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Hi everyone, welcome back to the Creative Conversation.
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In this bonus episode, I'm joined by David Stewart, the founder of Stuart Co.
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Chartered Accountants.
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Stuart and Co.
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are actually the proud sponsors of this series, and David is coming on to answer the most common accounts and finance questions that small business owners usually have.
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From understanding what you can claim as a business expense to when you should register for VAT, how to stay on top of tax and what small business owners should be thinking about as they grow.
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This episode is designed to give practical, straightforward guidance.
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Whether you're self-employed, running a limited company, or just starting to get serious about your business finances, and David will be sharing advice to help you get more informed and confident when it comes to your accounts.
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So, David, do you want to give a bit of background on yourself and your firm?
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Okay.
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Hi Danielle, thank you for having us on today.
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That's right.
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So yes, David Stewart, Stewart and Company, charter accountants.
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Been going for 24 years, I think, coming up, so quite a while.
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Man and boy.
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Yeah.
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Man and boy.
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So yeah, local firm charter accountants.
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Um, although we have Scotland wide and UK wide clients.
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General practitioner, so that's a kind of old-fashioned phrase.
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It's we're kind of jack of all trades.
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So we provide all services to all sizes of businesses.
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If you're a small business, just need a tax return done, we can help you with that.
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Larger limited companies, we do payroll that.
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So all the services that you would expect from a small firm.
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So yeah, it goes for a while.
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So we need to hopefully try and help.
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I've got a client base, probably about 800 clients to a thousand clients.
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Yeah.
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That's where we are.
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So and we're still growing.
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Yeah, we're growing all the time.
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So which is good.
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Okay, so we have some questions that small business owners tend to ask.
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So, number one, how can small business owners reduce their tax bill or be efficient with their tax?
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Well, uh, we get asked that question all the time.
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It's probably the number one question that we get asked.
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Um it really depends on the type of business that you have, what type of work that you do, what your level of overheads are.
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It's a bespoke answer that we would give to every individual client.
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So there's not a goal, there's not a magic bullet that you can suddenly produce.
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You know, when you when a new client comes to us, that's part of what we do, is we will go through certainly if they've come from another firm or they're certainly needed business, we'll go through and say, right, what are you claiming?
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You've thought about claiming for this.
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A lot of people forget about certain things that they can claim for.
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So you know, we'll look at things like phone, mobile phones, motor expenses, home office charges.
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There's a large remit, so it's all kind of tailored to what the individual does.
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So yeah, it's just a case of everything like it's got to be a hundred percent business, you know, that's from the revenue, you know, that they're very strict on that.
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So yeah, 100% business use, but some people, you know, do forget about things that they've maybe paid for personally, they don't bring it into the accounts.
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So yeah, it's it's a kind of journey through the the the accounts records as we go.
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So what the next question that actually m rolls on pretty well what are the expenses that businesses you teach they tend to forget to claim?
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Yeah, so they like the main ones.
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Yeah, so a lot of people don't claim for mobile phones, they think that that's uh personal thing, but you know, the the revenue normally except mobile phone.
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Yeah.
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If you're running your own business, you need your phone pretty much every day, so that's that's expected.
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Home office charges, a lot of people don't don't put that through if they're a small business and they don't have an office space.
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So if you have an office space, then obviously the costs involved with that would be would be deducted.
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But if you work from homes, people don't realise that you can make a claim for that within uh within your accounts.
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Motor and travel, so a lot of people will travel about.
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There'll be businesses that will go to customers all over Scotland and the UK, and they don't realise how they can claim for their business mileage and how they can bring that into the into the books.
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Um, you know, stationary advertising, all that sort of thing.
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So yeah, there's it's just a whole remote of things that we would look at for for clients.
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You probably get asked this all the time, but how much should sole traders or limited companies be putting away for tax each month?
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I know you can't give an actual money amount, but what can they do to make sure they're putting money away?
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Yeah, I mean it's a very prudent thing to do if you can put money away for for taxes.
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And we not everybody does it, you know.
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So when we come along, especially in January, which is the tax return deadline, and we say, Here are your accounts, and by the way, this is your tax bill, you know, the the biggest question we get is, well, how am I gonna pay for that, Dave?
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Yeah.
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Because well, you know, you've had the money, but that's what they say, Well, how am I gonna pay for that?
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Yeah.
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So the most prudent clients will put away a certain percentage each month into a second business savings account.
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That's what I do.
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Yeah.
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That's a very prudent thing to do.
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Now, some people, we have the guy recently that came to us and he was putting 30% of all of his takings directly into a second account.
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But now that we've done his first sets of accounts, he found that he had too much money in there, which is a great thing, so that gives him a kind of bonus back to the invest at back.
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Yeah.
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Yeah, absolutely.
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So I mean, you know, you've got if you're a sole trader, you've got income tax, but you've also got national insurance charge.
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So potentially roughly 30% of your profits will be payable after your personal allowance has been taken off as a sole trader.
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But yeah that's 30% of your profits, so not of your turnover.
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So uh between ten and fifteen percent is normally what we would suggest as a reasonable amount uh if if the if you can do it.
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Yeah.
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When should someone think about moving from sole trader to limited company?
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Again, very common question that we get asked.
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And there's not necessarily a definitive answer for that as to when uh a pressure point as to when that that would happen.
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If you're a very small business, and uh and what I mean by that is if if you're you're maybe turning over 30 to 50k profit-wise between the 10 and 20k, it's more often than not better to remain as a sole trader as opposed to going to to a limited company.
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Some people go limited right away for for commercial reasons.
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They want to be seen to be a limited company, it would it helps from a marketing market marketing strategy, sorry, it helps to give a bigger impression of of who they actually are.
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But from a tax and bureaucracy perspective, if you're a smaller business, it's easier to manage being a sole trader than being uh being a limited company.
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There's higher costs involved with a limited company, not just for your accounts, but you've got corporate tax to deal with and you've got personal tax on top of that when you take your money out.
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So yeah, there's a fine line.
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Normally we think you know, when you get above fifty to a hundred, that becomes a kind of marginal zone, and that's a to kind of if a business is really taken off, then we would then suggest potentially going on.
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What is the benefit of being limited?
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So the benefit is that so that it's all in the name, limited is a limited liability, so that gives protection.
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So it's it's so if you're a sole trader and you run your business as a sole trader and something went wrong within the business.
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Now, touch suite, these things don't happen, but they do.
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You you'll have business insurance, but if something happened on the watch of the business and somebody made a claim against the business, it's like they're claiming against me as a personal assurance.
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Yeah, absolutely.
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So you you're exp your personal assets are then exposed if you're uh a sole trader.
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If you're a limited company, then you have uh limited liability, so your personal assets will sit outside the company and there's a protection mechanism there.
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That can be broken in extreme circumstances, but in the main it gives a protection uh for personal assets.
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So a lot of people will do that, and that's why some people go into it from day one as well, is to kind of keep their personal assets out with so there's no exposure to them.
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So I guess like if something happened to Green Creatives, I would have to like pay the weight, my money would have to pay the wages or whatever.
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Yeah.
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I mean I always use the the example to somebody if if somebody has a premises or uh you were out working at somebody's clients and you did something that the roof fell in and then and somebody passed away or somebody was seriously injured, first thing you would do they would make a claim against Green Creative.
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So you would go to your insurance company and go, Well, I've got insurance, I've got liability insurance, and they'll go, Well, we've looked at the case and we think it's your fault, so you're not covered, then they would make a claim against you.
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Yeah, as a pencil.
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So if you've got your house uh and other assets, they could potentially have to be sold to pay the liability.
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So yeah, that's why people would look to do that.
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And is it not when you are a limited company?
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You can correct me if I'm wrong, but you have there's a limit for when you can take money out of the business.
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So like I could take money just now whenever it's it's a completely different regime, okay?
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So it's you've got to be much more disciplined when you pay limited things.
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As a sole trader, the way I describe it, the money goes round uh like a washing machine, it just goes round and round.
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As long as you pay your tax and pay all your dues, you can use that money as and when it comes in.
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As long as it goes around, it's your money.
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Limited company is completely separate, so it's a separate legal entity.
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So limited company is a separate legal entity from or use an individual.
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So every pound that you take out from a limited company is a distribution, and it can only be either a salary, a dividend, or a repayment of your directive loan.
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So the two forms of tax, there's corporate tax and then you have personal tax of what you take a company.
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But yeah, it's um it's much more disciplined.
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Um there's tax advantages in doing it, but only when you get up to, as I said earlier, to the 50 to 100 level and above, uh it becomes more advantageous because you can shelter your money within a limited company.
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You can decide if you're the sole director or shareholder, you can determine what dividends are taking out to yourself for personal income.
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So you a lot of people will will retain the funds within the company, build up the company profits, and they're not paying personal tax on that.
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As a sole trader, whatever you earn, you pay the tax on.
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Yeah.
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Some people use that as a as a tool.
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For small businesses, accounts, like what should owners be keeping track of each month to stay organised?
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Yeah, well that's depends on how good the client is, you know.
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So we see everything out there.
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So we have guys that will turn up on the 30th of January with a bag of I won't say rubbish but crumpled up receipts.
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And not even in any order, just chucked in a bag, you know.
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So you that's the extreme that you have with regard to bookkeeping.
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That's becoming less and less, I think, with with making tax digital, etc., that's coming in, uh it eventually will be in for everybody.
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There's much more focus on on digital records and clients and accountants having to having to do that.
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But yeah, ideally, I mean some people you you can jump into bookkeeping packages, a lot of clients do that.
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Obviously, there's market leaders out there that that that can be used.
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Again, they're they're good as long as you're prepared to spend time on them.
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So the worst thing that we get in the office as a firm is somebody who says I've done my books on one of the two market leaders and send them in to you, they think they're absolutely perfect.
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And they come out and we have to spend double the time through them all and fixing mistakes and fixing errors and stuff.
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So you know, if you're a very small business, an Excel spreadsheet uh is as good as anything.
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Um that as long as you can it's all about completeness.
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So it's completeness of income, completeness of expenses, having a record there of all your transactions, uh recording them on Excel is as good as anything if you're a small business.
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So you get bigger then you you the advantages of the these packages will will will help because they bring other things into the business.
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You can do budgeting, you can do forecasting, you can do things like that.
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So Yeah, that's what I do.
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I just list the income and the expenses, save on the receipts and that.
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But it's amazing how many people don't keep a track on their business.
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So I say when we come along and sit down on these year accounts and it's either delight that they've done a lot better, or they've thought they've done well and they've actually not done that well.
