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COVID-19: How CloudAccountingNI can help businesses.

As accountants, we are best placed to consider the financial impact that the Covid-19 outbreak will have on small businesses. Each small business is different and there is not a one size fits all approach.

Below are some of the things you, as a small business owner should consider:

1. Keep in touch

Here at Cloud Accounting, we can act as a guide. We will be sending emails. Keep in touch. The sooner that we are made aware of any problem, the easier it might be to solve especially with reference to HMRC payments.

If it gets to the point that you believe you have to put the business up for sale, do nothing until you speak to us. You won't get a good price in this market. The number of clients who take notice of their friends and take action without consulting with their accountant first is surprising. The answer will not always be to go bankrupt or close the company. 

2. Consider your cashflow

Work out your monthly cashflow for the next 3 months – sales and costs, including those deferred.

Aim to remove discretionary cost. Seriously consider removing marketing costs.

Add the income from government support packages

Try to spread the costs as much as possible.

Try to plug any gaps with bank finance.

3. Check out those in potential problems with HMRC

Check whether each client has paid their last tax bill. If not, tell them about HMRC's Time to Pay Service. All businesses in financial distress and with outstanding tax liabilities may be eligible to receive support. Consider those who might have difficulty with the July payment and advise accordingly. 

4. Investment in capital items

Investment advisers say that you should have a cash pile of at least two months to weather any financial storm.

Businesses that do and might have been considering making a large purchase such as a van could find that that the deals are more favourable now than previously.

5. Check insurance policies

Check out any insurance policies you may have – are you, or your staff, covered in any sickness claim? This is the value of having keyman insurance.

6. Government help

Make sure that you are up to speed with government guidance including the COVID-19: guidance for employers and businesses factsheet.

  • Refund for businesses and employers required to access Statutory Sick Pay 
  • 100% Business Rates retail discount for one year 
  • Funding support for those small businesses that pay little or no Business Rates because of Small Business Rate Relief
  • The Coronavirus Business Interruption Loan Scheme
  • The CoronaVirus Job Retention Scheme

7. Financial Help

You should investigate what help is available from your bank, what terms and conditions there are, and whether the help is currently needed. Most banks have pledged to offer support by mortgage repayment holidays, temporary increases in credit card limits, waiver of fees on early access to fixed savings accounts and late credit card, mortgage, and loan payments.

8.  Supply chains

Contact your suppliers. Suppliers will be more likely to contact you if they have to resort to restrictions. We advise investigating alternative suppliers. Supply chain issues are already threatening to derail some small businesses. Investigate the whole supply chain – you may say 'it's OK I get my supplies from XYZ Ltd based in the UK', but do you know where XYZ Ltd gets its supplies from?

9. Late payments

When cash is restricted, the temptation is to make late payments. This must be resisted, if only for reputational reasons. Late payments are already causing problems for businesses as 74% of business owners reported invoices due to be paid at the end of February had not been settled and were unlikely to be cleared before the end of March (business lender MarketFinance.com). Check your debtors! Tighten up your invoicing processes.

10. Review business costs

Look at all costs and reduce discretionary and non-essential expenses as far as possible. Fixed costs such as wages, rent, utilities, financing costs and tax liabilities not affected by a decline in sales need to be properly managed. Suggest investigating whether costs can be spread rather than paying in one lump sum (e.g. car insurance).

11. Review marketing strategy

No one is going to do or buy much other than the essentials during this crisis and, although this situation might lead you or your clients to reduce costs by rethinking the marketing strategy, this might not be the right time – consistency is key to recovery.

12. Review mortgage payments

Banks will be lending cheaply. Now might be a good time to consider remortgaging both your business and personal finance. Mortgages are based on past data, which will invariably be better for these past three years – defer applying and that may mean lending based on reduced profit figures making it more difficult to get a mortgage. 

13. Carry on

It is vital that the business must at least give the impression that it is carrying on. This may be impossible if the business is a restaurant, but is feasible for the many others who might have to self isolate. There are such businesses as Virtual Assistants that can help. 

If you have the facility to invite clients into your accounting software, now might be a good time to place this at their disposal. Consider plugging their books into bank data feeds, if not already used.

