Possibly a little more “something for nothing” -Enhanced Capital Allowances on Energy Saving Equipment

Previously I pointed out the potential savings that can be made and the finance available from The Carbon Trust for replacing current lighting, heating, cooling equipment etc with an energy efficient equivalent. In that article I mentioned that the cash flow savings delivered through reduced payments to your utility supplier can finance the loan repayments. This is not the whole picture. There is still a little more meat to add to the bones on this topic.

HRMC have in recent years attempted to encourage business to invest in green technology/ equipment. This has primarily been delivered through the Capital Allowance scheme.

The ‘incentive’ as provided by HMRC is the availability of Enhanced Capital Allowances to achieve tax relief on the acquisition and installation of certain certified energy saving equipment.

Check the following link to confirm that any potential equipment acquisition qualifies for Enhanced Capital Allowances before you buy http://etl.decc.gov.uk/etl/find/

The application of these Enhanced Capital Allowances effectively allow the business to claim tax relief on the full cost of acquisition and installation of this equipment in year one.

Example – assume the business spends £10,000 on energy efficient equipment and its subsequent installation. The business can then claim a reduction in its taxable profits to the extent of £10,000. This is applicable to either limited company, sole trader, or partnership businesses.

There is a further aspect to the Enhanced Capital Allowances for limited companies that we will look at next time.

Something for nothing? …

Fossil fuels, energy efficient equipment and The Carbon Trust

 

Having recently been involved in a review of utility expenses with some of our SME clients I came to challenge the notion that “you can’t get something for nothing in this life”.  Well, on the basis of some number crunching, a lot of meetings and discussions and the like with various others, it would appear that it is in fact possible to get something for nothing.

 

The technology upon which energy efficient lighting, heating, cooling etc. is based has developed so rapidly over the last, say 10 years that if your equipment was installed around that time, or before, then it just might be the case that you could change your lighting, heating/ cooling equipment “for nothing”.

 

In one of the cases that we have been looking into, as I referenced above, we have moved beyond the paper review of the costings, and are now looking at the physical equipment that is being proposed.

 

In that case the lights are ‘burning’ for approximately 50 hours per week.  It would appear that new energy efficient LED based lighting can be introduced to provide a ‘similar level of lighting’ but delivering between 65% – 70% efficiency gain on the current lighting.

 

The Carbon Trust currently provide interest free loans to SME’s based in Northern Ireland and Wales.  These loans are typically repaid over the first 3 – 4 years after installation.

 

The projected cashflow savings (through reduced payments to the electricity supplier) being delivered through the installation of these LED lights, in the case we have looked at, is greater than the monthly repayment of the Carbon Trust loan – albeit only by a small margin during the loan repayment period.  However, once the loan is repaid in full the savings all yours!

 

For more information on Carbon Trust and their interest free loan see their website: http://www.carbontrust.com/client-services/northern-ireland

 

 

Our next article will look at the Enhanced Capital Allowances position and their impact on the acquisition of energy efficient equipment.

LinkedIn Passwords Leaked by Hackers

LinkedIn has confirmed the rumors that some of its user passwords have been compromised. Some six million passwords have been said to be compromised, according to news sources this morning.

LinkedIn confirmed that some passwords have been compromised and said it would contact affected users with details on how to change their password.

Hackers posted a file containing encrypted passwords onto a Russian web forum.

Although usernames associated with the passwords were not released, the passwords themselves will surely be used to help reverse-engineer other cryptography systems. Some sources have revealed that we can also expect to see these passwords added to dictionary lists of programs that attempt to break into various accounts.

In other words — if you’re a LinkedIn user, no matter how strong your password seemed — it’s a good idea to go ahead and change it.

 

 

The Husband & wife business partnership and a healthy work life balance. Can we have both??

 

When we got married we were both studying our professional exams and training to become accountants. We were attending university together on a Saturday, studying together and living and breathing the same text books for three solid years. It seemed to work OK, however there was one fundamental difference, we were not working in the same firm. Perhaps this is why it seemed to work so well.