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So keeping track it's cash flow.
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I mean the cash flow is the biggest thing for any business.
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And that's what I do as well.
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Like on the spreadsheet, I've got a forecasting tab where if an inquiry comes in I put it in that that could be potential and then we see what's happening.
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Um but yeah, I think it's crazy that people don't do that.
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It's it's so some people are too busy to do it, they're out they're they're working all the time on on whatever duplication they have and they lose sight of that or they they they think that you know they think they're doing great and then they they're not.
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And and then ca that's when cash flow problems because that the any business that fails, or the majority of businesses that will fail, is that they're they run out of cash.
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You know, it's where you you see companies that go into liquidation and uh or the or the revenue will close them down, it's simply because they've dragged up the cash, which means it eventually that if things are working correctly, then that's eventually what will happen.
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You know, because I say you go back to the washing machine, and even with the companies you see it and they're they're they're pushing this pot and trying to pay as many people as possible, but eventually the circle comes down to zero because it's just not enough to pay.
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And somebody eventually says, Well, you need to pay me, you've not paid me, I'm gonna stop, turn off the tap, kind of thing.
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So yeah.
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So VAT that confuses a lot of people.
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When do you need to register and is it worth registering before you hit the threshold?
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Yeah, so the threshold is ninety thousand of turnover.
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So that's that confuses some people.
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That is sales, so that is your very, very top line.
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It's not profit.
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Not profit.
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Uh there's no staged entry into it.
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I guess a common question that we get asked is um, you know, is the first fifty thousand, three, and then above that is ninety above that level.
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There's no threshold with that in the UK.
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It's simply once you get to ninety thousand.
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It's a self-pleasing thing, as far as the revenue are concerned.
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You are duty bound as a taxpayer to notify them as when you get to that point.
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So registering beforehand, yeah, some people do.
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You can do a voluntary registration, um as long as it's accepted by the revenue, they'll they'll accept that.
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But would you do that if you were more like important or Because I'm I'm sort of struggling to think why you would do that, but is it a claim to that?
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Again, again, sometimes it's the c if you're doing it depends on your business and who your customer base is.
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So if you're doing business to business trade from day one, and what I mean by business to business is you're you're selling into limited company, other limited company businesses.
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So not necessarily a point of sale business, so not something like a restaurant or a pub, but more you know, if you're had like you're a consult a computer consultant and you had about five clients that you were doing work for and they were all VAT registered.
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It makes no difference if you then are VAT registered beforehand because you'll charge them for they'll pay it to you, and you you can then claim back on your expenses.
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So that's when it becomes it makes no difference, and sometimes it's an advantage to to go early and and do the voluntary registration.
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But most people who are point of sale will obviously wait until they get to the threshold in a 12-month period, and then after that they have to to become back registered.
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So again, it's a classic case, you know, a lot of people don't want to become back registered.
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The threshold has not increased greatly in line with inflation, in line with where things have been.
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Uh COVID there was some release given to businesses, but there was talk of reduced rates, there was reduced rates for hospitality, but that's all changed and we're back to standard now.
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So, really, I mean the threshold should be well over a hundred thousand if you took inflation into account.
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So there's more and more people coming into VAT, more and more people having to become that registered.
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What happens if you hit the threshold and then you go on down the threshold?
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So, yeah, yeah once you're at revenue with it.
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Well, there is a mechanism that you can deregister, but the deregistration threshold is not 90, it's a lower amount.
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So once they get you in, you know, even if you came down into the 80s, you'd still be required to be deregistered.
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So you the you would have to demonstrate that you have gone well under the the threshold.
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So there'd be a temporary application if you say you had one big job and you knew you'd meant this was going to take you well above it, then you would infer the revenue that this was only going to be for a short period of time and then they'd hopefully accept the deregistration after that.
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Yes.
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So it's it's a minefield in that what we're seeing now as well is a lot of businesses or clients will come to us at some point, sometimes we'll take on new clients.
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Um and then you look at their first their books, and you haven't seen the ducks obviously when a client comes, and then you top them up and they're well over the threshold.
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So that's an issue that has to then be resolved.
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You know, you have to go back to a point when you became or should have become that registered, and obviously inform the revenue.
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Um the revenue are now receiving much more information.
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Well, digital that's what you work in digital marketing, but the digital economy is coming, it's slow, but it's coming.
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So the revenue now sharing information with a lot more agencies and bodies than they used to do now.
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So credit card machines, credit card companies, Airbnb, just all of these people are feeding data or the revenue of accessing this data.
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So they have a lot of these records that they can we've seen that as well.
00:16:52.399 --> 00:17:06.640
There's kind of amnesty campaigns with the revenue where they'll come to you and say, We know where a couple of businesses that were on the verge of going VAT registered, and the revenue came along and said, We believe that you're VAT registered and give them an opportunity to go and rectify that.
00:17:06.720 --> 00:17:07.920
So yeah, there's much more data.
00:17:08.559 --> 00:17:11.200
Yeah, it's going to be hard to uh avoid it as such.
00:17:12.480 --> 00:17:16.799
Is there like a penalty to if you've left it for too long?
00:17:17.200 --> 00:17:29.759
Yeah, if you've left it for too long, they would just they would backdate it to and potentially add interest and penalties on to the fact of the money they haven't had at that time, they would certainly be adding penalties and charges on there.
00:17:30.000 --> 00:17:33.200
Yeah, it d yeah, it would depend on the individual circumstances for that.
00:17:34.640 --> 00:17:43.039
So we've actually kind of touched on this, but what is making tax digital and what do small business owners need to know about it?
00:17:43.279 --> 00:17:44.480
How long have we got for this?
00:17:44.720 --> 00:17:44.880
Yeah.
00:17:45.119 --> 00:17:49.200
Um what is uh So it yeah, well this is obviously the new regime.
00:17:49.279 --> 00:17:50.640
It's uh it it's everywhere.
00:17:50.880 --> 00:17:56.559
I was on the radio on the way in, listening to Talk Sport, and making tax digital adverts, two adverts in the way in.
00:17:56.640 --> 00:17:57.920
So yeah, it's a big thing.
00:17:58.079 --> 00:18:05.759
So this is this well so if we jump back to VAT, we've had Making Tax Digital for VAT for quite a while now.
00:18:05.920 --> 00:18:18.960
Uh certainly pre-Covid we've had making tax digital for so that what that means is every VAT return that is submitted by any UK taxpayer has to be done through Making Tax Digital, has to be done through a digital platform.
00:18:19.119 --> 00:18:19.359
Okay.
00:18:19.839 --> 00:18:29.119
Prior to that, you used to log on to the revenue, you had a revenue site, you would go on and you would just populate the figures on a on a return within the screen and do that submission from there.
00:18:29.279 --> 00:18:36.240
What making tax digital does is that it's basically confirming that the submission has come from digital software.
00:18:36.400 --> 00:18:39.200
Now that can come from a numerous places.
00:18:39.279 --> 00:18:58.640
So all the market leaders of accounting uh software, so not just the client-fronting ones that we talked about earlier, but you know, Sage and the you know the zero obviously, um but there's there's a multitude of the ones that we do Iris and they'll put they'll have a package that you'll be able to do the submissions from.
00:18:59.200 --> 00:19:03.759
You can also do uh for very small businesses, you can do a submission from an Excel spreadsheet.
00:19:03.839 --> 00:19:07.599
There's bridging very numerous bridging softwares, sort of bridging software.
00:19:07.680 --> 00:19:22.720
So they're all approved by the revenue, and it's effectively it takes the data from the spreadsheet and submits it digitally across to HMRC, and you get a correlation ID of of that that's been done with this kind of digital data style.
00:19:23.039 --> 00:19:24.160
So we've had that for a while.
00:19:24.319 --> 00:19:31.200
What they're now doing is they're rolling this out to initially sole traders and uh individuals who rent properties.
00:19:31.359 --> 00:19:31.519
Okay.
00:19:32.079 --> 00:19:44.079
So it's a staged introduction to this first year, which obviously it started in the 6th of April, uh first quarterly period, April, May, June, first submissions for the 7th of August coming up.
00:19:44.240 --> 00:19:49.200
So the very first income tax digital submissions are the 7th of August.
00:19:49.519 --> 00:19:57.279
And it's a similar thing, so you can either do this from software or from a an accounts package, or you could do it from a digital software.
00:19:57.440 --> 00:19:57.599
Okay.
00:19:58.160 --> 00:20:06.400
And initially what this is is information gathering to a degree from the revenue, because it there's a staged intro for 50,000.
00:20:06.480 --> 00:20:09.759
So you have to have turned over above 50,000 to join it this year.
00:20:10.079 --> 00:20:12.079
Next year it goes down to 30,000.
00:20:12.400 --> 00:20:13.440
It's quite a jump, isn't it?
00:20:13.839 --> 00:20:13.920
Yeah.
00:20:14.160 --> 00:20:16.319
In the following year, twenty thousand.
00:20:16.480 --> 00:20:16.640
Okay.
00:20:17.279 --> 00:20:20.319
Partnerships, so we do quite a few partnerships.
00:20:20.640 --> 00:20:22.960
They're not involved at the moment, they will come in.
00:20:23.119 --> 00:20:25.759
Um Limited companies, obviously not involved.
00:20:25.920 --> 00:20:31.200
Limited companies have a their set year end based on the when the company was formed.
00:20:31.359 --> 00:20:32.720
So that won't change.
00:20:32.880 --> 00:20:41.279
Um So eventually everybody will be we're gonna bring this out to everyone that does a self-assessment tax return will be doing it through making tax digital.
00:20:41.519 --> 00:20:45.440
So at the moment there's no changes to the tax payment dates.
00:20:45.599 --> 00:20:52.319
So the moment if you're anyone that does a self-assessment tax return and is due tax, there's two payment dates a year you pay at the end of January.
00:20:52.400 --> 00:20:58.319
And if you're in the payment and account system, you also pay in advance in the January and in the following July.
00:20:58.559 --> 00:21:02.799
There's no changes to that at the moment, there's no changes to the payment structure.
00:21:03.039 --> 00:21:05.920
Where I think this will go is we're going to go to quarterly payments.
00:21:06.160 --> 00:21:12.640
I think eventually, five years down the line, maybe even earlier, though when you do these submissions, they'll want a payment.
00:21:12.799 --> 00:21:14.160
A bit like a VAT return.
00:21:15.119 --> 00:21:16.079
That's where it will go.
