Annual Returns

Sole traders and small business owners working from a home-based office actually have a lot more pressure put on them when compared to doing a paid job working from an employers office space.

While the majority of people imagine that being your own boss comes with a lot of freedom, but in most cases the opposite is true.

You may think that every solo entrepreneur or small business owner can sit around all day in their pyjamas, drinking coffee and having the TV on in the background while they work from a laptop.

This image may seem really appealing, especially if you have to face the daily grind of commuting to an office every day, sitting in slow moving traffic, feeling uncomfortable sitting at your desk all day while wearing a suit, tie and tight shoes.

However, there are a lot of things that you can take for granted in your employed job that a small business owner must factor in. We are talking here about time-consuming, yet very important tasks, such as emptying your office waste bin, keeping your office environment clean and free from dust that can seriously affect the inner workings of your electronic equipment, and more....

More responsibilities than you think!

But it is not only the added tasks of a bit of office cleaning that you will need to take care of – the security of your home office will also fall squarely onto your shoulders.

An employer will provide their workers with a safe environment to work within and this includes having Health & Safety policies in place to keep staff physically safe and free from injury, but also Data Protection procedures that prevent sensitive data breaches and company information falling into criminal hands.

Working for an employer will also mean that your boss will be the one paying out for security staff, CCTV, security access points, fire alarm systems and equipment, smart locks and physical window and door locks.

Just because you run your business from your home office doesn't mean that you don't need to have security measures in place to protect your customer information and business data to remain compliant with the current Data Protection Act.

However, there are a lot of steps you can take to help automate your home office and free up your time from your day-to-day administrative tasks that are essential to the success of your business.

How to utilise digital assistants in your office

With the introduction of digital assistants in the form of Amazon's Alexa and others, we have been able to revolutionise our homes. Digital assistants have fundamentally changed the way a growing number of us interact with our digital devices.

Voice-activated AI technology is growing more versatile by the day. We are now seeing Alexa and other digital assistants being able to take on many different tasks in the day-to-day operation of our small businesses.

Setting up Alexa or an Echo-dot in your home office can immediately start to pay for itself through automating task such as scheduling your diary, conferencing calls, running productivity tools to keep you focussed on your work, organising your to-do lists, and delivering data.

Here are just three useful examples of how using a digital assistant can save you time and effort:

Automate your conference call schedule:

You can use a conferencing managing tool to sync with Google Calendar. This will help to remind you of your next conference call and will automatically connect your call without you needing to dial the number. You would simply need to say out loud: "Alexa, tell Conference Manager to start my conference call."

Organise your travel with email assistant:

If your home business involves visiting clients, then you can sync Alexa with an email assistant tool. This handy tool will parse your email inbox to find and read back travel confirmations, so if you want a quick rundown about your car rental, hotel booking or flight details, you will get the information you need without needing to physically check your emails for the information. You would simply need to say: "Alexa, ask Email Assistant what time is my hotel check-in."

Get up to date web analytics:

As well as delivering current news and curated data, your digital assistant can also give you real-time website data. Alexa offers web analytic tools that can sync with Google Analytics to deliver you fresh, real-time updates on your website data, such as visitor numbers and web traffic.

There are new skills being added by the day to digital assistants such as Alexa and Google Assistant. It is worth keeping up with the latest releases and useful tools that can help free up your time and keep on top of your office based tasks.

Automating your business bookkeeping and accounting

Balancing your books and keeping track of your business expenses can be an incredibly tedious job for most small business owners. Rather than sitting and pouring over your business bookkeeping and accounts for hours each week or month, you can look at automating these essential, yet quite boring tasks.

By using an online bookkeeping and accounting service, such as Quickbooks for example, you can transform how you do your company accounts.

Many sole traders will start out simple and use free tools and easy systems to get them off the ground and the money rolling in. This can involve creating a simple invoice in Word and sending this to your customers at the end of each month, or on the completion of your work project.

A physical paper-based cash book would then be used to note down all income and outgoings, along with petty cash and recording of business-related receipts.

Instead, by automating your bookkeeping and accounts through an online service, you can save yourself a lot of time and effort. Your accounting service will sync with your business bank account and any merchant trading accounts you have. Every time you make a business transaction it will be recorded. You can scan in physical receipts for petty cash and non-electronic spending.

What is also a major time-saver with online accounting software is that you can create and send invoices in seconds. These will be logged and tracked and you will be sent an automatic reminder of any late payments and outstanding invoice details.

