faq
Approve Time Off

If you have chosen to use Xero Payroll to handle your employees time off such as holiday, sickness, maternity leave etc someone will need to approve the Time Off requests so the information filters through to the payroll.

Within your company in Xero we can choose which employees have the ability to approve Time Off.  On submitting a Time Off request the employee can choose the appropriate line manager.  The line manager will then receive an email such as below to notify them about the Time Off request.

Login to Xero and then click on the appropriate Time Off request.  You can see below that until it has been approved or declined it will have a status of Requested.  At this point you could tick the box to the left of the employees name and then Approve to accept the Time Off request.  If you have multiple requests this can be a great time saving option.

If however you wish to check that the employee has sufficient holiday before approving the request then click on the request.  You can then see the Current Time Off Balance to see what accrued holiday the employee has and you can choose to accept or decline the request.

It is very important to note that the current time off balance excludes current approved requests not yet taken and all unprocessed time off.  Please bear this is in mind when deciding whether an employee has sufficient holiday entitlement.  Please check to see how the holiday entitlement is accrued.  If accruing on each pay period which is our preferred method then 1/12 will accrue each month when the payroll is processed.  This needs to be factored in when deciding if the Time Off can be booked.

You can see in the example above that there would be insufficient accrued holiday to take the day in September.  However as the September payroll has not yet been run there will be another 12.5 hours to be accrued during the month taking the balance up to 15 hours at the end of September.

You can see beneath all of the Time Off for that employee and what has already been taken by the Status of Completed and Approved is Time Off approved but not yet taken.

If you are unclear about how the holiday is being accrued you can click on the Holiday figure in the top left to see the screen below.  From this we can see that 150 hours are accrued each year which equates to 12.5 hours per month as we have chosen to accrue the Holiday over each pay period.

Using the Current Time Off Balance of 2.5 hours and adding 12.5 x 4 (number of months left in our holiday year) this employee has 52.5 hours holiday left until the end of the holiday year.  That is of course if they continue to work for the company throughout that period.  Any holiday taken not accrued can be deducted from their final salary payment.

If you wish we can also turn on/off the ability for employees to the accrued YTD entitlement to holiday on their payslips as shown below.  Accrued being the hours accrued in that pay period,  Used being the number of hours taken in the pay period and the Balance shows the YTD Time Off balance.

Once the Time Off request has been approved or declined the employee will receive an email or notification (if using the Xero Me app) as to your decision.

Articles of Association

Articles of Association are required by any company being formed in the UK under Companies Act 2006 and previous Companies Acts.  It sets out how the company is run, governed and owned.  As you can imagine it is quite long written in terms not often understood and bottom of your list of priorities of things to read.  But should it be?

The thing is if you do not know the rules you are playing to how can you ensure you are getting things right?  More importantly how do you know what you can do when things go wrong such as removing a fellow Director who is not pulling their weight.

By default the Companies Act 2006 gives the company unlimited powers.  The articles can put restrictions on the company’s powers – it might therefore be sensible for shareholders to restrict certain powers of Directors or require shareholders agreement.

There are no prescribed format for the Articles of Association but there are provisions that must be contained within it.  In order to make life easier for most companies being formed there are 3 model articles that can be adopted.  This article looks at private company limited by shares.  Copies of the model articles can be found on the HMRC website in full.  Below we have highlighted some of the provisions you will want to read (you would be advised to read the document in full).

  • Shareholders reserve power – Directors can be stopped from doing things but only after a Special Resolution has been passed.  Think long and hard when forming the company about items you may not wish to happen and set them in place first.
  • Directors to take decisions collectively – decisions of the Directors must be by majority so what do you do in the event of a 2 Director company who disagree?
  • Quorum for Directors Meetings
  • Casting Vote – very important if only 2 Directors in the company.  You may wish to consider a third impartial Director to aid the decision making process.
  • Directors discretion to make further rules – as a Shareholder are you happy that the people elected to run the business are free to set rules as they please?  Be wary as to not stifle Directors from performing their duties.
  • Share transfers – the Directors have the right to refuse the registration of a transfer of shares
  • Procedure for declaring dividends
  • Attendance and speaking at General Meetings
  • Quorum for General Meetings
  • No right to inspect accounts and other records

The articles can be amended by a special resolution of the members. If a company changes its articles other than to the model articles a copy of the articles should be sent to Companies House within 15 days of the change for review. A copy of the amending resolution must also be send within 15 days of being passed. You do not need to tell Companies House why you are changing the articles of association.

