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Temporary Summer VAT rules 

The government have made a temporary reduction in VAT for businesses serving families with children over the Summer holidays. This applies to restaurants and cafes, cinemas and theatres, amusement parks and museums, etc. 

For children’s meals and entertainment tickets the VAT rate reduces from 20% to 5% from 25 June to 1 September (odd dates but it’s to include the Scottish school holidays too). 

The rules are complex where these reduced rate sales are bundled with unaffected supplies. 

If you think you may be affected then there is more details here Temporary reduced rate of VAT for children’s meals, tickets and family attractions – GOV.UK or clients can contact us with your questions. 

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MTD. Achievement unlocked 

After years of preparation we have finally completed our first live MTD submissions. We’ve also helped several clients to do their bookkeeping and MTD for the first time. 

As accountants this is the sort of thing that we do all the time but many business owners are scarred by school maths lessons, or are just too busy to know all the rules that we just seem to absorb by osmosis (and years of slogging through exams!). Not to mention a fear of authority in the form of HMRC (they’re usually quite nice individuals, honest) 

Our lovely clients are always very appreciative when we help them out with things in our world but it’s because I try to put myself in their shoes.  

I find doctors and dentists terrifying as it’s all unknown. And potentially painful. Lawyers may feel at home standing in court but I would need to be on my best behaviour, fearful that I might have broken some law that I didn’t know about. And, amongst tradespeople, I am completely inept without my laptop and would have no hope of plastering the perfectly smooth surfaces that I see in my home and elsewhere. I couldn’t even manage a render that looked halfway decent. 

We may not be able to save our small client millions in tax, but we can take away their fears and hassles.  

Our role as accountants isn’t just filling in forms. We are what my kids call a ‘safe space’. A safe space for clients to ask all those questions about tax, money, and business generally. A safe space where they can feel at ease discussing their business, their ambitions, and even their fears.  

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When does a hobby become a business?

Sometimes it may not be clear when a hobby becomes a trade/business. HMRC have put together a helpful list of what they call ‘badges of trade’. None of these are conclusive but, if you meet more than one, it is likely that you have a business and should register as self- employed. 

  1. You intend to make a profit 
  1. Systematic and repeated transactions may indicate that you have a ‘trade’ 
  1. Are you selling something that could only benefit you by being sold rather than something that might give you ‘pride in possession’ such as a beautiful picture you enjoyed personally? 
  1. If your transactions are similar to those of an existing trade, then you may well be trading 
  1. Was the asset repaired, modified or improved to make it more easily saleable or saleable at a greater profit? 
  1. Was the asset sold in the same way as a trading organisation rather than a forced sale to raise cash? 
  1. Was money borrowed to pay for the asset? And was sale of the asset the only way to repay that funding? 
  1. Was the asset bought and sold within a short space of time 
  1. Was the asset purchased rather than an inheritance or gift? 

If it is not clear, then the courts will decide based on the overall impression when they review all these badges. 

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I love you, I love you, I love you … 

I’ve lost track of the number of times I’ve come off a call or received an email and commented ‘that’s one of my favourite clients’.  

And it’s no accident that we have the best clients.  

I used to do it in my first practice too. 

At Minerva Accountants we’re very clear on who we enjoy working with and only select clients who are a good fit. That means that we give them a better service so everybody wins. 

So I encourage you to: 

  1. Identify your ideal client 
  1. Adapt your marketing as if speaking directly to this client  
  1. Triage your existing clients A-D. My D clients may be your A clients or vice versa but it’s usually based on profitability (not fee), how easy they are to work with, and whether you smile when their number comes up on your phone. 
  1. Ask your best clients for referrals  
  1. Deal with your D clients. They may need a price review or a bit of retraining or it may be that they’d be better suited to another accountant so you need to let them go 
  1. Stop scrabbling around for business at any cost and refer to 1 above when deciding whether to take on a new client. 

Don’t settle for what you have, build the business that you first dreamt of. 

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Does that include VAT? 

If you’re selling to businesses then you would normally quote your prices EXCLUDING VAT 

If you’re selling to individuals you would normally quote your prices INCLUDING VAT 

If in doubt then do specify and, if you’re not VAT registered don’t mention VAT at all (I’ve just heard of a startup that was charging VAT even though not VAT registered!) 

You may have seen adverts ‘we’ll pay your VAT’ but this isn’t strictly correct. What they mean is that they’ll give you a discount equivalent to the VAT amount so, if you’re VAT registered, you can still reclaim the VAT on the discounted price. (Although most of these offers are on domestic purchases but you might need a new sofa for the office?) 

