What is a debtor?

At it’s most basic, a debtor is a party that owes money to another party. Who that party is can vary dramatically? It can be a single person, it can be a small business, it can be a big business, it can even be a government. If money is owed, the party owing that money is known as the debtor – they have the debt. Money is loaned, usually in a lump sum. Repayments are then made over a pre-determined period of time until the loan is paid off. Usually, in addition to the value of the loan, there will be interest in addition. This is where the incentive comes to loan money: the interest can be considered profit on the transaction. It’s quite possible to be a debtor and to have debtors at the same time, particularly as a small business.

What is a creditor?

A creditor is the party who has loaned the money to the debtor. It doesn’t have to be cash: a loan can comprise anything that has perceived or practical value, for example, stocks, or equipment. Creditors are generally comprised of banks, building societies, and other financial institutions. However, there is a rising trend for alternatives, such as peer-to-peer lending. There may be other businesses or even government institutions that might lend to businesses. The term “creditor” is not exclusive to any one particular field or institution. It’s very possible that you, as a  small business, might find yourself being the creditor to a debtor.

Pro and cons of Debtors & Creditors

Products and services may often be prohibitively expensive to pay for up front, or in one lump sum. Financing allows an individual or business to have use of the asset while paying for it in more manageable installments – often weekly, monthly, or sometimes quarterly. The benefit for the debtor is that they get access to funds or equipment that would otherwise be beyond them. This allows them to continue to build their business, so in some sense, the loan could be considered an investment in a business’ own ability to grow. The drawback is that a debt is considered a business liability, and non-payment may result in further penalties and potentially even legal action. The benefit for the creditor is that to be able to make a loan is the sign of a healthy and thriving business. There is also profit to be made in the form of interest paid on every loan repayment – so the ultimate amount paid back will be more than what was borrowed. The drawback is there is potential for non-payment, forcing the creditor to pursue potentially expensive legal proceedings to get what they’re owed.

Clear House Accountants recognize the hard work involved in understanding the various accounting and business terminologies involved in running a business. We have worked hard to create highly effective and concise guides and systems which will make this process easy for you, thereby helping you to understand complicated processes faster, enabling you to run and grow your business effectively. If you are looking for any advice or are stuck at some point in your business, please do not hesitate to contact us.

In the new Simple Assessment procedure HMRC is going to use the data they received from other sources to decrease the number of individuals that must submit a Tax Return:

• State pensioners who are new with income beyond the personal allowance threshold will have been taken off the Self-Assessment system from September 2017.
• PAYE taxpayers that have paid less tax than required which cannot be collected using their PAYE tax code will also be taken off from the Self-Assessment system.
• State pensioners who provide a tax return because their state pension is higher than their personal allowance will be taken off from Self-Assessment in 2018/19 tax year.

HMRC will analyze the data that they hold to automatically compute any tax owed:

• HMRC would have started writing to taxpayers using a P800 or PA302 with the tax calculations from 2017 onwards.
• Taxpayers should check and make sure that the data is correct and pay the required tax to HMRC. A good accountantcan be used if you think the calculation looks incorrect and any tax must be paid. A taxpayer will have 60 days to communicate with HMRC if they believe some of the data is incorrect.
• If HMRC fails to correct the information, the taxpayer has 30 days to make an appeal.

Simple Assessment will presently be used only in the simplest of situations but will be released for more complex cases together with the planned improvements to the personal tax account.

HMRC has recently written to the treasury and pointed out that if child benefits are being claimed by high earners, the partner who is earning a smaller amount in the household could be missing out on national insurance credits which would mean that they are reducing their statement pension entitlement.

It was confirmed that the government was warned a number of times already that within families where one individual is an earner and the other a non-earner if the earner claims child benefit, the non-earner loses their national insurance credit which in turn means access to their full future state pension.

Parents who are unsure about their position regarding this should speak to an accountant in London or a good tax specialist. The identification of this will mean no nasty surprises in the future.

