1. Enter your registered email  address and security code (if this is the first time you have used the service you will need to complete the “new customer Register” section and the security code will be emailed to you)
2. Select whether you are filing for a company or LLP, then enter where the company is registered (probably England & Wales), the company number and the authentication code (if it is the first time you need to add a company and wait for confirmation by post).
3. Select the document you want to file, in this case AR, the Annual Return, you will then be taken through a number of screens where you can check and amend details:
   • Registered Office
   • Location of Company register – this will be the registered office unless these are held elsewhere
   • Company Officers – details of the directors and shareholders, due to Companies Act changes you now have to specify the country/state of residence (ie United Kingdom) for directors of the company.  You will be prompted by highlighted red text if you have not amended any required fields.
   • SIC code – this code (or codes) should represent the activity of the company, there are main categories which are then further subdivided so it should be possible to pick an appropriate one.
   • Capital – the number of issued shares in each class and their respective rights must be disclosed.  These rights include voting, dividends, what happens on winding up and whether they are redeemable.
   • Shareholders – details of full names of shareholders required
   • You then just need to make a £15 card payment to complete the exercise.

There are various forms you can complete online including changes of directors addresses and the process is within reach of anyone used to completing online documents.  This article is a brief summary of how to complete an Annual Return and may not apply to specific circumstance so please seek professional advice before taking any steps based on the information shown. If you would like advice in this or other areas feel free to call.  Alastair Wood, AW Accounting – Accountants who “speak your language”

Cost

The actual cost of goods including bringing them in (ie delivery costs)

Net realisable value

The amount that you will realistically be able to sell it for. In many cases stock is held which “may” be useful in times to come but in reality this is not in the foreseeable future. In this case it may be that the value is a fraction of the cost or may actually be zero.

There are a number of different categories of stock and the practical way these are valued varies, but nonetheless all use the same principle. In all cases you should consider whether the realisable value is greater than cost and if not take a view on what value to apply.

Raw materials for manufacturing

These will be valued at cost of bringing the product to site. Clearly if the item is complete as it came onto site then the value will be that shown on the invoice. If there are a number of deliveries at different prices these are usually priced on a FIFO (First In First Out) basis, ie assume the oldest stock is used first. So you may have to refer to a number of prices if the quantity in stock is greater than the items on the last invoice.

The next problem is partially used “raw material”, you will need to value this based on what remains, so if it is a product sold by length you will need to measure the remaining amount and pro rata that by the cost of a complete unit (eg cable or fabric). A similar principle can be used for products sold by weight or volume.

Finished goods

These are valued at the cost of the materials used ,including any scrap or off cuts not useable elsewhere, together with the cost of any labour to produce the product.

Goods bought for resale

These are typically retail goods and are valued similarly to raw materials, this may be the area most prone to realisable value valuations due to obsolescence or old product lines.

The big mistake many business owners make is to value goods or products at sales value, this is an incorrect way of valuing and hopefully the above will be of assistance. This article is a brief summary of the principles of stock valuations and may not apply to specific circumstance so please seek professional advice before taking any steps based on the information shown. If you would like advice in this or other areas feel free to call.  Alastair Wood, AW Accounting – Accountants who “speak your language”

With the increases in disc capacity file size is not such an issue as it used to be however if you are going to send a file it will be quicker to send and less likely to be bounced by the receiver if it is not too big.  Files can be made smaller by:

1. Reduce the number of dpi (dots per inch), this reduced the resolution but this is not always necessary, I have given some guidance below.
2. Scan in black and white or grayscale, the fewer criteria that need to be covered the smaller the file, if you do not need a colour copy do not save in colour.
3. Save as a pdf, these generally seem to be smaller files than jpegs (ie picture files) although I am uncertain if this is a scientific fact, and they are less easily altered.

For a basic document that can be read but does not need to be reproduced 150dpi in black and white will suffice, I save almost all my “filing” in this format.  For a better quality copy of a text document 200dpi is better, and I only resort to 300dpi for photo ID where a recognisable photo is required.