00:21:16.240 --> 00:21:19.680
Uh how they get there and the journey to get there, we'll we'll we'll see.
00:21:19.759 --> 00:21:30.480
So in the moment, everyone that qualifies above 50,000 has to do four quarterly returns through the digital submission, and then they do a final tax return as normal.
00:21:30.720 --> 00:21:34.000
Because all that is reported is the trading side of things.
00:21:34.079 --> 00:21:44.000
So either the trade or the rental income, if you're qual depending on how you qualify, those are the bits that get reported into the boxes that the revenue are looking for.
00:21:44.160 --> 00:21:56.000
But at the end of the year, you still do your normal tax return because you you can have other income, you could have bank interest, you could have dividends from investments, you could have other things that you that you could have a directorship, you could have dividends from a company.
00:21:56.079 --> 00:21:58.319
That all then comes through your normal tax return.
00:21:58.480 --> 00:21:59.759
So it's an educational thing.
00:22:00.319 --> 00:22:02.720
For clients, it's quite a difficult one to to tell.
00:22:02.880 --> 00:22:11.519
So going back to the very start, so Jimmy that comes in with his bag of goods on the S Data January, who's between fifty and ninety, so he's not that registered.
00:22:11.839 --> 00:22:15.599
So so so for all that registered businesses, it's not going to be an issue.
00:22:15.839 --> 00:22:16.960
Yeah, they're not already doing it.
00:22:17.279 --> 00:22:18.960
We're already doing that, we've already got the data.
00:22:19.039 --> 00:22:21.680
They they're used to giving us their data every three months.
00:22:21.759 --> 00:22:22.400
So that's okay.
00:22:22.480 --> 00:22:23.839
This is just an add-on to what they do.
00:22:24.000 --> 00:22:35.039
The sweet spot or the difficult spot is the 50 to 90 guys who bring it in once a year, have no digital records, and now have to go into this system.
00:22:35.200 --> 00:22:37.279
So it's an educational thing for the clients.
00:22:37.359 --> 00:22:51.920
You know, we have to see you know, we're in the process of doing this with them all just now, is obviously not all so the the strange anomaly, sorry to go on about this, but I told you this the one did you draw for making tax digital, the anomaly with it all, and how it's not from our point of view, but it's from a client point of view.
00:22:52.079 --> 00:22:56.480
So we've just finished so in January there we finished the 24-25 tax returns.
00:22:56.640 --> 00:23:00.160
We've just passed the 5th of April, well, last month, 5th of April 26th.
00:23:00.240 --> 00:23:03.359
So your 25-26 return, most people haven't done them.
00:23:03.519 --> 00:23:06.319
The deadline for those are January 27.
00:23:06.559 --> 00:23:13.119
So, Jimmy, the the example of Jimmy coming in, he's not done his 25-26 because the bag hasn't been created yet.
00:23:13.359 --> 00:23:14.000
It won't be created.
00:23:14.400 --> 00:23:17.440
Not be created until the 29th of January 27.
00:23:18.000 --> 00:23:26.640
But we'll have to say to him, well, yeah, we haven't done those ones, but we actually need your April, May, June 26th data to put that quarterly fairly in.
00:23:26.960 --> 00:23:33.920
So suppose it's gonna make your life when people actually do it, surely it's gonna make the January tax returns easier.
00:23:34.880 --> 00:23:36.319
Well to a degree.
00:23:36.480 --> 00:23:36.640
Yeah.
00:23:37.119 --> 00:23:48.720
To a degree if if it's all done and when it's all up and running, you will have the four so basically the way it works is it's you're gonna have the first three months to a six month, could you go to nine months, twelve months.
00:23:48.880 --> 00:23:56.559
If everything is done correctly and and a client is keeping their books rigidly well and all reconciles, then it is, it's fine.
00:23:56.720 --> 00:23:58.559
We then pretty much have the twelve months.
00:23:58.720 --> 00:23:59.359
We've done that work.
00:23:59.519 --> 00:24:00.799
Yeah, so we'll make it easier.
00:24:01.920 --> 00:24:02.319
So I think so.
00:24:02.400 --> 00:24:07.039
For fat registered clients, we we're doing the bookkeeping every three months anyway for them.
00:24:07.119 --> 00:24:08.160
We're pulling the figures together.
00:24:08.240 --> 00:24:10.319
So when we pull the twelve months together, we've done it.
00:24:10.480 --> 00:24:10.960
It's all there.
00:24:11.200 --> 00:24:13.839
Bank squares, all the analysis is done, etc.
00:24:14.160 --> 00:24:15.039
So we'll get to that point.
00:24:15.200 --> 00:24:19.759
It's the initial entry into it that will be be harder for clients, client education thing.
00:24:19.839 --> 00:24:24.240
And the and you know, the the the initial reaction you get is well, I'm not doing that, so you have to do that.
00:24:24.400 --> 00:24:24.480
Yeah.
00:24:24.640 --> 00:24:25.440
You know, you don't have a choice.
00:24:25.680 --> 00:24:26.799
Just I'll go somewhere else.
00:24:26.880 --> 00:24:29.200
Uh we've had this, go somewhere else.
00:24:29.440 --> 00:24:32.319
But then they'll give you the same answers, you know, you've got to do it.
00:24:32.720 --> 00:24:36.480
Do you think that you'll get more clients maybe through this?
00:24:36.960 --> 00:24:41.759
Yeah, people are maybe not I mean absolutely I think the we've not within a couple of things.
00:24:41.920 --> 00:24:46.079
So maybe you don't want to pay for the software and stuff, or they don't they're not 100% sure.
00:24:46.559 --> 00:24:51.519
We've had that within a couple of inquiries or more than that, that people that have done it themselves, they're not sure about this.
00:24:51.759 --> 00:24:55.440
We've also had the other side of the coin over clients who have moved limited.
00:24:55.599 --> 00:24:59.359
So again, going back to your earlier question, what's the reasons for going limited?
00:24:59.519 --> 00:25:10.079
We've had four, I think, that have gone limited from the first of April this year, simply to avoid having to the bureaucracy of having to do quarterly returns.
00:25:10.240 --> 00:25:16.960
Now, that's a fine line because they've got more they've got bureaucracy with a limited company, but they're not just quarterly figures.
00:25:17.279 --> 00:25:19.279
So they've they've done that to avoid four.
00:25:19.519 --> 00:25:19.759
Yeah.
00:25:20.400 --> 00:25:22.000
So but that's what some people have done.
00:25:22.079 --> 00:25:27.279
You know, it's i it's more people that were thinking of going limited anyway, and this is a means to doing it a bit quicker.
00:25:27.519 --> 00:25:29.839
But the journey's just at the very beginning for this.
00:25:30.000 --> 00:25:34.799
Um there's a lot of work for ourselves, um, but we'll get there.
00:25:34.960 --> 00:25:39.839
Um it's yeah, it's just a case of so there's no penalties initially, it's a soft landing from the revenue.
00:25:40.000 --> 00:25:44.000
But there will be eventually for non-submission that you know and there won't be non-submission.
00:25:44.640 --> 00:25:48.799
But that some people that will do it themselves will estimate the figures.
00:25:48.960 --> 00:25:59.359
And there's no that's not technically correct, but the there's no check on these figures by the revenue because there's four quarters and then there's a thing that was termed as normal that pulls it all together, kind of thing.
00:25:59.440 --> 00:26:05.519
So some people that do themselves will will will potentially do that, but that doesn't take account of seasonal fluctuations, etc.
00:26:05.759 --> 00:26:12.799
So the best advice is to obviously either do it correctly or engage the services of of an accountant to to help you out with it.
00:26:13.359 --> 00:26:13.599
Okay.
00:26:13.920 --> 00:26:19.519
Another new thing that sort of came in is companies house sound require ID verification.
00:26:20.079 --> 00:26:20.559
Why?
00:26:20.720 --> 00:26:22.720
Like what is that and why have they brought it in?
00:26:23.119 --> 00:26:26.480
So yeah, this is another new change to the profession that we've had.
00:26:26.640 --> 00:26:30.400
So we're countless of these things that keep coming at us and we just have to deal with them.
00:26:30.480 --> 00:26:33.519
So yeah, this is this is from a money laundering point of view.
00:26:33.599 --> 00:26:41.359
This is effectively to bring a much tighter control into to how a limited company is running, the people behind that.
00:26:41.519 --> 00:26:57.200
It's to avoid fake companies effectively being it used to be it was very easy to form a limited company before whereby you all you need was an address, director's details, date of birth, and an address.
00:26:57.359 --> 00:27:03.279
There was no verification on the address, there was no verification on the director or the registered office.
00:27:03.440 --> 00:27:11.599
So from uh you know, major crime and and all this sort of thing, that's why they've done this, is to avoid these sham companies being created.
00:27:11.759 --> 00:27:22.319
So what they've done is that effectively everyone has to be digitally uh have an ID digitally verified and approved before they can form a new company.
00:27:22.480 --> 00:27:29.839
So it affects two lords everyone who's got a limited company, it affects them because everyone who does has to do a confirmation statement.
00:27:30.000 --> 00:27:38.960
So what a confirmation statement is is uh every company has to do one every year, pay for the privilege to company's house, confirms director's shareholders, registered office, etc.
00:27:39.200 --> 00:27:43.359
So there's a phased entry for every company that's in existence just now.
00:27:43.440 --> 00:27:50.480
So when you come to do that, you need to have all of the directors verified, the ID verified.
00:27:50.640 --> 00:27:58.640
And secondly, as I said earlier, any new company, you can't form a company now directly with Companies House until you've got a verification code.
00:27:58.880 --> 00:28:03.440
So what that involves, we had to become approved verifiers with Companies House.
00:28:03.519 --> 00:28:04.960
So not all firms will do that.
00:28:05.200 --> 00:28:08.880
We we went down the route of doing that for certainly our client base.
00:28:09.200 --> 00:28:24.640
So we then have to we've got a certain level of responsibility there, so we have to for every director and every new client that comes on board, we always get ID anyway, but we have to get ID, two forms of ID, uh we need to get bank statements, utility bills, etc.
00:28:24.799 --> 00:28:27.119
There's a there's a list generated by company size.
00:28:27.200 --> 00:28:37.440
So we follow that, we have to get that information, and we do the verification and we kind of we're verifying and trust that we've seen these documents, they they all agree with what the director has said.
00:28:37.599 --> 00:28:45.440
What happens we feed it into the system, generates a code, it's a unique code for every director, comes through email to themselves, say we'd send it to us.
