Is running a company really that hard?

Is running a company really that hard?

If you are new to contracting or are thinking of switching from an Umbrella company you may be considering whether to set up as Limited Company. At first glance this might seem quite a complicated task and the idea of actually running it, from the accounting point of view, can look a bit daunting. However, running a Limited Company is not as difficult as it sounds.

Like anything you’re doing for the first time there will be a few new things to learn, but overall a key point to success is to be well organised and disciplined about keeping your company information updated. It also really helps to have a good contractor accountant. Their expertise is invaluable and will help ensure that you are:

  • aware of your tax liabilities
  • submitting information on time
  • compliant with all relevant tax and Limited Company legislation

 

The simplicity of online accounting

One way to keep your accounting tasks as simple and quick as possible is to use an accountant with an online accounting system. With an online system it should only take you around 15 minutes each month to upload your latest information which will then go directly to your accountant.  Also, online systems make the process even easier by having functions which can upload a CSV file of your business bank statement. This will help reduce the time needed for manual input of your day-to-day business transactions.

 

Advantages of real time information

Once your information has been uploaded your accountant can view your company’s financial position in real time. The advantage of this is that it helps your accountant to give you timely advice on any tax liabilities due as well as the ability to notify you of any profits available for dividends.  This helps you to work more closely with your accountant so they can guide you in taking dividends from your company while making sure there is enough income to cover any liabilities. With their knowledge and experience they can help your company grow.

 

Advice on personal income

As well as offering guidance on your company accounts your accountant will be able to provide you with personal tax advice. This will make sure that you are also maximising your personal income and are aware of any taxes due.

If you would like to find out more about online contractor accounting services contact us at Intouch Accounting for further information.

 

This blog has been prepared by Intouch Accounting. While we have made every attempt to ensure that the information contained in this blog has been obtained from reliable sources, Intouch is not responsible for any errors or omissions, or for the results obtained from the use of this information. This blog should not be used as a substitute for consultation with professional accounting advisers. If you have any specific queries, please contact Intouch Accounting.

How will RTI (Real Time Information) affect me?

RTI (Real time information)

Will this affect me as a one man Limited Company, should I expect my accountant just to deal with it within the fee. What do I need to do to comply and protect myself?

Although you may not have any employees, one man Limited Companies will be affected by RTI. The reason is that as a one man Limited Company you are a director of your company. For the purposes of PAYE this means you are therefore an employee of the company, in the role of company director, which is within the scope of RTI.

RTI is replacing the year end PAYE P35 Employers Annual Return which details employees tax, NI and statutory payments made during the tax year. With RTI this data must instead be submitted to HMRC on a monthly or quarterly basis throughout the year.

A key point is that this affects PAYE submissions only. It has no impact on dividends or other payment arrangements.

The main benefit of RTI is that it will eventually make the PAYE system easier for employers and HMRC to manage and will be far more accurate. All this should mean that HMRC have better information to help them review employee’s income information and ensure they are paying the right amount of tax and NI in any tax year. The other key point is this will also mean that any benefits payable to employees are reported to HMRC as you go, and any tax codes can be amended accordingly. The majority of employers and pension providers will start using this system from April 2013 and all employers must be using it by October 2013.

The biggest issue with RTI is the sheer volume and frequency of administration.

For a one man Limited Company the easiest way to administer this is to plan all 12 of your salary payments in advance. This makes it much easier for you to then simply submit your pre-calculated PAYE figures on time and therefore avoid any late penalties. As the current late penalty proposals are for a minimum of £100 per week for small companies these are clearly best avoided.

If you have an accountant, agree with them what your monthly salary amounts across the year will be – and stick to them. Varying your salary without telling your accountant, making ad hoc cash withdrawals and so on are what may potentially cause problems. Ideally your accountant should be able to deal with your RTI administration for you as part of their regular service.

In practice, with good planning, the majority of one man Limited Companies who have an accountant will not experience much change when RTI rolls out.

