What is Cloud Accounting?

Cloud accounting software is similar to traditional, on-premises, or self-install accounting software, only the accounting software is hosted on remote servers, similar to the SaaS (Software as a Service) business model. Data is sent into “the cloud,” where it is processed and returned to the user.

All application functions are performed off-site, not on the user’s desktop. In cloud computing, users access software applications remotely through the Internet or other network via a cloud application service provider.

Using cloud accounting software frees the business from having to install and maintain software on individual desktop computers.

Cloud accounting also allows employees in other departments, remote or branch offices to access the same data and the same version of the software.

Organizational Reporting and Visibility

With cloud accounting, it’s also easier to get real-time reporting and visibility throughout your organization, with greater mobile capabilities and collaboration. Subscription-based models are popular among cloud accounting providers, and in most cases these subscriptions are usage-based. Companies that pay a cloud accounting subscription receive updates to the software as soon as they arrive, with no additional software purchases required.

What’s the difference between Cloud accounting and traditional accounting software?

There are several key distinctions between cloud accounting and traditional, on-site accounting. For one, cloud accounting is more flexible. Accounting data can be accessed from anywhere on any device with an Internet connection, rather than on a few select on-premises computers. Secondly, unlike traditional accounting software, cloud accounting software updates financial information automatically and provides financial reporting in real-time. This means account balances are always accurate and fewer errors take place due to manual data entry. They are also better able to handle multi-currency and multi-company transactions more efficiently.

In the on-premises world, every time a firm grows, they encounter greater software license and maintenance costs as well as new licenses and fees for database, systems management and other software. The firm might also have to make expensive capital purchases of new hardware, such as servers. With cloud solutions, businesses don’t get stuck with permanent, expensive equipment and licenses when your business contracts are up and, likewise, there are no big spikes in costs when it expands a little.

Also, cloud accounting requires far less maintenance than its traditional counterpart. The cloud provider completes the backups, updates occur automatically and nothing needs to be downloaded or installed on a company computer.

Is my financial data secure with cloud accounting?

Cloud accounting provides an equally secure (and sometimes even more secure) method of storing financial information than traditional accounting software. For instance, a company computer or laptop with critical financial information could be lost or stolen, which could lead to an information breach. Cloud accounting, however, leaves no trace of financial data on company computers, and access to that data in the cloud is encrypted and password protected.

Sharing data is also less worrisome. With cloud accounting, two people simply need access rights to the same system with their unique passwords. Traditional methods often require flash drives to transport data, which could be lost or stolen.

Lastly, cloud providers usually have backup servers in two or more locations. Should one server network go down, you still have access to your data. Information kept just on-premises could be destroyed or damaged in a fire or natural disaster, and may never be recovered.

Will cloud accounting save me money?

Companies that use cloud accounting require less initial server infrastructure to store data, and IT staff is not required to maintain it or update the cloud accounting system. Fewer overhead expenses and no new software purchases mean greater savings for businesses. For the on-premises world, it’s the exact opposite. Every time a firm grows, they encounter greater software license and maintenance costs as well as new licenses and fees for database, systems management and other software.

 

Who has to be VAT registered?

This post is about being legally required to register for VAT.

Who can register for VAT

You can register for VAT if you’re in business and you are one of these:

  • an individual
  • a partnership
  • a company
  • a club
  • an association
  • a charity
  • any other organisation or group of people acting together under a particular name, such as an educational or health institution, exhibition, conference, etc
  • a trust
  • a local authority

For VAT purposes, the individual or organisation that is in business is known as a ‘taxable person’.

Who can’t register for VAT

You can’t register for VAT if either of these is true:

  • you sell only goods or services that are exempt from VAT
  • you aren’t in business according to the definition that HM Revenue & Customs (HMRC) uses for VAT purposes

What is business for VAT purposes?

You can only register for VAT if you’re in business. HMRC defines a business as a continuing activity involving getting paid for providing goods or services – in money or another form of payment such as in-kind or barter.