00:28:45.599 --> 00:28:47.039
At that point, they're verified.
00:28:47.200 --> 00:28:48.880
They can then go forward in company.
00:28:49.039 --> 00:28:49.920
So it's just another level.
00:28:51.920 --> 00:28:52.960
Yeah, it's probably not a bad thing.
00:28:53.279 --> 00:29:00.240
Even like from if you don't have a company from like a consumer point of view, you're always going to be able to trace back if you need it to, like, who you've bought from or whatever.
00:29:00.319 --> 00:29:14.720
So now you go on to a company or company's house and do a search through the search engine, uh it will say this director has been verified and it will give our name as if we've done the verification for them, it will say verified by Stewart and Co.
00:29:15.039 --> 00:29:16.559
as an approved ID verifier.
00:29:16.640 --> 00:29:18.960
So it gives a level of comfort and protection.
00:29:19.039 --> 00:29:19.119
Yeah.
00:29:19.359 --> 00:29:20.240
Not just for the revenue.
00:29:20.319 --> 00:29:30.960
It used to only ever be the revenue, but now you know if you got a new inquiry from a company in Manchester that wanted to do business with you, and you thought, right, you know, you're gonna do you go into that in good faith, how much credit do you give them?
00:29:31.200 --> 00:29:31.359
Yeah.
00:29:32.079 --> 00:29:33.359
Yeah, that's a good I've never thought about it.
00:29:34.319 --> 00:29:39.519
You could do a separate credit check on them, but you would go and first thing you would do is go to a company's house and say check.
00:29:39.599 --> 00:29:45.279
Uh there's tight in registered offices as well, so you have to have you know, they've got rid of the P.O.
00:29:45.359 --> 00:29:47.359
boxes, that's what they're they're phasing out.
00:29:47.920 --> 00:29:58.960
It used to be you could have a PO box, one, two, three, in the centre of one, did it just that's much like fictitious, fictitious address, but not a proper registered address, so you have to have that now as well.
00:29:59.039 --> 00:30:04.000
So yeah, it gives the consumer a bit of protection and it certainly gives companies' house a bit more comfort for it.
00:30:04.079 --> 00:30:04.319
So yeah.
00:30:04.640 --> 00:30:04.960
Definitely.
00:30:05.200 --> 00:30:08.799
So last question um is about payroll.
00:30:09.119 --> 00:30:13.519
So at what point I know payroll is something that you guys do at shirt and call.
00:30:13.680 --> 00:30:17.519
So at what point do you need to register for payroll when you have employees?
00:30:17.839 --> 00:30:20.240
Yeah, so again, we get asked this all the time.
00:30:20.400 --> 00:30:32.720
The the number one answer uh I would suggest is whenever you have somebody that you are paying for services, either an employee of your business, you should operate a payroll scheme from day one.
00:30:32.799 --> 00:30:35.200
I'd put them on to the to the payroll scheme.
00:30:35.440 --> 00:30:39.839
Um the rules with the government are slightly different, it's just over 90 pounds per week.
00:30:40.000 --> 00:30:42.559
Above that, below that you don't have to operate a payroll scheme.
00:30:42.720 --> 00:30:44.319
Yeah, so it's like a money limit.
00:30:44.880 --> 00:30:45.920
It's a limit per week.
00:30:46.079 --> 00:31:01.119
Um but the employee has rights from day one, so there's been changes recently, and the Employment Act has come in, so it gives a lot more rights to to workers and less rights to the employers, um which is a good thing for employees.
00:31:01.279 --> 00:31:16.480
But I think you know the best advice is is go go from day one to you because you know, even if you were both weren't operating a payroll scheme and yet somebody was only only doing a few hours, they still have you know entitlement to six days, entitlement to all day for the period that they're working.
00:31:16.799 --> 00:31:19.119
So, from your point of view, you want to to record that?
00:31:19.359 --> 00:31:39.759
So you know the revenue if you you know the revenue were to do a a check on books and you had wages through as effectively casual wages, you know, you still got to have a certain amount of information about that individual because the rev it used to get uh an area where people could put through bigger numbers for casual wages, the days of that are are are are gone.
00:31:39.839 --> 00:31:46.319
So best advice is from day one, uh whenever you take some it's a it's a big thing to take somebody on if you're a small business.
00:31:46.640 --> 00:31:49.440
The biggest thing in any any business is taking on an employee.
00:31:49.599 --> 00:31:52.720
But the best advice because it that gives a record, it gives a record for you.
00:31:52.799 --> 00:31:58.880
So within your records, you have a payroll record, you have reports that verify that you've paid that person.
00:31:59.119 --> 00:32:05.680
The money that leaves your bank account will agree to what they've had in their bank account backed up by a payslip.
00:32:05.759 --> 00:32:10.319
So from your point of view, all your records are intact, HMRC complied.
00:32:10.480 --> 00:32:17.920
From the individual's point of view, they have a pay slip, uh they have a record of what they've had, if they need to go for finance, they need to go for mortgages.
00:32:18.480 --> 00:32:35.359
Even at the lower end of the spectrum, from a monetary point of view, they could be, we see this a lot, they could be man or or or or or wife who one of them stays at home, one of them does a wee bit of work, they've got young kids, but they still need that money combined to go for a mortgage.
00:32:35.680 --> 00:32:39.599
Uh so yeah, the having the record there will give them the information they would need.
00:32:39.839 --> 00:32:40.400
So yeah.
00:32:40.559 --> 00:32:42.400
From day one, really best advice.
00:32:42.480 --> 00:32:43.200
I'd get rid of them.
00:32:43.680 --> 00:32:45.279
Okay, well, thank you for coming on.
00:32:45.599 --> 00:32:46.160
That's okay.
00:32:46.240 --> 00:32:46.799
Thank you very much.
00:32:47.200 --> 00:32:56.559
Thank you for listening, and we will leave Stuart and Co.'s details in the episode descriptions for this series because obviously they've sponsored the series.
00:32:56.720 --> 00:33:01.680
So if you do feel like you need assistance with your accounts, then please feel free to reach out to them.
00:00:00.160 --> 00:00:02.959
Hi everyone, welcome back to the Creative Conversation.
00:00:03.200 --> 00:00:08.640
In this bonus episode, I'm joined by David Stewart, the founder of Stuart Co.
00:00:08.880 --> 00:00:09.919
Chartered Accountants.
00:00:10.480 --> 00:00:11.199
Stuart and Co.
00:00:11.439 --> 00:00:21.199
are actually the proud sponsors of this series, and David is coming on to answer the most common accounts and finance questions that small business owners usually have.
00:00:21.679 --> 00:00:32.159
From understanding what you can claim as a business expense to when you should register for VAT, how to stay on top of tax and what small business owners should be thinking about as they grow.
00:00:32.479 --> 00:00:36.880
This episode is designed to give practical, straightforward guidance.
00:00:37.039 --> 00:00:49.039
Whether you're self-employed, running a limited company, or just starting to get serious about your business finances, and David will be sharing advice to help you get more informed and confident when it comes to your accounts.
00:00:49.280 --> 00:00:53.840
So, David, do you want to give a bit of background on yourself and your firm?
00:00:54.240 --> 00:00:54.320
Okay.
00:00:54.399 --> 00:00:56.560
Hi Danielle, thank you for having us on today.
00:00:56.799 --> 00:00:57.280
That's right.
00:00:57.520 --> 00:01:01.439
So yes, David Stewart, Stewart and Company, charter accountants.
00:01:01.679 --> 00:01:05.760
Been going for 24 years, I think, coming up, so quite a while.
00:01:06.560 --> 00:01:07.040
Man and boy.
00:01:07.359 --> 00:01:07.519
Yeah.
00:01:07.680 --> 00:01:08.400
Man and boy.
00:01:08.480 --> 00:01:11.359
So yeah, local firm charter accountants.
00:01:11.519 --> 00:01:15.280
Um, although we have Scotland wide and UK wide clients.
00:01:15.519 --> 00:01:19.439
General practitioner, so that's a kind of old-fashioned phrase.
00:01:19.519 --> 00:01:21.519
It's we're kind of jack of all trades.
00:01:21.599 --> 00:01:24.319
So we provide all services to all sizes of businesses.
00:01:24.480 --> 00:01:28.239
If you're a small business, just need a tax return done, we can help you with that.
00:01:28.400 --> 00:01:30.879
Larger limited companies, we do payroll that.
00:01:31.120 --> 00:01:34.079
So all the services that you would expect from a small firm.
00:01:34.159 --> 00:01:35.680
So yeah, it goes for a while.
00:01:35.760 --> 00:01:37.439
So we need to hopefully try and help.
00:01:38.000 --> 00:01:42.480
I've got a client base, probably about 800 clients to a thousand clients.
00:01:42.640 --> 00:01:42.799
Yeah.
00:01:43.040 --> 00:01:43.840
That's where we are.
00:01:43.920 --> 00:01:45.200
So and we're still growing.
00:01:45.280 --> 00:01:46.239
Yeah, we're growing all the time.
00:01:46.319 --> 00:01:47.200
So which is good.
00:01:47.599 --> 00:01:52.640
Okay, so we have some questions that small business owners tend to ask.
00:01:52.879 --> 00:01:59.519
So, number one, how can small business owners reduce their tax bill or be efficient with their tax?
00:02:00.000 --> 00:02:01.760
Well, uh, we get asked that question all the time.
00:02:01.840 --> 00:02:04.400
It's probably the number one question that we get asked.
00:02:04.560 --> 00:02:12.000
Um it really depends on the type of business that you have, what type of work that you do, what your level of overheads are.
00:02:12.159 --> 00:02:15.039
It's a bespoke answer that we would give to every individual client.
00:02:15.120 --> 00:02:18.400
So there's not a goal, there's not a magic bullet that you can suddenly produce.
00:02:18.719 --> 00:02:27.360
You know, when you when a new client comes to us, that's part of what we do, is we will go through certainly if they've come from another firm or they're certainly needed business, we'll go through and say, right, what are you claiming?
00:02:27.439 --> 00:02:28.960
You've thought about claiming for this.
00:02:29.120 --> 00:02:32.000
A lot of people forget about certain things that they can claim for.
00:02:32.159 --> 00:02:37.680
So you know, we'll look at things like phone, mobile phones, motor expenses, home office charges.
00:02:37.840 --> 00:02:41.120
There's a large remit, so it's all kind of tailored to what the individual does.
00:02:41.360 --> 00:02:47.840
So yeah, it's just a case of everything like it's got to be a hundred percent business, you know, that's from the revenue, you know, that they're very strict on that.
