Taking the pain out of payroll

Outsourcing your payroll run can help reduce errors, says Natalie Goodall of accountancy firm Barnett & Turner. At the same time, it can ensure you comply with ever-more complex regulations. If you run a small business and manage your own payroll, the chances are that you’ve already seen at first hand some of the problems that can inevitably arise. It’s a time-consuming and increasingly complex process as regulations change. After all, we now live in a world of auto-enrolment and real-time reporting. There are significant risks to your business if you’re unable to keep up with the latest rules.

Errors aren’t just inconvenient and potentially costly. They also have a human consequence, as your members of staff are depending on seeing their salary move seamlessly into their bank accounts once a month. There are mortgages and gas bills to pay, which means morale can dip very quickly if there are glitches in the system.

So what are your options? You can battle on with one of your staff members handling payroll in-house – perhaps combining the job with another important accounting role – or you can choose to outsource the function to your accountant.

Of course, there are costs involved in any decision to outsource, but when you factor in both the internal cost savings and the time your own staff save, it can really start to make sense.

What if you’re able to free someone up a day or two a week, for instance? How might that additional productivity within your accounting function help your business? There may also be savings on payroll software, which needs to be constantly upgraded to keep abreast of the latest changes in tax and national insurance.

By using your accountant, you can be sure of a reliable service that won’t come to a halt just because an individual is off sick. You won’t have to worry either about keeping your own staff constantly trained and updated. At the same time, you can reduce any potential risk to the business which can arise from unfortunate errors and remain compliant with HMRC.

Although outsourcing isn’t right for every business – and you have to make a judgement based on your own particular circumstances – it’s certainly worth starting the discussion with your accountant. Too often, inertia and inaction can be an obstacle to real savings in time and cost.

If you would like to discuss anything related to this article please do not hesitate to call Barnett & Turner on 01623 659659 or email Jonathan at jwilson@barnettandturner.co.uk

The importance of keeping in touch

If you want to build a stronger business, your relationship with existing clients is absolutely critical argues Jono Wilson  of Barnett & Turner. There’s an old adage in business which is still true today. It’s much easier to sell your latest product or service to your existing client base than it is to go out and find new customers. So keeping a good relationship going is clearly in your financial interest. But it’s worth focusing on some of the other advantages too.

In many market places, you may find your competitors are becoming more and more aggressive in targeting your client base. A strong partnership is far and away your best defence, as clients are much more likely to tell you of any approach or meetings that might have taken place. You then have the opportunity to set out your own stall.

When a relationship is well cultivated, the chances are that many of your clients might also be prepared to refer you to others.  This word-of-mouth recommendation is an excellent way of growing your business organically.

Of course, I’m not talking about a relentless sales pitch. Your clients won’t want that at all. It’s about keeping in touch with them so they know you care about the relationship you have build and letting them know about what you’re able to offer to help them achieve their goals. Ultimately, they have the choice over whether to listen and act.

It’s important you’re aware of what other people in your business are doing at any one time. There’s nothing more frustrating for a client than having a conversation with you in which you’re oblivious to a meeting which took place with a colleague just days before. This is where Customer Relationship Management (CRM) tools can play a very positive role. They allow you to record all your contact on a regular basis, so you can see at a glance all the meetings and phone conversations that have already taken place.

The more you speak to your clients, the more you’ll understand their business. These regular conversations will allow you to make intelligent interventions and seize appropriate opportunities when they come up. But balance is important. Plan the calls or meetings in your diary and make sure that they are neither too seldom nor too frequent.

The long-term benefits of keeping in touch are mutual. You gain opportunities for new business and your client knows they have a reliable partner they can turn to at any point.

If you would like to discuss anything related to this article please do not hesitate to call Barnett & Turner on 01623 659659 or email Jonathan at jwilson@barnettandturner.co.uk

Too much capital? Your company may have more options than you thought.

For some years now, it’s been possible to reduce the capital in your company without going to court. More owners could probably take advantage of the freedom on offer, argues chartered accountant, Jonathan Wilson of Barnett & Turner. For many years, one of the fundamental concepts in company law was the notion that issued share capital had to be maintained and couldn’t be returned. In fact, this was generally accepted for more than a century until the Companies Act of 2006 made it to the statute book.

Over the best part of a decade now, private companies have no longer had to go to court to reduce their capital, but it’s taken a fair amount of time for owners – and even their accountants – to catch up with the implications.

Your company might simply have too much capital, which it just doesn’t need. Imagine a scenario, for instance, in which you intended to invest in land or property, but the right opportunity didn’t arise. Returning capital might be a legitimate and sensible step.

If you have cash in the company but are unable to pay a dividend because there are no distributable profits, you can reduce capital to create a reserve, out of which future dividends can be paid. Although there is no tax charge on the creation of the reserve, the dividends will be liable to income tax.