And finally, 14. look ahead

The coronavirus crisis will change the way businesses and society works. When the urgent part of the crisis is over, businesses should consider what this crisis changes for them, what they have learned and plan for any future crisis.

Opening a UK business bank account as a non resident

There are an increasing number of foreigners opening companies in the UK. The majority of formations agents receive questions regarding the opening of a bank account all the time. The brutal truth is that although you need a limited number of documents to form a limited company, opening up a bank account can be difficult.

Banks tend to be far more conservative and they commonly reject applications from overseas residents. This article is going to show you what you need to do to open a bank account as a foreigner.

You Don’t Need a UK Bank Account

One of the misconceptions people have about forming a new company online is that they need a UK bank account to operate. In many countries, it’s necessary to open an account in order to trade. The UK allows you to use your account from abroad, as long as you make it clear that you are using a foreign bank account.

But it’s always better to have a UK bank account because it makes it easy to trade. Imagine the difficulties of trying to make overseas transactions all the time. It’s a hassle you don’t need when opening a company.

Do You Need to Live in the UK?

No, it’s not necessary to live in the UK in order to open a bank account. It’s wise to acquire UK residency before applying for one, though. Most banks won’t entertain an application unless you have UK residency. This is due to concerns over fraud and the additional administration costs incurred by them.

registered office address isn’t enough for most banks. You need to prove that you have residency and you need a home address.

What Options Do You Have for Business Bank Accounts?

The following information was correct as of this writing. The bank account opening process is the same for practically all banks. You will have to submit both personal and company information. Luckily, UK banks have a step-by-step process you can follow, and you can always have your agent handle most of the process for you.

A face-to-face interview is always required, and you will have to submit suitable identification, such as a passport or UK driver’s licence. The following banks have different conditions regarding non-nationals opening business bank accounts.

HSBC – Non-resident directors can open an account, but the owners of the company have to visit the UK and present a photographic ID, along with proof of address. They will also have to sign a bank mandate.

Lloyds Bank – Lloyds offers business bank accounts for non-residents, but only if one director lives in the UK. This UK resident has to visit the bank in person.

Barclays – There are no stipulations for opening international bank accounts with Barclays. But international accounts must begin from their branch in the Isle of Man. You will still have the same benefits as onshore account holders, but your account will be classified as offshore.

A Barclays account does demand that you have to place £25,000 into that account within the first month of opening it. Sometimes they do waive the requirement if you include a covering letter in your application, though.

What is the Situation Like on the Ground?

The way to ensure that you get your application accepted is to look at the situation from the point of view of the banks. You have to assume that they are always looking at the potential for fraud. An offer to leave a large deposit in the account will help them to believe that you are serious.

If you can prove that you have an address in the UK, this is another plus point in your favour. Multiple directors and shareholders is another sign of trustworthiness because they are not relying on one single person to deal with them. If something goes wrong, they have multiple points of contact.

In general, the process of opening a business bank account in the UK isn’t too hazardous. It can take a few weeks to open, so it’s best to get this out of the way before you formally start trading.

What are the biggest problems you have experienced when it comes to trying to open up a business bank account in the UK?

Making Tax Digital for VAT – can I just record the daily gross takings?

Making Tax Digital for VAT – can I just record the daily gross takings?

For many businesses, Making Tax Digital changes how transactions must be recorded in their accounting records. Not only does it require the relevant information to be captured digitally, the rules specify precisely what information needs to be recorded in relation to each supply. This may require a change in the method or nature (or both) of these businesses’ record-keeping.


At Cloud Accounting LLP, we have seen numerous queries around how to keep records which are compliant with MTD, but a question which comes up repeatedly is how MTD affects businesses who supply final consumers, but who do not consider themselves ‘retailers’. Examples could include restaurants and cafes, car wash businesses, and even a different revenue stream within a non-retail business such as a bar or a gift shop within a B&B or hotel. I will refer to them as ‘cash businesses’ in the remainder of this article.

Summary

Retailers and other cash businesses (those who sell to an end consumer) do not need to capture the details of each individual supply they make in their digital records, but they do need to record the total of all retail supplies for each day of trading – it cannot be done on a less frequent (eg weekly) basis.