As stated elsewhere in this posting don’t leave things to chance and read this after the horse has bolted.  Know what is right from the off and what can be done in the event that things do go wrong and be prepared for it.  All Directors should have a good understanding of the constitutional documents of the company to ensure you are working within the constraints of the Articles of Association.  The Articles of Association should be reviewed and updated on a regular basis to ensure the balance between Directors powers and protecting Shareholders interest are maintained.

Bad Debt Processing

If you have a bad debt (i.e. a customer invoice that you know won’t get paid) you can write this off to bad debts in Xero.  This will mean that you won’t have to pay tax on the revenue in the financial year and also means that you can claim back any Output VAT previously paid over to HMRC on the sales invoice (this is only if you are on invoice accounting for VAT).

To process the bad debt in Xero, firstly find the sales invoice within awaiting payments (Accounts>Sales>Awaiting Payment):

So, in this example if we want to recognise invoice 0038 as a bad debt, we will click on this invoice to open it up:

Click on “Invoice Options” and then “Add Credit Note”.  Xero will automatically create a credit for the same amount as the original invoice using the same VAT treatment.  The only thing you will need to change is the account to 495 – bad debts (if you don’t have this account, see below notes on adding a new nominal account):

Once you are happy with the credit note, click “Approve”

This will automatically allocate the credit note to the invoice, so the invoice will no longer show within “Awaiting Payment”.

If you need to create a bad debt account, please follow these steps:

Go to Settings>Chart of Accounts:

Click on “Add Account”

Create an account using the details as below.  If 495 is not available select the next available number in this series.

Click “Save”.

You can then go back to your credit note and choose this new account.

Business Protection

When setting out in business there are a million and one things to consider but one of the things that never fails to surprise us is the lack of consideration given to the decision making process when starting a business with someone else.  Whether it be a partnership or Directors/Shareholders in a Limited company there are many more things to take into account.

On a far too frequent basis we see starry eyed people wrapped up in the ‘interesting’ and ‘sexy’ bits of starting a new venture without paying any attention to what would happen in the event that people fall out, the business doesn’t work out, someone wants to go off in a different direction or one of the Director/Shareholders decides to start a family.

These are all often scenarios but ones that are rarely planned for.  When going into business with someone else you need to tread carefully because whilst you may be best of friends or there is synergy between what you can bring to the table this is not a recipe for success – often quite the opposite.

It sounds doom and gloom but we deal with the consequences of people falling out or things not going to plan on a regular basis.  When you are new to business you have no idea what this means for you or what rights you have which is why it is so important to deal with this at the beginning.  You wouldn’t sign any contract without knowing how/if you can get out of it and what the repercussions are.  So why do it with what could arguably be your biggest asset?

Believe me when I say friends are friends when everyone is pulling in the same direction, things are going well and everyone feels that they are doing and equal amount of work for an equal return.  This is highly unlikely in the real world and you need to be open and honest enough with each other about what will happen in the event that this occurs.  A business relationship is just like a personal relationship and should be treated as such with respect and trust.

Many people have already fallen where you are now walking so as you can imagine there are many safeguards already in place.  Below we have compiled a list of the things you will want to consider when thinking about business protection.  Remember when looking into this options that your business asset may end up being the biggest asset you and your family own so it is imperative for their future safeguarding that you do not ‘come back to this when we are up and running and things are a bit easier’ as they never will be.  It is much harder to put things in place once you are running a successful business and often much more costly – thats if you make it that far.

In most small businesses the Directors and Shareholders are often the same people but it is very important for you to remember that these two roles are different and have different rights and responsibilities attached to them.  Just because you want someone out of the business does not necessarily mean you can make it happen.  If they are not performing their role as a Director what can you do about it?

Finding the perfect partner

The easiest way to deal with this is to ask yourself a series of questions.  If you answer No to any of these questions then perhaps you have a decision to make.

  1. Do you like them personally
  2. Do you have similar backgrounds and beliefs
  3. Are your personal and business goals aligned
  4. Is your exit strategy aligned
  5. Are your skills complimentary
  6. Could you buy in those skills from elsewhere and have the cash available
  7. Are you happy for them to be working on other projects at the same time as yours
  8. Do they have domain expertise you do not possess
  9. Do you genuinely believe they are bringing something to the table that you neither have or can buy in

DISCLAIMER: Nothing written within the Business Protection section of our Knowledgebase is deemed to be provision of advice and we highly recommend seeking the opinion of a solicitor or financial advisor.

