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Accounting Fact Sheets
Accountancy fact sheets supplied by the award winning Smith Emmerson in Nottingham
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Budget 2009 - A Brief Summary
- Details
- Category: Accounting Fact Sheets
- Published on Thursday, 23 April 2009 18:37
- Hits: 995
Thanks to the wonderful Smith Emmerson Accountants, who we recommend for your new small business accountancy services, they have provided a brief overview of the main points of the 2009 Budget from Wednesday 22nd April 2009.
Tony Byng
The Company Merchant Limited
87 Talbot Street
Nottingham
NG1 5GN
Tel: 0115 822 1319
SmithEmmerson.com
20% discount for The Company Merchant Limited customers
Company Car Tax
- Details
- Category: Accounting Fact Sheets
- Published on Saturday, 18 April 2009 10:27
- Hits: 1308
The system for taxing those who use company cars has remained fundamentally unchanged for some years, save for stepped changes in the emissions thresholds. The basis of the charge is to tax a figure calculated by multiplying the car’s list price by an emissions-based percentage, with a 3% surcharge on diesel powered cars.
The maximum taxable value of the benefit is 35% of the list price of the car when first registered. The list price includes car tax (if applicable), Value Added Tax and delivery charges, and is subject to an upper limit of £80,000.
Cars emitting CO2 at or below a specified level are taxed on 15% of the list price. This is the usual minimum charge and will apply up an emission level of 139 g/km:
Qualifying low emissions cars (QUALECs) with CO2emissions at 120 g/km and below are taxed at 10% of the list price (13% for diesel cars).
Cars running solely on diesel fuel are subject to a 3% supplement. Special rules apply to cars running on electricity, electricity and petrol, gas or petrol and gas, and E85 fuel, which are generally seen as more environmentally friendly.
Cars with higher levels of CO2 emission are taxed on a graduated scale rising to a maximum (for both petrol and diesel) of 35% of the car’s price. The detailed figures are shown in the Appendix. These figures apply to all company cars, including second cars.
CO2 emission information
For all cars first registered from at least November 2000, the definitive CO2 emissions figure for tax purposes is recorded on the Vehicle Registration Document (V5). Under an agreement with HM Revenue & Customs, the Society of Motor Manufacturers and Traders (SMMT) is providing a CO2 emissions enquiry service on their website at www.smmt.co.uk for cars first registered from January 1998.
Older Cars
Cars first registered before January 1998, for which there are no reliable CO2 emissions data, will be taxed according to their engine size, as follows:
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Engine Size (cc) |
Percentage of car’s price charged to tax |
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0 – 1400 1401 – 2000 2001 and more |
15% 22% 32% |
Fuel Scale Charges
Where the employer pays for any fuel used privately by the employee, there is an additional scale charge based on theCO2-based car benefit percentage applied to a standard value of £16,900.
Employee Contributions
Where the employee is required, as a condition of the car being made available, to payfor the private use of a car the value of the benefit is reduced accordingly (on a pound for pound basis). Capital contributions of up to £5,000 made by employees towards the cost of the car and/or accessories, when the car is first made available, will reduce its price for tax purposes.
By contrast it is "all or nothing" for the fuel scale charge, which remains at the full value unless the employee pays for all private fuel!
HM Revenue & Customs has published advisory fuel rates which will be accepted either for employers re-imbursing employees for the cost of fuel for business mileage, or for employees re-imbursing employers for the cost of fuel for private mileage. Alternative rates may be negotiated, for example when it is necessary for the performance of his or her duties that an employee uses a four-wheel drive vehicle, a higher rate per mile might be agreed due to the typically higher fuel consumption of such vehicles.