An alternative to the creation of a reserve is the return of cash directly to a shareholder. As we are talking about a capital payment rather than a dividend, the only liability will be for capital gains tax. And if you are operating a trading company, Entrepreneurs’ Relief should apply, reducing CGT to 10% under the current rules. My advice, however, is that you seek clearance in advance from HMRC to ensure compliance with Transactions in Securities regulations.

Although the liberalisation which came with the 2006 legislation was a reaction to the very restrictive regime that had existed before, the government ensured that a number of key safeguards were left in place.  Before proceeding with a return of capital, directors have to make a Declaration of Solvency, for instance, which states the company will be able to meet its debts for the foreseeable future. Your accountant should be able to advise you on the other steps you need to take to take full advantage of the changes.

If you would like to discuss anything related to this article please do not hesitate to call Barnett & Turner on 01623 659659 or email Jonathan at jwilson@barnettandturner.co.uk

Flat-rate pensions: clearing up the confusion

It appears to be a straightforward concept, but the new state pension regime does, in fact, throw up a few complications writes David Wilson of Barnett & Turner. From 6^th April 2016, anyone who reaches state pension age is entitled to the new flat-rate payment. While the concept implies that all pensioners will receive the same amount of money under the scheme, things aren’t quite that simple.  The sum paid out will depend on how many NI qualifying years you’ve accrued, as well as the number of years of entitlement to the additional state pension you’ve built up.

There’s something else to take into account too. You may have ‘contracted out’ from full entitlements for a period, if you were in a salary-related workplace pension or NI rebates went into a personal pension plan.

Here are some answers to frequently asked questions:

Who qualifies for the flat-rate pension?

If you don’t have a contribution record under the current system, you will have to gain 35 years of NI credits to qualify for the flat-rate payment. If you’ve already built up contributions, however, these will of course be taken into account.

What is meant by the ‘starting amount’?

The government has established transitional provisions which mean that your NI record prior to 6^th April 2016 will be used to calculate your ‘starting amount’ for the new system. This will be either the amount you would get under the current state pension rules (including basic and additional state pension) or, if it is higher, the amount you would get if the new state pension had been in place when you started working.

Is it possible to get a forecast?

Yes. In some cases, this can be done online, although you may have to make the request by post. Visit  www.gov.uk/state-pension-statement to find out more.

If you would like to discuss anything related to this article please do not hesitate to call Barnett & Turner on 01623 659659 or email Jonathan at jwilson@barnettandturner.co.uk

Tough new fines loom for safety slip-ups

If you thought a breach of health and safety regulations would just result in a rap over the knuckles, new sentencing guidelines may make you think again, argues David Wilson of accountancy firm Barnett & Turner. From 1^st February 2016, the sentencing guidelines for health and safety regulations became a great deal tougher. Although the advice is issued for courts in England & Wales, it’s likely to be considered within the Scottish legal system too, as most of the relevant laws apply right across the UK.

Under the new regime – which covers health & safety and corporate manslaughter, as well as food and hygiene offences – the larger your organisation and the more serious the offence, the more you can expect to pay in fines.  In this way, the Sentencing Council believes that penalties will become ‘fair and proportionate’.

If you’re looking for a benchmark as to what this might mean, Lincoln Crown Court fined energy multinational ConocoPhillips a cool £3 million on 8^th February for a major gas leak off the Lincolnshire coast. The company was also required to pick up nearly £160k in costs.

Time to assess your own level of risk

The new guidelines provide a much-needed steer for Directors and Senior management across all industries to move risk assessment and the whole issue of health and safety up their corporate agenda.

Where an infringement has been identified and a court is required to determine culpability, deliberate or flagrant disregard for the law clearly argues in favour of a significant level of liability. This will also apply if you who have failed to follow recognised standards in your industry.

This means you will need to have put appropriate risk management protocols in place.  Clearly your strategy should strongly concentrate on ‘prevention rather than cure’ otherwise exposure to breaches may well count against you in any legal case, as will any evidence of repeated breaches or failure to address issues resulting from previous incidents.

Allowing people to speak out

One other question which is important to consider for your business is whether you have any proper whistleblowing arrangements in place to identify health and safety issues.

If members of your staff – or people external to your business – have concerns over your health and safety practices, they must be allowed and encouraged to voice them without fear.    This is yet another factor which will be weighed up by the courts when considering any sentence.

Independent and external whistleblowing specialists such as SeeHearSpeakUp, can provide much needed risk assurance for your business by offering you effective whistleblowing services that will provide you with the protection your business needs.

