Tag Archive | "annual accounts"

Is cash accounting the way forward for micro-entities?


Contractor accountants may be interested to know that the Office of Tax Simplification has told the government that the UK’s smallest enterprises should be allowed to use cash accounting instead of producing full GAAP accounts.

The OTS’ tax director, John Whiting, said there was a good case for a type of cash accounting and we need to do more to come up with a straightforward method of calculating the tax liabilities of micro-entities.

However not all tax experts believe changing the way businesses produce their annual accounts will reduce red tape. Steve Collings for example says that preparing accounts isn’t a problem; rather it’s the tax system that needs to be simplified. He also expressed concerns that if cash accounting is adopted, something will go terribly wrong and small companies will become embroiled in tax evasion scandals.

The cash accounting proposal only applies to companies turning over a maximum of £30,000. But this could cause problems for small businesses once their turnover exceeds that amount and they need to transition to accruals accounting.

Another expert has suggested that income should still be accounted for on an accrual basis but flat rate accounting could be applied to expenses.

The OTS also recommended that there should be more flat rate expense allowances that qualifying businesses could opt-out of if they found a more beneficial system.

Companies that want to disincorporate should also qualify for a new tax relief, said the OTS. This would reduce the administrative burden on businesses while they reorganise.

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Image: Antique Cash Register by Michael Whay

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Companies house, filing errors, and online accountants


Companies House recently revealed that 10 per cent of all accounts filed have been rejected due to basic errors in regards to formatting.

The administrative body, which is responsible for holding all business records throughout the UK, has issued a request for all businesses to get their accounts properly in order or face the consequences, which could include being penalised.

Nearly 91,000 separate accounts faced rejection during the first half of 2010, with almost one third being rejected due to their statutory statements being filed incorrectly; Companies House refused to accept 33,349 accounts due to this error, while other common errors were balance sheets with signatures missing or duplicate accounts with conflicting figures.

Private companies can be hit with a late filing penalty of up to £1500 if their submitted accounts face rejection too close to the deadline for filing.

ICAEW’s Financial Reporting Committee member Kathryn Cearns stated that a percentage of the errors could have been caused by newly-enacted legislation; she said that while the Companies Act going into effect undoubtedly caused some of these technical errors, the fact that Companies House instituted some rules changes of its own could be a contributing factor as well.

In related news, the high rejection rate of accounts filings may be due to limited companies moving away from employing qualified professionals, such as online accountants, to engage in the task, some business advisers have cautioned.

Business experts have declared that a combination of a more vigilant Companies House, in conjunction with companies utilising under-qualified accountants to do any filing work for them, have contributed to the high rate of rejection.

© 2010 All rights reserved. Reproduction in whole or in part without permission is prohibited.

Image: Message error 404 by CyboRoZ

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