00:02:47.919 --> 00:02:55.120
So yeah, 100% business use, but some people, you know, do forget about things that they've maybe paid for personally, they don't bring it into the accounts.
00:02:55.199 --> 00:02:59.199
So yeah, it's it's a kind of journey through the the the accounts records as we go.
00:02:59.680 --> 00:03:07.599
So what the next question that actually m rolls on pretty well what are the expenses that businesses you teach they tend to forget to claim?
00:03:07.840 --> 00:03:09.199
Yeah, so they like the main ones.
00:03:09.439 --> 00:03:17.439
Yeah, so a lot of people don't claim for mobile phones, they think that that's uh personal thing, but you know, the the revenue normally except mobile phone.
00:03:17.520 --> 00:03:17.680
Yeah.
00:03:18.080 --> 00:03:22.479
If you're running your own business, you need your phone pretty much every day, so that's that's expected.
00:03:22.719 --> 00:03:28.080
Home office charges, a lot of people don't don't put that through if they're a small business and they don't have an office space.
00:03:28.319 --> 00:03:32.960
So if you have an office space, then obviously the costs involved with that would be would be deducted.
00:03:33.120 --> 00:03:38.479
But if you work from homes, people don't realise that you can make a claim for that within uh within your accounts.
00:03:38.719 --> 00:03:41.680
Motor and travel, so a lot of people will travel about.
00:03:41.759 --> 00:03:50.240
There'll be businesses that will go to customers all over Scotland and the UK, and they don't realise how they can claim for their business mileage and how they can bring that into the into the books.
00:03:50.560 --> 00:03:53.280
Um, you know, stationary advertising, all that sort of thing.
00:03:53.439 --> 00:03:57.520
So yeah, there's it's just a whole remote of things that we would look at for for clients.
00:03:58.319 --> 00:04:05.520
You probably get asked this all the time, but how much should sole traders or limited companies be putting away for tax each month?
00:04:05.680 --> 00:04:11.599
I know you can't give an actual money amount, but what can they do to make sure they're putting money away?
00:04:11.919 --> 00:04:17.600
Yeah, I mean it's a very prudent thing to do if you can put money away for for taxes.
00:04:17.759 --> 00:04:19.920
And we not everybody does it, you know.
00:04:20.000 --> 00:04:30.879
So when we come along, especially in January, which is the tax return deadline, and we say, Here are your accounts, and by the way, this is your tax bill, you know, the the biggest question we get is, well, how am I gonna pay for that, Dave?
00:04:30.959 --> 00:04:31.120
Yeah.
00:04:31.439 --> 00:04:35.360
Because well, you know, you've had the money, but that's what they say, Well, how am I gonna pay for that?
00:04:35.439 --> 00:04:35.600
Yeah.
00:04:35.920 --> 00:04:42.480
So the most prudent clients will put away a certain percentage each month into a second business savings account.
00:04:42.879 --> 00:04:43.600
That's what I do.
00:04:43.759 --> 00:04:43.920
Yeah.
00:04:44.160 --> 00:04:45.439
That's a very prudent thing to do.
00:04:45.519 --> 00:04:52.480
Now, some people, we have the guy recently that came to us and he was putting 30% of all of his takings directly into a second account.
00:04:52.560 --> 00:05:01.360
But now that we've done his first sets of accounts, he found that he had too much money in there, which is a great thing, so that gives him a kind of bonus back to the invest at back.
00:05:01.439 --> 00:05:01.519
Yeah.
00:05:02.240 --> 00:05:02.800
Yeah, absolutely.
00:05:02.879 --> 00:05:07.920
So I mean, you know, you've got if you're a sole trader, you've got income tax, but you've also got national insurance charge.
00:05:08.079 --> 00:05:14.079
So potentially roughly 30% of your profits will be payable after your personal allowance has been taken off as a sole trader.
00:05:14.319 --> 00:05:17.759
But yeah that's 30% of your profits, so not of your turnover.
00:05:17.839 --> 00:05:24.160
So uh between ten and fifteen percent is normally what we would suggest as a reasonable amount uh if if the if you can do it.
00:05:24.639 --> 00:05:24.720
Yeah.
00:05:25.040 --> 00:05:30.000
When should someone think about moving from sole trader to limited company?
00:05:30.399 --> 00:05:32.959
Again, very common question that we get asked.
00:05:33.120 --> 00:05:40.399
And there's not necessarily a definitive answer for that as to when uh a pressure point as to when that that would happen.
00:05:40.639 --> 00:05:59.120
If you're a very small business, and uh and what I mean by that is if if you're you're maybe turning over 30 to 50k profit-wise between the 10 and 20k, it's more often than not better to remain as a sole trader as opposed to going to to a limited company.
00:05:59.279 --> 00:06:02.399
Some people go limited right away for for commercial reasons.
00:06:02.560 --> 00:06:11.839
They want to be seen to be a limited company, it would it helps from a marketing market marketing strategy, sorry, it helps to give a bigger impression of of who they actually are.
00:06:12.079 --> 00:06:20.160
But from a tax and bureaucracy perspective, if you're a smaller business, it's easier to manage being a sole trader than being uh being a limited company.
00:06:20.240 --> 00:06:29.199
There's higher costs involved with a limited company, not just for your accounts, but you've got corporate tax to deal with and you've got personal tax on top of that when you take your money out.
00:06:29.360 --> 00:06:30.879
So yeah, there's a fine line.
00:06:30.959 --> 00:06:42.079
Normally we think you know, when you get above fifty to a hundred, that becomes a kind of marginal zone, and that's a to kind of if a business is really taken off, then we would then suggest potentially going on.
00:06:42.560 --> 00:06:44.480
What is the benefit of being limited?
00:06:45.040 --> 00:06:50.319
So the benefit is that so that it's all in the name, limited is a limited liability, so that gives protection.
00:06:50.480 --> 00:06:56.720
So it's it's so if you're a sole trader and you run your business as a sole trader and something went wrong within the business.
00:06:56.800 --> 00:06:59.120
Now, touch suite, these things don't happen, but they do.
00:06:59.199 --> 00:07:07.920
You you'll have business insurance, but if something happened on the watch of the business and somebody made a claim against the business, it's like they're claiming against me as a personal assurance.
00:07:08.399 --> 00:07:09.040
Yeah, absolutely.
00:07:09.120 --> 00:07:13.600
So you you're exp your personal assets are then exposed if you're uh a sole trader.
00:07:13.839 --> 00:07:22.240
If you're a limited company, then you have uh limited liability, so your personal assets will sit outside the company and there's a protection mechanism there.
00:07:22.639 --> 00:07:27.439
That can be broken in extreme circumstances, but in the main it gives a protection uh for personal assets.
00:07:27.519 --> 00:07:35.199
So a lot of people will do that, and that's why some people go into it from day one as well, is to kind of keep their personal assets out with so there's no exposure to them.
00:07:35.439 --> 00:07:42.720
So I guess like if something happened to Green Creatives, I would have to like pay the weight, my money would have to pay the wages or whatever.
00:07:42.959 --> 00:07:43.120
Yeah.
00:07:43.199 --> 00:07:58.639
I mean I always use the the example to somebody if if somebody has a premises or uh you were out working at somebody's clients and you did something that the roof fell in and then and somebody passed away or somebody was seriously injured, first thing you would do they would make a claim against Green Creative.
00:07:58.800 --> 00:08:08.800
So you would go to your insurance company and go, Well, I've got insurance, I've got liability insurance, and they'll go, Well, we've looked at the case and we think it's your fault, so you're not covered, then they would make a claim against you.
00:08:09.040 --> 00:08:09.600
Yeah, as a pencil.
00:08:09.759 --> 00:08:15.680
So if you've got your house uh and other assets, they could potentially have to be sold to pay the liability.
00:08:15.920 --> 00:08:17.759
So yeah, that's why people would look to do that.
00:08:18.079 --> 00:08:20.639
And is it not when you are a limited company?
00:08:20.800 --> 00:08:26.399
You can correct me if I'm wrong, but you have there's a limit for when you can take money out of the business.
00:08:26.800 --> 00:08:31.279
So like I could take money just now whenever it's it's a completely different regime, okay?
00:08:31.360 --> 00:08:33.919
So it's you've got to be much more disciplined when you pay limited things.
00:08:34.879 --> 00:08:39.840
As a sole trader, the way I describe it, the money goes round uh like a washing machine, it just goes round and round.
00:08:40.000 --> 00:08:46.159
As long as you pay your tax and pay all your dues, you can use that money as and when it comes in.
00:08:46.240 --> 00:08:48.000
As long as it goes around, it's your money.
00:08:48.240 --> 00:08:51.440
Limited company is completely separate, so it's a separate legal entity.
00:08:51.519 --> 00:08:55.840
So limited company is a separate legal entity from or use an individual.
00:08:56.000 --> 00:09:05.279
So every pound that you take out from a limited company is a distribution, and it can only be either a salary, a dividend, or a repayment of your directive loan.
00:09:05.440 --> 00:09:11.200
So the two forms of tax, there's corporate tax and then you have personal tax of what you take a company.
00:09:11.440 --> 00:09:13.919
But yeah, it's um it's much more disciplined.
00:09:14.000 --> 00:09:25.440
Um there's tax advantages in doing it, but only when you get up to, as I said earlier, to the 50 to 100 level and above, uh it becomes more advantageous because you can shelter your money within a limited company.
00:09:25.519 --> 00:09:32.480
You can decide if you're the sole director or shareholder, you can determine what dividends are taking out to yourself for personal income.
00:09:32.639 --> 00:09:39.440
So you a lot of people will will retain the funds within the company, build up the company profits, and they're not paying personal tax on that.
00:09:39.759 --> 00:09:42.639
As a sole trader, whatever you earn, you pay the tax on.
00:09:42.799 --> 00:09:42.879
Yeah.
00:09:43.519 --> 00:09:45.120
Some people use that as a as a tool.
00:09:45.679 --> 00:09:53.600
For small businesses, accounts, like what should owners be keeping track of each month to stay organised?
00:09:53.679 --> 00:09:56.879
Yeah, well that's depends on how good the client is, you know.
00:09:57.039 --> 00:09:59.519
So we see everything out there.
00:09:59.679 --> 00:10:07.519
So we have guys that will turn up on the 30th of January with a bag of I won't say rubbish but crumpled up receipts.
00:10:08.399 --> 00:10:11.200
And not even in any order, just chucked in a bag, you know.