Advisory fuel rates (from 1 July 2008)
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Petrol |
Diesel |
LPG |
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Engine size |
Rate per mile |
Rate per mile |
Rate per mile |
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Up to 1400cc |
12p |
13p |
7p |
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1401 - 2000cc |
15p |
13p |
9p |
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Over 2000cc |
21p |
17p |
13p |
Advisory fuel rates (from 1 January 2009*)
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Petrol |
Diesel |
LPG |
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Engine size |
Rate per mile |
Rate per mile |
Rate per mile |
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Up to 1400cc |
10p |
11p |
7p |
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1401 - 2000cc |
12p |
11p |
9p |
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Over 2000cc |
17p |
14p |
12p |
*As was done for the July 2008 changes, HMRC is content for the new rates to be implemented immediately where employers are able and wish to do so.
Tax Payable
These standard charges are subject to income tax at basic or higher rate (depending on the employee's rate of pay). The tax is usually collected under the PAYE system by appropriate adjustment of the employee's tax code.
For the benefit to be attractive, the employee must pay less in extra tax than it would cost him to run his own car out of his taxed income. These are examples of the 2008-09 tax costs to an employee of a company car:
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List Price |
Engine Size cc |
CO2 emission g/km |
Tax Rate 20% |
Tax Rate 40% |
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Petrol |
Diesel |
Petrol |
Diesel |
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Car £ |
Fuel £ |
Car £ |
Fuel £ |
Car £ |
Fuel £ |
Car £ |
Fuel £ |
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£13,000 |
1800 |
165 |
546 |
710 |
624 |
811 |
1092 |
1419 |
1248 |
1622 |
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£18,000 |
1300 |
200 |
1008 |
946 |
1116 |
1048 |
2016 |
1893 |
2232 |
2096 |
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£25,000 |
3000 |
240 |
1750 |
1183 |
1750 |
1183 |
3500 |
2366 |
3500 |
2366 |
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Tax Free Benefits
Car Parking
The provision of a car parking space at or near the employee's place of work is not an assessable benefit.
Pool Cars
There is no tax for using a pool car. This is one where private use is merely incidental to the business use, and it is not normally used by one employee to the exclusion of all others.
Please note: A pool car must not normally be kept overnight at or near an employee's home.
"Lower Paid" Employees
The provision of a car for an employee (NOT a director) who is paid at a rate below £8,500 per year (including the value of benefits) does NOT attract any charge to income tax. Nor is there any charge on fuel for private use provided to such employees.
Special Consideration for Sole Traders
If your spouse is employed in your business (but not as a partner), it can be very tax efficient to provide them with a car, as long as they earn well below £8,500. The use of the car can be tax-free in their hands, and the business will get full tax relief on all the expenses connected with the car, provided you can demonstrate the car is necessary for business purposes.
Business Use of an Employee’s Own Vehicle
It is quite normal practice for employees to be reimbursed at a reasonable mileage rate for business use of their own vehicles.
A statutory system of tax and national insurance free mileage rates applies for business journeys in employees’ own vehicles, as follows:
Cars and vans:
On the first 10,000 miles in the tax year 40p per mile
On each additional mile above this 25p per mile
Motor cycles 24p per mile
Bicycles 20p per mile
It is no longer possible to make a claim for tax relief based on actual receipted bills, nor claim capital allowances or interest on loans related to car purchases.
Unless the employee is reimbursed at a rate higher than the statutory mileage rate, the payments do not need to be reported on a P11D.
Company vans
The taxable benefit for the unrestricted use of vans will be £3,000. There is a further £500 of taxable benefit if the employer provides fuel for private travel.
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Van and fuel charge |
2008/09 |
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Tax (20% taxpayer) |
£700 |
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Tax (40% taxpayer) |
£1,400 |
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Employer’s class 1A NICs |
£448 |
Van drivers can avoid the benefit in kind charge of £3,000 per year, if they agree not to use the van for personal journeys. Driving to and from work is acceptable as long as there is a reasonable amount of business use. It is advisable to keep a regular check on the vehicle’s mileage to ensure the ‘only for business rule’ is kept.
Tax Saving Check List
· Keep adequate records of business mileage.
· Always check your tax code to see that the correct benefit is being applied.
· Sole traders and partners should consider the potential tax advantages of providing their spouse with a company car.
· If you have low private mileage, you may be better off if you pay for all your own private fuel.