You will be able to see at a glance how much you are owed, how much you have spent and know instantly the state of your business cash flow. This is so much better than having to work out all of your figures by hand.

Automating your Annual Reporting

As a sole trader or small business owner, you will need to complete and submit your annual tax return based on your income and expenditure for each tax year. You can prepare and submit these easily by yourself by using an online accounting solution, such as Quickbooks or a similar option.

As a sole trader, you will need to pay tax according to your income tax band. You will also need to pay either Class 2 or Class 4 National Insurance contributions, depending on your total business profits. Again, your tax and NI contributions can be automatically worked out for you using your online accounting solution.

If you are a limited company, you will also be required to complete and file your audited company accounts each year. This is necessary to keep your company compliant with the law, but it will also show you the financial health of your business. Your figures will also be used to work out how much corporation tax you will need to pay.

Ideally, you should have your company accounts drawn up by a qualified business accountant. This can be an expensive overhead for a lot of micro-businesses owners, especially if they are used throughout the year to keep checks and balances on your business finances, so using an online accounting system to do all of the legwork for you can make your record keeping as simple as possible.

You can set up your own personal gateway online with HMRC and this portal will allow you pay your self assessment tax bill each year, as well as check on things such as your pension entitlement assessment for when you retire, and details of any benefit payments that you currently receive, such as Tax Credits.

Freeing yourself from your home office

As a business owner working from home, you will have important day-to-day tasks to perform that are essential to keeping your business ticking over. This includes completing menial tasks without becoming distracted or sidetracked.

It can be hard to concentrate on your work if you are worried about what is going on right outside of your home office door. You may have a sick child at home that needs your attention, or you may be trying to work during school holidays and your kids are causing chaos.

Before you know it, you have lost a day's worth of productivity and important business calls have been missed or cut short. Your incoming business mail is piling up and left unopened, and your emails are stacking up in your inbox, but you are unable to work through them because you are struggling to juggle with so many other office tasks.

You can take steps to free yourself from your everyday office tasks and be there for your family whenever they need you. It is possible to escape your home office to take care of family matters knowing that while you are absent all of your important business telephone calls are still being answered promptly, professionally and in a friendly manner.

Now would be a perfect time to make use of very flexible and cost-effective virtual office services, such as those offered by Capital Office, London.

Whether you want to have your business phone calls covered when you need to concentrate on work, meet with important clients, or simply spend time looking after a family member when they are sick, you can use our unlimited business call answering service or you can go the whole hog and have our complete virtual office services at your fingertips when you need a little extra help.

By using virtual office services to free you from your every day time-consuming administrative tasks you can focus your time and energy on other more important things, such as getting a work project completed to meet an impending deadline, meeting with customers or potential new B2B partners or trade suppliers.

Capital Office, London is here to help you if you are struggling to run your own business from home or find your everyday business admin tasks are becoming a little overwhelming. You can find out more about the benefits of using an unlimited call answering service and how it can set you free from being tied to your home office telephone. Or you can discover how using a complete virtual office can actually be good for you and your business if you are a sole trader.

A new study by FreeAgent has shown that around 20% or one-fifth of micro businesses have no idea about the government’s Making Tax Digital scheme, despite the government publishing further information about the plan at the end of January.

Lack of information

According to the research, some 84% of respondents thought that the government had not provided enough information about either the digital tax plans or how this new legislation would affect business owners around the UK. But on the positive side, 41% said they were aware of the plans and that they felt positive about them. A further 27% thought that the legislation would make running a business easier than before.

Changing tax system

According to Ed Molyneux, CEO and co-founder of FreeAgent, the Making Tax Digital scheme will see one of the biggest changes to the UK’s tax system for generations. Businesses could also see the start of the changes as early as next year.

Yet despite positive responses from some micro-businesses, it is also clear that others have little idea about what the scheme involves. And even those who are aware of it don’t fully understand how it will affect their business. He went on to add that the Making Tax Digital scheme is a great way for businesses to gain clarity over their financial position as well as being better equipped to calculate and pay tax bills.

For the micro-businesses surveyed who did know about the scheme, there was generally a positive attitude to the changes with only a small number saying that they felt the changes would make things harder. But FreeAgent also urges the government to keep these businesses up to date with the changes and ensure they were fully aware when the changes are implemented.

The scheme

The scheme was announced in the March Budget in 2015 but the 2017 Budget saw the government give small businesses another year to institute the changes. It will involve keeping digital records and sending HMRC quarterly updates with every business having their own personalised digital tax account.

What does Making Tax Digital for Business really mean?