Given that we were ‘heading in the same direction’ it seemed inevitable that one day we would go into business together and here we are.

When we first made the decision to work together, I thought this will be great, we had just started our family and it seemed, to me, to be the perfect situation. I could work and still be flexible for my young children and not miss out on them growing up. I was going to be super woman!! However, when I actually started to think about it seriously I thought, what if we ‘kill’ each other, or even worse what if I turn into my husband!! However, we decided to risk it and in January 2010 we decided to just ‘go for it.’ I have to say, if I am honest, there have been arguements, but we have never looked back!!

Husband and wife business partnerships are on the rise, we can see this in our client list, through colleagues and friends, and when it works it seems to be working very well.

When a husband and wife go into business together they have the same end goal and dedication. This type of dedication can help young companies get off the ground. When married couples work together, their business can become like their own baby. Their emotional involvement with each other spills over into an attachment with the company, driving people to be more dedicated than they would other-wise be.

Don’t get me wrong the constant interaction, the strain of juggling work and personal life, and the trials of entrepreneurship—especially in a difficult economy—can take a toll. The key however is getting the work life balance right.

I am not a marriage guidance counsellor but I thought I would share a few of our secrets and experiences that have helped make it work for us:

Figure out how you will physically work together. This will be different for every couple. Some couples can work well in the same office space however others may need to be physically separated if they’re going to work well together. If a separate space is necessary for you to make it work, then I suggest you find a separate space.

Make clear your roles. Going into business with your spouse or partner is exciting because you are building something and you will have the same dream. However, how you visualise you get there will most likely be different. Identify each others responsibilities, you will both have different strengths so use them. That way you’ll avoid stepping on each other’s toes and hopefully minimise any arguments.

Understand your working styles. This is another one that often gets forgotten when a couple works together. When we were both training we worked for different companies and naturally developed very different working styles, you need to understand how the other person likes to work, how you each deal with stress, and go into it with similar, or at least clear, expectations about sharing the work. We clashed at the very start on our very different working styles. I am ‘hyper’ organised, like things in a certain way, and especially like a nice tidy desk. My husband however, does not share my enthusiasm for a clear desk, but we got round it, by simply buying separate trays, and once a week we go through these trays and clear it all away. That way I didn’t have to look at lots of loose paper and my husband didn’t feel he had to file everything every two minutes. It is about finding the compromise and using it.

Communicate. It is so easy to forget that communication in a work environment is different from asking if the dishwasher is emptied or agreeing about who’s going to pick up the kids from school. Make sure you’re communicating about the day-to-day stuff as well as the big picture stuff. And if you have other people working for or with you, communicate with them too. Remember you are running a business together not separately!!

Leave work at work. You don’t want to be talking shop over dinner. It’s bound to happen and lets face it, it does, but try and minimise this where possible so as not to have your lives be all work all the time.

Leave home at home. This is the other side of that coin, but it can be less visible on your radar. If you’re working together it will help if you can maintain a professional relationship that’s focused on the business. Making your grocery list while you’re balancing the books can make everything feel smashed together, which is no fun – and not productive – for anyone.

Respect each other. You respect each other in your marriage (hopefully). If your spouse is your business partner you should treat that person the same way you’d treat any other colleague, whether a boss or a peer.

If you can manage all that, you might just be able to live – and work – happily ever after.

The Modern Accountant ????

But Accountants DO NOT blog……

 

This may well be true, yet here we are, accountants, and we are trying our hand at blogging!!

 

It has become a general consensus that accountants are not known for trying out new ideas, and as for social media and blogging well, they simply ‘do not have the time’, it is ‘not necessary’, it ‘will not increase our profits’, it ‘will not add to the quality of service for our clients’ and it is ‘not an efficient use of our time.’

 

While this is all true, and ok, it probably won’t help us understand our clients better, it is most likely not very proactive, and lets be honest, who NEEDS an accountant that blogs?? However, despite all this, and in a bold NEW approach, I have pondered over the last few months that maybe our clients would like to understand US a bit better!!!!

