Below are a list of answers to some of the frequently asked questions we get asked the most (just click on the heading to see the answer). If your question isn’t here, just drop us a message and I’ll get back to you with an answer.
1Are there Approved plans I can only use if all employees are awarded shares or options under them?
Yes. The SAYE option plan and the SIP can only be used if the shares or options under them are to be awarded to all employees except those who have yet to complete a probation period of up to 18 months for a SIP and up to 5 years for a SAYE option.
2I need visibility of all accounting records in one place, what options are available to me?
ABS Accountancy works with various providers of bookkeeping, accounting systems.
From hard wired internally hosted systems, to cloud based systems accessible from anywhere and on any device in the world. We will advise you on practical solutions for your organisation and support its implementation.
- Bookkeeping & reporting
- Tax & VAT Compliance
3My business is planning to buy a car. Can we recover the VAT?
Normally VAT registered businesses cannot reclaim VAT on the purchase, acquisition or importation of motor cars. They are subject to what is known as an input tax block.
The block not only applies to outright purchase but also to any purchase under a hire purchase or similar agreement whereby ownership of the car eventually passes e.g. a lease purchase agreement.
However, VAT may be reclaimable in the following special cases:
- car leasing business;
- pool cars, subject to stringent conditions;
- cars unsuitable for private use, such as marked emergency vehicles;
- Stock for resale by motor dealers and manufacturers;
- Cars acquired for the purposes of a car-related trade (mini cabs, self-drive hire, driving instruction);
- Vehicles not regarded as motor cars:
- ambulances, caravans, prison vans, hearses and other vehicles constructed for
- a specific purpose which does not include the carriage of people;
- those with space only for the driver;
- vehicles with capacity for 12 or more passengers;
- those weighing at least 3 tonnes when unladen;
- vehicles which can carry a payload of at least 1 tonne.
Input tax deduction by the hirer of a leased car under a lease hire agreement is restricted to 50%. The vehicle must be used for business purposes in order to qualify for that 50% recovery.
If you are considering buying a double cab pick-up, car-derived van or combination van, it is worth seeking advice to see if they are excluded from the definition of a car for VAT purposes.
4How can I improve my management information?
First of all, find out what you really need to know – key drivers and performance indicators – and then put in place and develop the system to produce and monitor these on a regular basis.
We can help you to identify the information you need to know and methods of reporting on it – to the very best effect!
5I need to dismiss an employee, what process do I need to follow?
Under the UK legislation, for a dismissal to be fair you need to have a fair reason for dismissal and follow a fair process in dismissing the employee.
The five fair reasons for dismissal are:
- Poor performance
- Contravention of a statutory duty (e.g. expired visa)
- Some other substantial reason (SOSR)
Fair procedure will be slightly different in each of the five scenarios. In a misconduct case you would have to fully investigate the allegations before convening a disciplinary hearing at which the employee is allowed to be accompanied. In a redundancy scenario you must consult with the employees as soon as possible and offer suitable alternative employment if available.
If you are not confident in running these processes it is always best to seek advice or external support.
6What are the Corporation Tax rates
There are two rates of Corporation Tax, depending on the company or organisation’s taxable profits:
- the lower rate – known as the ‘small profits’ rate; and
- the upper rate – known as the ‘full’ rate or ‘main’ rate.
There is also a sliding scale between the lower and upper rates known as ‘Marginal Relief’: if the company or organisation’s profits are over the lower rate but less than the main rate, the effective rate of Corporation Tax it pays rises gradually from the lower rate to the higher rate depending on its taxable profit.
To illustrate the effect of Marginal Relief, where a company has taxable profits of £500,000 in the Financial Year 2012 (and no associated companies – see below), its tax liability is calculated as follows:
£500,000 @ 25% £125,000
minus 1/80 of £1,000,000* (£12,500)
Tax payable £112,500
* £1,000,000 is the difference between the upper limit and the profit.
However, if a company has associated companies, the limits noted above are reduced by dividing them by the number of companies that are associated. Broadly speaking, a company is an ‘associated company’ of another company if one of the two has control of the other, or both are under the control of the same person or persons.
7What does the Tax Premium Insurance cover?
Under the Insurance, subscribing clients will be fully protected and the practice will claim under our own insurance policy for up to £100,000 of professional costs, in the following circumstances:
- A HMRC enquiry into a personal or business tax return
- A HMRC enquiry into any business accounts, including those of sole traders, partnerships and limited companies.
- A dispute with HMRC where additional VAT is being pursued
- A dispute with HMRC where additional PAYE tax or National Insurance Contributions is being pursued
- A dispute with HMRC relating to the tax status of employees or subcontractors
8Do your Accountants talk in English or financial/accounting jargon?
All consultations with our Accountants are ‘jargon free’. They will explain your options in plain language to make all the benefits and implications as clear as possible.