For SMEs, entrepreneurs and sole traders, there are a few major changes that they need to be aware of that will be introduced over the next few years. Here we take a look at the most relevant changes that are planned to happen:

The end of annual tax returns

The Making Tax Digital (MTD) programme is designed to make the reporting of your business’s financial data to HMRC more straightforward through eliminating the need for an annual tax return. Instead, you will be required to send your financial updates to HMRC digitally via your online tax account on a quarterly basis. Rather than being asked to complete a new tax return four times per year, you will only need to submit financial data online without the need for any complicated paper form filling.

MTD has already begun

The initial consultation period for Making Tax Digital has already ended and we can expect to see the new legislation being announced at some point this year. The new MTD requirements will be operated through your existing digital tax account that you will already have with HMRC.

The MTD pilot scheme has already started with volunteers who have signed up to test the system. We can expect changes and tweaks to the system as their feedback is received. Hopefully this will make the system as user-friendly as possible to take into account those with minimal computer skills.

From July to December 2017, the online digital tax accounts will be able to give taxpayers an overview of their standing and what tax they will be liable for.

In 2018 it is expected that all businesses, landlords and self-employed people that have a turnover above the current VAT registration threshold will be able to start updating HMRC for income tax and NI on a quarterly basis using simple accounting software.

If the roll out continues to be successful, it is then hoped that in 2019 all businesses with a turnover falling between the current minimum threshold and the VAT registration threshold will also start to update HMRC on a quarterly basis too. This will also be done through their accounting software and submitted online.

Possible Software Issues

While it will be necessary to keep HMRC updated with your business finances digitally, HMRC have so far been pretty vague about the details. They will expect you to use a form of accounting software to submit your figures and have said that using spreadsheets is fine as long as the spreadsheet package you use will be able to connect to your digital tax account. This may be possible through some sort of software, but looking ahead it may be easier to simply use a digital accounting software package to compile your figures rather than rely on spreadsheets alone.

Real-Time Tax Information

By going digital, HMRC say that your business tax position will be reported to you in ‘as close to real-time as possible’. This will help to avoid you having to wait until the end of the year before knowing exactly how much tax you have to pay. This can help you to budget and set aside money over the year to pay your tax liabilities without the worry of being landed with a huge tax bill at the end of the year.

At the moment, the threshold for meeting the MTD requirements currently stands at £10,000. However, for those who are exempt because their annual sales fall below this figure, there is an option for them to opt in if they so choose. There are other groups that will be exempt from MTD and these will include charities and those deemed to be 'digitally excluded' for whatever reason.

For someone just starting out in business and wanting to officially register their business with Companies House, there are a few regulatory requirements that you need to apply to your business. One of these requirements is allocating an appropriate SIC code. Every registered UK company must report a SIC code. But what exactly is a SIC code and how does it apply to your business?Firstly, the term SIC code stands for 'Standard Industrial Code'. While SIC codes are important for your business, they are still quite misunderstood by many new business owners.Basically your SIC code is a way to describe and categorise what your business does. It is a system that Companies House use to provide information about the type of business you have and to give a general overview of your business activities. The classification of each company is available for anyone to view on the public record. You will need to know your SIC code for when you submit your Confirmation Statement each year.

SIC Codes Explained

Depending on what your particular business activities are, your company will fall into a certain category. Companies House keep a comprehensive list of possible types of businesses that operate in the UK which are arranged together under similar trade classifications. There are now approaching 100 different SIC code categories to choose from. Your SIC code will be the one that matches or is the closest type of business sector you operate in.Each sector or trade group has a SIC code applied to it, but more detailed classifications are allocated within each group according to their specialisation. So for example, trade group I refers to Transport, Storage and Communication businesses. Obviously this can cover a very wide variety of different businesses under this umbrella, so further individual codes are then assigned according to what they actually do.Each and every registered UK company selects one or more SIC codes that express the nature of their business from an official list of SIC codes provided by Companies House.Lets say you run a heavy haulage freight transport company. Your company would fall under category 49.4 that covers Freight transport by road and removal services. This group includes all land-based freight transport activities other than rail transport. Because your business specifically uses the road network to operate, you would then come under SIC category 49.41 Freight transport by road. This class includes all freight transport operations by road including:

• logging haulage
• stock haulage
• refrigerated haulage
• heavy haulage
• bulk haulage, including haulage in tanker trucks including milk collection at farms
• haulage of automobiles
• transport of waste and waste materials, without collection or disposal
• renting of trucks with driver
• freight transport by man or animal-drawn vehicles

When do I need a SIC code?