Clear House are specialist Accountants in London who create smart accounting and tax solutions for businesses, sole-traders and partners. If you have any queries of a specialist or a generalist nature, do not hesitate to contact us.

If you are affected by this charge and have not already settled with HMRC by reaching a settlement agreement, HMRC will be applying the loan charge on you.

HMRC has also flagged a few facts and figures about the taxpayers who will be impacted by this scheme, the facts are:

• Individuals who used loan schemes had double the income of an average taxpayer
• 70% of scheme users, used these for 2 years or more
• On average a scheme user avoided at least 20,000 pounds in tax and national insurance

If you have used a loan scheme at any point and have not settled with HMRC yet, there is still time to settle with HMRC, with added flexible payment options if you are unable to make the tax liability payments due to upfront.

Clear House are specialist London Accountants and Tax planners who can help you if the above applies. The loan charge scheme can be costly and time intensive if not handled properly and can lead to many other issues and investigations from being initiated.

Contact us if you have any concerns about the Loan charge 2019 or if you are stuck with a tax investigation so that we can help you to come up with smart tax solutions to your problems.

“Behind every good business is a great accountant”

How an Accountant can be the key ingredient for your Business Success?

First off, to give you an idea of how an accountant can help save you time and give your business a boost let’s look at what an accountant does. Depending on what your business does you can use an accountant in different ways, however, the key job of an accountant is to manage money and to ensure this is done in the best possible way.

Various UK accountants, Accountants in London and London accountancy firms will have different specialisms, so you can select this according to your need. It is even possible to have a virtual online accountant if your work is remote and getting into the city is tricky.

In general, accountants specialise in the following areas:

• Tax: Tax can be complicated. Fortunately, there are numerous UK accountants and Accountants in London that specialise in sorting out your tax forms for you. Give your brain a rest and let the best accountants in London take your tax worries away.
• Forecasting: Specialist management accountants can work on projections, budgets, and forecasting to ensure that your business can undertake effective planning for the future and come up with achievable goals.
• Financial management: Keeping accurate records, preparing statements for shareholders, and analysing progress to provide appropriate financial actions for your business are all tasks that an accountant can assist your business with.

How an accountant can save you time

Looking after the books yourself can be incredibly time-consuming and can lead to working hours that are well over the normal working week. What’s more, it’s unlikely that you have the expertise to do it properly so the potential for mistakes and miscalculations is high. Doing your accounts, yourself can be complex and there can be hurdles that you come up against that you do not have the financial expertise to handle. With an accountant on board, you can not only give yourself a break, but it can also help to prevent time-consuming mistakes that need to be rectified. (Financial Times confirms how 2018 saw a record rise in bad debt at Listed Companies)

With so much on your plate, it is easy to enter data incorrectly and you can easily fall behind with chasing payments and invoices from clients. An accountant can do all of this for you, ensuring that your documentation is up to date, useful and works in a way that benefits your business. With so many experienced accountants in London, you will be able to find one that can bring your business into the 21st century and get you set up with online software that can record and monitor payments, invoices, and expenses.

How an accountant can save you money

One of the biggest nightmares of any company is the tax. With a complicated tax system, it can be easy to miss deadlines, miscalculate your tax bill and fill out your tax documentation incorrectly. All the above can incur heavy fines and many businesses fall down this trap, losing much-needed money. This could all be avoided with a personal tax accountant on board.

Having your own personal tax accountant for your business will go a long way to save you both time and potentially money. They can keep your books in order, sort out your tax bill and help you to identify tax relief opportunities. Many businesses miss out on costs which can be claimed as expenses against your tax bill, a personal tax accountant can help you to identify these and potentially reduce that dreaded tax bill releasing money for other business opportunities.

Personal tax accountants aren’t the sole reserve of business owners, if you are self-employed or have a complicated tax arrangement it can be a wise choice to take on a personal tax accountant to look after your affairs. A personal tax accountant is responsible for helping you fill out your tax return, ensuring you are making the most of any tax relief and to get all of this done to meet HMRC deadlines. With a personal tax accountant on board, you can rest assured that your tax return is filled in correctly and you can avoid any fines for late or incorrect submissions.

