is from a colleague, they open the attachment without checking and suddenly a virus is in your system.

“Educate your employees regularly – what info do they give out and who to? Employ a sensible password policy and make sure they know what to open when getting emails. The most common signs are someone pretending to be a client or a director, and trying to create a false sense of urgency in order to rush or frighten you into making a decision. Generally, if it can’t wait ten minutes then it is worth raising with someone.”

What should I look for in my accountant?

“Accountants deal with a lot of confidential and important client data, and carrying out tasks like authorising payroll payments from their clients’ bank accounts. It’s this kind of data that would be very valuable to a potential hacker.

“For this reason we are registered with regulatory bodies that carry out audits on us before we are able to do these things. Further to this you shouldn’t feel shy about asking your potential accountant whether they carry the latest software, up to date systems etc. – all the things we spoke about above. They should understand that you want your data protected to the fullest.

“At Bulley Davey we offer advice and guidance to our clients on cyber-safety. If we’re your accountant then we’re here to help and you’d be surprised about how knowledgeable we are in the security department. It’s key to our everyday working. Furthermore, if you have an IT problem you should talk to someone you trust and as the saying goes – if you can’t trust your accountant, they shouldn’t be your accountant.”

“The best tip I can give is to be vigilant and stay updated whenever you can; whether you do that via a third party IT company or in-house, it will potentially save you countless hours, and possibly more, should you ever find yourself the target of a virus or cyber-attack!”

Top Tips for Internet Security at Work

  • Keep all your computers up to date with the latest software and legitimate antivirus software.
  • Never give out confidential information like account numbers or passwords over the phone or via email where possible.
  • Create strong passwords across the company, keep them private and change them regularly.
  • When on the go, treat all public Wi-Fi networks as a security risk. Never make financial or other sensitive transactions over public networks.
  • Establish a separate visitor Wi-Fi if you can. You don’t want visitors to be able to access your main Wi-Fi network as they will then have access to all of your systems indefinitely unless you change your details or router.

Child benefits and childcare: What to know for parents and business owners.

We all want the best for our children, and child benefits are there to help us when we need that little extra to provide as best we can. So too are employee childcare schemes which are not only beneficial for parents, but make good business-sense too. Laura Bilcliff from Bulley Davey explains the changes and pitfalls for parents and employers to look out for:

“Child benefits are a big pitfall for parents at the minute. In 2013 the government made child benefits means-tested – meaning parents had to prove their earnings sat below a certain threshold in order to receive them – those above received considerably less. Anyone with children can claim for child benefits, but this change means a few things:

  • If both parents individually earn less than £50,000 a year, you can get the full amount of child benefit.
  • If one parent earns between £50,000 and £60,000 a year, a ‘high income child benefit tax charge’ is levied on that £50,000+ income, which has the effect of reducing the child benefit payment by 1% for each £100 earned over the £50,000 threshold. For example, a mother whose partner earned £50,500 would lose 5% of the full child benefit.
  • If one parent earns over £60,000 a year, the tax charge means the child benefit payment is completely cancelled out – so effectively they now get nothing.

“That final bullet point is important. As since the means-test was introduced many parents have stopped claiming, especially those with a parent between the £50,000-£60,000 threshold, or those over it – as it is seen as not worth claiming for the little or nothing they receive.

“However many of these parents, and its estimated there are around 40,000 parents in this situation, don’t realise they are jeopardising their state pension when they retire by not claiming child benefit – even if they won’t receive anything – as they are losing out on the automatic National Insurance payment, which means you could have a smaller state pension when you retire.

“You may be in the position where this won’t affect you and you don’t want to pay the tax incurred for the sake of a state pension you won’t really utilise – in this case you will have to let HMRC know either over the phone (0300 200 3100) or by filling out a form via their website.

“If one parent earns over £60,000 a year and you do want to utilise the NI payments, especially for the lower-income parent, you can claim benefit at a ‘zero rate’. You won’t actually receive any child benefit – but you will still get the NI credits. To apply for this zero rate child benefit, tick a box on the child benefit application form – it’s in section 4 on ‘Higher Income Earners’.

“If you’ve stopped claiming and want to restart it isn’t too late, so long as you have a child under 12 – again in order to do this call 0300 200 3100 or visit the HMRC website.”

