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TAX AND A TINFOIL HAT?

Understanding tax and how it affects you can be complicated. One of the many taxes business owners have to consider is Corporation Tax; the tax paid by companies on their profits. To add to the raft of, often confusing, information available a 183 page guidance document is out for review; outlining the technical application of the new 12.5% Northern Ireland rate of corporation tax, which is due to be introduced in April 2018.

If you use accountants to prepare your year-end figures they may calculate your corporation tax liability too. But you cannot afford to ignore corporation tax until the year end, because your activities during the year could have a significant impact on the final bill.

If your company is liable for corporation tax, you need to keep adequate records so you can complete your company tax return.

Like a dog with a bone, it’s important we remind you that good bookkeeping makes your paperwork (such as VAT and tax returns) easier. It provides a system that tells exactly what is going on and if you are using real time cloud accounting software like Magic Beans’ clients, even better.  No mind reading required. Here are our top tips for ensuring you don’t feel like wearing a tinfoil hat to work.

  1. Set up a cloud based computerised system, like Xero, from the outset; ensuring your accounting function does not start to swallow valuable time. If you start with cloud based accounts, there will be no need to go through the sometimes time-consuming process of transferring your paperwork onto a new package at a later date.
  2. Choose accounting software wisely! Do not make a decision that means you need to double up on the tinfoil.
  3. Record all the money coming into and out of your business, both to keep track of your cashflow and for your tax records.
  4. Cash businesses, will need to use till rolls and point-of-sale systems to record sales.
  5. Non-cash businesses should issue an invoice for every sale.
  6. Give every invoice an original number and keep a copy of each.
  7. If your business registers for VAT You must issue VAT invoices.
  8. Update your accounts whenever an invoice is paid.
  9. When an invoice is paid, make a note of how it was paid (cash, cheque, BACS etc).
  10. Pay the money into your account, using the paying-in book provided by the bank.
  11. On the stub of the paying-in slip write the date, invoice number(s) and amount(s)
  12. Everything should match – ie lodgement slips, invoices paid, amounts received in the bank, etc.
  13. Ensure you have invoices or receipts for every purchase.
  14. Every time you make a purchase, ask for an invoice or a receipt.
  15. If you are VAT registered, the golden rule is that you must also have a VAT invoice for all purchases – to ensure you can claim the VAT back. We see new clients on a weekly basis who have over paid tax because they don’t keep accurate records of how they spent their cash – if its business related get a receipt!
  16. If you use money from the till for a purchase, put the receipt in the till immediately.
  17. When you pay an invoice or purchase goods, make a note of how you paid it (cash, cheque, BACS etc).
  18. Keep a note of all purchases for which you do not have a receipt.
  19. Enter the purchase invoices and receipts into your accounting software – using Xero or the add on Receiptbank will save you a lot of time as you can simply take a photo from your phone and upload it.
  20. Enter the details of the bills you have paid into your accounting system.
  21. Check the details against the invoice.
  22. Open a separate (preferably online) business bank account.
  23. If you are not using Xero or Receiptbank, keep receipts for cash purchases in a Petty Cash box.
  24. At least once a week review your unpaid sales invoices and chase any that are falling due.
  25. Choose software wisely.

These are just a few tips for making your life, and your advisors life, a lot easier. Ensuring that you can not only track your business income and expenditure, but also ensuring you can reduce your tax and VAT liabilities with appropriate records to support this.

For further advice on starting your business or cloud accounting software and bookkeeping support, contact Clare Galloway (clare@magicbeans.online) or www.magicbeans.online.