Author: admin

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Tax Tip 

How to take dividends 

I see too many directors helping themselves to company cash and calling it ‘dividends’. But every payment out of the business should be accompanied by some sort of paperwork (or digital equivalent). For dividends you will need: 

  • Review of management accounts and forecast to demonstrate that their will be sufficient funds left in the business to cover future debts (HMRC are particularly keep on this!) otherwise the dividends are illegal 
  • Sufficient post-tax profit to cover the dividends (another reason they may be illegal) 
  • A minute of the board meeting voting for the dividend 
  • A tax voucher for each shareholder. 

We have templates for the last two and we can advise you on whether your bookkeeping is good enough for the first. Hint: if it’s not up to date then it can’t possibly be adequate. 

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That which we call a rose by any other name would smell as sweet. Or would it?

I HATE it when people shorten my name! This isn’t the same as mishearing or misreading it but deliberately abbreviating it. My son, by contrast, hates it when people lengthen his name because they assume that it is a contraction of another common name.

Names are important to us. They are part of our identity.

This is why it is so important to remember people’s names. But what do you do if you have the memory of a flip flop?

A brilliant tip that I picked up is to repeat their name three times.

Beetlejuice. Beetlejuice. Beetlejuice?

This is what I try to do at networking events:

  1. When you are introduced to somebody it is simple to reply with “Nice to meet you Beetlejuice” (or whatever their name is)
  2. Then ask them a question using their name eg “where are you from, Beetlejuice?”
  3. Then introduce them to somebody else eg “Lydia, can I introduce you to Beetlejuice?” (This gets you brownie points for being a good networker too)
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Tax Tip

Director’s responsibilities

Whilst it might feel good to be the director of your own company you have several responsibilities as directors under the Companies Act 2006:

  1. To act within their powers (in the articles of association etc)
  2. To promote the success of the company for the benefit of its members as a whole ie not benefitting one member above the company eg by allowing one director/shareholder to take out more dividends/loans that the company can afford
  3. To exercise independent judgement – you can take advice but must decide for yourself
  4. To exercise reasonable care, skill and diligence eg using a chartered accountant or professional bookkeeper if you don’t have those skills in house
  5. To avoid conflict of interest
  6. Not to accept benefits from third parties
  7. To declare interests in transactions
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How to buy yourself more time

Having taken over a small practice I have been able to see the time saved by good practice management software.

We use Accountancy Manager but any decent practice management software will offer similar services

  1. A simple spreadsheet upload of all client standing data and services so everything is in one place (the PA from the new practice kindly provided this in the form of multiple spreadsheets which we merged)
  2. Engagement letters generated based on the services provided
  3. Engagement letters and accounts signed online
  4. Clients can update any missing information and changes of address in their standing data
  5. Automatic requests for missing data eg proof of ID or a UTR
  6. Recurring tasks set up automatically for each service
  7. Adding our own internal deadlines for tasks eg 3 months for accounts and 2 weeks for VAT returns rather than the 9-10 months and 5 weeks for the statutory deadlines.
  8. Automatic records request emails generated from those tasks and deadlines (all templates can be modified to suit your personal style)
  9. Time recording as the new practice still uses hourly billing
  10. Marking a task as complete automatically sets up the next occurrence
  11. Automatic links to Companies House to keep deadlines etc updated
  12. Generating confirmation statement reminders and submitting from within the software (a small handling charge on top of the Companies House fee)
  13. Tracking emails between clients and team members so they don’t have to CC me on everything
  14. Central repository of all information which helps as all the team are part time and even I am juggling two businesses.

It hasn’t been perfect (I’ll share my learnings/improvements separately) but it has been relatively smooth.

This technology has freed me up to ‘meet and greet’ the new clients as tech is still no replacement for human relationships.

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Tax Tip

Higher income child benefit charge (HICB)

If you are receiving child benefit this may be restricted from £50,000 and withdrawn completely from £60,000. With two cliff edges to avoid here are a few things that you can do to legitimately reduce your income.

  1. Pensions. You (or your company) can pay up to £60,000 per year into your pension. This will save tax but can also reduce your income below the relevant limit. The downside is that this money is tied up until retirement.
  2. Charitable donations. Most people give to charity throughout the year but do take care to giftaid it where you can. These donation can save you tax if you are a higher rate taxpayer and also be used to reduce your income below the relevant limit.
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Why it may be best to stay small

Small is beautiful. It’s also less hassle and much more agile.

As the sole director of my business I can hold my board meetings in the shower and, if I come up with a bright idea, I can often have it implemented by evening.

The downside of a small business is reduced cover for holidays and sickness. Especially if your business is just you. On the other hand even the best team will take up your time in managing their time and workload.

Before growing your business beyond you it is worth considering whether this will best suit your personal goals. Instead of taking on more clients and higher overheads you could look at taking on better clients and providing them with more profitable services. Before recruiting staff you could investigate software and other automation.

Bigger isn’t always best.

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Tax Tip

Dividend paperwork is important.

There should be a board minute each time dividends are approved as well as a tax voucher for each shareholder.

In small owner managed businesses it is common to run a DLA (director’s loan account) throughout the year and to clear it with a single large dividend at the end of the year. With MTD coming in this will need to be done quarterly.

Before declaring any dividend the board must ensure that the company will still be solvent after the dividends have been declared. It is hard to do this without some sort of management accounts or financial review so keep a record of these too.

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More than one tool in your toolbox

When it comes to improving your business you need to have more than one tool in your toolbox.

Although we often start with getting the pricing right we also like to look at other things. My books give you some examples of these but they are broadly:

Efficiencies – implement systems, checklists, automation and delegation

People – get the right people in the right place, suitably trained and equipped, and all pulling in the right direction

Marketing – a baseline level of marketing going on at all times so that you have clients/work already lined up for quieter periods

What else do you do to improve your business?

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Tax Tip

Company cars used to be an expensive perk but electric vehicles are now worth considering. For the 2023/24 tax year the P11D benefit in kind is just 2% of the taxable list price.

This means that you will pay tax on just 2% of the list price of the car.

If you have a penchant for expensive, less environmentally friendly, vehicles you might benefit from operating as a sole trader or a partnership.

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5 minutes a day keeps the accountant at bay

I’m starting an initiative for business owners to do their bookkeeping in FIVE MINUTES PER DAY rather than leaving it all to the end of the year.

If you’re on Xero or similar software this would be:

  1. Raise all your sales invoices and quotes. (Don’t forget to add a button to the invoice template if you take card payments. Remember to set up recurring invoices for regular clients. And don’t forget to turn on invoice reminders)
  2. Mark any accepted quotes so that they can be converted into invoices
  3. Forward electronic receipts to your Automated Bill Entry on Xero or Dext
  4. Take photos of any other receipts using Hubdoc or Dext
  5. Reconcile your bank by matching against the sales invoices or purchase bills/receipts. (You can set up recurring transactions for regular bills)

All this can be done through apps on your phone. When bookkeeping is this simple it’s not just kids who will be glued to their phones.

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