Employer Childcare Scheme

As an employer, having happy employees under an Employer Childcare Scheme is not only socially beneficial, but can also be economically beneficial. Changes mean that an April 2018 deadline is in place to get things set up, but it’s not too late! Laura talks us through why:

“I am about to go on maternity leave with my second child and can attest that, as parents return to work, childcare becomes an issue and it can often be a costly one. In 2014 the government announced the Tax-Free Childcare scheme to take affect from this year – with applications open until April 2018. The scheme rivals, but does not replace, the current Employer-Supported Childcare, but crucially it doesn’t require the employer to be involved.

“As an employer the benefits of establishing an employer-supported scheme include not paying National Insurance on Childcare Vouchers – these vouchers can be worth up to £55 per week or £243 a month for employees, but can be done via a salary sacrifice as long as it doesn’t take their earnings below the minimum wage – so you can save up to £402 per year for every employee who signs up to your scheme. Employers can also enjoy tax-relief of up to £1,000 a year, which can be doubled up if both parents are eligible.

“Companies can administer their own scheme, or hire an intermediary, who can do the leg-work in establishing your scheme for a small fee. But the key thing to remember is that only those businesses with schemes established before the April 2018 deadline will be able to see their benefits continue – as parents will only be able to benefit if they sign up to an employee scheme before this date.

“So again, our advice is to look into this and get it established before the deadline. It is good-practice as an employer to help your employees – and there are benefits to be had on both sides. It’s a win-win scenario!”

For more information or to speak to a specialist in your area, please visit bulleydavey.co.uk.


The Insolvency Rules are changing – for better, or worse?

In the past if your business suffered a bad debt from an insolvent customer generally the first you would hear of this officially was by receiving an invitation from an Insolvency Practitioner (the IP) to a meeting of the company’s creditors. The meeting was generally held in the IP’s office or a local hotel for larger company failures. This meeting was chaired by a director of the insolvent company and was the only real opportunity for the creditors of the company to have their say, to put the directors on the spot and to find out where all the money had gone!

The general perception was that this meeting was well attended, lively and entertaining and useful for identifying what had gone wrong in the company and mistakes that had been made. The reality was somewhat different. Creditors very rarely attended these meetings making comments such as ‘I’ve lost money anyway, why lose more travelling to a pointless creditors meeting’. In an effort to recognise and address these concerns the insolvency service set about modernising and updating the existing rules, which were introduced in 1986,  firstly to seek an increase in creditor engagement and secondly to ensure all modern methods of communication could be used in the process generally.  Bulley Davey’s Paul Ward explains some of the changes brought about by the Insolvency (England and Wales) Rules 2016, which came into effect on 6th April 2017:

“The first, and arguably the most significant step was to abolish the meeting of creditors, which at first glance seems an odd way to seek an increase in the level of creditor participation in the insolvency process.  The initial meeting of creditors has been replaced with a variety of ‘decision procedures’ including a virtual meeting, electronic or postal voting or even by way of deemed consent.  We consider that for the majority of cases that we handle it is likely that there will be a virtual meeting of creditors, whereby the creditors will have the ability to dial into a conference call where they will be able to raise questions of the director, in much the same way as they can currently at a physical meeting.

“From the creditor’s perspective the key advantage will be that they will be able to access the virtual meeting from their desk, with all relevant documents relating to the insolvent company’s affairs being available to them on a website, thereby avoiding the significant time and cost of travelling to a physical meeting. Whether this will lead to an increase in creditor involvement in the insolvency process remains to be seen.

“It has to be said however that the physical meeting will not disappear completely. Creditors can still request a physical meeting where certain thresholds are met and it is our view that in the case of some larger more complex cases a physical meeting is likely to be more desirable from both a practical and effectiveness perspective.

“In addition, the new rules bring in other aspects around communication with creditors, to include the ability to opt-out of communications from the IP and also the ability for the IP to merely post reports and notices onto a specific website, thereby saving potentially significant costs for the benefit of the creditors.  We believe this to be a change for the better as we are fully aware that creditors do not always wish to receive large statutory reports in the majority of cases.

“At Bulley Davey we believe that over time these changes to the rules will increase creditor participation at the start of the process as creditors realise that the commitment required to attend the virtual meeting is significantly less than the commitment required to attend a physical meeting.  We do however doubt that creditor engagement during the process will increase where periodic reports are merely placed on websites as there will be no requirement to inform creditors that documents have been published.  Either way we are embracing these new rule changes and can only encourage anybody with an interest to fully participate in the insolvency process for the overall benefit of all creditors.

