Many clients use Sage 50 Accounts it has been around for a long time and has added a lot of features over the years, which may not be familiar to many users.
Sage comes with a very large number of reports and it can often be difficult to locate the one you need. To make this easier, each report on the list now has a star next to it which can be selected to add the report to your favourites. Favourite reports appear in a separate category and can also be selected from the main menu bar.
Monthly profit and loss breakdown
This is a less well known but very useful report which produces a full monthly profit and loss account for the current year, with each month in a separate column. It can be found within Financial Reports > Management analysis > Standard budgeting > Profit and Loss (Monthly Breakdown). Every figure in this report can be drilled down to the individual transaction level.
Beware that reversing journals may be necessary here to make monthly stock adjustments (see next point).
It is possible to set up journal entries to automatically reverse at a specific date – e.g., to post month end stock adjustments or accruals which are reversed on the first day of the next month.
In order to do this you need to enable reversing journals (under Settings > Company Preferences > Parameters > tick “Enable reversing journals”.
Once done, when entering journals there will now be a tickbox underneath to make the reversing entry, along with the date at which the reversing entry will be posted. When you post the original journal, the reversing journal is immediately posted along with it.
Also part of the journal entry screen is the facility to recall commonly used journals – e.g., for posting monthly wages, depreciation, bank charges etc.
After entering a journal, click “Memorise” to add it to the list of these journals, or “Recall” to bring in an already memorised journal from this list. The journal can be edited before being posted, so this is particularly useful where the posting is the same but the amounts might vary from month to month, such as with wages journals.
In a similar way to recalling journals, sales invoices raised through Sage can be copied to be used as a template for creating a new invoice to speed up the process. This can be done from the invoice list within Customers – simply select the invoice to copy and select Duplicate from below the list. All details of the new invoice can be customised.
Similarly from the invoice list you can quickly raise a credit against an invoice by selecting the invoice and selecting Credit from below the list.
Preventing back posting
In the normal course of events there is nothing to prevent the back posting of transactions into prior periods (either years or management accounts reporting periods), which can be problematic.
Sage allows you to prevent this – go to Settings > Lock Date and select a specific date before which posting is to be prohibited. Note that this can be any date, not just the year end, so it may be useful in managing monthly closedowns, etc.
If you wish to prevent specific Sage users from overriding this control, their Sage logon must have “Lock Dates” access disabled.
How to Close Your Limited Company
We sometimes hear from clients who want to cease trading and request to close their limited company . Where the limited company does not have any debts, other than money owed to company directors, it is fairly straight forward to close the limited company.
The dissolution method known as “voluntary strike off” can be followed and the directors simply need to follow the Companies House prescribed process. The company directors will need to complete and sign form DS01 which can be downloaded here.
Once complete the form must be posted to Companies House at the address provided and a cheque for £10 will need to be enclosed. This is an admin fee levied by Companies House for the strike off of a limited company.
You must ensure that you have taken the following steps prior to applying for voluntary strike off:
1) The company has ceased trading and has not traded in the last three months;
2) You have informed HMRC as they will expect a final set of accounts and for any tax to be settled – although if you do close your limited company before submitting your final corporation tax return it is likely that HMRC will not ask for payment as the company has been dissolved;
3) All creditors must be informed prior to your application for voluntary strike off.
Finally, don’t forget to close your business bank account before the company is struck off. If you don’t the bank account will be frozen and any remaining balance will be lost to the Crown.
HMRC was given new powers from 1st September 2013 to request information from UK’s merchant acquirers – the companies that process card payment transactions.
This will enable HMRC to data-mine information on all credit and debit card payments made over the last four years.
It would seem likely that HMRC will use their Connect software to make connections within the data obtained that will forward investigations into taxpayers’ affairs.
The age of cloud based systems has come upon us. But what is a cloud based accounting system and how can it help you?
What is a Cloud Based Accounting System?
These are online accounting systems, not desktop accounting systems like Excel, SAGE or Quickbooks. They offer a simple accrual (or cash) based accounting system where you can raise sales invoices, post purchase invoices and perform bank reconciliations (either by utilising an automatic bank feed or importing your bank statements as a CSV file). These systems also offer a range of simple financial reporting functions and can be used to prepare your VAT returns.
These systems are ideal for small or start up businesses to work with their accountants but what are the advantages and drawbacks?
1. Cloud accounting software is hosted on remote servers (where your business software and data is stored on servers at a remote location).
Therefore there is:-
- No need to install software
- No need to upgrade software
- No need for backups
The cloud based provider will do this automatically for you saving you on costs such as installation and upgrades.
2. It allows both the accountant and client to view and share the same information at the same time. This will mean that you can easily post your payments and receipts without utilising spreadsheets and we can immediately access the data to provide a monthly bookkeeping service, prepare management figures and year end accounts.
3. These systems can be accessed remotely (anywhere and anytime) through the internet including laptops, desktops, phones and tablets etc.
1. The main risk with cloud computing is that your data is stored with a 3rd party. Therefore, you must ensure that the cloud provider is reliable and that your data is stored within a suitable jurisdiction.
2. Cloud based systems are dependant on your broadband provider so you must ensure that you have a fast and reliable internet connection.
There are a number of cloud based accounting systems currently on the market including XERO, KashFlow, SAGE One and QuickBooks Online.
If you are thinking about transferring to a cloud based accounting system please speak to us and we can help you decide if it is right for you and your business. Please also see our Topical Tips 163 and 185 for further information.
HMRC is launching seven new investigation task forces. Who’s being targeted this time?
