Accountants for Contractors Archives - Page 2 of 2

What is an Audit? Its Purpose and Its Importance

George / 12/05/2022

Most of us know audit refers to an official inspection of the accounts of a company. This inspection is done by an independent body normally. It has been observed that several organisations in the UK are in need of an audit, however, they are not very clear about what exactly is the purpose of an audit and when they require it. When Is An Audit Required? This is important to know for an organisation when it actually requires an audit. An audit becomes a legal requirement in case it meets any two out of three of the following thresholds: The strength of employees crosses the figure 50. The asset of the company is more than £5.1m. The turnover of the company is more than £10.2m. In some cases, a company has not crossed the above-mentioned figures but even then it requires an audit. Wondering why? It is possible when the company is likely to be part of a group that reaches the discussed figures or crosses them. What Is The Purpose Of An Audit? By now you must be wondering about the purpose of an audit and why it is required. The financial statement of a company is so important that it gives a picture of financial health. What is required to be changed, grown, or moulded for a better business future? The financial statement needs to be crystal clear to identify where a company really stands. An audit is a kind of independent opinion about the financial statement of the company. The main purpose of the audit is to get that third party’s opinion about the accounts inspection and financial statement to realise the growth of the business. This opinion is associated with the following factors: The financial statement must communicate a fair view of the finances of the business. The financial statement is made according to the required standards of accounting. Auditors are accountable for identifying material misstatements. Moreover, there has been a misconception about the auditors that they are liable for identifying all the misstatements through the process. However, that is not the case. Only material misstatements are required from the process. Importance of An Audit No matter what kind of business a company might carry out. Each one of them intends to achieve a certain and fair level of position and financial health. The process of an audit helps the organisation to achieve its ultimate goals. Some of them include the following which also adds to the importance of an audit. Have a look: A fair picture of the financial performance of the company. The true position of the business is carried out by the company. Realising the valuable insight after the process of audit. The factor of accuracy and managing accounts in a more smart way with comfort. Systematic errors that were happening throughout the year are fixed. Furthermore, The process of an audit is no doubt critically analysing the management decisions and it challenges the internal control. However, if you see it with a broader spectrum, this always helps to improve the internal system and financial health of a company. So, one can’t deny the importance of valuable feedback and the external perspective of the company. Eventually, this will help to grow the level of business. Final Thoughts Now that you have developed a better understanding of the purpose of an audit and relevant details, we can sum up the discussion finally. There is no doubt that the process of an audit challenges the internal control of a company. However, it ends up developing business valuation as you learn the unseen mistakes that are being carried out throughout the year. On the basis of third-party perspective and insight, you can develop strategies that will help your business to grow. The organisational performance will improve which will secure peace of mind and reduce the risk of business falling down in the future. We hope these few minutes of reading will help to make the right business decisions. Disclaimer: The information about the purpose of an audit explained in this article is general in nature. It does not intend to disregard any professional advice.

Accountants, Accountants for Contractors

Construction Industry Scheme Works – The Beginner’s Guide!

