tax
Tax doesn’t have to be taxing…Part Two
from Cockpit Arts Making It Blog:
By Dean Shepherd
This is the second part of two posts by Dean Shepherd. Click here to see part one
If you are attempting to complete your own tax return then it really is imperative that you use HMRC’s online filing system to do so. There are a number of reasons why. Firstly, there are many built in checks to ensure that you do not inadvertently enter incorrect information into any of the boxes. This may be as simple as checking your columns all add up or maybe something more intricate such as the ability to make certain claims and elections relevant to your circumstances.
Secondly, your tax bill will be calculated instantly on screen so you immediately know how much has to be paid and by when. No need to wait for a paper return to be processed and a tax calculation to be sent to you. Finally, you get longer to submit your return. The filing deadline for paper tax returns is 31st October whereas online returns do not have to be filed until three months later on 31st January. Further point: In order to use the online filing system you need to register your details and HMRC will provide you with an activation code through the post. It may therefore take a couple of weeks to set up and cannot be done the night before the filing deadline!
Business Payment Support Service
In the November 2008 pre-budget report the government announced a new Business Payment Support Service whereby businesses experiencing cash-flow difficulties could postpone certain payments of tax and set up instalment plans to spread the cost. This service is still in operation and is very useful for businesses wanting to pay their various tax bills via instalments. Most taxes are covered: Self Assessment, VAT, PAYE and Corporation Tax. All you need to do is call the helpline (0845 302 1435) prior to the tax liability falling due and agree an instalment plan over the phone. This service has been used very successfully by many of my clients.
Further point: You must call prior to the due date and if you go to them with an instalment plan in mind (e.g. tax to be paid in equal instalments over the next six months) then they are more likely to give you an immediate decision over the phone.
About the author:
Dean is an accountant and founder of Tax By Design, a firm specialising in helping small businesses in the creative sector. He is a member of the Chartered Institute of Taxation and holds a 1st class honours degree in Multimedia Design. He will be running Free Tax Surgeries over the summer in both Holborn and Deptford studios and will be giving a Tax Return Made Easy seminar in January for anybody that has left their Tax Return to the last minute! To find out about our workshops and the other events and services we offer join our mailing list.
I hope you find the above links useful. If you have any of your own to add then please leave a comment for others to read below.
Tax doesn’t have to be taxing… part one
from Cockpit Arts Making It Blog:
….unless of course you have better things to do with your time than read through the pages and pages of manuals, help sheets, leaflets and guidance notes on the HM Revenue & Customs website. The help sheets on completing your tax return alone stand at more than a thousand pages and they include nothing about VAT, National Insurance, PAYE or any of the other tax issues that small businesses face. That said, if you know where to look, there can be some very useful gems on the website and I have outlined some of the better ones below:
Working from Home:
Just because you rent a studio it does not mean that you cannot claim for business use of your own home. Many studios are not suitable for storing all the important financial paperwork which means the business is effectively operated from home. In the good old days accountants, like myself, used to advise clients to estimate the additional costs they incur from having to operate their businesses from home. This may have been an extra £5 or £10 per week, depending on the type of business, but relatively small amounts in terms of tax savings. However, when HMRC were forced to publish all their internal guidance manuals, we discovered a list of examples that are much more generous. HMRC have inadvertently confirmed that all businesses operating from home should claim a proportion of their rent, rates, service charges, mortgage interest, council tax, gas, electric, repairs and insurances. Some accountants to this day argue over whether council tax should be included but it is listed in black and white within HMRC’s own guidance and anyone not claiming is paying too much tax. Make sure you make that claim.
The Employment Status Indicator Tool:
Rather than take on members of staff and deal with the administrative burden that comes with being an employer, many small businesses will use freelancers and sub-contractors to take up the slack when things are busy. This is all well and good but what happens if HMRC come along and say that you should have put them on the books and deducted tax and national insurance contributions at source. Well, if you are unsure whether someone should be treated as an employee or a freelancer then use HMRC’s Employment Status Indicator Tool. You work through a series of questions and the tool then tells you whether they should be an employee or whether they can be paid as a freelancer. Nothing gets sent to HMRC and you do not give any personal details. However, a reference number is generated so if HMRC ever question your decision then you can state that you used their ESI Tool and present them with the reference number as evidence. Further point: The ESI Tool is not 100% accurate so if you disagree with its outcome then it is best to discuss your concerns with an accountant.
Read more tax advice in part two published soon…
About the author: Dean is an accountant and founder of Tax By Design, a firm specialising in helping small businesses in the creative sector. He is a member of the Chartered Institute of Taxation and holds a 1st class honours degree in Multimedia Design. He will be running Free Tax Surgeries over the summer in both Holborn and Deptford studios and will be giving a Tax Return Made Easy seminar in January for anybody that has left their Tax Return to the last minute!
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Financial support for your business
Naturally, most people are interested in any financial support for their business.
As a creative business adviser, I have helped hundreds of creative entrepreneurs over the years. Often, their enterprises are receiving financial support – from themselves !
This is because they are not taking into account the cost of things like use of a family computer, personal mobile phone, a back-bedroom office, or car. By ignoring the cost of these essential resources, they become ‘hidden subsidies’ to the business.
Ironically, as a result, these businesses lose money.
One effect is that they pay more tax because they seem to be making more money than they really are as a consequence of not including all their business costs.
More seriously, they often lose money because they charge customers too little. By ignoring these hidden costs, they kid themselves that the price they charge customers creates a profit. But when I help them to calculate and understand the full costs of their business, we often find that the price charged is too low to cover all the true costs of the enterprise.
This problem comes to a head when they need to buy new equipment and there isn’t enough money in the bank account – because they haven’t put money aside to acknowledge the depreciation of computers, cameras or other equipment.
As the business grows, its unprofitability becomes clearer. The true costs come out of the woodwork as the creative entrepreneur has to write cheques for office space, software, transport etc – things that were previously provided free by family, friends or themselves.
So the main reason I urge people to calculate all these hidden costs is so that they fully understand the economics of their business.
I find that those creative entrepreneurs who do this are the ones that charge their customers the right prices/fees – and consequently generate enough income to make their creative enterprise profitable and sustainable.
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There’s more about making your creative enterprise even more successful in my book ‘T-Shirts and Suits: A Guide to the Business of Creativity’ (also available as a free eBook) and further ideas and information on the T-Shirts and Suits blog.
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Copyright © David Parrish 2010.
www.davidparrish.com
find the fun in numbers
The successful entrepreneur has many attributes, including energy, ambition, confidence, perseverance and charm. My experience as a mentor leads me to suggest another very common characteristic: an almost pathological fear of the common spreadsheet.
Mike Southon writes in the FT about The Local Bookkeeper, a book keeping service who know MyCake. And the Finance on a Beermat
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