00:10:11.360 --> 00:10:15.360
So you that's the extreme that you have with regard to bookkeeping.
00:10:15.919 --> 00:10:23.840
That's becoming less and less, I think, with with making tax digital, etc., that's coming in, uh it eventually will be in for everybody.
00:10:24.000 --> 00:10:30.399
There's much more focus on on digital records and clients and accountants having to having to do that.
00:10:30.480 --> 00:10:35.360
But yeah, ideally, I mean some people you you can jump into bookkeeping packages, a lot of clients do that.
00:10:35.519 --> 00:10:38.639
Obviously, there's market leaders out there that that that can be used.
00:10:38.799 --> 00:10:43.600
Again, they're they're good as long as you're prepared to spend time on them.
00:10:43.840 --> 00:10:55.600
So the worst thing that we get in the office as a firm is somebody who says I've done my books on one of the two market leaders and send them in to you, they think they're absolutely perfect.
00:10:55.919 --> 00:11:00.639
And they come out and we have to spend double the time through them all and fixing mistakes and fixing errors and stuff.
00:11:00.720 --> 00:11:05.200
So you know, if you're a very small business, an Excel spreadsheet uh is as good as anything.
00:11:05.360 --> 00:11:07.840
Um that as long as you can it's all about completeness.
00:11:07.919 --> 00:11:17.120
So it's completeness of income, completeness of expenses, having a record there of all your transactions, uh recording them on Excel is as good as anything if you're a small business.
00:11:17.279 --> 00:11:23.200
So you get bigger then you you the advantages of the these packages will will will help because they bring other things into the business.
00:11:23.279 --> 00:11:26.000
You can do budgeting, you can do forecasting, you can do things like that.
00:11:26.080 --> 00:11:27.759
So Yeah, that's what I do.
00:11:27.919 --> 00:11:32.320
I just list the income and the expenses, save on the receipts and that.
00:11:32.720 --> 00:11:35.840
But it's amazing how many people don't keep a track on their business.
00:11:35.919 --> 00:11:44.799
So I say when we come along and sit down on these year accounts and it's either delight that they've done a lot better, or they've thought they've done well and they've actually not done that well.
00:11:44.960 --> 00:11:46.799
So keeping track it's cash flow.
00:11:46.879 --> 00:11:49.440
I mean the cash flow is the biggest thing for any business.
00:11:50.000 --> 00:11:50.960
And that's what I do as well.
00:11:51.039 --> 00:11:58.320
Like on the spreadsheet, I've got a forecasting tab where if an inquiry comes in I put it in that that could be potential and then we see what's happening.
00:11:58.639 --> 00:12:02.559
Um but yeah, I think it's crazy that people don't do that.
00:12:02.960 --> 00:12:14.159
It's it's so some people are too busy to do it, they're out they're they're working all the time on on whatever duplication they have and they lose sight of that or they they they think that you know they think they're doing great and then they they're not.
00:12:14.480 --> 00:12:21.120
And and then ca that's when cash flow problems because that the any business that fails, or the majority of businesses that will fail, is that they're they run out of cash.
00:12:21.519 --> 00:12:34.799
You know, it's where you you see companies that go into liquidation and uh or the or the revenue will close them down, it's simply because they've dragged up the cash, which means it eventually that if things are working correctly, then that's eventually what will happen.
00:12:34.879 --> 00:12:46.240
You know, because I say you go back to the washing machine, and even with the companies you see it and they're they're they're pushing this pot and trying to pay as many people as possible, but eventually the circle comes down to zero because it's just not enough to pay.
00:12:46.399 --> 00:12:51.440
And somebody eventually says, Well, you need to pay me, you've not paid me, I'm gonna stop, turn off the tap, kind of thing.
00:12:51.679 --> 00:12:52.159
So yeah.
00:12:52.480 --> 00:12:55.840
So VAT that confuses a lot of people.
00:12:56.320 --> 00:13:00.720
When do you need to register and is it worth registering before you hit the threshold?
00:13:01.039 --> 00:13:04.480
Yeah, so the threshold is ninety thousand of turnover.
00:13:04.559 --> 00:13:06.720
So that's that confuses some people.
00:13:06.879 --> 00:13:09.039
That is sales, so that is your very, very top line.
00:13:09.360 --> 00:13:10.000
It's not profit.
00:13:10.320 --> 00:13:11.039
Not profit.
00:13:11.279 --> 00:13:13.600
Uh there's no staged entry into it.
00:13:13.679 --> 00:13:21.919
I guess a common question that we get asked is um, you know, is the first fifty thousand, three, and then above that is ninety above that level.
00:13:22.000 --> 00:13:24.399
There's no threshold with that in the UK.
00:13:24.480 --> 00:13:26.879
It's simply once you get to ninety thousand.
00:13:27.200 --> 00:13:30.320
It's a self-pleasing thing, as far as the revenue are concerned.
00:13:30.480 --> 00:13:36.159
You are duty bound as a taxpayer to notify them as when you get to that point.
00:13:36.480 --> 00:13:39.039
So registering beforehand, yeah, some people do.
00:13:39.120 --> 00:13:44.559
You can do a voluntary registration, um as long as it's accepted by the revenue, they'll they'll accept that.
00:13:44.879 --> 00:13:51.360
But would you do that if you were more like important or Because I'm I'm sort of struggling to think why you would do that, but is it a claim to that?
00:13:51.919 --> 00:13:57.600
Again, again, sometimes it's the c if you're doing it depends on your business and who your customer base is.
00:13:57.679 --> 00:14:08.879
So if you're doing business to business trade from day one, and what I mean by business to business is you're you're selling into limited company, other limited company businesses.
00:14:09.279 --> 00:14:20.080
So not necessarily a point of sale business, so not something like a restaurant or a pub, but more you know, if you're had like you're a consult a computer consultant and you had about five clients that you were doing work for and they were all VAT registered.
00:14:20.240 --> 00:14:29.120
It makes no difference if you then are VAT registered beforehand because you'll charge them for they'll pay it to you, and you you can then claim back on your expenses.
00:14:29.360 --> 00:14:36.399
So that's when it becomes it makes no difference, and sometimes it's an advantage to to go early and and do the voluntary registration.
00:14:36.559 --> 00:14:46.240
But most people who are point of sale will obviously wait until they get to the threshold in a 12-month period, and then after that they have to to become back registered.
00:14:47.279 --> 00:14:51.600
So again, it's a classic case, you know, a lot of people don't want to become back registered.
00:14:51.919 --> 00:14:58.639
The threshold has not increased greatly in line with inflation, in line with where things have been.
00:14:58.879 --> 00:15:08.320
Uh COVID there was some release given to businesses, but there was talk of reduced rates, there was reduced rates for hospitality, but that's all changed and we're back to standard now.
00:15:08.399 --> 00:15:12.559
So, really, I mean the threshold should be well over a hundred thousand if you took inflation into account.
00:15:12.720 --> 00:15:16.879
So there's more and more people coming into VAT, more and more people having to become that registered.
00:15:17.279 --> 00:15:22.480
What happens if you hit the threshold and then you go on down the threshold?
00:15:23.039 --> 00:15:25.679
So, yeah, yeah once you're at revenue with it.
00:15:25.840 --> 00:15:31.279
Well, there is a mechanism that you can deregister, but the deregistration threshold is not 90, it's a lower amount.
00:15:31.440 --> 00:15:37.120
So once they get you in, you know, even if you came down into the 80s, you'd still be required to be deregistered.
00:15:37.519 --> 00:15:42.720
So you the you would have to demonstrate that you have gone well under the the threshold.
00:15:42.960 --> 00:15:56.720
So there'd be a temporary application if you say you had one big job and you knew you'd meant this was going to take you well above it, then you would infer the revenue that this was only going to be for a short period of time and then they'd hopefully accept the deregistration after that.
00:15:57.039 --> 00:15:57.279
Yes.
00:15:57.360 --> 00:16:06.639
So it's it's a minefield in that what we're seeing now as well is a lot of businesses or clients will come to us at some point, sometimes we'll take on new clients.
00:16:06.799 --> 00:16:14.720
Um and then you look at their first their books, and you haven't seen the ducks obviously when a client comes, and then you top them up and they're well over the threshold.
00:16:15.200 --> 00:16:18.000
So that's an issue that has to then be resolved.
00:16:18.159 --> 00:16:23.919
You know, you have to go back to a point when you became or should have become that registered, and obviously inform the revenue.
00:16:24.159 --> 00:16:27.360
Um the revenue are now receiving much more information.
00:16:27.519 --> 00:16:34.240
Well, digital that's what you work in digital marketing, but the digital economy is coming, it's slow, but it's coming.
00:16:34.320 --> 00:16:39.360
So the revenue now sharing information with a lot more agencies and bodies than they used to do now.
00:16:39.440 --> 00:16:48.639
So credit card machines, credit card companies, Airbnb, just all of these people are feeding data or the revenue of accessing this data.
00:16:48.720 --> 00:16:52.320
So they have a lot of these records that they can we've seen that as well.
00:16:52.399 --> 00:17:06.640
There's kind of amnesty campaigns with the revenue where they'll come to you and say, We know where a couple of businesses that were on the verge of going VAT registered, and the revenue came along and said, We believe that you're VAT registered and give them an opportunity to go and rectify that.
00:17:06.720 --> 00:17:07.920
So yeah, there's much more data.
00:17:08.559 --> 00:17:11.200
Yeah, it's going to be hard to uh avoid it as such.
00:17:12.480 --> 00:17:16.799
Is there like a penalty to if you've left it for too long?
00:17:17.200 --> 00:17:29.759
Yeah, if you've left it for too long, they would just they would backdate it to and potentially add interest and penalties on to the fact of the money they haven't had at that time, they would certainly be adding penalties and charges on there.
00:17:30.000 --> 00:17:33.200
Yeah, it d yeah, it would depend on the individual circumstances for that.
00:17:34.640 --> 00:17:43.039
So we've actually kind of touched on this, but what is making tax digital and what do small business owners need to know about it?
00:17:43.279 --> 00:17:44.480
How long have we got for this?
00:17:44.720 --> 00:17:44.880
Yeah.
00:17:45.119 --> 00:17:49.200
Um what is uh So it yeah, well this is obviously the new regime.
00:17:49.279 --> 00:17:50.640
It's uh it it's everywhere.
00:17:50.880 --> 00:17:56.559
I was on the radio on the way in, listening to Talk Sport, and making tax digital adverts, two adverts in the way in.