Another innovative way an Accountant in London can help your business is by making sure that your invoicing system is efficient and effective. Many businesses struggle with cash-flow issues as invoices aren’t paid on time, or they don’t have the capacity to chase unpaid bills. Experienced and tech-savvy accountants in London can help set up an invoicing system which automates the process, so the monitoring is done for you and payments can be received in a variety of ways.

How an accountant can improve your growth

Financial planning is the backbone of any successful business, and we’re sure you’ve all heard the stats about the number of businesses that fail in their first year, due to failure to draw up accurate projections, poor business plans and a lack of record keeping. Don’t let this be you by taking all the important step of finding and communicating with the best London accountancy firms and getting experienced accountants in London on your team.

In the UK, accountants not only help businesses with bookkeeping and tax bills, but they can also be a core player in developing your business. Whether it be an online accountant or a face to face meeting with accountants in London, a UK accountant brings financial expertise to your business planning. Let’s explore how an experienced online accountant or accountants in London can improve your growth in more detail.

• 360-degree financial view of your business

With a team of accountants in London on board, you will have someone with complete oversight of the finances of your business. As an individual business owner, this can be a hard thing to do, and it can be easy to get lost in the numbers. With a 360-degree view of your finances, and with up to date financial information, an accountant will be able to give well-informed advice on financial decisions, planning and opportunities for growth.

• Your cash flow will be in good shape

Healthy cash flow can be overlooked in business, and when it falls short it can be disastrous. Proactive accountants in London can provide excellent cash flow solutions for your business and put steps in place to ensure you don’t run into cash flow problems. From having an overhaul of your expenses to sorting out your credit control system, an accountant can get your processes into good shape and make those cash flow issues a thing of the past.

• KPIs can be put in place

Business Intelligence savvy firm of accountants in London will be able to identify what is working in your business, and what brings in the most profits. In this way, an accountant can be pivotal in developing key performance indicators (KPIs) for your business to enable you to make realistic and smart decisions for the future of the company.

• Identify funding opportunities

Being linked with a team of accountants in London can open a world of opportunity for your business. They will know about potential investment decisions that could be of interest to you or have knowledge about short-term business loans and funding grants that could be available to your business. With expert financial advice from an accountant, you can be confident that potential funding opportunities will be identified that could lead to the future growth of your business.

• Contribute to business planning

Investing in an accountant can have some excellent positive effects on your business planning and development. With their financial expertise, they can identify growth solutions such as identifying new markets for your business, benchmarking against competitors and helping you to effectively budget and forecast for the future. Skilled accountants in London can bring a breadth of knowledge to your company, as well as a fresh vision to stagnant business plans.

• Gives you more time

Inevitably, with the bookkeeping and accounts are taken care of and effective systems put in place for managing your finances, selecting a skilled firm of accountants in London will free up your time. As a business owner the workload can sometimes be overwhelming, and by just keeping things afloat you can often miss out on identifying areas for growth and developing your business. With time on your side, you can take the time to reflect on what’s working and what’s not in your business, as well as being able to put your skills to best use in developing your business ideas.

• Support through business changes

If you are planning any changes in your business, such as a restructuring of the company, a merger or potential expansion, having the expertise of a team of accountants in London on your side is essential to ensure that these decisions are financially viable. An accountant can also support with advising on any changes in financial structures that go along with a potential change in the running of your business.