 

I personally have always felt, even way back in my training years, (which feels like a million years ago now but really is not!!!) that it is important to show our clients that there is an ordinary human being behind all the ‘serious’ chat, tax regulations and number crunching. Maybe even someone that dare I say it has a ‘personality of sorts’!!!

 

So based on all this and with a gentle push and encouragement from some of our twitter friends Helen Cousins (@xcelbusiness), Sian Phillips (@_sians) and Sage Ireland (@sageireland) we are going to attempt this blogging thing!!!

 

This is my first ‘introductory’ blog and I hope you will all bear with me as I try to ‘master’ this over the coming weeks.

 

For now i have listed below some of our earlier posts that we included previously. A couple of them were in response to a few past client queries, which actually did end up being ‘a proactive use of our time!’

 

In the mean time if you have any interest in a specific topic you would like to see more information on please feel free to get in touch with us!!

 

and we have social networks too……

 

Follow us on twitter:  @stacielross

Like us on facebook: JSR Chartered Accountants

connect with us on linkedIn: JSR Chartered Accountants

Budget 2012: Key Points

George Osborne says his 2012 Budget will “reward work”, support working families and ‘unashamedly backs business’ but warns of need to continue his austerity drive in face of sluggish growth.

Budget 2012 Key Points:

Automatic review of state pension age to ensure it keeps pace with increasing lifespans. New single-tier state pension for future pensioners to be set at about £140 and based on contributions

Duty on all tobacco products to rise by 5% above inflation from 18:00 today – the equivalent of 37p on a packet of cigarettes. No change to alcohol duty. New duty on gaming machines at a standard rate of 20% and a lower rate for low-prize machines of 5% of net takings. No change to existing plans on fuel duty (however, please note that plans to increase Fuel by 3p from August still stand). Vehicle excise duty to rise by inflation, but frozen for road hauliers

Good news for young entrepreneurs Government considering enterprise loans for young people to start their own business.

Corporation tax cut to 24% from next month. By 2014 it will fall to 22%

From midnight, new stamp duty level of 7% for homes worth more than £2m. Any such homes bought through companies will pay 15%. Extra funding to help construction firms building new homes

CHILD BENEFIT Will be phased out when someone in a houshold has an income of more than £50,000. It will fall by 1% for every £100 earned over £50,000. Only those earning more than £60,000 will lose the entirety of the benefit

From April 2013, the 50p top rate of tax will be cut to 45p. Personal income tax allowance will be raised to £9,205 from April 2013, making people £220 a year better off. However, those aged 65 and over will no longer be entitled to the higher rate of personal allowance leaving these individuals paying around £260 more in tax per year.

It should also be noted that around 300,000 workers woll be pulled into the 40% tax bracket. Currently workers can earn £42.475 before paing tax at 40%, this limit is now to be reduced to £41,450 – This was not announced in Mr Osborne’s speech but was included in the budget document.

 

 

 

VAT Flat Rate Scheme – A Closer Look

Background:

The Flat Rate Scheme for VAT is a scheme specifically
designed by HMR&C to reduce the administrative burden on smaller VAT
registered businesses.  The scheme is
restricted to business whose turnover does not exceed a specified
threshold.  The scheme also excludes
businesses for a number of other reasons such as if the business has recently
been charged certain VAT penalties.

 

Application:

Under the Flat Rate Scheme the registered business charges
VAT at the standard rate/ applicable rate for the sale, however when it comes
to paying over the VAT liability to HMR&C the registered business
calculates its VAT liability at a specified “flat rate” based on the level of
sales.  The “flat rate” is a
pre-determined percentage that is list out by HMR&C, this flat rate varies
from trading activity, see the current table of rates at Appendix 1 below
(taken from www.hmrc.gov.uk ).

 

If your business operates within several of the business
areas listed it is necessary to select one rate, and this must be the rate that
best reflects the main or core business activity i.e. the area of your trading
activity that generates the greatest turnover.
This “flat rate” percentage would be applied to your total turnover.

 

The only VAT on acquisitions that can be recovered while a
business is registered under the Flat Rate Scheme is on capital additions
costing more that £2,000.