You are in business when, for example:

  • you earn an income by carrying on a trade, vocation or profession – by being self-employed or through another entity such as a limited company
  • you provide membership benefits as a club, association or similar body in return for a subscription or other form of payment
  • you provide certain other activities as a club or other recreational body, charity or other non-profit making body
  • you charge admission to a premises

To be in business, these activities must have a degree of frequency and scale and be continued over a period of time.

Even if your activities have some or all the characteristics of a business, they may not be considered a business for VAT purposes if they are essentially a recreation or hobby, or an isolated transaction. So if you only make occasional VAT taxable supplies, or your supplies are minimal, it may be that you don’t need to register for VAT. The one-off or infrequent sale of your personal belongings at a car boot sale or auction, for example, would fall into this category – but buying goods for resale on a regular basis is definitely a business activity.

You’re doing business in the UK, or intend to start

If your place of business is in the UK or you live here

You may need to register for VAT, or you may be able to choose to register voluntarily if you are doing any of the following kinds of business in the UK:

  • Supplying goods or services within the UK. If your turnover of VAT taxable goods and services supplied within the UK for the previous 12 months is more than the current registration threshold of £79,000, or you expect it to go over that figure in the next 30 days alone, you must register for VAT. However, if your turnover has gone over the registration threshold temporarily then you may be able to apply for an exception from registration – see the section later in this guide for more information.
    There is a section later in this guide on calculating your VAT taxable turnover.
  • Taking over a VAT-registered business from someone else.You have to add your own VAT taxable turnover over the last 12 months (if any) to that of the business you’re taking over. If the total goes over the registration threshold on the day of the takeover (currently £79,000), you’ll have to register. However, if your turnover has gone over the registration threshold temporarily then you may be able to apply for an exception from registration see the section later in this guide for more information.
  • Receiving goods from other countries in the European Union (EU).If you have received goods from other EU countries in the UK (these are known as acquisitions) with a total value greater than £79,000 in the current year since 1 January, or you expect to acquire more than that value in the next 30 days alone, you must register for VAT.
  • Supplying goods or services from the UK to other countries. See the section in this guide on supplying goods or services from the UK to other countries.
  • Supplying goods or services to the UK from other countries. See the section in this guide on supplying goods or services to the UK from other countries.

Calculating your VAT taxable turnover

Your VAT taxable turnover includes the value of any goods or services you supply within the UK, unless they are exempt from VAT. This means you must also include any supplies you make that would be zero-rated for VAT.

When calculating your VAT taxable turnover you will, of course, include your sales, but for VAT purposes, you should also include the value of certain other types of supply:

  • goods or services that you exchange or barter – see the link below
  • supplies of certain services that you receive from suppliers in other countries that you have to ‘reverse charge’ – see the links below
  • where you use your own labour to construct a certain building or civil engineering works for your own business use with an open market value of £100,000 or more – see the link below

You must not attempt to avoid registration by artificially separating business activities to reduce your turnover. See the section in this guide on artificial separation.

Do not avoid registering for VAT by artificially separating business activities

If you run more than one business, the sales in all those businesses must normally be added together to determine whether or not you must register for VAT.

However, if you are involved in the running of several separate legal entities, you may not need to combine the sales of those businesses to find whether you need to be VAT-registered.

If HMRC decides that you have artificially separated one business into smaller parts to avoid registering for VAT, it can decide that the entire business is a single taxable person and therefore must be registered for VAT. See the description of ‘taxable person’ in the section in this guide on who can and can’t register for VAT.

Situations that HMRC may consider a single taxable person for VAT purposes include:

  • Separate entities selling to registered and unregistered customers. The VAT-registered entity sells only to VAT-registered customers, and the entity not registered for VAT sells to customers who are not registered for VAT.
  • The same equipment or premises being used by different entities on a regular basis. The premises and/or equipment are owned by one of the parties, who charges rent to the others. This situation may occur in businesses such as launderettes and takeaway food operations.
  • Splitting up what is usually a single sale. This is common in industries such as the bed and breakfast trade, where one business supplies the bed and another the breakfast.

If you deliberately avoid registering for VAT, you may be liable to a penalty. For serious offences, the matter will be investigated by HMRC and you may be prosecuted.

