If you work in the construction business as a contractor or subcontractor, you should be aware of your responsibilities under the government’s Construction Industry Scheme (CIS). 

In essence, this is a scheme similar to PAYE that compels contractors to subtract 20 or 30% of every payment owed to a subcontractor and pay the difference to HMRC. 

The plan has two goals: to prevent fraud and tax evasion in the construction sector, as well as to assist subcontractors in spreading their tax responsibilities over the year. 

Table of Contents 

In 2021, there will be updates to the Construction Industry Scheme (CIS): 

The bill will address the following four issues: 

Reverse Charge on VAT: 

How the CIS performs: 

Covered work by CIS: 

Contractors’ requirements: 

Subcontractor’s requirements: 

In 2021, there will be updates to the Construction Industry Scheme (CIS): 

We will go through the basics of CIS later in this post, but first, you should be informed of the scheme’s recent and planned modifications. 

To tackle abuse, a proposed finance bill is being prepared: 

The government issued a draught finance bill in November 2020 that contained proposed reforms to the CIS to combat misuse and ensure HMRC can act promptly when the laws are breached. 

The bill will address the following four issues: 

• Different interpretations of the present regulation will be eliminated if the cost of materials clause is clarified. 

• Changes to the CIS set-off amendment power, which now allows HMRC to remedy mistakes or omissions on sub-contractor deductions. 

• Amendments to the definition of a “deemed contractor” are intended to discourage businesses from abusing the present regulations to avoid running the CIS. 

• Amendments to the CIS registration penalty to broaden the extent of the punishment for providing false information while applying for GPS or payment under deduction in the CIS. 

The changes will take effect on April 6, 2021, following consultation. As the date approaches, we will give you further details. 

Reverse Charge on VAT: 

HMRC’s new VAT rules for the construction sector, known as the “VAT reverse charge on construction and building services,” go into effect on March 1st. 

If you are a VAT-registered subcontractor delivering qualified services to other construction industry contractors, you will have to indicate the proper rate of VAT on your invoices to contractors starting March 1, 2021, but you will not have to charge it. Instead, the contractor is responsible for reporting the VAT to HMRC. 

The new system applies to all operations that are subject to CIS payment regulations. It applies to both normal and reduced-rate VAT supplies to VAT-registered contractors who then sell the services to ‘end-users,’ such as landlords, property developers, renters, or owners. 

How the CIS performs: 

CIS allows registered contractors to take money from subcontractor payments and send it to HMRC. The reductions of either 20% or 30% are considered advance payments for the subcontractor’s tax and NI contributions. 

Contractors must sign up for the scheme. Subcontractors are not required to register, but if you are not registered, your payments will be deducted at a higher rate of 30%. 

The CIS online tool allows registered contractors to file monthly returns and determine if a subcontractor is registered. 

Covered work by CIS: 

CIS includes the following sorts of work: 

• Alterations. 

• Building work. 

• Decorating. 

• Demolition or disassembly is a term used to describe the process of destroying or dismantling 

• Heating, lights, power, water, and ventilation are all installed. 

• Repairs. 

• Preparation of the site 

Contractors’ requirements: 

If you are a contractor, you must register with the CIS: 

• Construction work is done by subcontractors, who are paid by you 

• Your company does not undertake construction work, yet you spend more than £1 million on it every year. 

Before you hire your first subcontractor, you must first register with CIS. 

You must determine whether or not the subcontractor should be treated as an employee. The HMRC has status guidelines. 

Check with HMRC to see if subcontractors are registered with CIS before making any payments to them. The proportion of the money you deduct changes when you register. 

Deduct 20% (for registered subcontractors) or 30% (for non-registered subcontractors) from their remuneration and pay the difference to HMRC. 

To prevent fines, include all exclusions on a monthly return to HMRC and preserve complete and accurate records of all CIS payments and deductions. 

Subcontractor’s requirements: 

If you work for a contractor and are one of the following, you must register as a subcontractor with CIS: 

• Self-employed. 

• The proprietor of a limited liability corporation. 

• In a partnership or trust, a partner. 

Contractors must withhold 20% from your payments and send the deduction to HMRC each time they pay you. Contractors must withhold 30% of your compensation if you do not register for CIS. 

You will not have to make a single huge payment at the end of the year if you pay your taxes in advance this manner. If your records indicate a lesser profit after permitted costs, you may be awarded a refund. 

You can request for “gross payment status” when you register for CIS if you do not want contractors to make concessions before paying you. 