Turnover Thresholds for Registration:

A business can apply to register for the Flat Rate Scheme
provided the annual turnover is not expected to exceed £150,000 excluding
VAT.  Once your business is registered
on the Flat Rate Scheme the turnover excluding VAT can rise to more than
£230,000

First Year VAT Registration?

By way of a further incentive if in your first year of VAT
registration you enter the Flat Rate scheme then your business can benefit from
a 1% reduction to the appropriate flat rate.
This ‘introductory offer’ from HMR&C applies until the day before
the anniversary of your VAT registration, after which time you will be required
to revert to the standard Flat Rate for your business sector.

 

Record Keeping

It is essential that you keep a record of the calculations
to support your workings for each vat return and how your vat liability has
been arrived at.  You should as a
minimum keep a record of the sales applicable for the vat period, the “flat
rate” percentage you are applying and the resultant vat liability.

 

 

 

 

 

Appendix 1

Flat Rate Scheme percentage rates from 4 January 2011

These rates will apply from 4 January 2011 until further
notice.

Category of business Appropriate percentage
Accountancy
or book-keeping
14.5
Advertising 11
Agricultural
services
11
Any
other activity not listed elsewhere
12
Architect,
civil and structural engineer or surveyor
14.5
Boarding
or care of animals
12
Business
services that are not listed elsewhere
12
Catering
services including restaurants and takeaways
12.5
Computer
and IT consultancy or data processing
14.5
Computer
repair services
10.5
Dealing
in waste or scrap
10.5
Entertainment
or journalism
12.5
Estate
agency or property management services
12
Farming
or agriculture that is not listed elsewhere
6.5
Film,
radio, television or video production
13
Financial
services
13.5
Forestry
or fishing
10.5
General
building or construction services*
9.5
Hairdressing
or other beauty treatment services
13
Hiring
or renting goods
9.5
Hotel
or accommodation
10.5
Investigation
or security
12
Labour-only
building or construction services*
14.5
Laundry
or dry-cleaning services
12
Lawyer
or legal services
14.5
Library,
archive, museum or other cultural activity
9.5
Management
consultancy
14
Manufacturing
fabricated metal products
10.5
Manufacturing
food
9
Manufacturing
that is not listed elsewhere
9.5
Manufacturing
yarn, textiles or clothing
9
Membership
organisation
8
Mining
or quarrying
10
Packaging 9
Photography 11
Post
offices
5
Printing 8.5
Publishing 11
Pubs 6.5
Real
estate activity not listed elsewhere
14
Repairing
personal or household goods
10
Repairing
vehicles
8.5
Retailing
food, confectionary, tobacco, newspapers or children’s clothing
4
Retailing
pharmaceuticals, medical goods, cosmetics or toiletries
8
Retailing
that is not listed elsewhere
7.5
Retailing
vehicles or fuel
6.5
Secretarial
services
13
Social
work
11
Sport
or recreation
8.5
Transport
or storage, including couriers, freight, removals and taxis
10
Travel
agency
10.5
Veterinary
medicine
11
Wholesaling
agricultural products
8
Wholesaling
food
7.5
Wholesaling
that is not listed elsewhere
8.5

 

Inheritance Tax

Inheritance Tax is one of the most despised and potentially most expensive forms of taxation. The tiny number of individuals who make any effort to reduce their IHT burden is therefore surprising. Simple steps like making a will can drastically reduce an IHT bill, and require very little work. There are a number of ways in which you can cut your inheritance tax liability – but it is important that you act now.

To find out whether or not IHT will actually affect you add up the value of all the assets in the estate – such as a house, possessions, money and investments – and deducting any debts held by you such as mortgages, including household bills and funeral expenses. Although Individual Savings Accounts and Personal Equity Plans are not taxable during your lifetime, the assets included in these ARE liable for inheritance tax.  If the total value of your taxable assets exceeds the Nil-Rate Band, which is currently set at £325,000, then you should be taking action to minimise your IHT liability. It is therefore very wise to write a will, something we should all do regardless but it is particularly important in reducing an inheritance tax liability. Having a will in place can avoid leaving all your assets to the mercy of intestacy laws.