5 Reasons Your Business Needs a Dedicated Business Phone Number

Why do you need a separate phone number tied to your office if you already got a mobile phone these days?Well, for one, it offers a separation of calls meant for business and work. An office number that is powered by Internet technology can also be configured with powerful features, such as setting the time that calls are forwarded, as well as “out of office” messages.

Here are five reasons why it’s still important to have a business phone number. Not just any old phone number, but one powered by smart Internet technology from MightyCall.

1. Look professional

Freelancers or startup entrepreneurs sometimes work out of a home office or café and rely on a cellphone for all incoming calls. Having a dedicated line means you don’t have to share that mobile number with your contacts. Plus, it doesn’t show that you are a one-man shop, if impressions count for potential customers.
Don’t just sign up for an old line that has you stuck at one place, of course. Opt for a smartphone service that lets you easily forward a call to your mobile, just as you’d forward e-mail from one account to another.

2. Don’t miss an important call

Smart call forwarding means you don’t have to expose your private cell phone number to business contacts, while still maintaining the convenience of a mobile number. More importantly, it means you don’t miss important calls from potential customers.
Different phone numbers can be set up for various departments or functions. Staff in charge of accounting or sales, for example, can have calls to different office numbers forwarded to their mobile phones even on the go.

3. Provide a professional experience

Another powerful feature of a smart fixed line service is the ability to set when you forward the calls. For example, you can set up a hotline for customer queries about an upcoming event and have the calls forwarded to the organizer during office hours, but directed to a voice mail at night or over the weekend.
This gives control to the user, while presenting the calling customer an experience expected of a professionally organized event.

4. Show customers you care

In the event that you can’t answer a call, an Internet-based phone service may also enable you to automatically send a message — possibly even a voice message — back to the caller. This lets them know you care and will call back, instead of leaving them with a dull answering machine message.

5. Enjoy clearer calls

There are times when phone signal just doesn’t let you hear the other party clearly. That’s not what you want for important conference calls. A dedicated business phone number, connected to a fixed line network, is usually a better guarantee against disruptions that can happen to wireless calls.

12 tax changes you need to know for 2018-19

From National Insurance hikes to increased capital gains allowances, here’s what you need to know.

If you’re running your own business, every penny counts – and tax rules can have a huge impact on how much you earn. As the new tax year kicks off, find out how taxes will impact your bottom line. The new tax year starts on 6 April 2018, meaning a range of previously-announced rule changes will kick in. We explain the most important tax changes for the 2018-19 tax year you need to know about if you’re self-employed.

1. Tax-free dividend allowance slashed

Many self-employed people set up companies to take payments and pay out expenses, then pay themselves a dividend from the profits they make. This allows them to minimise their income, and therefore their income tax bill. But as of 6 April, this strategy will be less beneficial, as the amount you’re allowed to earn from dividends before paying tax – known as the dividend allowance – is set to fall.

Previously, you were able to earn £5,000 a year from dividend income before paying tax on it.  But from 6 April, this allowance will drop to £2,000. Use our 2018-19 dividend tax calculator to find out what you’ll pay.

2. Higher thresholds for Class 2 and Class 4 contributions

If you’re self-employed, you need to pay Class 2 contributions on income above a certain amount. In 2018-2019, this threshold is £6,205 a year – up from £6,025 in the 2017-2018 tax year. If you earn less than this, you won’t need to pay National Insurance at all, though you can opt to make voluntary Class 2 contributions. The threshold for Class 4 has also risen, from £8,164 last year to £8,424 in 2018-2019.

3. Increased rate for Class 2 contributions

The rate for Class 2 contributions is also going up. In 2017-2018, you had to pay £2.85 per week for your Class 2 contributions – in the coming year, that will increase to £2.95 per week.

These changes to NI contributions mean lower-earners will end up paying slightly less National Insurance, while higher-earners will pay a little more. As an example, if you earn £20,000, you’ll pay £1,195.24 into National Insurance in 2018-2019 – £18 less than what you paid last year. But if you earn £70,000, you’ll pay £4,039.74 in this tax year – an increase of £76.