 

This blog has been prepared by Intouch Accounting. While we have made every attempt to ensure that the information contained in this blog has been obtained from reliable sources, Intouch is not responsible for any errors or omissions, or for the results obtained from the use of this information. This blog should not be used as a substitute for consultation with professional accounting advisers. If you have any specific queries, please contact Intouch Accounting.

RTI – how’s it going so far?

RTI – how’s it going so far?

The new Real Time Information (RTI) process of submitting PAYE information has been ‘live’ for a few months now. HMRC appear pleased with progress so far, reporting that over 1.58m PAYE schemes are now successfully set up and submitting in real time.  They acknowledge that there have been teething problems with the online systems and there have also been a number of customer issues, but overall they’re confident that these can be resolved in the near future. Their stated aim in the first year of RTI operation is to support employers in using the online software and helping them with any queries.

 

What support are HMRC offering to employers?

In addition to their general customer service one of the ways they’re providing support is a ‘Troubleshooting’ section on their website. This gives detailed advice on what to do if any of the most common customer problems occur ie:

  • No data appears in forms filled out with the tools
  • There are service issues or online availability issues
  • Error messages appear when trying to submit PAYE data

Further information on these can be found in HMRC’s Operating PAYE in real time (RTI) section.

 

How have RTI users found things so far?

Despite the help offered by HMRC it’s clear that many users are experiencing severe problems. So far around 167,000 employers are being contacted by HMRC due to missing RTI deadlines, which potentially means late payment penalties. HMRC have also admitted that although 85% of employers are now set up for RTI a significant number have not yet made a submission.  In fact, this has proved to be such an issue that for businesses with less than 50 staff HMRC has granted a temporary respite. These businesses will now be allowed to submit once a month rather than every time they pay someone until April 2014. This is 6 months more time than the original deadline of October 2013. This is a good sign; the move was implemented as a result of feedback from stakeholders, which means they’re actually listening to what’s happening on the ground.

Employers who have started making submissions have experienced several problems, one of which is the issue of duplicate records. This has long been an issue within the PAYE system and HMRC are working to correct these errors, but employers are finding that they must dispute sums owed and work with HMRC to get them corrected which is more work for them. Other common reasons for disputed charges are:

  • Employers not sending in a return in a tax month and/or not telling HMRC that they haven’t paid anyone.
  • Employers deducting statutory payments from the amounts due and not telling HMRC.

It was always expected that there would be initial problems with implementing RTI so these and the many other issues which have arisen come as no surprise. The real test will be in how these are overcome and how quickly as they are having a real cost and time impact on those businesses which are most affected.

 

How much is RTI compliance costing employers?

As a consequence of the difficulties many are experiencing, a real concern for many small and medium sized businesses is the increased costs they’re facing to ensure that they can meet the increased administrative demands of RTI compliance. One key issue here is that the free RTI software offered by HMRC has proved difficult to navigate for many employers. In many cases the expertise does not exist within the personnel of these firms to deal with this, so specialist help is being bought from outside to do the job. HMRC anticipated that RTI compliance would cost small firms around £120 million. However, according to research done by the Forum of Private Business the figure is actually closer to £311 million which is real cause for concern.

Overall, while HMRC are optimistic about RTI the end-user employers, particularly smaller employers, are far from comfortable. While it’s encouraging that HMRC do appear to be taking on board feedback from stakeholders it will still be the employers themselves who will have to struggle through while all the issues are being sorted out.

At Intouch our Limited Company contractor clients can work with their personal accountant to make RTI an easy and painless process. For many the contractor is their company’s only employee, so it’s simply a matter of ensuring that your accountant knows how much PAYE income to process and they’ll do the rest.

 

This blog has been prepared by Intouch Accounting. While we have made every attempt to ensure that the information contained in this blog has been obtained from reliable sources, Intouch is not responsible for any errors or omissions, or for the results obtained from the use of this information. This blog should not be used as a substitute for consultation with professional accounting advisers. If you have any specific queries, please contact Intouch Accounting.