Reducing the Estate

One of the ways in which you can limit your liability is to reduce the total size of your estate. There are numerous ways of doing this. Many individuals choose to give gifts to family and friends in life rather than writing them into their will gradually reducing their estate. You may wish to think about downsizing your home in order to reduce the size of your property assets. If this is not realistic, you may also consider an equity release scheme – this will free up some immediate cash, which may be vital in retirement, and will again reduce the size of your estate.

Trusts

More commonly individuals are now turning towards trusts as an effective way of limiting their tax liabilities. Using a discretionary trust you can pass assets on to trust-holders, who are legally charged with looking after them until your death. At this point they will be passed on to your intended beneficiary. This can be an excellent way of pre-empting IHT but of also retaining your ability to determine who benefits from your estate.

However money given away before you die is still usually counted as part of your estate, hence subject to Inheritance Tax, if you die within seven years of giving the gift.

If you make large lifetime gifts, the beneficiaries could take out life insurance against the potential Inheritance Tax bill. Most gifts into trust are now subject to Inheritance Tax even if made during your lifetime, but this is an area where you would need specialist advice.

However, even if you do die within seven years of making a gift, there is a range of other exemptions worth taking into account to help lessen the tax bill:

        • Annual Inheritance Tax Exemption. The first £3,000 given away each tax year is completely ignored as part of your estate and thus not subject to Inheritance Tax if you die. If you don’t use this in a year, you can carry it forward for one tax year (no more) and use it then.
        • Gifts to charities and political parties are Inheritance Tax free. Any gifts you make to a ‘qualifying’ charity – during your lifetime or in your will – will be exempt from Inheritance Tax
        • Give £250 each year to everyone you know. Gifts of no more than £250 to any one recipient per tax year are excluded from Inheritance Tax.
        • Gifts from income. Inheritance Tax is a tax on your assets. However if you have an income (pension or earnings for example) and you give money regularly from that which leaves you enough income not to impact your lifestyle, then it is exempt.
        • Gifts on consideration of marriage. There are limits to this though: £5,000 for a gift from a parent, £2,500 from a grandparent, £1,000 from anyone else.
        • Woodland, Heritage, Farm and Business. If you own an agricultural property that’s part of a working farm then a percentage may be exempt from tax.

Spouses

Many married couples choose simply to pass their estate on to their spouse but, while this is an understandable choice, it is often not the most tax-efficient course of action. Rather, you may wish to consider placing assets above your Nil-Rate Band into a trust, which is passed to your children, but only after the death of your spouse. This ensures that both your own and your spouse’s Nil-Rate Bands are used effectively, as any transfers between spouses are exempt from tax. If you are interested in this course of action you should consult a professional.

Finally, it should be remembered that IHT rules favour those who are married or are in a civil partnership. Currently, co-habiting couples that are not married will not qualify for the exemption granted those who have legally codified their relationship. Unfortunately, the only way to gain this exemption is by marrying or entering a civil partnership, and this may therefore be an option you may wish to consider.

 

Conclusion

 

As we all know there are only two certainties in life – Death & Taxes.   However, with a little timely planning the two do not necessarily have to affect your loved ones at the same time.  Take some time now to plan your will, and speak with your accountant to ensure that your assets can and will be distributed in accordance with your wishes in the most tax efficient way.

Thinking of setting up in business?

There are many things that need considered when you start up a new business. Items such as: Business plans, Business Structure, Business Stationery, Books & Records to be kept, Accounts and their filing requirments, VAT, National Insurance, Tax on Profits, Employing Others, Premises, Insurances and Pensions. The list can seem quite daunting and never ending. However, this does not need to be the case. With the advice from a good accountant setting up your own business does not have to be a scary experience!!

Whilst some generalisation can be made about starting up a business, it is always necessary to tailor the strategy to fit your situation. Any plan must take account of your circumstances and aspirations. Whilst business success can never be guaranteed, professional advice can help to avoid some of the problems which befall new businesses.

