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The FBTC Tips to Business Success

Everyone has different ideas and views on what they class as ‘successful’, is it the amount of money you make or is it having the perfect work life balance (does this even exist?). If you know what you want to achieve you are heading in the right direction. The following factors will help you to achieve your success!

Focus – What do you want to achieve? Set yourself short term goals to ensure you stay on track. By knowing what you truly want, you can define your business and achieve your goals.

Believe – In yourself and your business. If you don’t who will?

Tax – Don’t forget about it! Ensure you plan for your taxes. (We can look after this area for you, one less factor to worry about!)

Creativity – Stand out from your competitors, think outside of the box, sometimes it is good to be different. Develop your business to put you ahead of the rest. It is also important to realise you don’t know everything, be open to new ideas and opportunities that approach you.

Adapt – You need to do this for your business to survive, adapt to change to ensure you are giving your customer what they want and need (they may not know they need it yet). Opportunities sometimes fall into your lap which aren’t the norm and you need to be able to understand how to deal with such happenings.  

Challenges – Identify and manage your challenges, develop your analytical skills. There is never a problem you just need to find the solution. This will help you move your business forward.

Cash -  Feed your bottom line, find ways to get money upfront to improve your cashflow. Make sure your capital expenditures aren’t draining your business.

Organisation – This is important in both your personal and business life. Been organised means you have control and this will increase your productivity. 

Understand – Spend time researching your industry and your target audience, you will then understand what your customers want and need. This way you can ensure your business is offering the correct products and services, in the right place and at the right time. 

Notes – Reflect on your business, write down your thoughts. Keep your notes to help you plan and prepare for the future. Self-reflection will help you to develop self-awareness and encourages active engagement in your work.

Technology – Stay ahead of the game, every day is changing. Does your business require you to use the latest software? Should you be liaising with your customer more, can you do this by using new technology? We can do everything we need to with our mobile phones, is their opportunity for you to make changes? Smartphones, social media, texting, emails and other communication channels make it easy to get your message out.

Add Value – Give your customers that little bit extra. Find low cost or no cost ways of making clients feel even better about the product or service you have provided. Such acts will increase your gestures of goodwill and also increase your word of mouth referrals. 

Net Profit – Keep an eye on your net profit, make sure you know how your business is operating. This then supports your focus, creativity and understanding. This also give you the opportunity to recognise any areas of concern, manage your finances and deal with any challenges.

Consistency – Ensure you develop positive habits that you can enforce over a long term. Therefore, giving each of your customers the same experience. 

You – Take time for you! You are the most important part of all!

Why do we have to pay money in advance of next year’s bill – payments on accounts? Why can't we just be charged the bill at the end of the year?

 If your total Income tax and NIC’s for the year is greater than £1,000, in addition to your Income tax and NIC bill, you will be asked to make ‘payments on account’ towards the next year.  They are payable in two equal instalments.  One by the end of January following the end of the tax year and one six months later by the end of July.

How are they calculated?  In simple terms, each of the two payments on account are calculated as 50% of your total Income tax and NIC due for the year just ended. 

When your tax bill is calculated for the following year, the total Income tax and NIC due is reduced by the sum of the two payments on account you have made in the year.  Consequently, if your profits are exactly the same amount in that year you will have already paid your total tax bill in advance.  If your profits are more or less than the previous year, this would result in a balancing payment or a refund. 

So why do these payments have to be made?  Does it sound unfair?  Not if you consider that unlike the employed paying Income tax and NIC under PAYE, the self-employed have nine months after the tax year ends in which to pay their Income tax and NIC bill.  HMRC’s view is that by then, you will have been earning towards that year so they want a cut of it before the tax year has ended.  It also keeps you up to date with your payments and gives you a clearer indication of where you are with your tax affairs. 

Under certain circumstances, payments on account can be reduced or completely removed.  This should only be done under guidance and advice from your tax adviser.  Unfortunately, the ‘I cannot afford to pay them’ reason to reduce/remove payments on account will not wash with HMRC!