Changing Accountants

Changing accountants is much easier than most accountants would have you believe.  Wonder why that is?  As accountants we wanted to let you into this mystery and show you how easy it is to change accountants.  We have detailed below what steps you need to follow to change accountants and what information you need to give to your old and new accountants.

Please think very carefully about the process you are about to embark on and why you are making the decision to change accountants.  Is your new accountant going to cover all of the areas that your old accountant obviously let you down in?  Have you asked your new accountant all of the questions you need to and been honest with them about your issues with your old accountant or business situation?  Most importantly of all if you are changing accountants be wary of the timing i.e. do not move accountants in January unless your personal tax return has been filed.

Accountants Leaving Letter

First of all you must notify your existing accountant of your intention to leave in writing.  Download our Accountants Leaving Letter template.

Professional Clearance Letter

Once you have notified your new accountant that the Accountants Leaving Letter has been sent your new accountant must send a letter to your existing accountant to request professional clearance and request handover of the paperwork and documents they will need in order to carry out the duties they have been engaged for.   Your existing accountant will handover to the new accountant provided there is no professional reason not to.  Most accountants will drag their heels here especially if you have outstanding fees.

Money Laundering Checks

You will be required to provide your new accountant with documentation which will allow them to complete their money laundering checks.  Your accountant should not work for you until the money laundering checks have been carried out.  In a normal situation this will consist of photographic ID and confirmation of address but each accountants internal procedures may vary.

Engagement Letters

Your new accountant should not complete work for you unless they have been engaged to do so and this will take the form of an engagement letter which sets out the basis of both parties responsibilities.  It is important you read these documents before signing as they set out the roles and responsibilities of accountants and customer.

Smart Accountancy Systems New Customer Set Up

All new customers are issued with a Welcome Pack which details the stages to be completed and who is responsible for them.  Using our Practice Management software we will keep you up to date and issue you reminders should we be missing stages.  Within the Welcome Pack you will receive a schedule of services so you can double check our understanding of the jobs you wish us to undertake.  We also provide details on all forms of communication we use so you can sign up to our newsletter and connect with us on the various social media platforms we use.

Should you wish to receive any further information about our services please contact us.

Claiming Mileage in Xero

Below you will find a brief video on how to post your business mileage in Xero and make sure that you claim back the VAT that you are entitled to.

Claiming VAT on Mileage on Xero from Smart Accountancy Systems on Vimeo.

Cross Option Agreement

As the preferred vehicle for shareholder protection insurance the cross option agreement provides the surviving shareholders with the option to buy the deceased business owners share of the business. In addition to the surviving shareholders being able to call their option to buy the shares, the legal representatives of the deceased’s estate also have the option to sell the shares of the deceased business owner to the remaining shareholders.

In either case, whether the remaining business owners want to buy the shares or the legal representatives want to sell, the agreement ensures the option is exercised. The cross option agreement is set up in this manner to ensure there is no binding sale, i.e. in certain circumstance neither party could exercise their option which means business property relief for inheritance tax purposes can be preserved.

In the process of setting up the appropriate business protection it should also involve setting up a cross option agreement with all the directors/partners in the business, enabling the remaining directors or partners to purchase the share of the business from the deceased’s estate.

This agreement in turn provides the dependents with a willing buyer and with cash, instead of shares or an interest in the business ensuring the right people remain in control of the business.

Cycle To Work Scheme

What is Cycle To Work?

The Cycle to work scheme enables employees to obtain a high value bike that they would not be unable to afford if they were to pay the cost up front themselves. The employer/organization pays for the bike and “hires” it out to the employee. The employer claims their hire fee over 12 months from the employee by making deductions from the employee’s gross pay. The amount claimed back from the employee is the entire value of the bike spread over a period of twelve months. The Scheme can be implemented for as little as one member of staff and provides savings for both the business and the employee.

Setting up the scheme.