We would welcome the opportunity to assist you in formulating a strategy suitable for your own requirements. We can also provide key services such as bookkeeping, management accounts, VAT return and payroll preparation.

Why not email us at info@jsrcharteredaccountants.co.uk to arrange a meeting to review your business requirements. Or even if you have just set up in business yourself why not contact us to see how we can assist you and relieve some of the initial burden so we can tailor a plan to suit your needs leaving you to concentrate on getting your business to grow!

Remember our initial consultation is still free!!

Jonathan & Stacie Ross .

Do I Really Need an Accountant?

 

 

Chartered accountants have come through a rigorous regime of training and examinations, and have wide practical experience which they can use for your benefit. They are the general practitioners of the financial world, with the expert knowledge and integrity to give you high quality advice on any aspect of your financial affairs.You will only fill in one tax return each year, chartered accountants fill in dozens, and you can benefit from that professional expertise and experience.

No-one likes paying taxes. But effective planning to reduce your tax bill requires professional advice. Don’t make decisions based on half-understood newspaper articles, or advice from a friend – they can be so wrong that they cost you money rather than saving it.

Running a business does offer some opportunities to legally save tax. But to make the best of them, you need to talk to your chartered accountant before entering into any major transactions, so that he or she has a chance to advise you on the best approach.

You also have to worry about the tax you deduct from your employees’ wages. On the whole, they are interested in their take-home pay. However, if you, with your chartered accountant’s help, find a tax-efficient way to get cash or benefits into their hands, that can reduce your overall costs.

A lot of people think that you only need a chartered accountant if you run a business. Not true. There are lots of times when you should consult a chartered accountant for your personal financial affairs. Some people have affairs that are so complex, they need to use a chartered accountant regularly to prepare their tax return and generally advise them. But even if you are not in that category, there are still plenty of times when you could benefit from an hour or two of a chartered accountant’s time.

One of the more complicated areas of taxation is the tax charge on benefits in kind, such as company cars. If your employer suggests that you might like to buy your own car and use it for work, how much extra pay would you expect to get to make the switch worthwhile. Don’t know? Your chartered accountant does.

What about a pension? Does your employer have a pension scheme? If so, is it any good? How do you know? Not all chartered accountants give financial advice, but most can give you some general unbiased information about your pension options, and can put you in touch with a reliable adviser.

What about when you change jobs? Do you know what package you should be asking for on termination, or on taking up your new job? Will the moving allowance that you get from your new employer be tax free?

These are all questions that a chartered accountant can help you with. You may face them a handful of times in your career – a chartered accountant deals with these issues regularly. Arrange a meeting to discuss the implications, get the benefit of an hour or two of a chartered accountant’s time.

When you get married, you may not think about inviting along a chartered accountant to the wedding! But it is a good idea to check up on the financial consequences. It might be a good time for parents to make gifts that are free of inheritance tax. You may find that you can reduce your tax bill by moving your savings between you. An hour with a chartered accountant before you say ‘I do’ might help to pay for the honeymoon!

Buying a house is another time when a chartered accountant could be useful. Which is better – to take a big mortgage and keep your savings invested, or use the savings to reduce the mortgage? There is no one answer that is right for everyone, you need a chartered accountant to advise you.

And finally there is death. Asking a chartered accountant for inheritance tax advice might seem morbid – but your spouse and children won’t thank you for your squeamishness. Inheritance tax can make a hard time even worse by creating financial problems. It is a particular problem for couples who aren’t married, since they cannot pass assets to each other tax free, but all families should know what the financial consequences of a death would be – and a chartered accountant can explain it to you.

So if you are considering preparing your own tax return this year or using an unqualified accountant, why not have a quick rethink. Last January we received numerous new clients who had prepared their own tax return and wanted us to have a look at it prior to submission. In EVERY case we were able to reduce their tax bill for them by using reliefs etc that they did not know existed!!!

So who knows, this year we may even be able to persuade HMRC that you have overpaid tax.

Then you won’t just be sending in your tax return – you’ll be getting tax returned!

 

Jonathan & Stacie Ross