Times are changing for my accounting records

June 1986, 9am a fresh-faced young man starts his first day in the accountancy profession.  After settling in he is handed a large carrier bag contacting crumpled up invoices, receipts and bank statements, “could you get all these summarised by the end of the day”. What to do?  Luckily, he is given a calculator, pens and a pad.  Crisis averted.

Over the course of the next twelve months this young trainee would spend the majority of his time adding up 80-page, 32 column Guildhall cashbooks all by hand with the help of his trusted add lister.

The next 30 years would see some considerable changes in the accountancy and bookkeeping world.  Computers would start to appear in offices and businesses.  People would move away from traditional manual bookkeeping and use software designed to replace the old cashbook and ledgers.  Not only could you analyse the transactions far easier and quicker, but you could also reconcile the bank and check your trading statements at any point, not just at the year end.

The original software was desktop based, tying you to the office in order to keep information up to date or to get any information out.  With the advent of cloud technology, storing your data offsite, this gave you the best of both worlds.  Most of the work can be done in the office, but with cloud technology this same information can be accessed to provide quick information whilst out on the road.

Accountancy software, in particular cloud based, isn’t just confined to the general accounts it can also help with automating the day to day tasks such as;

  • Scanning purchase invoices, reducing the need to manually enter each one
  • Emailing sales invoices letting you track when they were sent and when they have been viewed
  • Taking a photograph of receipts from mobile telephone or tablet and uploading directly into the software
  • Attaching copies of invoices and receipts to transactions, reducing the amount of paperwork needed to be filed
  • Cleared bank transactions being directly fed into the software, allowing them to be automatically matched or added

This new technology has changed how a business owner can use the basic financial information at their disposal.  With more up to date and accurate information they can try and spot trends or weaknesses in the business.

No two businesses are the same, even ones in the same industry, meaning people may want different information;

  • How much am I making?
  • Who is my top customer?
  • Did I make a profit on that job?

These sorts of questions can now be answered in an instant.

Technology can help speed up the process of putting together your accounting records, allowing you to concentrate on the main reason you started in business in the first place – we are yet to find anyone who thinks great I get to do my bookkeeping at the end of the week.

For more information on this subject please contact Nick Wetherall

Related Party Transaction Reporting in Charity Accounts

Trustees must always act in the interests of their charity and not for their own personal benefit, but it is not uncommon for conflicts of interest to arise. It is important the charity is open and transparent in such situations, and it is good governance to handle these conflicts appropriately.

In charity accounts, the reporting of related party transactions is integral to complying with the SORP and providing details about their transactions with persons and entities closely connected to the charity or its trustees.

The Charity Commission has recently undertaken a review of a sample of Charity accounts and although reporting was found to be significantly better in larger charity accounts, less than two thirds of the charities in lower income samples fully complied with the SORP’s transparency requirement.

Charities preparing accruals (SORP) accounts must disclose:

  • trustees’ remuneration and benefits
  • trustees’ expenses
  • transactions with those persons and entities that are closely connected to the charity or its trustees, referred to as related parties

Trustees may delegate accounts preparation to charity staff or their accountant but remain responsible for approving the trustees’ annual report and accounts. The independent examiner or the auditor cannot be expected to know all of the related parties involved with the charity and so trustees need to co-operate with them to ensure that the disclosures provided in their accounts are complete.

If you have any questions on charity reporting, please do not hesitate to contact one of the charity specialist team at MHA Moore and Smalley.

Risk Management for Academies

Today’s video features Sarah Ollerton and Nicola Mason as they discuss risk management for academies.

This year the academies financial handbook has changed the requirement for a risk register from a should to a must, meaning academies need to update and review their existing risk register.

Watch to learn more!

Disposals of UK land – changes to the capital gains tax compliance regime for non-UK resident individuals

What’s new from 6 April 2019

The non-residents capital gains tax (NRCGT) rules have been extended to include non-residential property. The rules now apply to direct and indirect disposals of interests in all UK land (i.e. both residential and commercial).

A direct disposal is a disposal of land, whereas an indirect disposal is a disposal of shares in a company (whether the company is UK resident or not) and at least 75% of the value of the shares is derived from UK land. This briefing note covers the rules surrounding direct disposals for individuals and further advice should be sought for disposals by non-UK resident companies.

Background

The NRCGT rules were introduced on 6 April 2015 and apply to disposals of residential properties from this date. Only the gain arising after 5 April 2015 is chargeable and there are different ways of calculating the gain depending upon the individual’s circumstances.

The new rules now extend NRCGT to cover gains on commercial property, but only to the extent that the asset has increased in value since 5 April 2019.

Compliance

All persons making a NRCGT disposal have 30 days following the conveyance of the property (not the date of exchange) to submit an on line NRCGT Return to HMRC. A return must be filed even if there is no tax payable or the property is sold at a loss.