“It should be stressed that the general duty of the IP to investigate the conduct of the directors and the affairs of the company are not being changed through the introduction of these new Rules.  We continue to encourage and value the input and engagement of creditors as this can be a valuable source of information when carrying out these tasks.


Get ahead of the game and join the digital tax revolution

‘Be careful whose advice you buy, but, be patient with those who supply it.’

These immortal words from Director Baz Lurhmann’s famous song Everybody’s Free (To Wear Sunscreen) are great and apt words for the world of accountancy.

As Chartered Certified Accountants our job is to give advice to our clients built upon a trusting relationship. It was also a relationship built on patience as much of our time was dedicated to the many processes involved with collating, analysing, reconciling and reporting on our clients’ accounts. 

That was an unavoidable reality until recently. Cloud technology is revolutionising accountancy and government changes, set to come into effect in 2018, will cement its importance for all businesses, individuals and accountants.

Mitchell Burden, Director at Bulley Davey, explains why cloud accounting can revolutionise your business:

“Being an accountant comes with a certain stereotype – an out-of-date technophobe who deals in numbers and processes.

“This couldn’t be further from the truth. Cloud accounting software allows you and your accountant to access and analyse your accounts in real-time, at any time, from any online device and securely.

“What does that mean for your average business owner? It means that the processes you and your accountant have to go through are drastically reduced: no more backing up your accounts, mailing them to your accountant; no more software compatibility issues and more.

“Instead of trawling through the invoices and cheque books, reconciling these with your bank statements, producing reports and then discussing them with you several weeks later, we can instantly review the accounts and advise you on how best to develop your business, plan for tax, identify better ways to manage and grow your wealth – it is in these areas that your local qualified accountant remains really valuable.

“Using a system such as Xero, which Bulley Davey has been a partner of since 2013, also allows you to link your account directly to your company’s bank transactions. This means that any payment made using online banking or using your company debit or credit card can be automated into your cloud accounting system – rules can be applied to automatically deal with regular transactions.

“Ultimately, it makes the process much quicker and more accurate. The time saved could then be used more effectively to help your business become more efficient and profitable.

“The government has announced that, starting with Income Tax in 2018, the tax system will move entirely online by 2020.

“So why not get ahead of the game? Starting this process now means that when the switch over happens you’ll be ready and it could help save you time and money.

“We have a number of cloud accounting packages that will help get your business up and running. So take a step to the future and let your business reap the benefits.”


Should you get married for money?

As accountants and tax advisers we are by no means considered to be qualified relationship counsellors or wedding planners.

However, while love, thankfully, still tends to be the primary reason couples choose to get married, recent surveys suggest that less people are choosing to do so. Some surveys suggest that almost one in eight people are living together in a long term relationship as a couple but are not married.

One reason could be that weddings are expensive. The average UK wedding costs over £25,000 according to website, Hitched.co.uk.

But, we have found that a number of our clients weren’t aware of the, sometimes considerable, financial and tax benefits of marriage. Richard Moor, Director at Bulley Davey Wealth Management explains why you should marry for money.

“There are many reasons people get married – some for companionship, others for security and many for tradition – however not many would admit to marrying for money, but you should!

“Firstly, if you and your partner are married you may be entitled to a tax break called the marriage tax allowance. The marriage tax allowance is a little-known way for couples to transfer a proportion of their personal allowance to each other.

“So let’s say we have Richard and Judy. Judy is employed and a higher rate tax payer but Richard is currently unemployed. Both Richard and Judy both have a standard personal tax allowance of £11,000. However, because Richard and Judy are married Richard could transfer some of his unused personal allowance to Judy – up to £1,100. This would mean that Judy could reduce her tax bill by up to £440 each tax year.

“Also while the idea of losing a loved one is not something we like to dwell on, 2017 will see some important changes to inheritance tax for those who are married, that have made it even more worthwhile to marry for money. The most significant of these being the introduction of a new enhanced main residence nil rate band.

