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Tax penalties for limited companies and how to avoid them

Tax penalties for limited companies and how to avoid them
Essential tax compliance for limited companies

Tax penalties for limited companies and how to avoid them

Penalties for late payment

Late payments of taxes incur interest charges at a rate of 7.75%. This applies to various taxes, including corporation tax and income tax. So it’s worth avoiding, not least because of the dent in your cash. No one wants a penalty so let’s help you get it right!

A little note – All companies, including dormant and non-trading entities, are required to submit a confirmation statement at least once a year. This ensures the accuracy of the information that HMRC and Companies House have on record for your company is correct.

Although there is no penalty for late filing, it is mandatory to submit a confirmation statement even if there have been no changes to your company during the review period.

Additionally, you must declare that the planned future activities of the company are lawful. This requirement is applicable to all confirmation statements dated 5 March 2024 onwards.

 

Top Tips to avoid penalties.

Avoiding penalties and ensuring compliance is not just about adhering to deadlines; it involves strategic planning and best practices. Here’s a few top tips:

  1. Accurate record-keeping

Maintaining detailed and accurate financial records is more than a procedural task – it is the backbone of financial responsibility and regulatory compliance for any entity. This record-keeping ensures that financial statements and tax returns are prepared with precision, minimising the risk of inaccuracies that could potentially result in penalties or HMRC compliance enquiries.

  1. Never underestimate the importance of a good bookkeeper

Good attention to financial documentation offers invaluable insights into the business’s financial health, enabling informed decision-making. It also simplifies the process of identifying and putting right discrepancies early.

Get a good bookkeeper and make sure they are licensed and regulated for Anti-Money Laundering – it’s the law, so don’t use an unregistered bookkeeper. If you directly employ a bookkeeper make sure they are trained. Your bookkeeper will know your deadlines and compliance obligations.

  1. Save cash for tax obligations!

Setting aside funds for tax liabilities as they accrue throughout the financial year is a good idea and a must. This methodical approach eliminates the last-minute rush to gather sufficient funds for tax payments, thereby reducing stress and the risk of incurring penalties for late payments.

Additionally, by allocating funds for taxes in advance, individuals and businesses can improve their cashflow management, allowing for a more stable financial outlook.

  1. Use accounting technology – Digital First

The Making Tax Digital (MTD) initiative by HMRC represents a transformative approach to tax filing, mandating a digital-first approach.

Bookkeeping software solutions such as QuickBooks, Xero and Sage are designed to integrate seamlessly with HMRC’s systems, automating the submission of VAT and PAYE returns directly from the software.  Digital accounting helps businesses adhere to regulatory requirements while enhancing their operational efficiency and financial transparency. It will bring peace of mind and you accountants can access your software remotely, saving time and  making your like easier.

  1. Addressing penalties

When companies face penalties for late tax filings or payments, the option to appeal provides a recourse if they can present a valid reason for the delay, such as severe illness or unexpected technical disruptions. But be aware a good accountant will apply for a filing extension if you let them know about illness, bereavement or real technology issues.

Successful appeals hinge on the ability to conclusively demonstrate that the company took all reasonable steps to meet its tax obligations, despite the challenges faced.

Get help

Regular conversations with your accountant are often really helpful for maintaining compliance. Seeking professional help not only facilitates adherence to statutory deadlines but can also enhance your operational efficiency and financial health.

If you need help get in touch with us.

 

Moving your business to the cloud – 4 Myth busting good reasons to do so

We have lots of Xero bookkeeping and accountancy clients from all over the UK and many in East Anglia.

Some clients were already using Xero when we met, and some were not. Some were using spreadsheets or server based systems like Sage 50.

Here are 4 myth busters that will help you decide to move your bookkeeping and accounting to the cloud.

Check out the 4 most common reasons people give for hesitating about moving their bookkeeping to the cloud. We help you see the advantages cloud accounting gives you.

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Number 1 – Cloud what? It doesn’t add anything to what I already have

Running a business can be stressful, and when you add in family responsibilities, falling behind with friends, domestic matters or interests – suddenly time, or the lack of it, comes into sharper focus. If only you could create more time and get more done.

If you are always out on a job, like a plumber, or any business where you go to the customer you’ll find that cloud accounting enables your mobility. You can login and send invoices, add contacts or check payments. You can even take payments on the go, that are fully connected to your accounting software. If you buy items, on the go, you can take a photo with your phone and send the receipt straight to your bookkeeper – Job done, time created.

We estimate that we save 2.5 minutes per bookkeeping transaction, by asking clients to use the Receipt Bank app to send us their bills, receipts and parking tickets. Clients save all the time they used to spend on doing the bookkeeping themselves.

Receipt Bank App with Shaper Accountants

When it comes to needing more family time, cloud bookkeeping comes to the rescue. You can send invoices, bills and receipts for expense claims by phone app while the dinners cooking – leaving you stress free to play with the children and read the bedtime story.

Say hello to your very own Time creating solution

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Number 2 – I can’t learn something new and my staff definitely won’t!