  • Cycle To Work will set up the scheme for you in partnership with either Cycle Solutions or Halfords (you can choose the best partner for you)
  • They will help promote your scheme to all of your employees.  This is important as the scheme has to be made available to the entire workforce.
  • The employees choose their bike and/or safety equipment up to the value of £1000 (including VAT).
  • The employees sign a hire agreement, with payment coming out of their gross monthly salary – that means they can save up to 47% of the cost through income Tax and National Insurance savings (if you are a higher rate tax payer, or 32% if you are a standard rate tax payer). The employers make a saving on Employer’s NI on the amount of salary sacrificed (at 13.8%).
  • The Bike must be used mainly (more than 50%) for qualifying journeys i.e. between home and work (or part of this travel e.g. travel to the train station).  If this qualifying condition is not met the salary sacrifice cannot be used to save tax and national insurance.
  • The bike and/or safety equipment can either be delivered to or collected by the employee.

End of the scheme options

  • If the employee does not want to keep their bike and equipment then it can be arranged for the goods to be returned or collected.
  • If the employee does want to keep ther bike and equipment and they don’t want to minimise their expenses the employee can pay the market value of the bike and equipment. ( Ususally 18%-25% of the original price).  This must be market value to avoid a benefit in kind arising on the transfer.
  • If your employee does want to keep their bike and equipment and they do want to minimise their expenses then the employee can carry on with the scheme with Cycle Solutions for a small refundable deposit of 3%-7%. They will have no further payments. 36 months after this Cycle Solutions will contact your employee to see if they want to keep their bike and equipment. If they don’t then they can send their bike and equipment to Cycle Solutions and they will refund their deposit. If they do want to keep their bike and equipment then they will get a receipt from Cycle Solutions and Cycle Solutions will keep their deposit.

If you decide to set up a cycle to work scheme and your employees hire a bike through the scheme, please let our payroll team know in order that we can set up the salary sacrifice over the 12 month period.

Does Auto-Enrolment Pension Apply to Family Companies?

Where auto-enrolment applies it is not optional.  An employer must enrol all of its employees.into its workplace pension.  Employees that are eligible are allowed to voluntarily opt out.  Employers including small family companies must assess the workforce regularly as those eligible can change and this can be a time consuming arduous task.  There are some exceptions:

Sole Director Company

If you are a sole director of a company and do not have any other employees then auto-enrolment does not apply.  If The Pensions Regulator has contacted your business about auto-enrolment complete an online form to notify them that your business is outside the scope of auto-enrolment.

Husband and Wife Companies

The situation for husband and wives is slightly more complicated.

  • if you are both Directors and neither have a contract of employment then auto-enrolment does not apply.  Likewise if you are both Directors and only one of you has a contract of employment then auto-enrolment still does not apply.
  • if one of you is a Director and the other an employee then auto-enrolment would apply to just the employee
  • if the Director also has a contract of employment then auto-enrolment would apply to the Director also

Larger Family Companies

The situation is similar to that of the husband and wife company.  Your business may be made up of Directors or a mixture of Directors and employees.  The defining factor is whether employment contracts are in place.  If they are then auto-enrolment applies.

All Companies

As a general rule of thumb a company has only one Director with an employment contract, sometimes called a service contract, auto-enrolment doesn’t apply. Conversely, where two or more Directors have contracts, auto-enrolment applies and you must decide if those Directors with contracts are eligible to be included in your workplace pension.

If your company has employees who are not directors auto-enrolment will always apply regardless of whether or not they have contracts.

If everyone is a Director and the company wishes to avoid auto-enrolment, consider whether you can dispose of employment contracts that exist.

Summary

The position for family companies depends on whether the company has employees that are not Directors.  If it does then auto-enrolment will apply.  If it has Directors and no employees then auto-enrolment will only apply where there are two or more of them with employment contracts.  Sole Director companies aren’t affected by auto-enrolment.

Disclaimer

The information contained in this article is intended solely to provide general guidance on matters of interest for the personal use of the reader, who accepts full responsibility for its use. The application and impact of laws can vary widely based on the specific facts involved. Given the changing nature of laws, rules and regulations, and the inherent hazards of electronic communication, there may be delays, omissions or inaccuracies in information contained in this article. Accordingly, the information on this article is provided with the understanding that the authors and publishers are not herein engaged in rendering legal, accounting, tax, or other professional advice or services. As such, it should not be used as a substitute for consultation with professional accounting, tax, legal or other competent advisers. Before making any decision or taking any action, you should consult a professional adviser.

Envelopes

With Receipt Bank you can choose to send in your purchase invoices and receipts via snail mail.  This means you can pop your items in an envelope and relax while Receipt Bank scan and extract the data.