“Richard and Judy have been together for 50 years but are not married. Upon Richard’s death, Judy’s inheritance of Richard’s estate will be taxed at 40 per cent of everything over £325,000 (the nil rate band) because he was legally single. Assuming Richard’s taxable estate was worth £1m, this would mean that up to £270,000 would have been lost to the taxman. This allowance will increase to £500,000 by 2020 under the new enhanced nil rate band measures being introduced by the government. The additional £175,000 available by 2020 is to be treated as a separate allowance and will only apply to an individual’s main residence or wealth created from that main residence.

“However, if Richard and Judy were married, there would be no inheritance tax charge on the transfer of Richard’s taxable estate to Judy as spouse transfers are exempt. At Judy’s death her estate would be eligible to claim two times the nil rate band against the value of her personal estate. This would allow her children or next of kin to inherit her estate tax free up to £650,000 as things currently stand. On an estate worth £1 million this would mean their children would pay the taxman £140,000. By 2020 the combined nil rate band and main residence nil rate band will mean it is possible to shelter a £1 million estate from inheritance tax, meaning that Richard and Judy’s children might not have to pay any tax at all.

“Sound confusing? It is a little bit. And, of course, there are instances where this new measure might not be of benefit as well. However, in simple terms, if you would rather pass down your hard earned money and assets to loved ones and family members instead of the taxman we highly recommend speaking to an accountant or tax advisor to see how this could benefit you.”

Bulley Davey and Bulley Davey Wealth Management have a number of offices in the region – Peterborough, Spalding, Wisbech, Oundle, Corby, Stamford, and Holbeach. Visit bulleydavey.co.uk for more information and to speak to an advisor.


No rabbits in this hat 

A personal perspective on the autumn statement from Nick Barks, Director, Bulley Davey

The Autumn Statement was dull. There, I said it.

Does anybody else remember the days when Chancellors stood up, raised a glass of whiskey, talked for 3-4 hours on the tedious detail of macro-economics and tax thresholds and finally right at the end pull a tax-change rabbit out of the hat that left people shocked and excited?

There were certainly no rabbits in Phillip Hammond’s hat yesterday afternoon.

And also, while I certainly do not doubt that there are far too many people that fall into this category, can we agree that JAMs is one of the most awful and patronising acronyms of all time? I am sure that Sir Phillip Green is also ‘Just About Managing’ to retain his yacht at the moment.

At Bulley Davey our focus is on people and how the Chancellor’s numbers impact our clients personally. On that basis it is not the detail of this statement that matters – of most concern to us all will be the overall macro-economic forecasts which predict troubled times ahead, slower than anticipated growth and limited prospect of increased individual prosperity for some time to come.

Perhaps I shouldn’t be too flippant. Some of the details do matter – and my colleagues have put together as ever an excellent summary which you can find on our website. There was good news for business owners with the confirmation of corporate tax reduction and for employees, who saw rises to their personal tax thresholds and National Living Wage.  Further rural rates relief should help businesses outside the urban areas. There are some significant investments in infrastructure for our region, including £27 million for the Oxford-Cambridge expressway (well done to the LEP for securing this!).

But does anyone else feel like they have heard this all before?

And even the attempt to conjure up a last minute rabbit failed. The courageous and correct decision to abolish the autumn statement (which has become little more than a media circus) turned out to be a simple exercise in moving the deck-chairs.  Next year, I think we might have two budgets.  The year after a budget and a six monthly statement, but in the spring not the autumn.  Plus ca change!

Although, perhaps, we are a little harsh on Mr Hammond. This budget was always going to be tough after the shadowy depths of Brexit, and until decisions are made, it feels as if we are all on standby.


What is driving change in the world of company cars?

Company cars are only going to make financial sense in the coming years if they’re very low or zero-rated on CO2 emissions, writes RICHARD MOOR of Bulley Davey. Personal car allowances and personal contract hire may be the way forward.

It’s true to say that the company car was a nice perk in the past, but as benefit calculations have become more and more aggressive over time, its attractiveness started to wane.

Regardless of the amount you actually pay, it’s the new vehicle list price, inclusive of optional extras, that is important for tax purposes. In addition, the CO2 emissions, fuel type and HMRC benefit multiplier are required to calculate the value of the car benefit in kind. For diesel vehicles, there is an additional 3% added to the benefit multiplier percentage.