SIC codes are something that as a business owner you don't necessarily think about or even have to deal with on a day to day basis. The fact that you actually need to have one is only realised when you are submitting your Confirmation Statement to Companies House when there are any changes to your SIC code(s) that need reporting. A SIC code is also needed to form a new company and to be able to allow you to successfully complete your filing process for your first annual Confirmation Statement should your business undergo any changes.

How do I discover my business's SIC code?

In order to find the correct SIC code to suit your business, you should use the Companies House official SIC code list. You will first need to find out what your actual trade description is before you can find the right SIC code category on the list. There is a condensed PDF version of the SIC code list here.The SIC Code list is divided into different trade groups, and while you can search for your code by entering your trade description, it may take a little bit of digging around to find the most relevant match to suit your business activities. This can be quite difficult to define if you work in a particularly obscure sector, so it may take a while to find the closest possible match if there isn't an exact category that fits.Some of the trade classification categories are very specific and will be quite obvious by its very description,‘Striking of coins’, for example. But other categories are a bit more vague and can cover quite a variety of different activities, 'Other food services', for example would be a category to choose if you cannot find an exact match for your food-related business activities.

Changes to the SIC Code System

The list of SIC codes is ever growing and changing because it aims to be the most comprehensive list of classifications as possible. The most recent major changes came about in January 2008, where a 2007 version of the code was introduced. This means that all 2007 codes have five digits, while the older 2003 revised codes only had four. All Annual Returns made since 1 October 2011 have required a 2007 version of the code.Whether SIC codes will go under any further changes in future is unknown, but as more diverse industry sectors evolve and develop, it is highly likely that SIC codes will undergo some more changes in years to come. In fact, since the original list was created back in 1948, there have been revisions published in 1958, 1968, 1980, 1992, 1997, 2003, and 2007.

How many SIC codes does my company need?

In most cases a business will only need one single SIC code to cover their activities. This may be one that best describes the nature of the business, especially if it involves dealing with just one product or service, such as business accounting or carpet manufacturing etc.There is an option for a company to choose up to four SIC codes should they need to, so if your particular business is quite complex in nature, or you offer varied services that cross different sectors, then a single SIC code will not be able to fully describe what your company does. In this case you can choose more than one code to cover all you bases.

Do I need a SIC code to form a new Company?

As of the 30th June 2016, all new businesses need at least one SIC code to be able to form a company. The SIC code should be chosen that best describes the planned business activities of the new company. Without at least one or more valid SIC Codes, Companies House will reject your formation request. It would save you a lot of time and hassle to plan ahead and sort out your SIC code before you go through your company formation process.

Reporting your SIC Code

If you formed your company after 30th June 2016, your SIC codes need only be included in your Confirmation Statement if they have changed during the year since formation. It can be more common than you think for a change to happen. Should your company expand, change its business sector or offer a more diverse range of services that would require different SIC codes to explain its activities, then Companies House would need to be updated with this information.You will only have to report your SIC codes in your annual Confirmation Statement each year as and when they change. There is no need to report SIC code changes immediately – you can wait until your next annual Confirmation Statement to report them.

An essential concept in the financial management of business is cash flow. Financial analysts explain that cash flow refers to the resources generated by companies in a given period from its operating activities, investing and financing. The indicator is the result of the comparison of the financial inputs and outputs over a financial year.The measure of cash flow represents the ideal solution for companies to identify their value, assess their finances and make decisions for the future.Such measurement is the basic substance of cash flows. It portrays the sources and uses of money in circulation by companies, i.e. where it came from and what was used.The cash flow statement includes three types of activities:

1. Operating activities. This is the main source of cash for companies without considering those practices relating to investment or obtaining financing.

Within this category you have to consider:

• Collection of cash from the sale of goods and services
• Cash payments for the acquisition of goods and services
• Collections and payments made to ensure the operation of your business
• Lost income, be it interest or cash payments.

2. Investing activities. These are the activities that relate to the acquisition or sale of fixed assets.

In this category are:

• Payments and receipts inherent in the sale of machinery, buildings, equipment, and in general all those enduring intangible assets and fixed assets.
• Investments in debt management and loans made by your business.

3. Financing activities. These are the practices associated with the hiring of financial obligations.

In this section you should include:

• Obtaining external financing or any other source provided it is not operating an internal financing source.
• Cash payments for the obligations of your business.
• Disbursements, cash reimbursement or distribution partners of your company.

After analysing all these components, your company should know its liquidity. This means its ability to meet financial commitments and generate immediate cash.