Envelopes are sent out on the first Wednesday of the month so don’t get into a blind panic if you have not received one it might be on its way.  If you wish to send in documents more than once a month then you can do so by using a Freepost address provided.  The details are specific to your account so please feel free to contact us should you have some items you wish to get processed urgently.

HMRC PAYE and NI Payments

When a payroll has been created using Xero Payroll it automatically posts the entries into your accounting ledgers for you.  Whilst many people preferred the Pay Run option where it would create a Bill to allocate the payments against this was not good practice.  As the employee net payments were created as Bills anyone with access to the system could for example see how much each employee was being paid for example.

This does mean however that using Xero Payroll has meant a change in process for dealing with the PAYE/NI Payments that you would have previously been able to allocate to the outstanding Bill.

The default PAYE/NI Control account which is where the payments due to HMRC are posted is 825 – PAYE Payable.  This is where you need to post the PAYE/NI payments made to HMRC.  From the bank you can create a transaction per the below screen.

As Xero is intuitive it will learn the posting applied and it will prompt you with this suggestion after a couple of months.  If you want something more robust that will just require clicking ‘OK’ then why not try setting up a Bank Rule which each time something comes through the bank which meet your set criteria Xero will process per your instructions.  The video below explains this in more detail and we have included a screen shot below of how your rule may look.  Once you have mastered this you will be apply to apply this logic to other bank payments and receipts.

Creating Bank Rules from Xero on Vimeo.

Is Tax Payable on Festive Gifts?

Is tax payable on festive gifts

The holidays are coming, the holidays are coming, tis’ the season……..to get caught with your pants down.  We all love Christmas and the giving of gifts to the team and loyal customers but what are the tax consequences of doing so?  We don’t want to be the Grinch but below are some key considerations to take into account before flashing the cash.

Cash

A cash gift paid to a business you would expect to be treated as income and therefore be taxable.  Whilst this is the case for cash gifts from an accounting point of view it does not always follow that it is taxable.  If the business can reasonably assume the payment is a gift it isn’t taxable even if it comes from a customer.

Where the cash gift is passed on to Directors or employees you must consider whether the benefit in kind rules come into play or it might be taxed as salary.  A cash gift passed on to employees or Directors counts as employment income and is liable to tax and NI.  If you use the money to buy gifts for employees the benefit in kind rules apply meaning no employee NI to be paid.

Non-cash

Gifts of goods or services from third parties can be taken tax and NI free by Directors and Employees provided certain conditions are met:

  1. The gift came from a 3rd party
  2. Your business or anyone connected with it did not acquire the gift (customers don’t count as a connection in this regard)
  3. The gift isn’t a reward for specific services provided in the course of doing your job
  4. The gift is not cash or use of services of the donor
  5. The cost of all gifts from the donor to the same person does not amount to more than £250 in the same tax year

There is a separate tax and NI exemption for gifts from third parties in the form of entertainment such as tickets to an event or a meal.  Unlike gifts of goods there is no £250 limit so an all expenses trip to Lapland comes tax and NI free.  We are also partial to the odd music or sporting event so please feel free to spread the Christmas love.

Summary

A cash gift received by the business is not usually subject to corporation tax but if it’s passed to a Director or Employee it’s taxable like salary.  Non-cash gifts worth up to £250 are usually tax and NI exempt and a gift of entertainment e.g. meals or drinks is exempt regardless of value.

For full HMRC guidance please see  HMRC’s internal guidance.

Disclaimer

The information contained in this article is intended solely to provide general guidance on matters of interest for the personal use of the reader, who accepts full responsibility for its use. The application and impact of laws can vary widely based on the specific facts involved. Given the changing nature of laws, rules and regulations, and the inherent hazards of electronic communication, there may be delays, omissions or inaccuracies in information contained in this article. Accordingly, the information on this article is provided with the understanding that the authors and publishers are not herein engaged in rendering legal, accounting, tax, or other professional advice or services. As such, it should not be used as a substitute for consultation with professional accounting, tax, legal or other competent advisers. Before making any decision or taking any action, you should consult a professional adviser.

Mark Invoices As Paid

When you use Xero coupled with bank feeds it is great as it speeds up the process and completing the bank reconciliation.  But how often do you reconcile the bank? Daily, weekly, monthly?  If we are honest we probably do not do it each day in which case you will have invoices in your system showing as outstanding when in fact they may have been paid.

