Welcome to the June/July 2018 Newsletter from Chamberlains
It’s too hot for anything very weighty at the moment but there’s normally something worth a bit of explanation or something to remind you about. The last two months I talked about property investment (again!) and strayed into the role of companies – so perhaps it would be useful to talk a bit about how they work. And a few other things to mention briefly – the new Trading Allowance, some Congratulations, encrypted emails, a new idea about “procurement” (getting good value and quality on your purchases), and tax fee protection.
Many people operate their business through a company, normally a “private limited company”. The word “private” isn’t often used, but it can be useful to show that it’s not a “public limited company”, a PLC. The legal framework for PLCs is more complicated – they generally need more share capital and to have an expensive audit, so they’re used for larger businesses
When we call a company “limited”, we’re saying that the liability of the owners, the shareholders, is limited to the shares that they own. In simplistic terms, if you put £100 share capital into a company (a sort of starting kit of funds) if the business fails and you’ve been acting responsibly and haven’t taken out too much money personally, your loss can be limited to the initial £100.
But what are shares? In any company, the shareholders are the owners of the company. There can be different types of shares which can give different rights to their owners, but ordinary shares are the simplest version – as it says on the tin – and just give you a share in the company’s profits and assets. In a family-owned company, it’s easy (unless someone decides to get a divorceL) – the shareholders confirm what should be paid out as dividends, who can be directors etc.
An important point: dividends are paid in proportion to the number of shares. So if Mr Plutocrat owns 25 of the 100 shares and Mrs Plutocrat owns the other 75, she gets three times as much as him. If he, as an overbearing and dominant director, decides on what dividends should be paid (he doesn’t have the right all on his own, but he bullies her into it) and he decides to pay himself £1,000 dividends, she’s entitled to £3,000. In conjunction with your friendly accountant, the payment of dividends is part of the overall tax planning – it can be useful to split shareholdings so that, for example, everyone in a family uses their tax allowances by the dividends.
There’s lots more to say about companies – there can be considerable tax advantages and you can keep a business independent from you (why should your business creditors try to take your personal house away from you?) – but I don’t want to swamp you with information, so I’ll wait until next time.
As a brief taster or reminder, I’ll just say that dividends are a useful way to take money from a company – still cheaper than drawing a salary due to the extra costs of National Insurance. And you get the first £2,000 dividends tax-free!
An innovation since last year is that everyone (individuals, not companies) is entitled to claim a notional £1,000 expenses against their trading income. This is designed to encourage start-ups and small-scale entrepreneurs, but it applies to existing businesses. For example, we have a translator as a client. Many years ago I was a translator myself, so I can empathise with this. One of the good things about this sort of activity is that there are few expenses – a bit of use-of-home-as-office, some stationery, IT costs, a new dictionary or two (I still have a fine collection!) – and it may be quite difficult to find many expenses to claim against the income. However, with the new allowance, you can just use the standard £1,000. We’ve already saved this client a couple of hundred pounds by using this. Of course, if your expenses are more than this, you simply use the higher figure. Either way you save tax.
And talking of saving tax, Keith Olding and Vikki Barnard, two of our wonderful managers, are doing yet more training as Chartered Tax Advisors on top of all their other qualifications. And they’ve just passed their half-way exams – with an average mark of over 80% between them! I’d like to think that it’s because we’re giving them such good experience in Chamberlains, but I think that they’re both just rather good at this sort of thing and that we and you are really lucky to have them working on our behalf. Well done them!
And while I’m spreading around good will and happiness, why not include some clients? Seale Nurseries, a specialist local rose cultivator, have again gained a Silver Gilt Award (the one just below Gold) for the 4th year running at the Hampton Court Palace Flower Show. True dedication! (And thanks to Keith for fighting his way through the traffic to go to check them out.)
Our excellent office manager, Shelene, diligently sorted out our GDPR policies and procedures (see the May newsletter). Very usefully as a follow-on, she has arranged for us all to have encrypted emails. Normal emails will continue unchanged, but if there’s something sensitive to send to a client, we can leap into encrypted mode at the touch of a button – which should make it easier for us and you. If you’d like to know more about this, please just say (and I’ll pass you over to Shelene!)
A NEW IDEA
And I wouldn’t want to leave out our other wonderful manager, Nikki Crumbie, who joined us in January. She put us in touch with an interesting business who are able to source all sorts of services on a quality-checked value-assured basis, no-cost-to-use. I met with them recently and I hope we’re going to be able to work with them to help our clients, both commercial and domestic. The idea is that they have a network of trusted providers – all sorts of different services – and that these suppliers come to you at a discount because they don’t have to have marketing cost to find you. And in return they’re so glad to do this that they share a little of their profits with the coordinators and with Chamberlains. Watch this space – more anon…
THE FEAR OF THE TAXMAN…
You may remember that Chamberlains provide a service to support you if the dreaded taxman (or taxwoman – sometimes they’re worse!) decides to look into your affairs. HMRC’s computer systems are ever more sophisticated and they check tax returns from all angles. If something looks odd, they can easily ask about it. There may be nothing wrong, but we still have to spend time explaining things – and we’ll probably need to charge extra for doing so. Fighting them off isn’t always straightforward – we need to collect extra information from you, maybe research the issue, liaise with them, etc. – which all takes time. So many of our clients agree that a modest annual fee is perhaps worthwhile for peace of mind. If you’d like to know more, look at our special website: http://chamberlainsaccountancy.clientweb.site/ or give me a ring. The new subscriptions start from 1 August. I’ll send out invoices to those who had them last year; if you would like one, please let me know.