CBM Accounting is here to help: 

This is a quick rundown of the processes required to comply with CIS. If you have any questions about the scheme or the modifications, our team of experienced small company accountants would be happy to assist you. We can assist you with the best guide and decision-making for your business. 

Get in contact with CBM accounting to learn more! 

When it comes to evaluating a company’s financial health, reading a balance sheet is critical. One of the three major financial statements is the balance sheet, often known as the statement of financial status. A financial statement describes a company’s financial situation at a certain point in time. The balance sheet differs from the other main financial statements in that it depicts the flow of money via different accounts over time. 

The balance sheet is generally seen as the most essential of the three statements since it may be used to assess a company’s health and long-term viability. When performing credit analysis, a lender, for example, considers the balance sheet’s strength before evaluating if the cash flows are sufficient to cover the loan. As a result, keeping a solid and healthy balance sheet is a continual priority. 

Therefore, the balance sheet’s structure and how to understand different elements of the balance sheet are described in the following sections. They also go through how to interpret the notes and the essential links between the other statements and the balance sheet. 

The following are the major components of a balance sheet: 

• Fixed assets 

• Tangible assets 

• Current assets 

• Stocks 

• Debtors 

• Cash at the bank and in hand 

• Total current assets 

• Creditors: amounts falling due within one year 

• Net current assets/(liabilities) 

• Total assets less current liabilities 

• Creditors: sums due after a period of more than one year 

• Provision for liabilities 

• Net assets 

• Capital and reserves 

• Called up share capital 

• Profit and loss account 

• Shareholders’ funds 

Table of Contents 

Is it important to read or understand a balance sheet? 

Isn’t it true that the balance sheet is only relevant for year-end accounting? 

Debt: 

Is your business at risk of going into debt? 

Do I need an accountant to file my balance sheet as a small business owner? 

Take action instantly: 

You can get assistance from CBM Accounting: 

Is it important to read or understand a balance sheet? 

To read a balance sheet, you must first comprehend its further, components and what the reported statistics reveal about your company’s health. 

Without a question, understanding your company’s financial sheet is critical. Our mission is to guarantee that technical accounting concepts, facts, and numbers are explained to clients in clear English and practical terms. As a result, our clients receive vital information without becoming perplexed or bored! 

Isn’t it true that the balance sheet is only relevant for year-end accounting? 

Tangible assets, goodwill, shareholders’ money, and net asset value are frequently determined just once a year, and often many months after the year-end. You would want to see it at least quarterly, if not monthly if it was significant. 

However, a few figures are quite valuable when running a small business or analyzing the books of your rivals. 

The things most closely associated with cash (and even cash itself), such as working capital and debt, are the ones to keep an eye on. 

Debt: 

The World Economic Forum has a long-term debt of roughly $114 million on its books. The notes once again clarify the nature of the long-term debt. The business grew from a $250 million credit facility, according to the papers.

Furthermore, the loan interest rate is 5.45 percent, which is higher than the previous year’s rate of 4.56 percent. It indicates that the company’s credit risk has grown, as seen by the higher debt-to-capital ratio. 

Because there is no need to pay HMRC or suppliers before you need to, many healthy businesses may have a reasonably significant current creditor balance. Therefore, here are a few simple checks to determine if these debt components appear to be in good shape: 

• Creditors of taxation: Calculate the usual outstanding PAYE bill by adding 45 percent of the yearly employee costs divided by 12 and then adding the current company tax bill (from the P+L). You may also try to estimate the typical VAT bill by subtracting yearly income from total costs (excluding property and workers) multiplied by 20% divided by 4. If all of this adds up to around the same figure as the balance sheet, that is approximate, what you would anticipate for a typically running business. 

• Creditors in the trade: Divide the amount into the accounts by the total costs excluding property and workers, and then multiply by 365. This will give you an indication of how long the firm takes to pay invoices. If it is about 30 days, that is quite standard. 

• Loans from a bank: After you have totaled up your bank debt, both current and long-term, you will need to compare it to your EBITDA. Banks used to lend 5–6 times EBITDA, but in today’s environment, small business financing seldom exceeds 2.25 times EBITDA. Any longer and EBITDA may be lower than expected when the loan was taken out. 

Is your business at risk of going into debt? 

The balance sheet may be a valuable indicator of the stability of your financial situation since it provides insight into debt and its influence on your corporation. It accomplishes this by providing you with an estimate of your net debt situation. Subtract cash and cash equivalents from your total liabilities to arrive at this figure. 