I hope this will help you in deciding what size to scan a document but if you are unsure about this or would like advice in other areas feel free to call.  Alastair Wood, AW Accounting – Accountants who “speak your language”

1. The very back page or two is the detailed profit and loss account which as the name implies shows the profitability of the business after expenses but before tax.  The first figure will be sales or turnover which is the income for the year based on sales actually completed, but not necessarily paid for.  From this is deducted the direct costs in making those sales, ie the materials or costs which directly result in the sales being made, but will exclude any stock or work in progress which has not resulted in sales by the year end.  This results in a gross profit which should be the profit made on all the individual jobs completed during the year.
2. From the gross profit are deducted expenses or overheads which are all the costs of running the business which are not directly involved in generating sales, which will include salaries, rent and advertising for example.  There will also be other adjustments for depreciation on assets and finance costs resulting in a net profit before tax.
3. The tax is shown on a less detailed profit and loss account which is half way through accounts, normally the first page of figures from the front.  This summarises the headline figures from the detailed profit and loss then shows the tax (which will be approximately 20% of the net profit) being deducted to leave a profit after tax from which dividends are paid.
4. You will need to turn to the notes to the accounts which are towards the back to see dividends, the actual dividend paid is shown in a note at the beginning and the effect on the company reserves shown as one of the last notes.  This will show how much the company was worth at the beginning of the year, how much value was added during the year in profits and how much paid out by way of dividends.  This shows the value of the company at the end of the year which takes us to the balance sheet.
5. The balance sheet is found just before the notes pages and measures the value of the company by netting off the assets of the company against it’s liabilities.  Fixed assets are shown first including vehicles, plant and equipment, each year their value is reduced by depreciation as a measure of their age and usage.  This is shown as an expense on the profit and loss account.
6. Following fixed assets are current assets which include items more easily convertible into cash such as stock, monies owed by customers and others (debtors) and bank balances themselves.  From this are deducted current liabilities which include monies owed  to suppliers and others (creditors) and in taxes: corporation tax, VAT and PAYE.  The net of current assets and liabilities reflects the liquidity of the company, in general this should be a positive amount in order to service the running of the business.
7. If there are long term liabilities such as bank loans or HP these are deducted from the value of fixed and net  current assets to show the asset value of the business.  This will equal the value of shares owned plus the reserves balance shown in point no #4, hence the name “balance sheet”.
8. Some of the figures in the profit and loss and balance sheet, particularly of note the debtors and creditors, are not broken down into their constituent parts and the detail can be found within the notes to the accounts.

The layout of the accounts is laid out in statute and includes parts that may be of little relevance.  Your accountant should be able to explain the bits of relevance to you at the end of the year.

We hope you find the contents of this blog useful; you should of course always seek professional advice for your specific needs.  Alastair Wood, AW Accounting – Accountants who “speak your language”

• Date registered at Companies House: The default date chosen is the end of the month one year from incorporation, so if you incorporated on 4 February 2010, your year end would automatically be 28 February 2011.  You can however change this.
• If you did not start trading through the business until May, you may want to change the year end to April so it represents a full years trade
• If you started on 4 February you might consider that your first year ended on 31 January and change it accordingly
• If you are involved in seasonal work (eg tourism) it would probably be easiest to have your year end in the off-season so that you have more time to complete the year end and also fewer transactions to split between the years
• If you have a year end which is not 31 March you have the ability to vote dividends in the most tax efficient way between the accounting years

There are some rules which limit how often you can change your year end and the maximum length:

• you may not extend a period so that it lasts more than 18 months
• you may not extend more than once in 5 years
• you may shorten an accounting reference period as often as you like
• full details available at Companies House

In reality therefore there are a number of reasons why your year end may not be the same as the tax year although at first sight this might seem the logical choice.  The notes above refer to Limited companies and while most sole traders and partnerships have March year ends some of the considerations are the same.

We hope you find the contents of this blog useful; you should of course always seek professional advice for your specific needs.  Alastair Wood, AW Accounting – Accountants who “speak your language”

accountants are now seen as the most trusted source of business advice

for UK firms, we consider why you should have an accountant and how to choose one.