· If you have high business mileage, it may be better to use your own car and claim "mileage" from your employer.
· Encourage your employer to apply for a P11D dispensation.
· If you are on the borderline of "lower paid", think about setting up a contribution for the use of the car, to keep on the right side of £8,500.
· Tax - free parking is a must!
Cars with higher levels of CO2 emissions
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CO2 emissions |
Appropriate % |
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(g/km) |
Petrol % |
Diesel % |
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120 and below |
10 |
13 |
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121 - 139 |
15 |
18 |
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140 - 144 |
16 |
19 |
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145 - 149 |
17 |
20 |
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150 - 154 |
18 |
21 |
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155 - 159 |
19 |
22 |
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160 - 164 |
20 |
23 |
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165 - 169 |
21 |
24 |
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170 - 174 |
22 |
25 |
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175 - 179 |
23 |
26 |
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180 - 184 |
24 |
27 |
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185 - 189 |
25 |
28 |
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190 - 194 |
26 |
29 |
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195 - 199 |
27 |
30 |
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200 - 204 |
28 |
31 |
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205 - 209 |
29 |
32 |
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210 - 214 |
30 |
33 |
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215 - 219 |
31 |
34 |
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220 - 224 |
32 |
35
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225 - 229 |
33 |
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230 - 234 |
34 |
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235 and above |
35 |
The Company Secretary
- Details
- Category: Accounting Fact Sheets
- Published on Wednesday, 15 April 2009 21:55
- Hits: 896
Private companies are no longer required to have a company secretary, although they may continue to have one if they wish. You must give notice of the appointment, resignation or changes of any particulars of a company secretary to the Registrar of Companies.
In the case of a company without a secretary anything required or authorised to be done by or to the secretary may be done by a director.
Register
A register containing the secretary’s name and address must be kept at the company’s registered office.
Duties
The company secretary should maintain the company’s statutory books:
Register of members
Register of directors and secretary
Register of application and allotments and return of allotments
Registers of transfer of shares, debenture holders, and charges
Register of material share interests
The company secretary should keep the company seal, share certificates, letters of allotment, the Memorandum and Articles of Association, and the Certificate of Incorporation. He or she should also arrange and provide notice for company meetings, the Annual General Meeting, and directors’ meetings.
The company secretary, as an officer of the company, is liable, together with the directors, for default fines and other penalties provided by the Companies Act.
Contractual liability
Where the company secretary enters into a contract on behalf of the company, he or she should make it clear that he or she does so as the company’s agent, thereby avoiding personal liability.
Do call us if you would like further help or advice on this subject.
87 Talbot Street
Nottingham
NG1 5GN
Tel: 0115 822 1319
SmithEmmerson.com
20% discount for The Company Merchant Limited customers
Keeping an eye on your cashflow
- Details
- Category: Accounting Fact Sheets
- Published on Saturday, 18 April 2009 10:24
- Hits: 884
Cash is the lifeblood of a business, but with so much emphasis usually put on profitability, it can be easy to overlook this fact. Of course, the bottom line is important, but poor cash flow management can drive a growing and/or profitable company out of business.
The risk is especially great for expanding companies. For example, if billing is delayed at the same time as stock is accumulated to fulfil increased orders, you can find yourself short of the cash needed to pay suppliers and employees.
The benefits of projection
Cash flow projections are critical, especially in times of need, but you don’t have to wait for a crisis to benefit from good cash flow planning. A properly developed cash flow projection can help a business foresee and prepare for potential shortages. Cash flow management can also help you:
· Maintain adequate cash reserves to pay bills, expand the business and invest in facilities and product development
· Reduce interest costs through managed borrowing
· Increase interest income by transferring surplus funds into interest-bearing accounts temporarily
· Receive discounts through bulk purchasing
· Improve relations with the bank manager
Businesses that prepare cash flow projections often learn something about their systems, the dynamics of their business, and the process often has other positive outcomes. For example, you might discover that you need to pay more attention to certain customers, or that you can defer payments to suppliers more beneficially.