Let’s clear the air!

Did you know you could receive a £150 penalty notice for failing to display a ‘no smoking’ decal in your work-related vehicles?

In line with the Smoke-Free (Exemptions and Vehicles) Regulations 2007, you must ensure that at least one 'no smoking' sign is displayed in a prominent position in each compartment of your vehicle. Visit Smoke Free England for more information.

According to Cancer Research UK, the number of smokers in Britain has fallen by 1.9 million since the smoking ban was enforced in England, 10 years ago.

Whether you operate your business from a vehicle or premises make sure you are meeting the regulations to prevent unnecessary costs. If you receive a penalty notice it is not an allowable business expense.

Pin a Website link to the home screen of your mobile or tablet

Look forward and see where you are heading!

Keeping the taxman at bay

Let’s talk about how and why HMRC Investigations happen, this week’s tip explains the best way to deal with an enquiry and keeping the taxman happy.

Once the Revenue has taken up an enquiry, it is in the taxpayer’s interest to settle the enquiry as speedily as possible by cooperating with HMRC and providing them with any information they request as they do have statutory powers that they can put in place if they don’t get the information that they require within specified periods of time. 

The length of an investigation can vary from months to sometimes years depending on what HMRC find and how they decide to progress.  During an enquiry, the Revenue may well look at your personal expenditure as well as your business records.  It is important that you can also account for entries on your personal bank, building society and credit card statements as well as your business statements.  The Revenue will often deem receipts that you cannot account for as undisclosed business income.

Clearly, the best way to avoid having an enquiry into your tax return, is to ensure that when your tax return is submitted it includes accurate and complete accounts information and that it also gives full details of all your non-business income such as any bank or building society interest, income from property, Capital Gains etc.  This may be stating the obvious but it can only be achieved by keeping full and accurate records:

-You should always record all sales and business receipts as you get them and retain the records;

-You should keep back-up records, for example, invoices, bank statements and paying-in slips to show where the income came from;

-You should record all purchases and other expenses as they arise and ensure, unless the amounts are very small, that you have, and retain, invoices for them.

It is important that each entry is recorded as and when it happens.  By doing this, it reduces the chance of you omitting or entering an incorrect amount if you have to record it on your records some weeks or months after the event. 

You will see from this how important it is for you to keep accurate records in both your personal and business dealings.  By doing this, the chances of you getting a letter from the Revenue will be considerably reduced.  However, if you are unlucky enough to still be selected for an enquiry, your hand is much stronger when you can produce accurate, well-kept and timely records.

The FBTC online cashbook is a great way to record your business income and expenditure. Have a read of the FBTC Online Cashbook "Simplicity at its best!"

If you have any questions about Revenue investigation or the online cashbook, please get in touch;

Call 0344 984 4445 Email  info@fbtc.co.uk

“I am writing to tell you that I intend to enquire into your Tax Return.”

The first line of the letter that tends to send a shiver down the spine of most self-employed individuals if they are unlucky enough to receive a letter from HM Revenue & Customs.

You may have submitted your Tax Return and thought ‘great, it has been accepted’. But confirmation of receipt doesn’t mean to say that HMRC have finished with it.

Under Self-Assessment, the Revenue’s method of dealing with Tax Returns is to “Process Now / Check Later.”  The Revenue then has a period of time to review the entries on the Return.  If some of the entries on the Return differ from information which they already hold or if these entries fall outside the normally accepted patterns for that particular business sector, then there is a possibility that the Return could be selected for an enquiry. 

There is a time limit within which the Revenue can take up an enquiry.  This is currently within 12 months of the normal filing date for the Return i.e. a 2015/16 Tax Return must be filed with the Revenue by 31st January 2017, therefore the window for opening an enquiry is up to 31st January 2018. 