A qualified accountant is an experienced professional and will be able to act as your finance specialist allowing you to concentrate on spending your time running the business.  From a business perspective they can assist in making the most of the information you have whether interpreting existing information or planning where to go next.  They will also be able to make efficient use of your resources so that you do not end up with a bookkeeper doing lots of work to complete VAT Returns yet miss out on the advantages of producing meaningful management accounts for little extra effort.

Due to the number of businesses that accountants come across whether clients or trade contacts, they are also sources of information on company structuring, personnel matters and financial implications of contracts.  They may well also be able to help you find business services from recommended suppliers.

However the bread and butter of the accountants work is tied up in compliance services for businesses and individuals to comply with government tax rules and cover:

• Preparation of accounts
• Preparation of corporation tax or partnership tax returns
• Individuals tax returns
• Payroll services
• Bookkeeping and VAT services
• Dealing with HMRC investigations
• Company formation

Larger and more specialist firms may also be able to deal with

• Auditing
• Specialist tax planning
• Advising on tax treatment in specific areas (eg VAT and property)

How do you set about choosing an accountant?

This decision is a matter of your personal requirements, one of the best ways is by recommendation but you do need to make sure you are fit into the same category as the person who has recommended, the service may be great for them, but not so good for you.  You should always have a meeting or speak on the phone to see if you get on from a business footing, as mentioned earlier there must be a level of trust between adviser and client.  Other areas you can look at and consider are:

• How proactive are they?
• How do they communicate (face to face, telephone, email)?
• What do other clients say about them?
• What do the testimonials on their website  say?
• Do they have newsletters/blogs or information sheets to help out?

The choice is largely personal as I was reminded at a recent event , “people employ people” not businesses.  Whatever choice you make I hope it serves the purpose you want it for.

Alastair Wood – AW Accounting “the accountant who speaks your language”

1. Small claims can be made on line using HM Court Service website, moneyclaim.gov.uk.  There is useful guidance on the HMCS website.
2. There is an excellent flowchart on p11 of the HMCS Guide for debt recovery for Small Businesses
3. Once Judgement has been registered by the court the customer is obliged to pay you, however this is where so many businesses stall and where The Sheriffs Office can come in useful, the following is the process as shown on their website:

If you have a County Court Judgment or Order over £600 (including court costs) or a High Court Judgment or Order up to 6 years old then you have come to the right place. For a court fee of just £50, we will ‘transfer-up’ your judgment to the High Court for Enforcement free of charge.
Our Nationwide team of experienced High Court Enforcement Officers offer the highest collection rates in the country which are monitored by the Ministry of Justice. In 2008 we averaged 96p in £1 on enforceable debts.

Unlike others, we do not send letters warning of our intended visit. A warning often prompts the defendant to abscond or hide/sell any assets they may have.

Our first point of contact is a prompt visit by our High Court Enforcement Officers to the defendant’s premises to seize goods, chattels and other property. These can be removed and sold at auction if the defendant fails to pay the sums due. Our extensive powers include the ability to force entry to commercial premises (including shops, warehouses and barns) for the purposes of this seizure.

We are to collect the judgment amount, your court costs, your ‘transfer-up’ fee, interest at 8% and our fees, costs and charges from the defendant. We do not take a percentage of the money that you’re owed as many debt collectors do.

Unlike many of our competitors, all of our High Court Enforcement Officers carry portable Credit/Debit Card Machines allowing easy secure Chip and PIN payment by the defendant. At present, this accounts for 70% all of all payments collected.

We will keep you updated at every stage of the enforcement process, requesting your further instructions if necessary.