00:17:56.640 --> 00:17:57.920
So yeah, it's a big thing.
00:17:58.079 --> 00:18:05.759
So this is this well so if we jump back to VAT, we've had Making Tax Digital for VAT for quite a while now.
00:18:05.920 --> 00:18:18.960
Uh certainly pre-Covid we've had making tax digital for so that what that means is every VAT return that is submitted by any UK taxpayer has to be done through Making Tax Digital, has to be done through a digital platform.
00:18:19.119 --> 00:18:19.359
Okay.
00:18:19.839 --> 00:18:29.119
Prior to that, you used to log on to the revenue, you had a revenue site, you would go on and you would just populate the figures on a on a return within the screen and do that submission from there.
00:18:29.279 --> 00:18:36.240
What making tax digital does is that it's basically confirming that the submission has come from digital software.
00:18:36.400 --> 00:18:39.200
Now that can come from a numerous places.
00:18:39.279 --> 00:18:58.640
So all the market leaders of accounting uh software, so not just the client-fronting ones that we talked about earlier, but you know, Sage and the you know the zero obviously, um but there's there's a multitude of the ones that we do Iris and they'll put they'll have a package that you'll be able to do the submissions from.
00:18:59.200 --> 00:19:03.759
You can also do uh for very small businesses, you can do a submission from an Excel spreadsheet.
00:19:03.839 --> 00:19:07.599
There's bridging very numerous bridging softwares, sort of bridging software.
00:19:07.680 --> 00:19:22.720
So they're all approved by the revenue, and it's effectively it takes the data from the spreadsheet and submits it digitally across to HMRC, and you get a correlation ID of of that that's been done with this kind of digital data style.
00:19:23.039 --> 00:19:24.160
So we've had that for a while.
00:19:24.319 --> 00:19:31.200
What they're now doing is they're rolling this out to initially sole traders and uh individuals who rent properties.
00:19:31.359 --> 00:19:31.519
Okay.
00:19:32.079 --> 00:19:44.079
So it's a staged introduction to this first year, which obviously it started in the 6th of April, uh first quarterly period, April, May, June, first submissions for the 7th of August coming up.
00:19:44.240 --> 00:19:49.200
So the very first income tax digital submissions are the 7th of August.
00:19:49.519 --> 00:19:57.279
And it's a similar thing, so you can either do this from software or from a an accounts package, or you could do it from a digital software.
00:19:57.440 --> 00:19:57.599
Okay.
00:19:58.160 --> 00:20:06.400
And initially what this is is information gathering to a degree from the revenue, because it there's a staged intro for 50,000.
00:20:06.480 --> 00:20:09.759
So you have to have turned over above 50,000 to join it this year.
00:20:10.079 --> 00:20:12.079
Next year it goes down to 30,000.
00:20:12.400 --> 00:20:13.440
It's quite a jump, isn't it?
00:20:13.839 --> 00:20:13.920
Yeah.
00:20:14.160 --> 00:20:16.319
In the following year, twenty thousand.
00:20:16.480 --> 00:20:16.640
Okay.
00:20:17.279 --> 00:20:20.319
Partnerships, so we do quite a few partnerships.
00:20:20.640 --> 00:20:22.960
They're not involved at the moment, they will come in.
00:20:23.119 --> 00:20:25.759
Um Limited companies, obviously not involved.
00:20:25.920 --> 00:20:31.200
Limited companies have a their set year end based on the when the company was formed.
00:20:31.359 --> 00:20:32.720
So that won't change.
00:20:32.880 --> 00:20:41.279
Um So eventually everybody will be we're gonna bring this out to everyone that does a self-assessment tax return will be doing it through making tax digital.
00:20:41.519 --> 00:20:45.440
So at the moment there's no changes to the tax payment dates.
00:20:45.599 --> 00:20:52.319
So the moment if you're anyone that does a self-assessment tax return and is due tax, there's two payment dates a year you pay at the end of January.
00:20:52.400 --> 00:20:58.319
And if you're in the payment and account system, you also pay in advance in the January and in the following July.
00:20:58.559 --> 00:21:02.799
There's no changes to that at the moment, there's no changes to the payment structure.
00:21:03.039 --> 00:21:05.920
Where I think this will go is we're going to go to quarterly payments.
00:21:06.160 --> 00:21:12.640
I think eventually, five years down the line, maybe even earlier, though when you do these submissions, they'll want a payment.
00:21:12.799 --> 00:21:14.160
A bit like a VAT return.
00:21:15.119 --> 00:21:16.079
That's where it will go.
00:21:16.240 --> 00:21:19.680
Uh how they get there and the journey to get there, we'll we'll we'll see.
00:21:19.759 --> 00:21:30.480
So in the moment, everyone that qualifies above 50,000 has to do four quarterly returns through the digital submission, and then they do a final tax return as normal.
00:21:30.720 --> 00:21:34.000
Because all that is reported is the trading side of things.
00:21:34.079 --> 00:21:44.000
So either the trade or the rental income, if you're qual depending on how you qualify, those are the bits that get reported into the boxes that the revenue are looking for.
00:21:44.160 --> 00:21:56.000
But at the end of the year, you still do your normal tax return because you you can have other income, you could have bank interest, you could have dividends from investments, you could have other things that you that you could have a directorship, you could have dividends from a company.
00:21:56.079 --> 00:21:58.319
That all then comes through your normal tax return.
00:21:58.480 --> 00:21:59.759
So it's an educational thing.
00:22:00.319 --> 00:22:02.720
For clients, it's quite a difficult one to to tell.
00:22:02.880 --> 00:22:11.519
So going back to the very start, so Jimmy that comes in with his bag of goods on the S Data January, who's between fifty and ninety, so he's not that registered.
00:22:11.839 --> 00:22:15.599
So so so for all that registered businesses, it's not going to be an issue.
00:22:15.839 --> 00:22:16.960
Yeah, they're not already doing it.
00:22:17.279 --> 00:22:18.960
We're already doing that, we've already got the data.
00:22:19.039 --> 00:22:21.680
They they're used to giving us their data every three months.
00:22:21.759 --> 00:22:22.400
So that's okay.
00:22:22.480 --> 00:22:23.839
This is just an add-on to what they do.
00:22:24.000 --> 00:22:35.039
The sweet spot or the difficult spot is the 50 to 90 guys who bring it in once a year, have no digital records, and now have to go into this system.
00:22:35.200 --> 00:22:37.279
So it's an educational thing for the clients.
00:22:37.359 --> 00:22:51.920
You know, we have to see you know, we're in the process of doing this with them all just now, is obviously not all so the the strange anomaly, sorry to go on about this, but I told you this the one did you draw for making tax digital, the anomaly with it all, and how it's not from our point of view, but it's from a client point of view.
00:22:52.079 --> 00:22:56.480
So we've just finished so in January there we finished the 24-25 tax returns.
00:22:56.640 --> 00:23:00.160
We've just passed the 5th of April, well, last month, 5th of April 26th.
00:23:00.240 --> 00:23:03.359
So your 25-26 return, most people haven't done them.
00:23:03.519 --> 00:23:06.319
The deadline for those are January 27.
00:23:06.559 --> 00:23:13.119
So, Jimmy, the the example of Jimmy coming in, he's not done his 25-26 because the bag hasn't been created yet.
00:23:13.359 --> 00:23:14.000
It won't be created.
00:23:14.400 --> 00:23:17.440
Not be created until the 29th of January 27.
00:23:18.000 --> 00:23:26.640
But we'll have to say to him, well, yeah, we haven't done those ones, but we actually need your April, May, June 26th data to put that quarterly fairly in.
00:23:26.960 --> 00:23:33.920
So suppose it's gonna make your life when people actually do it, surely it's gonna make the January tax returns easier.
00:23:34.880 --> 00:23:36.319
Well to a degree.
00:23:36.480 --> 00:23:36.640
Yeah.
00:23:37.119 --> 00:23:48.720
To a degree if if it's all done and when it's all up and running, you will have the four so basically the way it works is it's you're gonna have the first three months to a six month, could you go to nine months, twelve months.
00:23:48.880 --> 00:23:56.559
If everything is done correctly and and a client is keeping their books rigidly well and all reconciles, then it is, it's fine.
00:23:56.720 --> 00:23:58.559
We then pretty much have the twelve months.
00:23:58.720 --> 00:23:59.359
We've done that work.
00:23:59.519 --> 00:24:00.799
Yeah, so we'll make it easier.
00:24:01.920 --> 00:24:02.319
So I think so.
00:24:02.400 --> 00:24:07.039
For fat registered clients, we we're doing the bookkeeping every three months anyway for them.
00:24:07.119 --> 00:24:08.160
We're pulling the figures together.
00:24:08.240 --> 00:24:10.319
So when we pull the twelve months together, we've done it.
00:24:10.480 --> 00:24:10.960
It's all there.
00:24:11.200 --> 00:24:13.839
Bank squares, all the analysis is done, etc.
00:24:14.160 --> 00:24:15.039
So we'll get to that point.
00:24:15.200 --> 00:24:19.759
It's the initial entry into it that will be be harder for clients, client education thing.
00:24:19.839 --> 00:24:24.240
And the and you know, the the the initial reaction you get is well, I'm not doing that, so you have to do that.
00:24:24.400 --> 00:24:24.480
Yeah.
00:24:24.640 --> 00:24:25.440
You know, you don't have a choice.
00:24:25.680 --> 00:24:26.799
Just I'll go somewhere else.
00:24:26.880 --> 00:24:29.200
Uh we've had this, go somewhere else.
00:24:29.440 --> 00:24:32.319
But then they'll give you the same answers, you know, you've got to do it.
00:24:32.720 --> 00:24:36.480
Do you think that you'll get more clients maybe through this?
00:24:36.960 --> 00:24:41.759
Yeah, people are maybe not I mean absolutely I think the we've not within a couple of things.
00:24:41.920 --> 00:24:46.079
So maybe you don't want to pay for the software and stuff, or they don't they're not 100% sure.
00:24:46.559 --> 00:24:51.519
We've had that within a couple of inquiries or more than that, that people that have done it themselves, they're not sure about this.
00:24:51.759 --> 00:24:55.440
We've also had the other side of the coin over clients who have moved limited.
00:24:55.599 --> 00:24:59.359
So again, going back to your earlier question, what's the reasons for going limited?
00:24:59.519 --> 00:25:10.079
We've had four, I think, that have gone limited from the first of April this year, simply to avoid having to the bureaucracy of having to do quarterly returns.