So the calculation is then pretty straightforward as shown below:

Car

List price

HMRC

Company car taxable benefit for the year ended…

 

Including extras

benefit multiplier

5 April 2016

5 April 2017

5 April 2018

5 April 2019

5 April 2020

 

£

%

£

£

£

£

£

Ford Focus

18,000

21

3,780

       

(Diesel)

 

23

 

4,140

     
   

25

   

4,500

   
   

27

     

4,860

 
   

30

       

5,400

Value of car benefit in kind

3,780

4,140

4,500

4,860

5,400

               

Tax due on car benefit

20%

756

828

900

972

1,080

             

Tax due on car benefit

40%

1,512

1,656

1,800

1,944

2,160

             

Annual increase in tax payable

9.5%

8.7%

8.0%

11.1%

 

The problem is that the HMRC benefit multiplier is set to increase quite dramatically in the coming years, which may pose challenges for businesses and their employees. (The ostensible justification for the rises is the green agenda of reducing polluting vehicles, but we are already in the position where fully electric cars are being taxed, so there’s some room for debate over the true motivations.)

A company that contract hires its fleet may well be locked into an arrangement they can’t escape, which will leave workers out of pocket. In 2016-7, the tax due at basic rate on our Ford Focus would be £828. And it keeps rising year-on-year until 2019-20, when it reaches £1,080. Higher-rate tax payers would find themselves shelling out £2,160.

It seems likely that many businesses may choose to move to a car allowance instead, encouraging their staff to buy or hire a vehicle themselves – perhaps with an instruction that it needs to be less than five years old for the sake of reliability and appearance. Personal contract hire is now easier than ever. Big deposits are no longer required and it’s possible to pick up a car for a competitive price per month, particularly where the user has low annual mileage.

It’s worth bearing in mind that the figures in the table above completely exclude fuel. You have an additional calculation to make if an employee is getting free petrol or diesel.

The long and the short of it is that things are getting tougher and traditional company car arrangements are becoming progressively less attractive. It may be time for you to think ahead.


Why trusts are giving way to Family Investment Companies

For people with significant wealth, Family Investment Companies are now a more fashionable way of planning for the future, argues DAVID WEBB of Bulley Davey.

Trusts have for many years been an option when looking at tax-efficient ways of planning for the future and helping children and grandchildren. Recent changes however have limited what you’re able to put into trust – in most cases to £325,000 in a seven-year period. This is one of the reasons we are seeing more and more interest in Family Investment Companies (FICs), despite the fact that the concept has actually been around for many years.

To start with, just think of a FIC as a company, into which you can build different shares, rights and restrictions, and issue some of these shares to children or grandchildren. It doesn’t have to trade. It can just hold different assets as an investment and it might be possible to transfer an existing portfolio of investments into your FIC, depending on whether this creates any tax charges.  This transfer is often done as a loan, so the initial value put into the company can be withdrawn when you have need for cash.

So why bother?  Well, assets can grow and income then becomes taxable within the company at 20% rather than at the higher rate of personal income tax. With certain investments – dividends from most other companies, for instance – no tax is payable at all within the FIC.  You can choose then whether you want to take some income from the FIC as dividends on your shares, or perhaps you simply “draw down” some of the loan you used to set it up.  Dividends can also be paid to other shareholders, for example your children if they are over 18, or grandchildren, so passing income around the family in the same manner as making payments to them as beneficiaries of a trust.

There are, of course, some downsides. You have the costs and administration associated with setting up a limited company and, in theory, your accounts are a matter of public record, which anyone is free to inspect.  It could be that in the longer term, if the company pays tax on gains and you then take that out as a dividend, that you could pay more tax overall, and obviously tax rules can change in future.

So setting up a FIC isn’t necessarily an obvious and straightforward decision. I recommend doing the due diligence beforehand, and sitting down not only with your accountant, but also a financial adviser and a lawyer. There may, for instance, be implications for your will and you do need to decide when setting the FIC up who you want to be shareholders, and what benefits you want each person to get in future.  By and large however, savings in income tax will often outweigh the potential risks, and there can be longer-term inheritance tax savings too.

Here are some frequently asked questions: 

How do I fund an FIC?

If you create a large director’s loan account, the company founder should be able to withdraw funds in later years with no tax implications.  You may want to partly fund by loan and partly fund by share capital.

 

How does the tax position compare between assets I hold myself and in an FIC?

Corporation tax is currently 20% (income tax up to 45%) and there’s no tax on UK dividends received in a FIC. There are some other benefits that companies can take advantage of, as well as the differing tax rates. 