George / 06/07/2021

If you intend to work as a main contractor in the industry, you must register your business for CIS. You are required to verify subcontractors directly to HMRC if they work with you. By verifying the subcontractors HMRC means to keep a track of their registration whether it is already done or not. After registration with CIS and HMRC, it will help to tell the rate of deductions to be made from them. there is a wide range of CIS Accounting Softwares that can help for smooth processing. Before you think to opt for the best possible option available for your business, let’s see what information this blog can unfold for you. Get in touch with our CIS Accountants for immediate assistance on CIS registration. This Blog will cover the most frequently asked questions like: What Is CIS Accounting? Who Counts as Main Contractors and Subcontractors? What Kind Of Work Is Covered By CIS? Construction Industry Scheme (CIS): CIS is the abbreviation of Construction Industry Scheme which contains a set of rules by HMRC. This explains how the subcontractors that work in the construction industry should get paid. Also, it keeps a track of VAT records and generates reports to have a perspective of your business accounting year. Under this scheme, the main contractors tend to deduct the amount from the wages of subcontractors working in the construction industry and further send it to HM Revenue and Customs (HMRC). These deductions from subcontractor’s payments are taken as the advance of tax and national insurance. Moreover, the main contractors are bound to register for this scheme whereas the subcontract can or can’t register. However, if subcontractors don’t get themselves registered there are chances of high deductions from their payments. To verify your monthly returns or to verify a subcontractor, talk to our CIS Accountants at CruseBurke! Who Counts as Main Contractors and Subcontractors? Main Contractor: An individual in the construction industry who employs subcontractors is called the main contractor. For main contractors, it is an obligation to get the business registered for CIS as well as to verify the subcontractors from HM Revenue and Customs (HMRC). Through the process of verifying the subcontractors will help you to know whether they are already registered or not and what is the rate of deduction from their payments. For the subcontractors who are already registered, the deductions will not be high rated and will only be paid to HMRC. Generate reports to gain perspective on your accounting year and keep a track of VAT with our Accountants at CruseBurke, contact us now! Subcontractors: The person who works for the main contractor in the construction industry is the subcontractor. CIS Tax deductions are made from the payments of subcontractors. These deductions are your advance to tax and national insurance and when you claim tax returns, it will be taken off if any amount is owed. In case the business turnover exceeds a certain limit and your previous paid taxes are on time, you can even apply for gross payment status. The contractor will no longer be able to deduct CIS from your payment. Any due tax will be paid at the end of the year. CruseBurke has an in-depth knowledge of the construction industry and CIS Accounting, contact us to get instant help to get year-end accounts done! What Kind Of Work Is Covered By CIS? A major part of the construction is covered by Construction Industry Scheme. It covers permanent as well as temporary building structures. Also, it deals in civil engineering work for bridges and roads. For CIS purposes, it includes: Site preparation includes work like laying foundations and providing work. After construction, ensuring the building’s cleanliness. Installation of power, heating, lighting, water, and ventilation. Decorations, repairs, and alterations. Other building work For CIS Accounting purposes, you are not bound to register if you do certain jobs like: Delivery of material used in construction. Work like running a canteen or site facilities do not come under construction clearly. Making of machinery or plant or any other material used in construction. Carpet fixing Surveying and architecture Scaffolding with zero labour For further details on what is not covered by CIS Accounting, immediately reach out to our experts at CruseBurke In case of exception that your business is based outside of the UK, CIS Accounting rules will remain the same but how you apply for registration and pay tax will be a different process. Conclusion: I hope this blog helped to provide vivid gathered information and have a better understanding of what is CIS Accounting all about. To tie everything together up, it will not be wrong to say that Construction Industry Scheme is a way of hassle-free processing of the accounting at the year-end only if you follow the set rules religiously regardless of you being the main contractor or the subcontractor.