A ‘net debt situation’ is when you have more debt than cash. However, if your balance sheet shows that, you have more cash than debt; your company is referred to have ‘net cash.’ 

Is it necessary to be concerned if you have a net debt position? Certainly not. 

It is possible that you are borrowing or investing funds to fund expansion, complete a critical project, or raise stock or other resources to capitalize on a significant market opportunity. 

Moreover, because of the recent epidemic, your debt may have arisen due to events beyond your control, rather than bad financial management. Excessive debt, on the other hand, may be harmful, especially if debt levels remain high for a long time or abruptly grow. 

Comparing your debt level to that of similar-sized firms in your sector is a good method to analyze your debt situation. Debt levels vary widely by industry, so do not draw easy comparisons with other small and medium enterprises. 

You may also incorporate a useful ratio to evaluate your debt situation. Divide your EBITDA (profits before interest, taxes, depreciation, and amortization) by the total debt on your balance sheet. The debt-to-earnings ratio shows how much debt your company has in comparison to its earnings. You may use that ratio is used to evaluate your position to that of other companies in your industry. 

Do I need an accountant to file my balance sheet as a small business owner? 

Balance sheets may be frightening, especially if you do not have any accounting experience. It is worthwhile to engage the assistance of an accountant, either to get you started or to save you time and effort. 

Accountants can assist you in determining what constitutes an asset, liability, or equity. They can also search for any mistakes, miscalculations, or missing data if you are having problems balancing your statement. Balance sheets are something that every small firm should get properly, because even a minor inaccuracy may quickly compound. 

Take action instantly: 

Understanding a balance sheet is a crucial part of operating a business, but it is just as important to act on what you learn. This is especially crucial if you find yourself in a bad debt situation. 

If your clients owe you a big sum of money, for example, this affects your financial position; therefore, you should try to enforce stricter payment conditions. Similarly, you should try to negotiate the best terms with your suppliers. 

That is a basic initial step, but an expert accountant can assist you in taking it a step further and using the balance sheet to gain even more insight into your financial situation. You can find opportunities to enhance your business and/or reduce risk by comprehending the numbers and using the knowledge to take action. 

You can get assistance from CBM Accounting: 

It can be difficult and time-consuming to decipher all of the data on a balance sheet. Our small company accountants have a lot of expertise in assisting businesses with balance sheet creation and analysis. You may also use our fast accounting quotation or contact us if you would like to set up a company valuation. Furthermore, get in touch with CBM Accounting to get more advice about balance sheet creation. 

Annual accounts, also known as statutory accounts, are a series of financial statements prepared at the end of each fiscal year. In the United Kingdom, all private limited corporations must prepare statutory accounts. 

A limited company’s financial activity and performance are reported in statutory accounts. Corporation tax can also be calculated using annual accounts. 

Table of Contents 

Copies of statutory accounts should be delivered regularly. 

What is the purpose of a statutory account? 

Information page of the company: 

Report of the Directors: 

Balance sheet 

Profit and loss account: 

Statement of cash flows: 

Filing your accounts: 

Notes to the accounts: 

Do you require the services of an accountant? 

Copies of statutory accounts should be delivered regularly. 

• Shareholders. 

• Companies House is a government agency that regulates businesses. 

• HMRC (Her Majesty’s Revenue and Customs). 

• Attendees of the company’s general meetings. 

It is a legal necessity to file statutory accounts. You have a choice in how you submit your accounts as a small or medium firm. You can deliver a full set of accounts, often known as statutory or annual accounts, or an abridged set, which has less material but still meets Companies House and HMRC compliance standards. 

• This article discusses the information that must be included in statutory accounts as well as the critical numbers to keep an eye on. 

• Statutory accounts are necessary for your shareholders to understand how your business is doing and to maintain your records up to date with Companies House. 

• A balance sheet, profit and loss account, cash flow statement, notes to the accounts, and a directors’ report, as well as a cover, contents, and company information pages, must be included in statutory accounts. 

• You must include many key figures, and if you know what to look for, you can even check up on how your competitors are doing. 

 What is the purpose of a statutory account? 

 

Information page of the company: 

Your company’s name and registered number, as well as the address of your registered office and the names of your directors and accountant, should all be included on this page. 

Report of the Directors: 

A director’s report is a financial document that is needed to be filed by bigger limited corporations after the fiscal year. The director’s report explains your company’s primary activities, as well as its performance and prospects, as well as any dividends that may be distributed to shareholders. 