How is an FIC structured?

A lot depends on what you want to achieve – one of the great aspects of FICs is they are so flexible.  You may have a founder shareholder, for example, who keeps tight control over the FIC, and then different classes of shares for each family member, allowing flexibility over dividends and future asset growth.

You could also still use a family trust – many FICs have trusts as shareholders.  As noted earlier, there is a great deal of choice when setting a FIC up.


Five ways to measure business health

Keep on top of how well your business is performing by monitoring five key indicators, writes MITCHELL BURDEN of Bulley Davey.

There’s an old adage in accountancy: turnover is vanity, profit is sanity and cash-flow is reality. It’s a way of saying that there are numerous measures you can apply when measuring the financial health of your business, but it’s often good to have a rounded picture.

Too often, in a lot of smaller businesses, owners see the annual accounts process as a necessity to satisfy HMRC and possibly their bank. For that reason, it can be left to the last minute. In effect, this can often be nine months after the end of a particular accounting period. So by the time they get an insight into how well their company is doing, the information is no longer up to date.

My advice is to talk to your accountant about receiving management accounts on a monthly or quarterly basis. Then, you need to start looking at the following key indicators:

CASH-FLOW

Everyone talks about it, but how many people really understand its importance? The balance of the money flowing in and out of the business needs to be positive and you can only achieve this with accurate, up-to-date forecasting. You can then start to analyse the reasons for any discrepancies between the projections and your real figures.

TURNOVER

Again, here you should be interested in any differences between your projected turnover and the actual figures. If there are variances, it’s worth having a discussion with your accountant and talking through the implications.

GROSS PROFIT

In a nutshell, your gross profit margin is your income, less cost of goods sold. If this figure isn’t high enough, you won’t be able to cover your overheads and make yourself a profit.

OPERATING PROFIT

Your operating profit figure is your gross profit less your overheads, but will exclude tax and interest. If this figure is too low and you haven’t yet taken money out of the business, you may have nothing to show for your endeavours.

NET PROFIT

This is your total income, less all expenses including interest and tax.

With cloud accounting now becoming increasingly common, it’s actually possible to monitor all these critical indicators in real time. This means you can make comparisons to the same period last year and see whether any improvements you’ve made to your business practices have achieved results.

For further information regarding the benefits of Management Accounts and Cloud accounting please speak to your accountant.

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Invest now and reap the reward

With the general election just around the corner, there’s an element of uncertainty over how the tax regime will change. Accountant RICHARD MOOR of Bulley Davey thinks that now may be an excellent time for businesses to make investments in fixed assets.

In their Green Budget published earlier in 2015, the Institute for Fiscal Studies analysed the growth in overall tax take following general elections. Perhaps unsurprisingly, the think-tank found that there was a strong tendency for taxes to be hiked in the period following the poll.

One area which may come under scrutiny when a new government is formed in May is the Annual Investment Allowance (AIA), which gives qualifying businesses 100% tax relief on the purchase of qualifying fixed assets. The allowance covers most items of capital expenditure although two notable exceptions are building structures and cars.

The AIA is an allowance which has never been so good, as the cap is currently at £500,000 – a figure many small businesses are unlikely ever to approach and which offers a lot of scope for larger enterprises too.

The policy is understandable in the aftermath of the recession, as it’s an excellent way of stimulating investment and boosting the wider economy. But the increase is only temporary and is due to expire in December 2015. The Chancellor announced in his Budget speech, delivered on 18 March 2015, that it “would not be remotely acceptable” for the AIA to reduce to the previous limit of £25,000 and that a new limit will be set at “a much more generous rate”.

This leaves business owners with uncertainty as to the level of revised AIA commencing January 2016. The Chancellor indicated a better time to address this relief will be in the Autumn Statement. So we are all left waiting…

The UK economy is generally a lot stronger now than two or three years ago. It’s a time when investment is on a lot of people’s agendas. My strong suggestion is that if you are considering making capital investments in the near future, it might be best to move ahead now, while you can maximise your tax advantage within the published regime.

You may be one of the many business people who is familiar with the idea of the AIA, but not necessarily keeping a close track of the changes in the cap rate. If so, it’s time to talk to your professional adviser about getting the most out of your allowances while the rules are stacked in your favour.

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