how much dividend can i pay myself tax free

Accountants for Contractors, Dividend Allowance

When Can You Pay Yourself Dividends As A Contractor

George / 06/04/2021

If you’re a limited company owner, you can use two ways to pay yourself. The first way is through the salary and the second is through dividends. Most people prefer to pay themselves through dividends as it is one the most tax-efficient ways to pay yourself. In this blog, we’ll explore how much dividend can I pay myself tax-free as a contractor. You might be looking for: How do dividends work in the UK Timing dividends right could help save tax How Can a Self Employed Personnel Benefit From Dividend Allowance But before that, you should first know what are dividends! Basics of Dividends: Dividends are the profit made by a company that is paid to the shareholders after deducting the expenses of the business i.e tax etc. In other words, they are one of the simplest ways to pay yourself without losing much money on taxes. You can get a dividend allowance of £2,000 for 2021/22 that is tax-free along with your personal allowance. The shareholders of limited company pay themselves salary to minimise Income Tax and National Insurance liabilities. Besides, the amount they receive as dividends is exempted from National Insurance and they can avail more tax reductions on their gross income. Reduce your income tax as a contractor with our accountants! How Much dividend Can I pay Myself Tax-free? Like we have just discussed, you are exempted to pay National Insurance Contributions for the income you received as dividends. Yet, you need to pay income tax on the money you receive as dividends. But, you might be still wondering: how much dividend can I pay myself tax-free. For that, you can avail annual dividend allowance of £2,000 that is totally tax-free. However, if you are a basic rate taxpayer earning below £50,000, you need to pay 7.5% of the income tax including the dividend payment. For higher rate taxpayers (earning more than £50,000 up to £150,000) the rate of income tax is 32.5%. If you’re additional rate taxpayers (earning above £150,000 as income), you are obliged to pay 38.1% of the income tax. After doing calculations, you personally pay your income tax at the end of the year through your self-assessment tax return. You should remember that whether it’s a dividend, salary, or any other income, it will be considered your gross income. You are liable to pay income tax on it at the above-mentioned rates. Let’s make it easier for you through this formula: Income = Salary + Dividends + Any other income Struggling to legally minimise your income tax liabilities, CruseBurke will do it! Quick Wrap Up: Hopefully, you have got a reliable answer to how much dividend can I pay myself tax-free. As most contractors say that the best way to withdraw money from a limited company is to pay yourself through a small salary and dividends. Though it varies as per your situation, yet it’s worth investing to combine both to get the optimal tax advantage. Need professional help from an accountant, we’d love to hear your queries. Contact us now! Disclaimer: This blog provides general information on paying dividends as a contractor.

Accountants, Accountants for Contractors, Accounting Issues, Tax Issues, VAT

Get your Way Around Common VAT Problems

George / 06/01/2021

As an accountant, we have to do a lot of problem-solving each day. Let’s take a look at the top ten VAT problems, and identify solutions for each one of these too. Businesses want to end up paying as little as possible, and getting your VAT right is one way to make sure you’re not overspending. Having the right accountant by your side is all you need to get everything right and avoid VAT payment problems. Know that VAT can go wrong in limitless ways. It’s a self-assessed tax being handled by ten other people. What are the chances that there might be zero chances of a human error? Then the team of accountants ends up saying ‘if only’ multiple times when they get themselves into serious VAT payment problems. If only a business owner would have ended up checking the VAT position before signing a contract or checking up on the VAT position before letting out a property, things would’ve been different. Most business owners even agree on a transaction without working out its VAT. Normally, people don’t consider VAT while carrying out the transactions and it’s troubling for them when they’re issuing their invoices or submitting VAT returns. As tax advisors, the accountants at Cruse and Burke always encourage you to keep all these situations in mind to make sure you don’t end up in a mess. It’s been seen in prior situations too that businesses that have problems with paying VAT in their minds before carrying out transactions see their commercial outputs improve significantly. You’ll not only improve profits but also make sure that you’re avoiding losses to the maximum. So let’s take a look at some of the common issues faced while getting your VAT done and help you overcome major VAT problems down the road: Having a lead in time always helps out in keeping VAT problems at bay. Enough time helps you carefully prepare for regulations, return forms, and systems for registering taxpayers and processing VAT returns and payments. Plus having prior experience is a benefit, and it always helps out. Sometimes small enterprises or companies are responsible for doing new invoices and working on the bookkeeping requirements. The problem arises especially among people going for VAT upon imports. Small enterprises have vigorously opposed the idea since the department in charge of internal taxes has been given the job primarily. Another major problem encountered by people of developing countries is that the staff number is not specified for resolving all the VAT issues. This is one problem of high concern for these countries. As VAT is something completely different from a general sales tax. VAT is considered as a modern tax of nature. So many countries demand that it must be dealt with in separate organizations. According to many developing countries, VAT should be dealt in a completely separate organization apart from general income tax, let’s say. We’ve not only identified potential problems that can get you into serious trouble but also identified solutions for all of them. VAT issues are common and you’ll try your best to avoid them to the maximum keeping in view the solutions above. We wish you good luck in getting everything right and pressing on the long-term measures to sort out everything the perfect way.