If you have multiple people accessing your Xero, perhaps you have a bookkeeper for example it would be good practice to mark items as paid when you know you will receive the money.  Instances where this might occur are when you have received a remittance advice which is future dated or you have received a cheque payment which you will not cash straight away.  By marking the invoices as paid it means you won’t chase down customers for payments that they have already paid.  These are the sort of things that can really annoy customers.

How do you mark an invoice as paid in Xero?

This is quite simple to do.

Accounts > Sales > Awaiting Payments > Search (use the search facility to find the customer or invoice)

Click on the invoice and in the bottom right hand corner you will see the Receive a payment box.  Here you can enter the details of the receipt being the amount received, the date paid (i.e. the date the remittance advice says it will be deposited), which bank account it was paid into and lastly the reference (this can be the paying in slip number if a cheque).  Then click Add Payment.

If you are receiving money that pays multiple invoices then we would not recommend doing it this way but to use the batch deposit option.  In the example below you can see that we have highlighted two invoices as they were both paid at the same time by the customer as one amount.  As Xero is intuitive and tries to auto suggest the right allocation during the bank reconciliation by doing things in this way when the £2,245 hits the bank account then Xero will try and match it to the £2,245 we have entered into the system.  If we do two separate amount of £1,995 and £250 it will not make the suggestion as they do not match.

Once you have ticked the invoices being paid click the Deposit button next to the Email button.

Complete the date, reference and the bank account that the receipt will be paid into.  The Deposit button will then become green and you can can click on it.

Your sales invoices in Xero will be marked as paid and no longer show as awaiting payment and a receipt will be entered into the bank account ready for the person who does the bank reconciliation to tie up to the bank feed.

What you might notice is that when you use Find & Match to allocate bank lines there are invoices that show with a single green arrow as shown below which are invoices that have not been marked as received.  The double green arrows are the receipts that you have allocated against the invoices as per the method above.

If we are doing the bookkeeping on behalf of clients we would normally suggest where practical that they mark the sales invoices as received.  We will normally be looking at the bank reconciliation once a week so if you want to keep the sales ledger as up to date as possible then mark the invoices as received.

Monthly Invoicing

We want clients to make use of our service and expertise so we bill on a monthly basis.  Our logic being that if you pay for a service on an ongoing basis you will be more inclined to use it.  What this also means is that you pay a small monthly charge equivalent to 1/12 of the annual fee.  To keep things simple we bill in line with your financial year so we both know where we stand.  This does mean that if you join us part way through a financial year then you will need to pay a catch up bill to bring you in line year to date.

You do not end up paying more it is simply a matter of cash flow timing.  Please bear in mind that if we do not charge a catch up fee we will be out of pocket for example your year end is March and you sign up in December.  You will only be billed three times which is 3/12 of the annual fee.  You don’t have to be an accountant to work out that is not sustainable.

Contents

  1. What is monthly billing
  2. What is a Fixed Fee
  3. What if it is not covered by my Fixed Fee Quote
  4. Why Standing Order
  5. Example of Invoicing
  6. Cancellation of Service

What is Monthly Billing?

Exactly what is it says on the tin.  We raise an invoice each month in line with the agreed fee and you pay it monthly.  We raise the monthly bills on the 1st of the month and they are due for payment by the 6th of the month.  No big invoices, no nasty surprises.  You shouldn’t be surprised every time you get a bill from your accountant – you will never receive an invoice from us having not agreed it in advance.  If you have more than two invoices outstanding at any one time then we stop servicing your needs.

What is a Fixed Fee?

Fixed Fee billing means that you pay what we quote and not a penny more.  You will never receive an invoice from us for a different fee than agreed.  If we are rubbish at quoting that is our problem not yours and we would not pass on that burden to you.

What if it is not covered by my Fixed Fee Quote?

If you ask us to carry out a task that is not covered in your monthly fixed fee then we will tell you.  You don’t work for free and neither do we.  What we will do is advise you on what needs doing and how and then provide you with a written quote for carrying out the task.  You can then make a decision whether you want to learn how to become an accountant or whether you wish to do what you do best knowing that we’ll get the task completed and for the price agreed.

Why Standing Order?

We ask all clients to set up a Standing Order for payment of their standard monthly fee which is due on the 6th of each month.  Standing Orders do not incur any charges on either party and as our price is fixed for at least 12 months it does not seem to make sense to pay out on processing fees when it is not required.