However, it has been known for HMRC to open an enquiry outside of that time frame which is called a ‘Discovery’ enquiry.  Why can they do this you ask?  Because they can!  Such an enquiry can take place where based on the information (or lack of) shown on the tax return HMRC could not have known that the tax return was incorrect and issued an enquiry within the normal time limits.

In addition to the ‘normal’ lines of enquiry, HMRC are now carrying out random ‘Business Record’ checks in which they look into your record keeping.  If they have reason to believe that it is not up to scratch, they will arrange to make a visit.

Unfortunately, no one is immune from receiving a ‘Business Record’ check, however you can take steps to avoid a full-blown investigation.  How?  Stay tuned for our next tip – Keeping the Tax man at bay!

FBTC Online Cashbook "Simplicity at its best!"

Do you want an easy to use online cashbook system to record your business income and expenditure?

Fill your car with fuel then head to your next lesson. 5 minutes to spare before Justin Thyme arrives for his 3pm lesson, then login to your FBTC online cashbook and add the £50.00 fuel expense to your cashbook. It is as easy as that!

Record as you go then you can spend your own time reading Intelligent Instructor magazine. Prevent the end of year rush to record your income and expenditure.

Tracey Leck, FBTC Accounts Technician, advises the online cashbook is the way forward to streamline your accounts. It is the most efficient way of recording your income and expenditure.  

But don’t take our word for it, Deborah Hunter has been an FBTC client since 2011, see her thoughts on our cashbook system; “I use the online cashbook for ease. I can log at my leisure, come back to it when I please and it orders each entry in the date order. Simplicity at its best!”

Stephen Harlow is another client of ours that favours the online cashbook, “Having used the online cashbook since joining FBTC in February 2016, I can only recommend it to all, especially those currently using the paper format cashbook. Data entry is simple with nicely laid out and intuitive categories’’.

If you have any questions about our online cashbook get in touch. If you want to start using the online cashbook it is a straight forward transition and we can advise you accordingly.

Call us on 0344 984 2515 or email us at info@fbtc.co.uk  to take advantage of our FREE online cashbook.

Easter Eggs are an allowable business expense aren't they???

Sadly Easter Eggs are not an allowable business expense.

This maybe a good time to mention some expenses that are not allowed. In other words, those expense that do not meet the HMRC test of ‘wholly and exclusively for business purposes.’
 
There are a whole raft of expenses that could be deemed allowable but in fact are not.  The most commonly asked about are:
 
-Personal insurance and sickness policies.  It probably makes sense to have such insurance but unfortunately the costs are not an allowable business expense. The fact that they are personal expenses is a bit of hint.

-Work clothes and shoes.  You may quite rightly claim to your accountant: ‘I have to look good whilst I teach’.  True, but so do most people who go to work in any professional capacity and they have to personally pay for their suits, shirts and ties. It is no different for a driving instructor or any other similar profession.  However, shirts and tops are allowed for tax purposes if they display a prominent logo promoting your business.  Shoes are a definite no: we all have to wear shoes.

-Spectacles and eye tests. This is an interesting one but at the end of the day we all have to take regular eye tests, wear glasses if required, and pay for them personally.  The same applies to sunglasses.
 
The list of non-allowable expenses is understandably endless. Some of the strangest requests that have made the non-allowable list include chewing gum, gym membership and solar panels.
 
Making a claim for an expense that is not allowed for tax purposes on your tax return could land you in hot water with HMRC if they investigate the detail of your return. Usually the cost to you of that investigation will be far in excess of the expense you were endeavouring to offset against tax.  Seek expert advice before deciding whether to include an item on your tax return, if you are not 100% sure about it. Call us 0344 984 2515!

What about a chocolate calculator then??   

Happy Easter....

Your Home is no Tax Haven!

We recently wrote about ‘employing’ someone to take care of your paperwork, answering your calls and basically all things office related. A common question relates to utility bills and what can and cannot be claimed as business expenses.  Your driving school business is predominantly run from your tuition vehicle but it still may be possible to gain tax relief against certain utility bills.               