Late filing and payment penalties may be charged if the 30 day deadline is missed.

The Return must include a calculation of the chargeable gain or allowable loss and the tax due must be paid within 30 days of conveyance (i.e. the same deadline as the filing of the Return).

The rate of tax depends on whether the property is residential or non-residential and the level of the individual’s other income for the year.

The compliance regime has also been revised from 6 April 2019 to require all non-residents to make a payment on account of the CGT due on the disposal, irrespective of whether or not the individual is within the Self-Assessment regime. 

Potential problem areas

Due to the short filing and payment deadline not all of the relevant information may be known within that timeframe. It may be necessary to include reasonable estimates in the computations and then amend the Return when the actual details are available. In addition, it may not be possible to correctly calculate the amount of tax payable because the rate of CGT depends on an individual’s UK taxable income for the whole tax year and this may not be known at the time of submitting the return.

How we can help

We would be happy to calculate the capital gains tax position on the sale of the UK property and advise upon which method of calculation is most beneficial for your client. We can also file the NRCGT Return with HMRC.

Should you wish to discuss this in further detail please contact a member of our Professional Practice Team on 01772 821021.

Income recognition for charity

In this video Nicola Mason and Sarah Ollerton are discussing when a charity becomes entitled to recognise it’s income.

In the case of a grant, evidence of entitlement will usually exist on the offer of funding. That being said, some grant offers will contain terms and conditions which must be met before the charity is entitled to recognise this income.

Watch to find out more!

Are you thinking of starting up in small business?

Starting up in business can be a fresh start for some, an exciting opportunity for others, a need to satisfy one’s personal goals and ambition, or simply something to do in your spare time.  You might decide to stay small, keep your costs low, think about maximising profit on a small turnover.  Conversely you might aspire to grow your business fast, have multiple sites, build a team around you, generate your profit with low margins but high turnover. 

Whatever your drive to be in business, whatever your size and aspirations, it’s important to get the fundamentals right from the outset, seek professional advice in areas where you don’t have the skill or knowledge, but even if you do have those skills, it always good to have business advisers working alongside and supporting you. 

Our guide talks through some of the common areas to consider when starting in business, but likewise it might be worth a read for some business owners looking to move their business forward.

Open Banking Changes within Quickbooks

Open Banking regulations have been introduced in the UK.

In line with these regulations, QuickBooks is upgrading its bank feeds. Existing connections will be switched off and replaced with a more stable process which will give you a better experience.

Once these new feeds are ready, we’ll ask you to log in into QuickBooks and authorise the new feeds. This will allow your data to keep flowing into QuickBooks without interruption.

The new feeds will give you more control, improving the process and making it more secure.

Please note, for security reasons, the connection will need to be re-authorised every 90 days. If you have further questions about Open Banking, you can find more information on this FAQ on the link HERE

SMEs and International Tax

Expanding a business overseas can be a new and exciting chapter for a business but in order to transact successfully overseas, the business must understand the various tax considerations to ensure they don’t miss out on profits and don’t fall foul of foreign tax regulations.

One of the main issues arising from overseas business transactions is Withholding Tax.

Withholding Tax (WHT)

WHT is a tax deducted at source by the customer in the overseas company. The local tax regulations of the country will determine the percentage deducted. SMEs must understand the implications of this and factor in ways to mitigate this tax otherwise it can become an absolute cost to the company.

First thing is to consider the rate that could be applied, the overseas country may have a double tax treaty with the UK and this means that the rates of WHT can be reduced to the treaty rate which is generally lower than the countries standard rates or in some cases reduces the WHT percentage to 0%. If a company is charged in excess of these rates, an application can be made to recover the difference. The success of an application will depend on the relevant countries’ procedures and deadlines.

The other way of mitigating the tax is by double tax relief. Double tax relief works by offsetting the tax withheld against the UK tax charge. This can mean in some instances the whole of the WHT can be offset and the UK liability is reduced to nil conversely however if there is a small amount of CT chargeable or the WHT tax rate is in excess of the UK CT rate (currently 19%) then the difference is again going to be a cost to the company.

What’s the answer?

It is important to create a dialogue with the customer at the beginning to understand what they are planning to deduct. Often problems can arise if there are disagreements as to the nature of the service, and therefore which rate to apply.

It may be that a gross up clause is included in a sale agreement which would effectively negate the WHT, This could create problems however if a customer does not wish to accept the increased values.

Further Advice

If you would like to discuss this article in more detail or you would like to speak with a member of our team, please call us on 01772 821021 to be put in contact with a member of our Tax team.

Data Analytics in Audit

In audit terms, data analytics in audit is a tool which auditors can use to analyse large volumes of data, to asses risks in a population and identify items for further testing.

The main benefits are:

– Enhanced audit quality

– Improved audit effectiveness

– Mitigating risks of fraud

Data analytics should increase; the focus, approach to risk, and the outcome from the audit process.