Cashflow checklist
20 signs that your business could be facing cashflow problems
In times of economic uncertainty, cash is undoubtedly king. To help you focus on your cashflow and profitability we have prepared this checklist. Simply answer ‘yes’ or ‘no’ to say whether each statement is true for your business. If you have more ‘no’ answers than you are comfortable with, you may be facing cashflow problems. Call us to discuss an action plan.
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Yes |
No |
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When we receive a job, we know we can complete it and be paid on our terms |
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We send a bill as soon as we complete a job |
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Invoicing documents are accurate, complete and clear |
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Our credit procedures alert us to problem customers so that we can follow up on outstanding accounts |
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We monitor and enforce our credit terms and obtain deposits from ‘doubtful’ payers |
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We finance capital expenditure in the most cost-effective manner |
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Our pricing reflects time spent on jobs and covers associated risks |
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Employees understand the importance of the business’s cashflow |
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We complete work efficiently |
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We catch mistakes before they reach customers |
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Mistakes cause us to improve processes |
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We keep a close eye on budgets throughout the year |
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We determine the viability of outsourcing work |
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Adequate controls are in place to control employee overtime |
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We are effective in negotiating materials and supplies contracts |
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We forecast cashflow monthly and base our financial arrangements on our projections |
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Our bank is our partner and understands our business and its financial needs |
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We always see that work is done by the least expensive, capable employee |
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We link staff pay to productivity and company profits |
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Our standard operating procedures are written down and everyone follows them |
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87 Talbot Street
Nottingham
NG1 5GN
Tel: 0115 822 1319
SmithEmmerson.com
20% discount for The Company Merchant Limited customers
How to present a request for finance to your bank
- Details
- Category: Accounting Fact Sheets
- Published on Wednesday, 15 April 2009 21:39
- Hits: 866
It is important to appreciate the following criteria used by banks when considering providing finance for a client:
The client
Does the bank know you?
How long have you been in business?
Do they know your trade?
What past record do you have in the business?
What past record do you have with the bank?
The amount
Are you requesting sufficient finance? (crucial)
How will it be spent?
Have you obtained estimates for expenditure?
What is the position, if applicable, relating to planning regulations?
Do your cashflow forecasts show that the increased finance will result in increased business? If so, will a further increase in working capital be necessary?
Repayment
Repayment of loans for capital goods can normally be geared to the life of the machinery - and buildings up to fifteen years
Banks normally prefer to use structured loans rather than overdrafts, with the repayments to include interest and capital
A moratorium on capital payments can sometimes be arranged for the first six to eighteen months
Payments can be geared to seasonal trading where appropriate
Security
The bank will seek to ensure that your business is viable on its own profitability and that you are using the security only as a backup
Banks normally regard freehold property, shares, life policies, bonds, and guarantees as acceptable tangible security
You can consider factoring debts through a specialist factoring organisation
Intangible security - a floating charge on all other assets - is applicable only to limited companies
Remuneration for the bank
The days are past when banks were prepared to make special concessions on interest rates and commitment fees. Bank managers now normally make an initial charge for lending finance, and also charge a market rate over the bank’s minimum lending rate.
General
We recommend you tell your bank manager what is required, and ensure that you present him or her with a proper proposal for consideration. Banks are in business and make a considerable profit from lending money. Thus, it is important when requesting finance from them that you take a positive attitude. Take particular care over the following:
Make sure you have requested adequate finance to support your proposal
Demonstrate in writing that the finance is required and that your request is set at the correct level
Your bank manager will expect to see up-to-date accounts - please ensure you allow us adequate time to prepare them properly
Where applicable, ensure that profit forecasts are available
Make sure you include cashflow projections to demonstrate your ability to repay the loan and interest
Your bank manager will tend to take a more positive view of your request for finance if he or she is assured they will be receiving regular information on your business trading.
Do call us if you would like further help or advice in this area.
87 Talbot Street
Nottingham
NG1 5GN
Tel: 0115 822 1319
SmithEmmerson.com
20% discount for The Company Merchant Limited customers