00:25:10.240 --> 00:25:16.960
Now, that's a fine line because they've got more they've got bureaucracy with a limited company, but they're not just quarterly figures.
00:25:17.279 --> 00:25:19.279
So they've they've done that to avoid four.
00:25:19.519 --> 00:25:19.759
Yeah.
00:25:20.400 --> 00:25:22.000
So but that's what some people have done.
00:25:22.079 --> 00:25:27.279
You know, it's i it's more people that were thinking of going limited anyway, and this is a means to doing it a bit quicker.
00:25:27.519 --> 00:25:29.839
But the journey's just at the very beginning for this.
00:25:30.000 --> 00:25:34.799
Um there's a lot of work for ourselves, um, but we'll get there.
00:25:34.960 --> 00:25:39.839
Um it's yeah, it's just a case of so there's no penalties initially, it's a soft landing from the revenue.
00:25:40.000 --> 00:25:44.000
But there will be eventually for non-submission that you know and there won't be non-submission.
00:25:44.640 --> 00:25:48.799
But that some people that will do it themselves will estimate the figures.
00:25:48.960 --> 00:25:59.359
And there's no that's not technically correct, but the there's no check on these figures by the revenue because there's four quarters and then there's a thing that was termed as normal that pulls it all together, kind of thing.
00:25:59.440 --> 00:26:05.519
So some people that do themselves will will will potentially do that, but that doesn't take account of seasonal fluctuations, etc.
00:26:05.759 --> 00:26:12.799
So the best advice is to obviously either do it correctly or engage the services of of an accountant to to help you out with it.
00:26:13.359 --> 00:26:13.599
Okay.
00:26:13.920 --> 00:26:19.519
Another new thing that sort of came in is companies house sound require ID verification.
00:26:20.079 --> 00:26:20.559
Why?
00:26:20.720 --> 00:26:22.720
Like what is that and why have they brought it in?
00:26:23.119 --> 00:26:26.480
So yeah, this is another new change to the profession that we've had.
00:26:26.640 --> 00:26:30.400
So we're countless of these things that keep coming at us and we just have to deal with them.
00:26:30.480 --> 00:26:33.519
So yeah, this is this is from a money laundering point of view.
00:26:33.599 --> 00:26:41.359
This is effectively to bring a much tighter control into to how a limited company is running, the people behind that.
00:26:41.519 --> 00:26:57.200
It's to avoid fake companies effectively being it used to be it was very easy to form a limited company before whereby you all you need was an address, director's details, date of birth, and an address.
00:26:57.359 --> 00:27:03.279
There was no verification on the address, there was no verification on the director or the registered office.
00:27:03.440 --> 00:27:11.599
So from uh you know, major crime and and all this sort of thing, that's why they've done this, is to avoid these sham companies being created.
00:27:11.759 --> 00:27:22.319
So what they've done is that effectively everyone has to be digitally uh have an ID digitally verified and approved before they can form a new company.
00:27:22.480 --> 00:27:29.839
So it affects two lords everyone who's got a limited company, it affects them because everyone who does has to do a confirmation statement.
00:27:30.000 --> 00:27:38.960
So what a confirmation statement is is uh every company has to do one every year, pay for the privilege to company's house, confirms director's shareholders, registered office, etc.
00:27:39.200 --> 00:27:43.359
So there's a phased entry for every company that's in existence just now.
00:27:43.440 --> 00:27:50.480
So when you come to do that, you need to have all of the directors verified, the ID verified.
00:27:50.640 --> 00:27:58.640
And secondly, as I said earlier, any new company, you can't form a company now directly with Companies House until you've got a verification code.
00:27:58.880 --> 00:28:03.440
So what that involves, we had to become approved verifiers with Companies House.
00:28:03.519 --> 00:28:04.960
So not all firms will do that.
00:28:05.200 --> 00:28:08.880
We we went down the route of doing that for certainly our client base.
00:28:09.200 --> 00:28:24.640
So we then have to we've got a certain level of responsibility there, so we have to for every director and every new client that comes on board, we always get ID anyway, but we have to get ID, two forms of ID, uh we need to get bank statements, utility bills, etc.
00:28:24.799 --> 00:28:27.119
There's a there's a list generated by company size.
00:28:27.200 --> 00:28:37.440
So we follow that, we have to get that information, and we do the verification and we kind of we're verifying and trust that we've seen these documents, they they all agree with what the director has said.
00:28:37.599 --> 00:28:45.440
What happens we feed it into the system, generates a code, it's a unique code for every director, comes through email to themselves, say we'd send it to us.
00:28:45.599 --> 00:28:47.039
At that point, they're verified.
00:28:47.200 --> 00:28:48.880
They can then go forward in company.
00:28:49.039 --> 00:28:49.920
So it's just another level.
00:28:51.920 --> 00:28:52.960
Yeah, it's probably not a bad thing.
00:28:53.279 --> 00:29:00.240
Even like from if you don't have a company from like a consumer point of view, you're always going to be able to trace back if you need it to, like, who you've bought from or whatever.
00:29:00.319 --> 00:29:14.720
So now you go on to a company or company's house and do a search through the search engine, uh it will say this director has been verified and it will give our name as if we've done the verification for them, it will say verified by Stewart and Co.
00:29:15.039 --> 00:29:16.559
as an approved ID verifier.
00:29:16.640 --> 00:29:18.960
So it gives a level of comfort and protection.
00:29:19.039 --> 00:29:19.119
Yeah.
00:29:19.359 --> 00:29:20.240
Not just for the revenue.
00:29:20.319 --> 00:29:30.960
It used to only ever be the revenue, but now you know if you got a new inquiry from a company in Manchester that wanted to do business with you, and you thought, right, you know, you're gonna do you go into that in good faith, how much credit do you give them?
00:29:31.200 --> 00:29:31.359
Yeah.
00:29:32.079 --> 00:29:33.359
Yeah, that's a good I've never thought about it.
00:29:34.319 --> 00:29:39.519
You could do a separate credit check on them, but you would go and first thing you would do is go to a company's house and say check.
00:29:39.599 --> 00:29:45.279
Uh there's tight in registered offices as well, so you have to have you know, they've got rid of the P.O.
00:29:45.359 --> 00:29:47.359
boxes, that's what they're they're phasing out.
00:29:47.920 --> 00:29:58.960
It used to be you could have a PO box, one, two, three, in the centre of one, did it just that's much like fictitious, fictitious address, but not a proper registered address, so you have to have that now as well.
00:29:59.039 --> 00:30:04.000
So yeah, it gives the consumer a bit of protection and it certainly gives companies' house a bit more comfort for it.
00:30:04.079 --> 00:30:04.319
So yeah.
00:30:04.640 --> 00:30:04.960
Definitely.
00:30:05.200 --> 00:30:08.799
So last question um is about payroll.
00:30:09.119 --> 00:30:13.519
So at what point I know payroll is something that you guys do at shirt and call.
00:30:13.680 --> 00:30:17.519
So at what point do you need to register for payroll when you have employees?
00:30:17.839 --> 00:30:20.240
Yeah, so again, we get asked this all the time.
00:30:20.400 --> 00:30:32.720
The the number one answer uh I would suggest is whenever you have somebody that you are paying for services, either an employee of your business, you should operate a payroll scheme from day one.
00:30:32.799 --> 00:30:35.200
I'd put them on to the to the payroll scheme.
00:30:35.440 --> 00:30:39.839
Um the rules with the government are slightly different, it's just over 90 pounds per week.
00:30:40.000 --> 00:30:42.559
Above that, below that you don't have to operate a payroll scheme.
00:30:42.720 --> 00:30:44.319
Yeah, so it's like a money limit.
00:30:44.880 --> 00:30:45.920
It's a limit per week.
00:30:46.079 --> 00:31:01.119
Um but the employee has rights from day one, so there's been changes recently, and the Employment Act has come in, so it gives a lot more rights to to workers and less rights to the employers, um which is a good thing for employees.
00:31:01.279 --> 00:31:16.480
But I think you know the best advice is is go go from day one to you because you know, even if you were both weren't operating a payroll scheme and yet somebody was only only doing a few hours, they still have you know entitlement to six days, entitlement to all day for the period that they're working.
00:31:16.799 --> 00:31:19.119
So, from your point of view, you want to to record that?
00:31:19.359 --> 00:31:39.759
So you know the revenue if you you know the revenue were to do a a check on books and you had wages through as effectively casual wages, you know, you still got to have a certain amount of information about that individual because the rev it used to get uh an area where people could put through bigger numbers for casual wages, the days of that are are are are gone.
00:31:39.839 --> 00:31:46.319
So best advice is from day one, uh whenever you take some it's a it's a big thing to take somebody on if you're a small business.
00:31:46.640 --> 00:31:49.440
The biggest thing in any any business is taking on an employee.
00:31:49.599 --> 00:31:52.720
But the best advice because it that gives a record, it gives a record for you.
00:31:52.799 --> 00:31:58.880
So within your records, you have a payroll record, you have reports that verify that you've paid that person.
00:31:59.119 --> 00:32:05.680
The money that leaves your bank account will agree to what they've had in their bank account backed up by a payslip.
00:32:05.759 --> 00:32:10.319
So from your point of view, all your records are intact, HMRC complied.
00:32:10.480 --> 00:32:17.920
From the individual's point of view, they have a pay slip, uh they have a record of what they've had, if they need to go for finance, they need to go for mortgages.
00:32:18.480 --> 00:32:35.359
Even at the lower end of the spectrum, from a monetary point of view, they could be, we see this a lot, they could be man or or or or or wife who one of them stays at home, one of them does a wee bit of work, they've got young kids, but they still need that money combined to go for a mortgage.
00:32:35.680 --> 00:32:39.599
Uh so yeah, the having the record there will give them the information they would need.
00:32:39.839 --> 00:32:40.400
So yeah.
00:32:40.559 --> 00:32:42.400
From day one, really best advice.
00:32:42.480 --> 00:32:43.200
I'd get rid of them.
00:32:43.680 --> 00:32:45.279
Okay, well, thank you for coming on.
00:32:45.599 --> 00:32:46.160
That's okay.
00:32:46.240 --> 00:32:46.799
Thank you very much.
00:32:47.200 --> 00:32:56.559
Thank you for listening, and we will leave Stuart and Co.'s details in the episode descriptions for this series because obviously they've sponsored the series.
00:32:56.720 --> 00:33:01.680
So if you do feel like you need assistance with your accounts, then please feel free to reach out to them.