Top 10 reasons you need an accountant for your business

To summarise, here are the top 10 reasons why investing in an accountant is a sound business decision:

1. Tax relief – tax saving opportunities will be identified, and it is highly likely your tax bill will be reduced.
2. Taxes filed correctly – an accountant will be able to work out your taxes accurately so no need to worry about incorrect calculations that could result in a fine.
3. Tax deadlines will be met – fear of missing the tax deadline can become a thing of the past – an accountant will have that all underhand, so you don’t incur any unnecessary fines.
4. Books in order – your books will be in order, data correctly entered, and documentation filed where it needs to be, no need to waste time on mistakes made from negligence or lack of capacity.
5. Effective systems in place – an accountant can make sure systems for invoicing and expenses are efficient and easy to manage to save you time and ensuring payments both in and out are effectively monitored.
6. Healthy cash flow – with a financial expert on board steps will be put in place to make sure your cash flow is kept in a healthy state, ensuring your business avoids difficult monetary situations.
7. Financial expertise – an accountant doesn’t just keep the books in order and sort out the taxes, they can also bring sound financial advice to the table and input this into business planning and decisions.
8. Identify areas for growth – by having a complete view of the business and how it is doing financially your accountant can identify areas that are working well and could be developed further.
9. Identify funding opportunities – with contacts and experience an accountant can help identify potential funding opportunities for your business.
10. Gives you more time – perhaps most importantly, with an accountant on board you are free to do what you do best and make sure your skills are put to optimum use in supporting and developing your business.

What can I be taxed on?

Before getting your head around the amount of tax you owe to the creditor HMRC, you need to get to grips with what income you can be taxed on as not all types of income are taxable, such as certain welfare benefits and specific types of savings and investments. If you have a mirage of different incomes it is a good idea to get a Tax accountant on board to ensure that you get your tax bill right and avoid becoming a debtor to HMRC.

Personal income tax needs to be paid on the following:

1. Employment – if you are employed by someone you should pay your tax automatically and will see the amount deducted on your payslip
2. Profits you make when you are self-employed
3. Money received from rental income
4. Pensions
5. Benefits received from your job such as a company car
6. Some welfare benefits
7. Interest from savings or a trust
8. Income from dividends

The amount of tax you pay depends on the amount of income you have earned. The majority of people will have a personal allowance which is the amount you can earn before paying tax, and if you earn below a certain amount you will not be required to pay tax.

How do you pay income tax?

Working out your personal tax might seem daunting but for most of us, it is all sorted through the Pay As You Earn (PAYE) system. On your pay-slip, you will see your tax contributions as well as your National Insurance payment which are both taken out automatically. The amount you pay is determined by your tax code which informs your employer how much to deduct from your earnings each month.

If you fall into the slightly trickier category – either your finances are a little more complicated (as you are on a high income or have multiple income streams) or you are self-employed you will need to complete your annual self-assessment tax return.

How do I complete the self-assessment tax return?

Working out your personal tax and completing the self-assessment tax return can be a real headache, and the last thing you want is to become a debtor to HMRC. Getting a tax accountant on board to help complete the tax return for you can save you lots of time and effort, as well as helping to prevent receiving unnecessary fines if you complete it wrong or late.

Employing an accountant to help with your self-assessment tax return will not only make sorting out your personal tax much easier, but it can even help save you money in the long run as they can advise you on potential tax relief opportunities. You can also claim the cost of the accountant’s fees as a tax reduction. So, you’ve got nothing to lose.

How do I get tax relief?

Tax relief can be claimed for certain expenses that are incurred as part of your employment. These could be related to costs related to running your business such as utility bills (e.g. internet and electricity bills), staff costs, equipment and travel expenses.

While tax reliefs are there to reduce your tax liability, it can be incredibly complicated to work out your entitlements and many who are self-employed don’t make the most of these benefits. Your personal tax accountant can help you to manoeuvre the tax system and make sure that it works to your advantage.

What are tax credits?

If you are on a low income, then you may be entitled to working tax credits. This is money, provided by the government, that is there to assist working people who are on small incomes. Your eligibility depends on the number of hours you work per week, and the amount that you earn. The basic amount of working tax credit is around £1,960 a year but the amount you receive depends on individual circumstances. Claiming working tax credit can be done via a claim form on the www.gov.uk website.