4. Capital gains tax allowance increased

The profit you’re able to earn tax-free from selling assets – known as the ‘capital gains tax allowance’ – will increase to £11,700 in the 2018-19 tax year. This is up from £11,300 in the tax year prior. This means if you’re planning to sell a valuable asset that qualifies for capital gains tax, you’ll get a smaller tax bill.

If you’re selling a business as a sole trader or partnership, don’t forget you may be able to benefit from ‘entrepreneur’s relief’. This reduces the capital gains tax rate to 10% on the first £10m of gains you make over your lifetime.

5. Personal allowance increases

Like other earners, the self-employed will benefit from an increased personal allowance, which determines how much you can earn before you pay income tax. For 2018/2019, the personal allowance is £11,850, up from £11,500 in the previous tax year.

Remember that as a self-employed person, you pay tax on your profits – meaning your earnings after expenses are deducted. If you’re in Scotland, keep in mind that a new income tax system applies to you from the 2018-19 tax year – you can find out more in our guide to income tax in Scotland.

6. Higher rate threshold increases

For England, Wales and Northern Ireland, you’ll need to pay a higher rate of income tax on profits above £46,350 – this is up from £45,000 in the 2017-18 tax year. To work out how these changes will affect your tax bill, you can use our income tax calculator. Income tax in Scotland works differently.

There are five rates of income tax to pay:

  • Income between £11,850 and £13,850 is subject to the starter rate of 19%
  • Income between £13,850 and £24,000 is subject to the basic-rate of 20%
  • Income between £24,000 and £43,430 is subject to the intermediate rate of 21%
  • Income between £43,430 and £150,000 is subject to the higher rate of 41%
  • Income above £150,000 is subject to the top rate of 46%.

 

7. Making Tax Digital pilot

In coming years, HMRC plans to introduce a monthly or quarterly income reporting system for sole traders and small businesses, a project called Making Tax Digital. Rather than submitting a single tax return, businesses will report their earnings on a regular basis and receive an estimate of their tax liability.

While the roll-out has been delayed until 2020, sole traders can sign up for a pilot to use the software at the HMRC website.

8. Business rates to switch to CPI

The way business rates increase is set to change as of April. Currently, business rates are increased in line with September’s Retail Prices Index (RPI), but moving forwards, rates will be tied to the Consumer Prices Index (CPI).

This may seem like a technical change, but you’re likely to benefit from lower rates, as CPI tends to be a lower than RPI. In September last year, CPI was 3%, while RPI was 3.9%.

9. IR35 crackdown may be imminent

In April 2017, the government rolled out tax reforms in the public sector to ensure compliance with IR35 – legislation to combat companies misclassifying employees as contractors to avoid tax. There is speculation that this crackdown will be extended to the private sector in the coming year.

The IR35 rules primarily apply to people employed as contractors through an intermediary or personal service company. If you’re a freelancer or contractor, you should check whether IR35 could apply to you because if it does, you may face a hefty tax bill. In the private sector, the employee is responsible for checking their status and will be liable for any tax owing.

10. VAT threshold decrease on hold

Before the Autumn 2017 Budget, there was some speculation that the government might lower the threshold at which small businesses had to register for VAT. But ultimately, the government announced the threshold would remain at £85,000 for two years from 1 April 2018. Around 6,000 small businesses are expected to surpass the threshold for VAT in the 2018-19 tax year.

If you employ staff…

11. Rise in minimum pension contribution

From April 2018, employers will need to make a 2% mandatory contribution into their employee’s pension fund – up from 1% in the previous tax year. Keep in mind that this will increase again from April 2019 to 3%.

12. Increase in National Living Wage for staff

As an employer, you should be aware that the National Living Wage will increase from £7.50 to £7.83 from April 2018 – a rise of 4.4%. This means you’ll need to raise the wages for any staff aged over 25 who are paid at the minimum wage.

Brand new website

We’ve recently had our website completely revamped by the fantastic guys over at Business Suite! Read more