For accountants who are responsible for project formulation, financial statements are the corollary of their work and the culmination of their efforts. For entrepreneurs and managers of businesses, this allows them to take actions and decisions they deem appropriate for the proper conduct of the business.This situation can be summarised in the financial statements, whereby they record the financial results for the integrated management of business that the organisation runs. This information is of interest to various sectors, such as:- The owners and / or shareholders and those fully interested in knowing the results of the economic entity.- The directors and officers are interested in the excellent conduct of the business, to know if you are meeting the objectives established.- Administration: To guarantee the proper administration of the institution in accordance with its goals and objectives.- Supervisors and control bodies: Those that manage audited financial statements give credibility to your financial information.- Government bodies: Interested in the financial statements that are audited by aspects of formality and regulation.- Workers : As a means of feeling security in their employment.- Suppliers and creditors: Because they are interested in liquidity and fairness of the financial statements.- Investors: Because they will be able to analyse, to invest or not to invest in certain types of business.- To the general public: To know whether a particular organisation has a good picture of trade, if there are good services, products and whether they have quality.Under this perspective, the audit of the financial statements involves an examination of the financial statements of its operations holistically, including media, economic, administrative, financial / accounting, legal, environmental etc. An established, well respected company such as thecheapaccountant.co.uk can help with this aspect.Due to the above, the financial audit should not only aim at the verification of the accounting record, but also the detailed examination of the actions of the organisation, areas, processes, licenses, operations, records and support in a responsible manner to be as efficient as possible.In that way a financial audit process requires consideration of, among others, the following:- Understand the organisation, policy, regulations, structure, processes, financial reporting and accounting handbook with your chart of accounts.- Prepare guidelines, programs or questionnaires for an audit and internal control and other working papers, based on the representative account.- Know the computer applications that manage the organisation, especially accounting and finance.- Review the different accounts assigned to the financial statements, considering the accounting, financial, administrative, legal, economic, environmental or otherwise. Determine for each of them, the cause, effect and impact as well.- Translate in technical working papers, supported and objective manner, each of the findings, to be considered in drafting the final review report.With respect to internal control you should:- Evaluate the quality of information systems and media in the accounting process.- Check profiles of who will be able and responsible for handling and recording of accounting functional areas.- Verify proper handling of correspondence and memory of the organisation file.- To verify the existence of control processes that perform the accounting area of dependencies and other sources of accounting information.- Monitor an Improvement Plan,Another insightful blog post produced by Your Virtual Office London.

Yes, annual return and company tax return are two obligations bestowed upon companies which are a legal requirement. In this article we will look meticulously as what is needed and when you need to act upon this.

I have a limited company do I need to be aware of an annual return?

If you run a Limited company you will need to understand the legal requirements that are necessary in order for your company to run legally. An annual return is a legal requirement, this is snap shot of your companies` information, this is required at least once every 12 months and needs to be updated if major changes have taken place. The annual return is a publicly available record and provides Companies House and the public with key information.

Key features of an Annual Return

• Provides a comprehensive view of how the company is set out
• Substantiates who runs the company in the form of directors and shareholders details
• It confirms the registered office address of the company
• It will confirm the secretaries` details if there is one allocated
• Compulsory every 12 months, and are due 28 days from the anniversary of the company incorporation

Do I need to complete a tax return?

If you run a limited company then you are legally required to complete a tax return. It`s a legal requisite from HMRC that facilitates a tax calculation to be performed on the financial figures produced from the companies trading. The director of the company is normally responsible for ensuring the statutory tax return is completed, if this is overlooked the company will amass fines and will ultimately be struck off if the notices are ignored.

How to find out when my tax return date is

You can find out when your tax return date is by using the Web Check system for companies house, this is a free online service and it provides insightful information about any Limited Company including your own. This is different to an annual return; the tax return provides more detailed financial information regarding your company`s financial trading. It is used to determine how much corporation tax is owed. An annual return is required by Companies House; a tax return is required by HMRC and then is submitted to Companies House so that they can list this on the company register for public access.You will need to either type your company name or company number in the search field. You will then be presented with a list of companies, select your company. On the next screen you will see the snap shot information including the accounts due date.

Key features of an Annual Return

• Legal requirement normally every 12 months,
• Your accounts due date can be found online via the Web Check service
• The tax return is for HMRC, need for tax computation to establish if any tax is due

If you found this blog helpful you can read more insightful articles on accountants and taxation here. Your Virtual Office London is a leader in virtual office, accounting and company formations.