If you would like to discuss anything related to this article please do not hesitate to call Barnett & Turner on 01623 659659 or email Jonathan at jwilson@barnettandturner.co.uk

A New Era for Tax Reporting

As the dust settles in accountants’ offices up and down the country after the annual January rush to meet the deadline for Self Assessment tax returns, it’s the perfect time to look ahead to the new Digital Tax Accounts that were first announced back in the March 2015 Budget writes Tracy Henson of Barnett & Turner, Chartered Accountants & Chartered Tax Advisers. The Government have set out plans to modernise the current tax system, making the current returns a thing of the past.  Instead, there will be a digital online account for millions of individuals and businesses, where all tax affairs can be viewed, giving an up-to-date tax position at any time.  The thought process behind this is to ensure that people can stay on top of their tax affairs rather than having a sudden liability after they produce their year-end return.

The idea has not gone down well with everybody though.  Concerns have been raised over the additional burden of reporting, with initial details revealing that the online accounts should be updated “at least quarterly”.  With the promise of penalties for those who fail to comply, the thought will send shudders down the spine of the less organised amongst us.

There may be further concerns about what HMRC are planning to do with the additional wealth of information that they will have at their disposal.  Few could argue that the new plans are not considerably more intensive and possibly intrusive than those currently in place, but whether this leads to an increase in Tax Enquiries remains to be seen.

Enough people have been willing to make their thoughts known on the subject, with a Parliamentary debate taking place on 26^th January 2016, following 110,300 signatures on an online petition against the plans.  It seems that this will not be enough to dampen proceedings though, with the Government response stating that “Making Tax Digital will not mean ‘four tax returns a year’. Quarterly updates will largely be a matter of checking data generated from record keeping software or apps and clicking ‘send’.”

As we await further details throughout 2016 following consultation, it remains to be seen whether their “Bold vision for a new, modern tax system, which will make it easier for all taxpayers” can live up to its own billing, especially in the eyes of those not currently keeping regular management accounts on computerised systems, and those none too excited at the prospect of making more regular tax payments.

If you would like to discuss anything related to this article please do not hesitate to call Barnett & Turner on 01623 659659 or email Jonathan at jwilson@barnettandturner.co.uk

Why back-ups should be front of mind

It may be the end of a long day, but the inconvenience of backing up your files is nothing compared to the problems that can result from lost or corrupted data, says Debbie Birkett, office manager at Barnett & Turner. How often do you back up your Sage data? What if I said you really ought to be doing it every time you use the package?

It may sound like overkill but, in the business world, your accounts information is just too important for you to sit back and cross your fingers. Once you get into a routine, you’ll probably find that the back-up process isn’t really that arduous at all.

A common issue is that data can become corrupted over time. Errors creep in. At some point, you’re likely to recognise the problem, but you then need to be able to return to the last ‘clean’ files. Although Sage has a special department which can try to resolve corrupted data, there are no guarantees and the process could cost you significant sums of money.

If you’ve been backing data up, you just need to keep reverting until you reach the point where the files are without errors. At least you then have a starting point for reconstructing your figures and don’t need to begin again from scratch.

Another thing worth bearing in mind is that Sage will prompt you to conduct a data check when you back up. I strongly recommend that you do this, as you get a snapshot of the data integrity and the system will highlight any potential problems. There’s not much point, after all, in backing up data which is already problematic.

So what role should accountants play in all this? It’s certainly true that when there’s a crisis, clients will often go to their professional advisers and ask whether they have kept their own back-up. You may be lucky, but the reality is there’s no obligation for the firm you retain to be doing this kind of work on your behalf.

My advice is therefore to back up to a memory stick, external hard drive or to a server. And once you’ve completed your back up, it’s always worth browsing to the destination and checking the files really are there! You can even try restoring them if you want absolute peace of mind, just to make sure that nothing would go wrong in the event that you needed to re-import them in an emergency.

Increasingly, of course, there are more options to back up in the cloud, via services such as Google Drive and Dropbox. While this is undoubtedly useful, it may be that you’ll feel most comfortable having the data copied locally too. In the world of IT, a belt and braces approach is almost certainly best.

If you would like to discuss anything related to this article please do not hesitate to call Barnett & Turner on 01623 659659 or email Jonathan at jwilson@barnettandturner.co.uk

Dividend changes: are you ready?

In his 2015 Budget, Chancellor George Osborne introduced significant changes to the taxation of dividends. Owners of small businesses need to take note according to Jonathan Wilson of Chartered Accountants and Chartered Tax Advisers Barnett & Turner. It’s quite usual for directors of small companies to extract profits as dividends, which form a regular income. The main reason is tax efficiency, as when the dividend is paid out to an individual, it is treated differently from other income. There’s a notional tax credit of 10%, which means that if you’re on the basic rate, the effective tax due is zero. Higher-rate tax payers pay 25% on a dividend receipt.