The report includes a list of the directors who served during the reporting year, as well as a summary of their responsibilities. 

You can use this part to reflect on the previous year and describe business conditions and financial performance, as well as any events that may have impacted the balance sheet. This can be followed by a look at the next 12 months’ possibilities. 

A director should sign the report, along with a declaration that it has been authorized by the board. 

Smaller businesses with a turnover of £10.2 million or less, a balance sheet of £5.1 million or less, and 50 workers or less are exempt from filing a Directors’ Report in the Statutory Accounts. 

Balance sheet 

The balance sheet’s goal is to give an overview of a company’s financial situation. It accomplishes this by laying out a company’s total assets, as well as any amounts owed to lenders or banks, as well as the amount of equity. 

A balance sheet depicts the worth of everything your company possesses as well as what it owes, as well as what is required to be paid up until the end of the financial year represented by this set of accounts. 

It includes numbers for the current and preceding years, as well as a numbered reference to any explanatory comments on the Notes page. T The elements listed below are the most crucial to include: 

• Fixed assets 

• Tangible assets 

• Current assets 

• Stocks 

• Debtors 

• Cash at bank and in hand 

• Total current assets 

• Creditors: amounts falling due within one year 

• Net current assets/(liabilities) 

• Total assets less current liabilities 

• Creditors: sums due after a period of more than one year 

• Provision for liabilities 

• Net assets 

• Capital and reserves 

• Called up share capital 

• Profit and loss account 

• Shareholders’ funds 

A director should sign the balance sheet, along with a declaration that it has been accepted by the board. 

The important metrics to watch when you or your shareholders study your accounts are those that demonstrate how much cash is available in the business. 

Keep an eye out for trade debtors, or the money owing to you by your customers, as well as trade creditors, or the money owed to you by your suppliers. 

If your clients owe you a lot of money, it will hurt your cash flow, so you should try to impose stricter payment conditions. Similarly, you should try to negotiate the best terms with your suppliers. 

Analyze all of your debt, both short and long term, as well as the value and status of any loans. Debt is divided on the balance sheet between current creditors, who are owed money within the next 12 months, and longer-term borrowings, which include commercial loans and any repayable During the epidemic, government grants or loans were taken out. 

On the balance sheet, loan or grant repayments are categorized. Payments due in the next 12 months, for example, are classified as current creditors on a five-year loan, while the balance is classified as longer-term debt. 

Depending on the amount of time you have to repay your loans, you may not have much free cash. 

Profit and loss account: 

 

The profit and loss account depicts a company’s revenue and losses over a period. 

After deducting all expenses from the income, the profit and loss statement reveals how much money your company produced in a given accounting period. If total expenditures are fewer than sales, a net profit is obtained; if total expenditures are more, a net loss is incurred. 

The profit and loss account calculates your profits by subtracting your costs from your sales. The following is a summary of the account: 

• Gross profit 

• Operating profit 

• Turnover 

• Tax on ordinary activities 

• Cost of sales 

• Profit on ordinary activities before tax 

• Profit for the financial year. 

The pre-tax profit, also known as EBITDA (profits before interest, taxes, depreciation, and amortization), is one of the most important metrics in this section. In the notes to the accounts, you can explain depreciation, tax, interest, the value of fixed assets and amortization, and intangible assets. 

In your internal management accounts, you can provide more detailed detail on certain categories of turnover or costs, but you do not have to disclose such figures in your statutory accounts. 

Statement of cash flows: 

 

A cash flow statement, also known as a funds flow statement, is a financial statement that summarizes a company’s cash transactions for a specific accounting period. 

A statement of cash flows is a financial statement that displays a company’s liquidity and is thus useful in establishing the company’s short-term viability, such as its capacity to pay bills, wages, and other immediate obligations. Investors, lenders, and creditors can use cash flow statements to assess a company’s financial health and ability to repay obligations. 

Only cash and cash equivalents are addressed in a cash flow statement. Any operations that do not directly affect cash collections or payments, such as depreciation or bad debt write-offs, are removed from the cash flow statement but may be recorded in the footnotes. 

The cash flow statement illustrates how much money comes in and goes out of a business. Money from operating activities, investment returns, tax costs, capital spending, and dividends paid are often included. 

It is a useful tool for determining how frugal a company is because it demonstrates how money is spent. You must, however, consider facts from the balance sheet to gain an indication of cash due in the future. 