After launching nearly 40 task forces in the last two years HMRC hasn’t yet run out of steam and the latest batch are aimed at different industries as far apart as the Isles of Scilly and Scotland. The new task forces are aimed at the:
Other forces. In the early days we heard through the grapevine that some of HMRC’s task force officers weren’t well informed about the industry sectors they were investigating. That’s less likely to be the case now, plus they are increasingly getting other forces involved, like the police and the Home Office. The latter will check that you’re keeping the right paperwork for any foreign workers you employ
Make the right first move. It’s easy for HMRC to say you have nothing to fear if you aren’t unfairly avoiding tax, but in our experience if it’s looking for trouble it might find it even where there isn’t any. Therefore, if you’re contacted by an HMRC task force we recommend speaking to your tax advisor immediately.
The list below sets out the main reasons why your client would need to fill in a tax return:
They were self-employed for any part of the tax year.
Partner in a business partnership
They were a partner in a business partnership for any part of the tax year.
They were a company director (unless this was a non-profit organisation and they didn’t receive payments or benefits).
Savings and investment income
They received £10,000 or more in the tax year.
They received £2,500 or more in the tax year.
Income from Property
They received income from property during the tax year of £10,000 or more (before deducting allowable expenses) or £2,500 or more (after deducting allowable expenses).
Foreign income that is liable to UK tax:
They received any foreign income that’s liable to UK tax.
Employment and wish to claim expenses or professional subscriptions
They were employed or a director. They have expenses or professional subscriptions of £2,500 or more to claim
They received income from all sources in the tax year of £100,000 or more.
Bankruptcy / Sequestration / Individual Voluntary Arrangement
They may need to fill in a tax return for the year in which they were declared bankrupt, sequestrated or entered into a voluntary arrangement.
High Income Child Benefit Charge
If your client’s income is more than £50,000 and your client or their partner received Child Benefit, they may need to fill in a tax return.
HM Revenue and Customs (HMRC) recently introduced a campaign for taxpayers to bring their tax affairs up to date under Self Assessment.
This is aimed at individuals who have been issued with a tax return for any tax years up to 5 April 2012 but who have not yet submitted the return to HMRC.
Individuals who have outstanding tax returns and who do not take advantage of this campaign may face a penalty charge of 100% of the outstanding income tax and National Insurance Contributions (NIC) (200% for overseas matters for the 2012 tax year).
If you would like to join this campaign, you must notify HMRC and submit all outstanding tax returns up to 5 April 2012 by 15 October 2013. In addition, any outstanding income tax and NIC must be paid by 15 October 2013. It may be possible to arrange a payment plan with HMRC’s My Tax Return Catch Up team.
Taxpayers cannot take part in this campaign if HMRC has opened an investigation, enquiry or compliance check into their tax affairs. Also, only taxpayers currently registered for Self Assessment can take advantage of this campaign.
Employers please note that the National Minimum Wage rates are increasing from 1 October 2013. They will be:
To simplify accounting and tax reporting for the smallest businesses, from 6 April 2013 small businesses can choose to calculate profits/losses on the basis of the cash received and expenses paid out. This is known as the cash basis, and it ignores debts owed by the business and amounts owing to the business, until those amounts are paid. The normal accounting method is known as the accruals basis.
The cash basis will only be available to businesses which operate as sole-traders or partnerships, and whose turnover is under the VAT registration threshold (£79,000 from 1 April 2013). Some other businesses will be barred from using the cash basis and these include:
- All companies and LLPs;
- Farmers using the herd basis;
- Any business using profit averaging over several tax years;
- Businesses in a mineral extraction trade; and
- Lloyd’s underwriters.
Once a business is using the cash basis it can carry on doing so until its annual turnover is twice the VAT registration threshold (£158,000 from April 2013).
Although apparently simple, the cash basis will have some disadvantages:
- The deduction for loan interest paid will be limited to £500 per year; and
- Losses can only be carried forward to set against future profits, whereas under the accruals basis losses can be carried back in the first four years of the trade and set off against the trader’s other income.
In addition any unincorporated business, whether or not they are using the cash basis, will be able to use flat rate expenses to replace the calculation of actual costs incurred in these categories of expenses from 6 April 2013:
- Motoring costs (mileage at 45p per mile);
- Use of home for business purposes (based on number of hours used per month); and
- Private use of part of commercial premises, such as a public house (based on number of occupants who are business owners or their immediate family)
As these flat rates are completely optional, and will vary in effect in each business, we need to discuss if the flat rates will be suitable.
It is common for unmarried couples to jointly own a property. Cohabiting couples with assets in excess of £650,000 may be subject to inheritance tax at 40% in the event of one of them passing away. This is as a result of each individual may have up to £325,000 worth of assets that can be transferred free of inheritance tax on their death to non-spouses - this is called the nil rate band.
The above is not the case for married couples, as assets left to a spouse is exempt from inheritance tax and in addition the unused element of the nil rate band of £325,000 is transferred to the surviving spouse meaning the amount of £650,000 worth of the surviving partner’s death estate may not be liable to inheritance tax.
Capital Gains Tax
A key point is that married couples can transfer assets between each other without being subject to capital gains tax. As a result of this, married couples can transfer assets to each other freely to ensure that the capital gains annual exemption of £10,900 is fully utilised on the subsequent sale, for example on a rental property that is owned by one of the married couple prior to a sale of this property, half of the ownership can be transferred to the their spouse meaning upon sale of the property the married couple can fully utilise the capital gains exemption of £21,800.
Other areas to consider
Married couples allowance applies when one of the married couple was 65 before 6 April 2000 when the universal married couples allowance was withdrawn.
Licenced Accountant in Brighton