From the start of the 2016 – 2017 tax year, company directors will have some more difficult choices to make. The tax credit is abolished, so that any cash received as a dividend will be subject to tax. Three new bands of tax on dividend income will be introduced at the same time:

• 5% for basic rate
• 5% for higher rate
• 1% for additional rate

On the positive side, a new Dividend Tax Allowance will remove the first £5,000 of dividends from tax each year.

Clearly, it’s likely that small business owners are going to end up with a higher tax liability under the new regime. Most individuals are, however, likely to remain incorporated, as – on balance – there’s still going to be annual tax saving and an advantage in taking dividends in lieu of salary.

Some people may be considering increasing dividends in the last few months of the tax year 2015 – 2016, but it’s important to look at the bigger picture. If your adjusted net income tops £100k, for instance, you will lose the personal tax allowance. You also have to think about whether you have sufficient funds available in the company to pay the dividend in the first place.

It’s a subject which is still in the spotlight, as only limited information is available on the new regime. That means that it’s in your interests to take professional advice. Your accountant should be able to give you a good idea of how the changes will affect you as more detail becomes available.

If you would like to discuss anything related to this article please do not hesitate to call Barnett & Turner on 01623 659659 or email Jonathan at jwilson@barnettandturner.co.uk

Pensions come into their own

If you’re a business owner who’s ignored pension provision until now, the new regime should make you sit up and take notice, argues David Wilson of accountancy firm Barnett & Turner. In the past, it’s been hard to persuade some small business owners to take pensions and related guidance particularly seriously. Many may have had other investments and will have been relying on them to produce a suitable income in retirement. The restrictions in the pension rules and what you were able to draw down was certainly a psychological obstacle for a number of people.

Since the change in the regulations earlier in 2015, clients have definitely been taking more notice and have been actively reviewing their options. Some have decided to increase their company pension contributions, restrict their personal income and take tax-free cash straight away. As it’s possible to go back three years in your calculations, contributions per individual can be maximised.

When you put in additional pension contributions and draw tax-free cash, it may be possible to preserve your personal allowance for the current year. What’s more, by reducing your income, you may find yourself going down the marginal tax bands.

The company gets relief on the contributions and individuals are entitled to draw up to 25% of the fund as a tax-free lump sum. (If you draw any income, you restrict the amount you can pay into pensions in the future.)

Another point worth making is that the pension fund can be quite a useful and low-cost life assurance vehicle. That’s because if you die under the age of 75, the proposals are that the full fund will go tax free to any nominated beneficiary.

In some instances, it may be possible for a pension scheme to purchase a commercial property from the individuals that currently own it, effectively releasing equity into their own names. As well as helping with cash planning, this strategy can also reduce exposure to inheritance tax.

So now, with the new regime in place, there are plenty of interesting talking points. Overall, we try to help clients, hand in hand with their financial advisers to achieve a balanced portfolio with a spread of risks. Pensions are a more important part of the equation than ever because of the increased freedoms.

With changes to dividend rules coming into effect in April 2016, I suspect accountants and financial advisers will be having even more conversations with clients who are looking at this issue in a new light.

If you would like to discuss anything related to this article please do not hesitate to call Barnett & Turner on 01623 659659 or email Jonathan at jwilson@barnettandturner.co.uk

Could growth vouchers eventually grow on business?

Jonathan Wilson from accountancy firm Barnett & Turner reviews the recent growth voucher programme and wonders what lessons we can learn from its apparent lack of success. Back in January 2014, the government launched a ‘growth voucher’ scheme aimed at supporting small businesses. It was designed to help SMEs gain access to technical and financial advice and offered £2,000 if companies were to match the funding with their own cash.

The idea was that small firms and start-ups would benefit from financial advice, assistance with business planning and marketing consultancy. Just the kind of boost that would allow them to take the next steps towards expansion.

In order to qualify, you needed to be an independent company with fewer than 250 employees and turnover or assets of under £50m.

Although the principle seemed sound, the scheme wasn’t as much of a success as the government had hoped. Out of a pot set aside of some £30m, only £3.6m was actually used. Even more strikingly, only 1,800 of the 7,000 successful recipients spent their vouchers.

So what lessons can be learnt? Well, first of all, the vouchers weren’t very well advertised. And even if you had heard of them, it wasn’t entirely clear what you were able to use them for.

When firms are growing fast, they’re often very focused on the day-to-day challenges of the business and may not be ready to reflect with external consultants. Although marketing support is always valuable, the chances are that most companies would already have created a business plan some time previously.

There’s then, of course, the issue of finding your own £2,000 up front in order to make use of the £2,000 voucher.

The government is putting a positive spin on the programme, arguing that it was effectively a piece of research that we can learn from. It may be that if a new version of the voucher programme is planned, consideration should be given to widening the range of potential consultancy and support that companies can access from approved suppliers.

If you would like to discuss anything related to this article please do not hesitate to call Barnett & Turner on 01623 659659 or email Jonathan at jwilson@barnettandturner.co.uk