SEIS

From April 6 2012, SEIS (Seed Enterprise Investment Scheme) is available to those who buy shares in new company start-ups. This government backed investment offers 50% income tax relief and the potential to defer tax on capital gains. Plus, SEIS investments made in the current tax year get a bonus of not just deferring tax on capital gains, which can be as high as 28%, but completely exempting it.

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Do you want good or Great Contractor Accounting?

When you are considering moving into contracting for the first time, what is the best way to assess the quality of a quality Contractor accountant?

Firstly, are going to go “budget” or “quality”?

Secondly, are you going to make a decision “online” or “in person”?

And of course you need to know the questions you should ask which ties
both of the above together: It is now possible to go almost completely
“virtual” with your accounts which is great for some but not others. After all,
if support a team in league two, you don’t expect to see premier league quality
football.

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Umbrella Company Wound up

Reed Umbrella Limited has been wound up in the public interest following an investigation.

It had failed to maintain professional standards or file accounts and had also abandoned consultants who had worked for it. There was also a question mark over whether it had declared all of its income as its 2008 accounts showed turnover of just over half a million pounds but it was known that it had processed fees of over £20 million over an unspecified time period and no accounts were filed after 2008 but it seems highly likely that the 2008 turnover wasn’t accurate.
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IT Contracting roles update

The REC (Recruitment and Employment Confederation) has reported a 6 month high in the demand for IT contractors.

After a relatively quiet period since last summer, an increase in demand for professionals such as IT project managers, developers and
SAP specialists
has helped drive the improved outlook.

The report has also highlighted that the recently introduced Agency Workers Regulations (AWR) are continuing to have minimal effect on temporary workers. In reality, many recruiters are continuing to shift workers away from umbrellas towards trading through their own limited companies not only because of the income benefits they often bring but also to move involved parties outside the scope of the regulations.

Closing down your Limited company

Occasionally contractors ask us if it is worth closing their company and starting a new one in order to avoid an IR35 enquiry because once the company has been struck off there is no company to investigate and no company assets to pursue.

We will consider below whether this is true or not but it is first necessary to consider that HMRC carry out very very few investigations including considerably less in recent years than previous ones. To balance this, they still do carry out investigations and it seems entirely possible that the upcoming budget may deliver at least some small improvements to the tools that HMRC will have in their armoury to make investigations more worthwhile.
So back to the question of whether closing a company achieves the aim. Well there are no guarantees but HMRC will investigate fewer dissolved companies than active ones.
After an application is made to Companies House to dissolve a company, i.e. close it, there is a three month delay whilst interested parties, including HMRC can request a delay in closure in order to make a claim on any debts owed by the company. In respect of IR35, HMRC would be able to request the company is kept open to continue an investigation that is already in progress or commence an investigation if they have any suspicions.
Once the company is struck off, it is possible for HMRC to restore a company for PAYE but in reality this rarely, if even, happens.

However our advice is always: if you believe that IR35 doesn’t apply to you, then closure of a company for genuine reasons should hold no fears.

Cash flow Management

Businesses don’t go bust because of a lack of profitability. They go bust because they run out of cash. Ever heard the phrase “cash is king”. As a small business owner you must have come across this from time to time, but what does it actually mean and what can you do to influence your cash position for the better? Read on for some top tips.

Look at your customer debtors report. Be brutally honest and highlight potential bad debts. Then, implement cash control procedures to help chase the debt. Or hand them over to a debt collection agency. This can work well where you know you are unlikely to get the debtor to pay so you need to apply a little pressure.

Look at your suppliers and agree early settlement discounts or spread annual payments wherever possible and practical.

Operate a tax reserve account where you ‘put away’ a monthly amount to cover future tax and VAT liabilities. This will help you plan your own cash flow more efficiently.

Identifying and report costs. You may have taken on costs that were justifiable at the time but in a different environment can be seen as excessive. You need to identify and justify costs so that you can make informed decisions about what costs to cut.

Operate a simple forecast cashflow so you can identify pressure points before they happen.