Example of Invoicing

I started part way through my Financial Year

If you wish to become a client mid-financial year then there will be things that your old accountant has done and we will not need to carry out so whilst we will quote you on the standard monthly billing moving forward your catch up bill will be based on what needs to be done.
Company year end is March and we raised a monthly quote of £130+vat.  The first monthly bill raised will be on the 1st October for £130+vat.  In September we will raise a one off catch up bill equivalent to the number of months we are though the year being April to September which is 6.  The bill will not be £130+vat times 6 as there will be tasks that have already been completed.
In this example the only items that need catching up will be the annual accounts and corporation tax which are included at £87.50+vat per month.  The catch up bill will therefore be £87.50+vat @ 6 months.

Cancellation of Services

If you stop using our service then you cancel your subscription and we stop invoicing you.   As long as your invoices are paid up to date we can transfer your Xero subscription across to you and you are free to go.  If you want to have all of the jobs completed that were included in your subscription then you need to have paid the equivalent of 12 monthly payments in that year.  This means from a timing point of view the most sensible time to cancel is in the last month of your financial year.  That way you have paid for all items for that year and we will complete for you before handing over to your new accountant making things nice and easy.  If you do leave mid-financial year then we will refund you the difference between what had been invoiced year to date and the value of the work completed.

Music Subscription Costs

This is a subject that has come up a lot more recently, and seems to be an expense a lot of companies have been trying to claim.

The main point to remember when thinking of putting costs like this through the company is, will you be using this for personal use also?  If this is a yes, then you are not able to claim this as a business expense as you are not able to confirm it is 100% for business use.

Another point to remember is also with subscriptions they do come with specific conditions of use.  Spotify are one of these subscriptions which hold specific terms of use.  You will find it hard to show how the product is being used for business without going against the terms and conditions, due to Spotify being a personal use service.  I have attached a link to their terms and conditions.  A main point to note is that they do not include public broadcast rights (noted in point 8).  What this means for your company is that you will not be able to use this in a way that others can listen in… it is for your ears only.

Spotify Terms and Conditions

Based on these points, if you still believe you are entitled to claim this, please let us know.

You may also wish to consider whether you need a licence to play music in your place of business.  This is in the form of either PRS or PPL music licence.  You may find that this is something your business should be paying for, and both licences may be needed.

Net Wage Payments

When a payroll has been created using Xero Payroll it automatically posts the entries into your accounting ledgers for you.  Whilst many people preferred the Pay Run option where it would create a Bill to allocate the payments against this was not good practice.  As the employee net payments were created as Bills anyone with access to the system could for example see how much each employee was being paid.

This does mean however that using Xero Payroll has meant a change in process for dealing with the Net Wage Payments that you would have previously been able to allocate to the outstanding Bill.  This is how we recommend that you treat this now.

The default Net Wages Control account which is where the payments due to employees are posted is 814 – Wages Payable – Payroll.  This is where you need to post the net wages.  From the bank you can create a transaction per the below screen.

As Xero is intuitive it will learn the posting applied and it will prompt you with this suggestion after a couple of months.  If you want something more robust that will just require clicking ‘OK’ then why not try setting up a Bank Rule which each time something comes through the bank which meet your set criteria Xero will process per your instructions.  The video below explains this in more detail and we have included a screen shot below of how your rule may look.  Once you have mastered this you will be apply to apply this logic to other bank payments and receipts.

Please be careful how you use this.  If you wrap up pay, expenses and dividends for example as one payment you cannot just post it all to 814 – Wages Payable.  You may wish to consider using options 3 and 4 in the Bank Rule to split items out.  Alternatively why not have different Payees set up on your online banking that way you can use a different reference for wages, expenses and dividends and set up a rule for each.

Creating Bank Rules from Xero on Vimeo.

Paying Corporation Tax to HMRC

Your Corporation Tax liability for the month should be paid electronically 9 months and 1 day after your year end.  For example, a 31st March year end would be payable by 1st January 2016.  Always check bank holidays as the payment will not reach their account on a bank holiday so you will need to bring the payment date forward accordingly.

To find your liability there are several places you will find this.  We would suggest you revert back to our email we sent you when the accounts were sent for signing.  This details the amount to pay and the deadline for payment.

To make payment to the revenue, the following bank details should be used: