Will There Be A Fourth Self-employment Support Scheme Grant?

Covid-19 has wreaked havoc throughout the world. With the third lockdown now upon us, many self-employed workers are suffering from enormous losses to their income. The good news is help is available. The government’s new scheme, known as the Self-employment Income Support Scheme, was designed to help workers through the coronavirus crisis. 

The SEISS arrangement was first brought in last year in 2020, to provide grants to those whose income has been negatively impacted by the pandemic. From May 2020 self-employed workers were able to apply for the grant. However, applications for the first grant closed in July 2020. The second grant shortly followed, lasting between August-October and was worth up to £6,570. And finally, a third grant was brought into play to assist through the winter months. 

But is there going to be a fourth grant? 

The simple answer is yes, an economic update from the house of commons confirmed the scheme will be extended through February to March. 

A whopping three million people have already applied since the first grant release and over 20 billion pounds already handed out. 

So far the government has not given any indications to how much support you can get under the fourth grant but rest assured more information is due to be published shortly. 

Who can claim?

As the fourth grant covers February to April, it is time to get your applications in. Unfortunately, eligibility conditions have not changed. So if you were not eligible for the first three grants, you wouldn’t qualify for this grant either.

Here is what you need to know to apply:

  • You must show you are currently trading but have been impacted by reduced demand. 
  • You must declare you have been trading but are currently unable to do so due to the pandemic. 
  • You must show the impact put on your business at the time of the current grant.
  • If you filed a tax return for 2018/19 on or before April 2020, and provide proof, you were trading through that tax year. 
  • You must declare you intend to continue trading. 
  • Finally, you must declare you reasonably believe there will be a significant reduction to your trading profits at the time of your grant. 

Be wary, as there a few things that can affect your application, these being:

  • If your tax return was late, amended or under enquiry. 
  • You are a member of a partnership.
  • You have had a new child. 
  • You claim averaging relief. 
  • You have state aid. 
  • You are a military reservist. 
  • You have loans covered by the loan charge.
  • You are a non-resident or chose the remittance basis. 

To apply for the grant schemes, you must visit the Gov website before the end of April. Remember to make sure you have with you your unique taxpayer reference, national insurance number, government gateway user ID and password and your UK bank details. You will need these to begin your application process. 

Is An Accountant Required To Submit Your Tax Return?

Most often, it is fair to say that most business owners are not confident when it comes to deciding which aspects of their tax duties they can deal with themselves and when they can be at an advantage from calling in a professional. Some would argue that giving the job to an accountant is a much easier option. However, there is now clever technology that can boost your confidence when organising your taxes on your own. 

How does self tax assessment work?

Self-assessment tax returns declare how much taxable income you have earned in that financial year and determines any expenses you may be qualified to claim. 

The digital tax initiative, which is slowly being introduced, means that annual returns will be replaced with quarterly reports. 

Tax returns depend upon close attention to detail, making sure to provide exact dates, figures and details of any marital and special relief privileges you might be eligible for. Business owners should always be willing to support their claims with sufficient evidence such as invoices or receipts if requested to do so. If you submit false information you may be charged with a hefty penalty, this would be the same if you were to miss a filing deadline. The longer you take to amend the complication, the more your fine is likely to grow. 

Other tax filing options

Sadly, some small businesses simply do not have the money to spare to hire an accountant; however, it’s essential to keep your returns free from errors. Human error is a genuine but leading issue in incorrect returns, and if they were to make a mistake, your business would be liable. Many people shy away from completing their tax returns due to the added pressure it brings.

An alternative method is to invest in a tax software (for example Quickbooks) that keeps track of your income and expenses throughout the financial year. Providing you input your figures carefully, the calculations should be error-free! On the other hand, spreadsheets, calculators and good book-keeping can help you be your own accountant. Although it may not be as simple as tax software, it is undoubtedly attainable if you have a good head for numbers!

How can a tax account be useful? 

Business accountants deal with numbers daily, therefore, are ideal for protecting your figures. More so, they know the conduct; what you are and are not entitled to claim and how you can cut your liabilities. Employing an accountant not only saves bundles of stress but also a lot of time, it is typically around £150 for a reputable firm, often a little less if you only require a basic service. The price may seem quite reasonable to a business who may on average spend several hours completing their own tax return. 

If you feel like you could benefit from having an accountant, don’t hesitate to get in contact!

Accountants Face Exceptional Challenges For The End Of 2020 And Beyond

With the COVID-19 pandemic causing more uncertainty and disruption, this has led to an increase in challenges in auditing financial statements for accountants. Not only this, but extra difficulties have come to light with regards to Brexit and the transition period finishing on 31st December 2020. Not only this, but climate change has become another important topic of 2020 as well as COVID-19 and Brexit.

These three key issues are predicted to alter areas of financial statements. This is because investors will want to gain information that will clearly explain how directors of businesses have responded to their implications. Transparency will be vital for this to occur.

Directors will also be obliged to review every area of every financial statement, which will be subject to judgement and estimation uncertainty. Furthermore, forecasting will also play a vital part in conducting impairment as well as concern reviews. The uncertainty of all this could require help from other sources.

Soon auditors will have to demonstrate levels of professional scepticism. This increased uncertainty amongst financial professionals will mean that they will need to take an approach that involves seeking good-quality corroborative evidence as well as evidence derived from different sources.

Those preparing annual reports are urged to commence the planning early due to the challenges in the upcoming reporting season. There must be a focus on transparency and engagement across organisations to gather information with auditors. It is also important to think about the reporting deadlines and making their scope as flexible as possible because of the extraordinary challenges that will be occurring for auditors and preparers. These challenges will not only be affecting their professional lives, but COVID-19, Brexit and the climate crisis will affect the personal lives of auditors too.

The key lessons that we can learn in preparation for this are to be as organised and flexible as possible to meet these deadlines. Preparing for the worst financial scenarios due to the three key challenges will also be important in ensuring no more challenges will arise from the ones already established.

The Institute of Chartered Accountants in England and Wales (ICAEW) provides lots of relevant resources and will be able to develop these resources to the changes which are occurring at the end of 2020. They offer technical support with regards to the COVID-19 situation with information for auditors and preparers free of charge.

Take a look at my blog here to see how some UK accountants are voicing their concerns about their environmental worries.

Accountants Considered ‘Key Workers’ According To Firms Due To The Pandemic

According to a study by Xero, the importance of accountancy has been emphasised due to the COVID-19 pandemic. Many small to medium-sized enterprises are now considering them as key workers in the UK’s economic recovery.

Xero recorded that 43% of small business owners said that their company’s accountant was an essential part of the company’s survival during the pandemic, with an impressive 63% saying their accountant delivered an unquestionable high standard of service. A further 37% of business owners suggested that their accountant enabled them to retain their members of staff during the most tumultuous time of lockdown.

In addition to this, a lot of small to medium-sized enterprises also highlighted how vital technology has been for their company’s financial development during the pandemic. It has been a driving force in keeping the businesses thriving during the worst part of the epidemic in particular. Almost half of the business owners questioned in Xero’s survey said that the cloud and its technology had been large support that has enabled staff to work from home with the company’s accountant, safely and remotely.

Saving data to the cloud has been one of the changes accountants have been making to their way of working due to the Coronavirus pandemic, as well as businesses alone. 

Many business owners went to government websites in order to seek resources at the beginning of the pandemic. Here, they were advised about cloud-based software to survive as a business. Without this ground-breaking technology, many companies would have risked a huge financial loss. Now, 45% of companies have said that their accountant is more important than it has ever been. 14% had contacted their accountant for the very first time due to the pandemic and 38% have said that they have a better relationship with their accountant than before the pandemic even began. 

Accountants have been particularly useful in providing help and support in areas such as VAT, tax returns and payrolls.

The fast-growing cloud software has been an invaluable source for small businesses surviving financially during the pandemic. It is now shaping the accounting landscape and how companies manage their finances with accountants remotely.

Accountants play an essential role in transforming small firms, and in relation to the pandemic, saving them from financial chaos. 

Remote Working Continues For Accountants Seven Months Into The Pandemic

The shared experience of working in the office vanished when the COVID-19 pandemic hit the UK. The feeling of company and teamwork in a space disappeared along with this and challenges soon arose for businesses trying to keep things running smoothly and remotely.

Some businesses coped better than others. Ones which were more used to removing sensitive financial data from the office were better equipped at working remotely. These organisations have been laying the groundwork for years of being able to balance the books from the comfort of their homes, so the pandemic was a good opportunity to put this into practice.

These businesses had worked to gain a continuous accounting process. This automates routine accounting tasks that require complicated calculations such as depreciation and amortisation. Therefore, these processes become continuous because of how automated they are. This automates the generation of financial statements, transfers with eliminations and reconciliation tools including AP sub-ledgers and the general ledger. Technology is an efficient way to process transactions for accountants and counteracts the complexities that come with working remotely.

The goal is for these automated processes to happen continuously. The pandemic has focussed on a need for automatic technologies and has also highlighted the importance of the cloud in doing so. The cloud allows sensitive financial information to be stored securely. This could involve data privacy as well as internal permissions when accountants are outside of the office.

Cloud-based technologies are updated regularly in line with the newest standards and regulations which often change. The cloud is kept modern and running smoothly. This maintains compliance for organisations.

With automated systems, there is increased accuracy. There is no need to rekey information from system to system manually. This reduces the chance of human data entry errors, so saves time that can be dedicated to other internal operations within the businesses. It also increases the quality of work-life for employees when functions are automated and left to the end of the month. The most tedious work has become more automated.

In conclusion, although remote working continues for accountants seven months into the pandemic, there have been advantages that have come with it. These advantages mentioned above have sped up the work of accountants by saving them time and removing more tedious aspects to complete. Accuracy has increased and the overall move to automation couldn’t have come at a better time for accountants.

If you need any help with your accounting needs, get in contact today.

Accountant’s Guide to Managing Your Business Finances

Financial management can take many years to master. Managing your money is difficult but so vital to grow and develop your business. Nowadays, we are blessed with the ability to hire accountants to help manage our business finances for lower costs than you may think. However, you cannot be purely reliant on accountants alone as you are accountable for managing your finances. Here is your guide to equipping yourself with the essentials to manage your finances…

Understand the basics of finances

All business owners must have the basic skills of managing finances in order to have a successful business. There is terminology which is vital to know like the breakeven point, net profit, cash flow, expenses and gross revenue. These will be terms used on a daily basis so make sure you understand them all.

Furthermore, you must also understand business accounting documents such as revenue forecast, cash flow statement, income statement and balance sheet. If you aren’t familiar with these terms and documents, google them and research what they all mean and do. It will be invaluable knowledge for your business. 

Keep track of your cash flow

Cash flow is the money that goes in and out of your business and is easy to lose track of so ensure you are organised and know where it is at all times. The inflow of your business is from selling your goods whereas your outflow is the money your business spends on stock, payroll as well as marketing too. Try to always keep your outflow lower than your inflow, even though this could prove difficult. Just bear it in mind at all times and never lose track of your business goals.

Ensure your business and personal finances are kept separate

If you are a small business owner, it may seem easy and simple to have all your finances in one account. This is not recommended as it makes your business disorganised and can lead to tax issues as your business grows larger in the future. The first thing you should do when setting up your business is having two separate bank accounts for your personal life and company.

Spread out your tax payments

Paying your tax in a lump sum isn’t always the wisest of moves as large amounts of money leaving your cash flow can seriously affect it. Instead of this, try and opt for tax as a monthly expense. This will help you with budgeting.

Have a business cash reserve

Have a business bank account that can be used as a cash reserve. Top it up as often as you can and make it easy to withdraw money when needed for your business. This will take the pressure off when you have any additional bills to pay for your business.

If you need assistance with your business accounting, contact me today!

Benefits of Making Tax Digital

The Government’s programme to make tax digital is a bold one. HMRC has set its aim to become one of the most advanced digital tax administrations on the globe. But what do we mean by making tax digital and most importantly, what are the benefits of this new scheme? This article will guide you through the pros of making tax digital and why it’s a win-win situation for all parties involved in the programme.

What is making tax digital?

The definition of making tax digital is the programme to which HMRC aim to change from paper-based systems as well as forms for the administration of tax to more digital variants. Making tax digital is already prevalent for VAT in the UK. This was established in April 2019 for businesses that are over the VAT threshold of £85,000. As of March 2020, there were over 1.4 million businesses who have joined the digital VAT service. It will eventually be rolled out for self-employment tax, company tax and income tax too.

Making tax digital also aims to make tax files simpler for businesses as online software will be able to automatically prepare tax returns as well as sending them to HMRC directly.

The Benefits

There are numerous benefits to making tax digital. For example, businesses will become more productive; saving them hours each week of business administration. Additionally, there will be less paperwork and reduced stress filing all the tax returns. Accuracy will be enhanced, and fewer errors will be made when submitting these tax returns. Tax liabilities will be more visible, staff can do other business activities with the time saved, and it will be quick and easy to view all tax data on phones and tablets. Not only this, but it’s a greener method, with zero paper so a reduction in deforestation will occur.

The future of making tax digital

So, what can we expect soon by making tax digital? Well, by 2021, it is predicted that HMRC will enforce digital tax methods for corporation tax as well as income tax. It is expected that this will happen in the first tax year for income tax 2021/2022. However, all this may potentially be delayed because of the COVID-19 pandemic. The pandemic has led to delays in numerous projects across sections and has led to the prioritising of specific financial resources. 

Speak to Herridge Accountants now about making your tax digital. 

An Introduction to VAT

VAT can be a confusing concept to grasp if you have never needed to pay VAT before. Nonetheless, being VAT registered can bring with it lots of advantages concerning your finances. Here is a brief introduction on VAT with some answers to questions you may have on the subject.

VAT is a tax which is added to the majority of services and goods. It is something you must pay if you are a business or merely an individual. You pay it on a range of things from bills to clothes. For companies who make over £85,000 a year, they will need to add VAT to their goods and services’ costs. Businesses must register for VAT if they turn over more than this.

Once registered, a business will need to charge VAT on the goods and services which they sell and offer. Companies will also need to fill in a return every three months. This will include information like how much VAT their business has charged as well as how much their business has paid.

Businesses will have to pay outstanding amounts of VAT if they have charged more than they have paid. In contrast, companies are able to claim back VAT money from HMRC if they have paid too much VAT than they have charged.

VAT rates in the UK are 20%. That is the standard rate. Mobility aids and children’s car seats are 5%, and most food, male razors, children’s clothing and books are 0%. Health, financial insurance and most sports services are exempt from VAT too. Find out more about on different types of VAT.

Sole traders and freelancers must also pay VAT if their turnover annually will exceed the £85,000 threshold. The VAT will be registered in their name unlike businesses, and they must ensure always to keep records of the VAT they are charging customers.

There are a few VAT schemes to consider when applying for VAT, so it is important to do your research to discover which one is right for you. There is standard accounting, which is the common one, the Flat Rate for businesses which turnover less than £150,000 per year, as well as Annual Accounting for a turnover of less than £1.35 million and cash accounting which is the same threshold but for small businesses.

Advantages of VAT are that you can reclaim VAT that is paid on top of things bought for your business, such as phones, laptops and office equipment. You can register for VAT even if you do not earn the £85,000 per year yet. This will mean you won’t have to bother looking out for the threshold when you hit that sum and owe HMRC a large lump sum.

To register for VAT, you will need to go to the gov.uk site. You will need things like a tax reference, bank details of your business and company number/address. After this, you will gain your VAT certificate with details of your VAT.

Five Reasons Why You Need an Accountant

Managing your finances is not for everyone. It can become very complicated and dreary and detract from the time and passion you put into your own business with the wasted hours filing tax returns. Whether you are just starting out or running a top company with the aim to expand, an accountant can be a big help. Here are five reasons as to why you need an accountant!

Saves Time

Having your own business begins with the idea that you are passionate about. This excitement doesn’t tend to include the hours spent going through your finances and paying taxes. Accountants are paid for doing the financial work you don’t want to do. They will allow you to save time to focus on your business. You get to spend time making money and not having to crunch numbers.

You are still legally responsible for an accountant’s accuracy, but you can hand over full account management to them. Your accountant can do virtually everything on your behalf, saving you so much time. They can do things like complete tax returns, manage PAYE and more. They can even be the ones who communicate with HMRC

Organisation

Deadlines for tax can change regularly. This can be a stressful ordeal, and getting a foot out of line could lead you to underestimate your future tax bills. An accountant is organised and knowledgeable on all things financial. They can guarantee that deadlines will be met, and you will be paying the correct amount of tax at the right times. Having an accountant will be a useful safety net to ensure nothing goes wrong and will keep all your numbers organised and tidy.

Save Money

Hiring an accountant is not as expensive as you might think. Good accountants can address areas where you could save money. This could be through claiming entitled expenses. This would cut your tax bill considerably and might mean that in the long run, your accountant will be paying their own fee through the money they saved for you!

Support and Advice

Not only are accountants there to help with your finances but having their support can really improve your whole businesses’ setup. If it’s a new business and you’re inexperienced, they can be there to look over your plans and goals. As you grow and expand, they can show you your options and direct you in ways dependant on your business’s structure

Makes life simple

Working with figures and finances is not everyone’s cup of tea. Hiring an accountant is a good idea if you dread the thought of seeing spreadsheets, invoices, and tax returns. You can sit back, relax and concentrate on your business and make money while your accountant does the work you don’t wish to spend your weekends doing. Life will be pure bliss, and you have the added knowledge that you won’t be penalised for late payments!