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Key metrics for a startup business 

Every business needs to keep a track of their numbers otherwise you end up being a busy fool. With the business trinity of software, bookkeeper and accountant this is relatively easy these days but even accountants can end up being too busy to keep an eye on the numbers that really matter.

Revenue – yes we want to grow this but a ‘million pound’ business can still be less profitable than one a fraction of the size.

Profit by client – how much time does it take to look after each client? Are you charging enough? Are you giving away free services outside the scope of your contract?

Profit by service/product – what is really the most profitable and scalable for you? Standard work carried out by cheaper staff or high value work that can only be done by you?

Cash runway – how many days of expenses will your current cash balance last if no further money comes in? (I was impressed that my son knew this as a freelance theatre tech as I can’t ever remember teaching him!)

Profitability per hour – we can all earn more by working 80 hours a week but this is the one that will keep you on track for a decent work-life balance and is my primary KPI.

Revenue per head – maximise this before adding more heads to your payroll

Average fee – can you increase this by adding extra useful/necessary products or services? 

(I’ve just realised that I’ve used m-dashes but it really is me writing this and not AI!)

ICAEW Business confidence monitor 

UK UK Business Confidence Monitor: National | ICAEW 

SouthWest South West | ICAEW

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Align your VAT quarters with your year end 

It’s not just tidier but it makes year end reconciliations much simpler too as you can tell at a glance if your year end VAT return = the VAT balance on your balance sheet report.

To change the VAT period just log onto your HMRC VAT account and change it there. (Bottom of the page with the business details) 

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When was the last time you worked on your business?

We have a July year end, a legacy from when my children were small and my life revolved around the school year. 

August is my quiet planning time and, with three businesses, there’s a lot to think about. 

It is important to take time out of your business and we run strategic planning days for businesses and accountants for just this purpose. It’s now time to take some of my own medicine. 

When do you take time to plan? 

(Our next group strategy days are in Sep, Dec, Jan, Feb, and Mar or we can run a bespoke day for your business) 

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Inheritance rates and bands 

After my slightly tongue in cheek tax tip last week suggesting that you can avoid inheritance tax (IHT) completely if you trust your beneficiaries enough to hand over everything sooner rather than waiting for your death here are the latest inheritance rates and bands 

  1. Nil-Rate Band (NRB) – The first £325,000 of an estate is normally taxed at 0% 
  1. Residence Nil-Rate Band (RNRB) – An additional £175,000 allowance may apply if a main residence is left to direct descendants (children, grandchildren, etc.). Combining these two bands gives you £500,000 
  1. Married Couples / Civil Partners – Unused NRB and RNRB can generally be transferred to a surviving spouse or civil partner. So the combined tax-free allowance is up to £1,000,000 
  1. Annual Gift Allowance – an individual can give away £3,000 per tax year free of Inheritance Tax. (If you don’t use the exemption in one tax year, you can carry it forward one year only, allowing up to £6,000 to be gifted in some circumstances) 
  1. Marriage / Civil Partnership Gift Allowance – You can make tax-free gifts when someone is getting married or entering a civil partnership: 

£5,000 to your child.  

£2,500 to a grandchild or great-grandchild 

    £1,000 to anyone else 

      1. Other Useful Small Exemptions 

      Small gifts exemption: up to £250 per person per tax year to any number of individuals 

      Normal expenditure out of income: regular gifts from surplus income can be immediately exempt from IHT if they do not reduce your standard of living and are properly documented 

        1. Other lifetime gifts to individuals are usually outside the estate if the donor survives 7 years after making the gift. (Gifts within 7 years may still be taxable, although taper relief can reduce the tax after 3 years) 
        1. Reduced Rate for Charitable Giving – the usual rate for IHT is 40% but this is reduced to 36% if at least 10% of the net estate is left to charity 
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        Xerocon benefits 

        I’ve just spent this week at Xerocon London. So what was the benefit of 3 days out of my business? 

        • listened to all sorts of interesting talks from the best accountants that will help me to improve my business 
        • getting beyond the AI hype to some practical ideas for embedding more AI into Minerva Accountants 
        • hearing about the Xero roadmap and all sorts of new features to help accountants and business owners 
        • chatting to other software companies about how they can help Minerva Accountants and our clients 
        • chatting to other forward thinking accountants from around the world about the issues that we face in our businesses, what works, and what doesn’t 
        • being invited to speak about accountant/entrepreneur/high performer 4am waking and what we can do to help ourselves 
        • breakfast with the Small Business Commissioner (Emma Jones who wrote the foreword to my second book) to discuss the problem with late payments and new legislation that is making its way through parliament 
        • generally relaxing knowing that my business was in safe hands with my fabulous team 

        I now have a head buzzing with ideas on how to improve Minerva Accountants so that we can offer better advice and more efficient services to our clients.