Our standard optical character recognition software uses Able2Extract, and then it uses the running total on the bank statement to check the correctness of the scanning. If there are any errors, then it is able to correct them automatically in a number of steps, highlighting the corrections made so that a human supervisor can check them. Sometimes scanning conditions are poor, so we display the scanned results to the human operator before the correction, and we rely upon the fact that humans are good at pattern recognition, and can make changes before the running total check.
Archives for May 2017
It is quite common to invoice a customer with terms of “30 days or net monthly account”. Small customers will be expected to pay within 30 days, while large customers will be expected to pay at the end of the month following the month of the invoice, so an invoice sent in April 2017 would be settled by 31 May 2017. Large companies do it this way because they may receive several invoices from a supplier, and will want to settle all of them with one payment when they do their computerised cheque run. It would therefore be a good idea for the supplier to have sent a statement at the start of May listing all outstanding invoices. Typically the cheque run would be about the 25th of May. If you give credit and have debts to collect, then you might like to have a discussion with us. Most accountants are also general business advisers as well.
We now have our activities colour-coded in a distinctive way. Anything to do with VAT is green, like the old form VAT100. Payroll is yellow, like the old payslip booklet P30BC. Companies and corporation tax are blue, like the second version of the CT600 or the general colour-cast of the Companies House website. This leaves red for sole traders and sometimes gold for partnerships.
Value Added Tax returns for the quarter ended 30 April 2017 are due to be submitted by 7 June 2017, and any payment which is due should be made electronically by the same date.
If you will be a new student in September, then the deadline for a student loan application is the end of May if you want the application to be processed on time by the start of September.
The deadline for second year students may be a bit later.
We are going to introduce our own bookkeeping system which will integrate with our other operations. This is intended to be the simplest possible system one can imagine. It will have pages at the front to record cash transactions, with the left-hand page for income and the right-hand page for expenditure. The user will be encouraged to enter transactions in columns, which makes it easier to transfer it to our software. After we get the books, we will enter cash transactions in columnwise fashion. We enter all the numbers first, which will generate “datepoints” to make it easy to enter all the dates second. Then the narratives are entered third, but after a few narratives have been typed in longhand, the autocomplete system will kick in to help out. After a few more narratives, we can run a Narrative Prediction routine to guess the rest, and then we only need to overtype the guesses that are wrong, still with autocomplete to help out. This is almost as good as having an optical character recognition system which can read handwriting. Many clients won’t have more than just a few cash transactions.
Small private companies with a year end of 31 August 2016 and into their second or later year of existence should submit their accounts to Companies House by 31 May 2017 in order to avoid a Late Filing Penalty.
Employees should be issued with form P60 by 31 May 2017. Please impress upon them the importance of keeping a copy of this form, perhaps along with the last payslip as a backup document. This is assuming that the last payslip shows cumulative pay and tax in agreement with the P60.
If employees have children going to university for the first time, then the deadline for student loan applications is also the end of May. They may appreciate it if you give them the P60 straight away if you haven’t done it already.
Since corporation tax is often in the news, we will say a few words about what it is. Corporation tax is a tax levied on companies and associations. We will start by saying how and why it is levied on associations.
Let’s say a social club has a thousand members. The law regards this as an association of a thousand people, something like a partnership, but not as a separate legal person. If somebody sues the club, then they are suing all the members, and indeed they can pursue every last member if the court awards compensation to them, and if the valuation placed on the club itself is insufficient.
However, if the club makes a profit while in competition with a publican running a public house, then both the club and the publican will need to pay tax. The publican just pays income tax. In the case of the social club, the Revenue do not send out a thousand tax demands, but instead they make the club pay another type of tax called corporation tax.
A company can also make a profit and have lots of shareholders, so the company is made to pay corporation tax as well. The rules on corporation tax are utterly different from the rules on income tax. The income tax year end is April 5th, but a company can choose its own year end. Income tax often has to be paid up front, while most small companies don’t pay corporation tax until nine months after the year end. Income tax payers get a personal allowance, but companies do not. On the other hand, income tax payers must also pay National Insurance, often as merely an additional tax, while companies do not.
If a company is left with profits after tax, then it can distribute some of these profits to its shareholders as a “dividend”. These dividends need to be included in the shareholder’s personal tax return, and are subject to another tax called dividend tax.
A company can also pay a salary to its directors, or make pension contributions on their behalf. Deciding the best mixture of salary, dividend, pension and other forms of reward is usually done under advice from the company’s accountant.
This offers scope for optimisation as an accountant like me would put it, or manipulation as a politician would put it. Big companies can employ an army of accountants and tax advisers to work out how to minimise their tax bill while rewarding their staff and shareholders. In some cases the accountants are so successful that the company ends up paying nothing.
We can apply the “coffee shop rule”. This says that if I buy a cup of coffee in a local family-run independent shop, and I buy the same cup in the branch of a multinational chain, then the tax-take per cup should be roughly the same. If it isn’t, then I would be inclined to blame the Revenue for their failure to collect taxes, although their hands can be tied by European Union law (shortly to disappear). I have to declare an interest here, because I might want to produce accounting software in competition with multinationals.
Politicians like to moralise about fair taxes, though they rarely tell us what a fair expense claim looks like. Actually all we have is the letter of the law, and moralisations are just pointless because six hundred MPs could have voted for that law for six hundred different motives. Year on year, the letter of the law tends to become ever longer, so the tax manuals that accountants work with become ever thicker. This actually means that society becomes more and more beholden to accountants over time, which isn’t a healthy situation.
Sometimes when you are an employer, you might have happened to have made no wage or salary payments at all for a PAYE month such as the month from 6 April to 5 May 2017, in which case you must submit electronically an Employer Payment Summary as a NIL return by 19 May. This is too easy to overlook.
If you engage a local accountant and business adviser or a payroll bureau to do your wages, then this will be taken care of. In our case we keep a diary and do a batch of payrolls at about the same time each month. Our payroll files are bright yellow like the P30BC booklet so we do not overlook them.