Some of your business, such as preparing lesson plans and bookkeeping is carried out at home but this would probably account for less than 10% of your time. So what expenses are allowable for tax relief?  In most cases, it will be small proportion of your heating and lighting bills.  Unfortunately, rent, rates, council tax and water rates are not allowed for tax purposes. It may be possible to gain relief by making a claim for ‘home use as office’ but whether this is beneficial is heavily dependent upon your personal circumstances and you should certainly seek expert advice before proceeding down this route!

If you decide to ‘build’ an office in your home or add an extension in which to house an office you should ask yourself if it is justifiable and necessary for the running of your business.  However, it is possible to gain tax relief on items that you purchase to ‘kit out’ your ‘office’ such as filing cabinets and the like, but not the cost of construction or converting a room into an office.

Generally, for a small business, a table in the kitchen will suffice for your paperwork! 

What would your dream office look like???

If you’d like further advice on this or any accountancy matter please contact FBTC on 0344 984 2515.

Will someone please answer the phone?

Telephone calls and paperwork! And all you want to do is go out and do what you are good at – teaching people to drive. Why not ask a family member to manage your diary, take telephone calls and more importantly keep your accounting records up to date? There is nothing like having a free administration service on hand when you need it.

But is having your family member work for free the best way? Not necessarily and it can benefit you as a self-employed individual if you ‘pay’ someone to run your ‘office’ and keep your paperwork in order as the cost is tax deductible against your trading income. 

However, in the complex labyrinth of UK tax rules, regulations and do’s and don’ts, paying someone is not as straight forward as you would think:

-You must pay the person the average hourly ‘going rate’ for the type of work they carry out;

-You have to consider whether the person already receives any other form of taxable income.  If they do, the addition of your ‘pay’ may push their total income over the taxable limit and they could end up having to register for self-assessment and paying tax themselves on this new income;

-There has to be a paper trail of payment.  This is one of the areas HMRC will look into closely if you are ever unlucky enough to be picked for an investigation, specifically transactions between family members.

Paying a family member to help you out could open a can of worms and could prove quite costly if it not administered correctly but done properly is a good way to reduce your tax bill.

If in doubt, ask! 0344 984 4445

Ensure you make time!

How often do you keep your accounting records up to date?  Once a week?  Once a month? Do you play catch up at the end of the tax year when your records are requested from your accountant?

You should try and set some time aside each week to update your accounting records and get into the habit of doing it daily or weekly, whilst the week is still fresh in your memory.  The FBTC online cashbook is a great tool to do this! Click here to find out more about our online cashbook.

You will find it much easier to recollect what has happened in the last seven days, than trying to think back over fifty two weeks, if you are trying to complete your records after the tax year has ended.

The advantages of sticking to this regime are plentiful.  As well as being able to keep a track on how your business is performing, it will assist you in answering the questions from the dreaded ‘Business Record Check’ letter should you be unlucky enough to receive one from HMRC.  Based on a set of answers you give in relation to questions about your accounting records, HMRC will decide if they will need to pay you a visit to carry out further checks.  The more accurate information you can supply them with, the better your chances are for not getting a visit.

If you’d like further advice on this or any accountancy matter please contact FBTC on 0344 984 2515.

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PLANNING FOR YOUR TAXES

Plan ahead! Look forward and see where you are heading! Plan for your taxes……

Let's get organised! Start a saving account or maybe a payment scheme with HMRC, prepare yourself for your final liability.
 
Don’t forget as well as income tax, Class 4 National Insurance also needs paying and you should be planning and accruing for this too.

Always contact HMRC should you need to discuss your tax bill, don't stick your head in the sand. They may agree a payment plan which is a much better option than accruing interest on what you owe.

If you’d like further advise on this or any accountancy matter please contact FBTC on 0344 984 2515.

Don't forget to check out our Facebook and Twitter pages!