What to do if you can’t pay your bill to HMRC 

Getting a bill in the post from the creditor HMRC can be a scary thing if you can’t pay it. It is important to not get into the position of a debtor and suffer in silence, there are things that can be done. Make sure you get in touch with HMRC immediately and explain your situation, this can be done through your tax accountant or you can contact them directly. HMRC may give you more time to pay your bill or offer the option of paying in installments to spread out the financial burden.

If you ignore the problem, HMRC may take the money directly from your account, there is also the option that they may take you to court and it is possible that you will incur further charges through fines.

Tax doesn’t have to be taxing

As the well-known saying goes, tax doesn’t have to be taxing. Often, your personal tax contribution will be sorted out by your employer so it is very little you need to do (except for making sure you are on the right tax code). If your situation is a little more complicated (if you are on a high income or are self-employed) it is a good idea to get a personal tax accountant on board so that your self-assessment tax return is filled out accurately and on time. An accountant in London can also make sure that you pay the right amount of tax and that you make the most of any tax relief you are entitled to.

For businesses in London, choosing the right software becomes challenging, due to the myriad of options. Here are the top 10 cloud accounting software’s, which your business can use to handle your finances, we have used these softwares and mention below how each software can add value to your business and how it can enable your accountants to be more proactive towards your business.

1. AccountEdge Pro

You and your Accountants will love AccountEdge Pro because it is one of the most customizable tools available in the market. It can handle complex functions such as reports, time billing, and inventory. Another reason why it is popular among business is due to its extensive double-entry tools. This is not a cloud software but we like mentioning this one due to the vast amount of features it offers its users.

1. Clearbooks

A top-notch software for businesses and their accountants in London, Clearbooks is the perfect tool for small and medium-sized businesses. When it comes to simple accounting, nothing can match the simplicity of this tool. It comes with an organizational dashboard, which integrates with numerous operations of your company. Creating and issuing invoices, tracking and submitting VAT, easily managing CIS while having unlimited access to free email and phone support.

1. FreshBooks

One of the most popular online software for small businesses and their accountants, FreshBooks comes with countless features. Whether you want it to handle business reports, time tracking, expense tracking, or invoicing, you can do it all from its simple user-interface. Also, you can integrate it with third-party services such as Zendesk, MailChimp, WordPress, and PayPay.

1. Kashoo

If you are an accountant who wants a tool which specializes in usability, expense and income management, Kashoo is a great solution. It comes with support for multi-currency, an important feature when your business is global. Thanks to its exceptional customer support, you can solve your problems via social media, phone, live chat, and email.

1. KashFlow

KashFlow is great because you can import data from popular software such as Excel, Sage, and QuickBooks. With its easy-to-use interface, it will take no time in getting used to its features. It allows you to create estimates, automate and record purchases, and import bank transactions.

1. QuickBooks

No list is complete without mentioning QuickBooks, as it is one of the best in the industry. Estimating income taxes for the quarter, automated mileage tracking, and tracking income and expenses are some areas where QuickBooks performs exceptionally.

1. Reach

Every small and medium-sized business owner love Reach, because of its comprehensive features. It has modules for CRM, POS, and accounting, along with the ability to track every operation of your company from a single software.

1. Sage Business Cloud Accounting

A veteran in the world of cloud accountants, Sage Business Cloud Accounting provides great value for its services. Cash flow forecasting, project tracking, invoices, managing VAT, and quotes are some of the many modules available to accountants. Also, it has in-depth guides, to solve any problems you face while using its tools.

1. Xero

Accountants in London can never get enough of Xero, because of its affordable subscription plans. With Xero, you can track inventory, create online reports, make smart lists, and customize reports. At the same time, its excellent online support, you can resolve problems in record time.

1. Zoho Books

Zoho Books is a reliable software for businesses and accountants because of the features it provides are second to none. When it comes to creating transaction forms and records, you get granular control. Some of its other key features are multiple gateways for payment, simple user interface, and time/project tracking.