Thanks go to the Sheriffs Office for allowing us to use this information, and we hope that this will help you to collect outstanding debts but accept no responsibility if the action is unsuccessful.  Alastair Wood, AW Accounting  – Accountants who “speak your language”

1. If a big contract goes wrong, any liability (aside from any covered by insurance) is down to you personally, there is no limitation of liability
2. You are potentially paying tax on profits which have been retained in the company and you personally have not benefitted from
3. Even if you are drawing all of the profits you are still paying higher tax than as a limited company

While this would almost certainly be benficial for that business it also applies businesses making £20-£30k profits.  A limited company is not necessarily the dream answer however, some of the drawbacks are:

1. It is a more complicated and  structure
2. Consequently it will cost more to run
3. Other obligations include completing a corporation tax return within 12 months of the year end, sending accounts to companies House within 9 months and sending an Annual Return each anniversary of incorporation.
4. Even if you are the only employee you will have to maintain and run a PAYE system, pay any tax quarterly or monthly and submit an annual P35 Return by 19 May
5. There are legal obligations which you have as a director of the company

So how do you go about it?

1. Firstly you will have to decide on a name and see if it available at Companies House, it must be different to any other on the register and the rules are quite stringent on similar names (eg adding UK to a name)
2. For consistency make sure that any web address or trade mark is available if you want them  to be the same as the company name
3. Register the company at Companies House or get a professional such as your accountant to do it for you
4. Register the company for corporation tax and PAYE
5. If turnover is above or expected to be above the VAT limit, register for VAT too.  If you are transferring from an existing company you can retain the VAT number.  In some situations it may be beneficial to register even if you are under the limit
6. Advise all of your customers and suppliers of the name so that official paperwork is all issued in the new name, you may also have to revisit existing contracts
7. Record keeping should be completed regularly so you always know how the company is doing, you may well be doing this anyway as the business has grown

The details above may not include all of the issues you need to consider and you should seek professional advice which is appropriate to your situation before taking any action.

Alastair Wood, AW Accounting  “speaking your language”

Sole trader

This is the simplest way to work for yourself and there has been much discussion in recent months about people reverting back to sole trader status, or setting up as a sole trader in preference due to increasing company tax rates of which more later.  As a sole trader you pay tax on all of the profits you make in the business and for most small owner managed businesses there is tax of 20% and NI of 8% once a profit threshold of £6.5k and £5.7k respectively has been reached.  However once profits exceed £43k you become subject to higher rate tax at 40% on the excess although NI is then only 1%.  The NI rate is increasing by 0.5% in 2010/11 and a further 0.5% in the following year.  In addition to this you also have to pay an NI “stamp” of £2.40 per week.  This type of business is relatively simple to administer and a tax return is completed as a part of an individuals annual self assessment return.  The business is linked to the individual and they are personally responsible for any debts of the business.

Limited company

To take yourself one step away from this liability a limited company is an entity in its own right and any contracts are with the company not the owners (shareholders) or managers (directors), although they do have other responsibilities in statute.  A company is registered with Companies House and must send in accounts every year and also complete a tax return annually for submission to HMRC.  The company is taxed at 21% on all of its profits and this rate will not increase as expected next tax year (2010/11), and it is for this reason and the NI increases that I consider the pendulum is not swinging back to sole trader status as much as expected.  The people who work for the business are employees and are paid a salary, the shareholders however can be paid by way of salary and also dividend.  As the name implies shareholders hold shares and the percentage of ownership is then fixed, it is this percentage that defines the proportion of a dividend that they receive.  A dividend is paid to the shareholders as a payment for their investment in the business and this area should be considered carefully before setting up.

Partnerships

A simple partnership if effectively two or more sole traders working together sharing the profits of the business, however each one is liable for all of the business debts.  In recent years Limited liability partnerships have become available which are separate entities from the partners (called members) and allow limited liability similarly to limited companies.  For both types of partnership, the profits of the business are shared in line with a partnership agreement which should be written but may just be verbal.  This allows more flexibility than a company where the dividend is fixed by the number of shares held.  In a partnership the agreement can use different criteria (such as sales made) to split the profits between partners.  This is therefore a more flexible option.

This is only a brief summary of some of the differences between the options available which may help you to decide which is the best option for you, or indeed a pointer to ask more questions before setting up.  You should seek professional advice before proceeding but whatever you decide to do I hope you business is a great success.