OK, to engage and use cloud business tools and apps you need a few skills and a few items. You need;

  • A smart phone – Apple works best with most business apps. Android is getting better.
  • A laptop, computer or tablet
  • Internet Access
  • Social Media
  • Tip – If you have an office team member to do the bookkeeping or admin – buy an Apple iPod. Download the Receipt Bank App and snap away. It’s cheaper and less contentious than giving someone a phone.

If you have any experience of any of the above, we can teach you how to manage your business on-line with cloud accounting and bookkeeping. Having trained hundreds of clients, we know small, bite sized, learning tips will get you the end result – time creating, efficient, up to date accounts – giving you advantage over your competitors.

Tip – On line you’ll find lots of free training videos for all sorts of cloud accounting software – search on You Tube to see how others can help you.

Say hello to your very own leopards that can change their spots, to get ahead

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Number 3 – Cloud Accounting costs too much

Most cloud bookkeeping products are paid for by a monthly fee, with the flexibility to stop the payments whenever you want, like if your business dries up or you switch to another product. The software updates are included and happen seamlessly. Most server based products are a one off upfront cost plus the cost of periodic updates.

You can free trial most products and add them onto your accounting software – Xero or QuickBooks Online – with ease. That way you create a bespoke solution for your company.

Tip – really have no cash? – There are some free bookkeeping products available, with limited functionality, but they do the job if you have time. In the early days of business, you may well have time or if you have a partner who has time to help you, this isn’t a burden. When you start making profits time will be the one thing money can’t buy you.

Even when cash is tight you will appreciate and value the fact that you never lose a receipt again, that you can snap pictures of business items and your bookkeeper has them in hours. The opportunity for more accurate and timely cash flow forecasting is suddenly an option for all cloud bookkeeping clients.

Say hello to creative business tech solutions that works for you – scale up and down and you have technology on your side – to suit your budget.

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Number 4 – I don’t trust the Internet with my data

Most professional Bookkeepers and Accountants take data security very seriously and we only work with cloud software providers who do the same. Internet banking is now the norm, but when it first came along many didn’t believe it would ever catch on. Sometimes holding out for the tide to turn back, can be a long wait, and while you wait others take your customers and win new ones.

Here’s a few tips to make sure you are secure;

  • Whenever you have the option to set up two step authentication for sign ins, do it. You’ll need a mobile phone for this. Tip – check out Google Authenticator
  • Ask your bookkeeper or accountant if they are registered with the Data Protection Office – or check yourself. That way you know they will treat your data with care.
  • Ask which Institute regulates your bookkeeper or accountant – so you know they have integrity and follow the rules.
  • Check out the software provider’s own attitude to data security too.
  • Have good password habits
  • Keep software up to date. Tip – with cloud based software the updates happen and don’t take your time up.
  • Educate you whole team so they all know the signs of malicious emails and work at protecting your business online.

This is what Xero have to say to reassure customers

This is what Receipt Bank have to say

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 It’s time to get on board, my friend and take a seat

The Internet has revolutionized the way most of you do business, making you ever more connected with the rest of the world – new markets, suppliers and customer, all buying from you, on-line. To gain courage and understanding check out places like Barclay Eagle Labs where Digital Eagles can help you learn about protecting your business from unwanted cyber attention.

Ask Cloud Bookkeepers and Accountants for demos of software and make good use of the many free trials available, have a good look, then leap.

You can call us, Skype us, email or Tweet us for a tea and tech session to help move you forward.

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Follow us on Twitter @ShaperAccounts

What could go wrong with your business

Murphy’s Law is the law of unintended consequences, or more commonly known as, if it can go wrong, it will go wrong.

An example might be, your internet connection will fail when you are doing something that is really important to you – like running a cloud accounting training session, or paying a supplier via online banking or even during an important Skype meeting. We’ve all been there.

Research has shown this is one law that people perceive to be true, whether it is or not.

So, what are the advantages to you, of being a little bit more prepared for those unintended, but inevitable consequences? Well, having a feeling of control helps keep things on track. And having a plan B for those moments is a good idea. So if you run a training course and your internet fails big time, you may well find the power of your iPhone hotspot coming to the rescue.

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In terms of bookkeeping and accounting, what could go wrong?

Well, you could always miss a deadline if you do it all yourself. You could incur a fine or penalty for missing the deadline, and you could find yourself low on cash, or out of cash if you don’t negotiate a payment plan with HMRC. Just one example. You could think everything in the business is rosy, only to find that in real terms your profits are falling as costs creep up and you can’t raise your own prices, or gain enough new business. Being able to mitigate these risks will be a big help to you.

Once you have all your bookkeeping data in your cloud system – QuickBooks online or Xero – you could use some great low-cost apps to extract that data so you can see the wood for the trees.

Analysis going back as far as records allow can be a real eye opener. This week we’ve been pulling data from QBO and Xero into Fathom. This app allows businesses to see trends, growth, cash usage etc – it gives a really good overview of what’s going on. And when trouble strikes the data is available to help mitigate the impact – or, even better,  you could see it coming.

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The way small businesses are run today has changed dramatically in terms of technology. There’s always a business app on the market to help deal with a problem, and if integrates into your workflow and accounting system – even better. Top Tip – Low cost, monthly paid apps can help you be better prepared for trouble.

You can follow us on Twitter @shaperaccountants.co.ukaccounts or check visit our website for cloud accountancy help.