This can be done on a simple Monday – Friday spreadsheet. In certain circumstances it may be necessary to split gross takings between those supplies that are zero rated and standard rated.

Read on if you want to understand the detailed legislation behind it:


Record keeping requirements

Let’s first look at the basic requirements and consider why cash businesses may find these difficult to comply with.
The Value Added Tax (Amendment) Regulations (2018 No. 261) state that the following information must be captured within the digital records:
(3) Subject to paragraph (4) the information specified for the purposes of paragraph (1) for each accounting period is—
(a) subject to sub-paragraph (c), for each supply made within the period—
(i) the time of supply,
(ii) the value of the supply, and
(a) subject to sub-paragraph (c), for each supply made within the period—
(i) the time of supply,
(ii) the value of the supply, and
(iii) the rate of VAT charged;
Paragraph (c) provides some relaxation from these rules:
(c) where more than one supply is recorded on a tax invoice and those supplies are either—
(i) supplies made which are required to be accounted for in respect of the same prescribed accounting period and are subject to the same rate of VAT, or they may be treated as a single supply for the purposes of … sub-paragraph (a)…
These rules are repeated in paragraph 4.3.2 of the VAT Notice (700/22).


Most readers will be aware that the word ‘supply’ in VAT has a particular meaning, and is much more granular than the amounts recorded on an invoice or statement, or amounts paid or received. So, businesses who make lots of individual supplies, particularly to end customers for whom they are not required to supply a VAT invoice, would have difficulties complying with the above record-keeping requirements of MTD.


Relaxation for retailers

Fortunately, all is not lost. Provision has been made in the Regulations to relax the above requirements in particular circumstances:
(4) The information specified in paragraph (3) may be varied by direction of the Commissioners to make provision about—

(c) the operation of retail schemes under Part 9 of these Regulations (supplies by
retailers);
Paragraph 4.5 of the VAT Notice provides that relaxation in a paragraph which has the force of law:
In addition to the records listed in paragraph 4.3 above, if you account for VAT using a retail scheme you must keep a digital record of your Daily Gross Takings (DGT). You are not required to keep a separate record of the supplies that make up your DGT within functional compatible software.
For more information on retail schemes and Daily Gross Takings see VAT notice 727: retail schemes.


So, retailers do not need to capture the details of each individual supply they make in their digital records, but they do need to record the total of all retail supplies for each day of trading – it cannot be done on a less frequent (eg weekly) basis.
But the question remains – does this relaxation include ‘non-traditional’ retailers ie the cash businesses described above?


What is a retailer?

There is no definition of ‘retail’ or ‘retailer’ in the VAT Act or the VAT Regulations. HMRC provide a definition in the retail scheme VAT Notice (727) as follows:
Retail is the selling of goods or services to consumers [and the retail schemes are aimed at retailers that cannot account for VAT using normal accounting].


Accounting for VAT in the normal way does not require businesses to issue a tax invoice to unregistered customers, but it does require them to identify, for each sale, the tax exclusive value and the VAT, and to be able to produce periodic totals of those amounts. Many cash businesses will not be able to do this, because of the level of information they retain in relation to each sale they make – even if they use electronic tills.


Therefore, in accordance with the definition above, and as HMRC has also kindly confirmed to us, cash businesses are considered to be retailers for these purposes. Cash businesses are likely to be covered by the point of sale scheme. This applies where the business is identifying the VAT rate when they make the sale and, if all sales are standard rated, they simply apply the VAT fraction to calculate the VAT due. As there is no retail scheme calculation per se to undertake then these businesses often do not realise that they are using a retail scheme.


So, these cash businesses can therefore benefit from the relaxation set out above in relation to their retail sales ie they can simply record their Daily Gross Takings in their digital records. They do not need to record each individual sale, nor is a digital link required between their tills and their accounting records – the input of the Daily Gross Takings is the start of the digital journey.


Any non-retail sales will need to be recorded in the digital records on a supply-by-supply basis as they do not benefit from this relaxation.

CLOUD ACCOUNTING LLP

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Name: Cloud Accounting LLP
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