Filing your accounts: 

After registering with Companies House, you must file your first accounts 21 months later. 

After that, you must file nine months after the conclusion of your company’s fiscal year. Depending on how long you wait to file, you might be fined up to £1,500. 

If you own a small business, you do not have to file a full set of accounts with Companies House. You can file an abridged version instead, but a full version must still be sent to shareholders and HMRC together with your company tax return. 

Notes to the accounts: 

The balance sheet or profit and loss account can benefit from additional context and depth provided by notes to the accounts. 

The notes must contain an explanation of the accounting principles you employ, as well as the rationale for preparation and how you depict turnover and depreciation. 

You can show whether money is owing to a bank, a firm, or the taxman by adding numbers to certain values in the balance sheet or profit and loss account. 

You might include further information under taxable fixed assets, such as the cost of a new asset, as well as depreciation and net book value. 

You can categorize creditors into trade creditors, deferred income, taxes, and other creditors. 

Do you require the services of an accountant? 

Statutory accounts can be technical and time-consuming, and making a mistake can result in fines. Our small business accountants have extensive expertise assisting businesses with the preparation and submission of their financial statements. 

Contact CBM Accounting today for more accounting, tax, and bookkeeping assistance, or request a quick accountancy estimate to discover how we can assist you. 

Death and taxes are said to be the only certainties in life, and although we cannot assist you with your mortality, we can help you with the other. When dealing with cryptocurrencies, it is essential to stay ahead of your tax obligations as soon as possible because penalties for not doing so may quickly pile up. 

Tax regulations for bitcoin transactions can be a little confusing, and you may be liable for a variety of things, including income and company tax, stamp fees, and – depending on the transaction type – VAT. The way you pay tax and how much you pay depends on whether you are classified as a business or an individual. 

The good thing is that HMRC gives a lot of material that makes understanding crypto regulations a bit easier, which we will go over here. 

Table of Contents 

How does it work? Are you a company or an individual? 

Cryptocurrency extracting as a business: 

Staking or lending as a business is subject to a tax: 

As an individual, investing in cryptocurrency: 

What precisely is a disposal for capital gains purposes? 

How much cryptocurrency tax do you have to pay? 

Example of calculating capital gains on a cost-basis: 

EXAMPLE: 

Be aware of the regulations regarding same-day and bed-and-breakfast reservations: 

Transforming one cryptocurrency into another: 

Using Cryptocurrency to pay for products and services: 

Transferring cryptocurrency between your wallets or accounts: 

 

Taxation on Initial Coin Offerings (ICOs) and Initial Exchange Offerings (IEOs): 

How to Reduce Your Tax Expense? 

Utilize your yearly capital gains tax allowance: 

Compose for your cryptocurrency losses: 

Claiming losses for coins or cap coins that are no longer in circulation: 

Taking advantage of deductible costs: 

Final thoughts 

For additional tax information, visit our website, or get an accounting quotation right now! 

How does it work? Are you a company or an individual? 

To begin, keep in mind that if your activity level is equivalent to that of a corporation, HMRC may choose to consider you as a business rather than an individual. So, how does HMRC figure out if your cryptocurrency is an investment or if you are a crypto trader? That relies on several things, including: 

• The total number of transactions and the frequency with which they occur. 

• Organization 

• Risks 

• Commerciality 

• The length of time you devote to the activity 

• The amount of time you keep instruments, whether you buy and sell them quickly or keep them for a long period. 

Cryptocurrency extracting as a business: 

If extraction is defined as a company based on those standards, all earnings will be added to trading profits and taxed. Fees or incentives for any type of staking action will be included, however, reasonable expenditures will be deducted. 

Consider that any rise in value from the time of acquisition will be added to trading earnings when selling mined bitcoin. For such a purchase, you will additionally have to pay National Insurance Contributions. 

Staking or lending as a business is subject to a tax: 

It is worth noting that this is a murky area because HMRC provides no reporting advice. The best method is to announce it in the same manner as extraction is declared. That is, any staking or lending revenue would be taxed at your usual income tax rate. If you were paid in cryptocurrencies, you would have to figure out what the fair market worth of the coins was at the time you got them. 

As an individual, investing in cryptocurrency: 

What precisely is a disposal for capital gains purposes? 

If you are classified as an individual and invest in crypto, you will have to pay capital gains tax when you sell it. HMRC defines ‘disposal’ as follows: 

• Buying and selling crypto assets for profit 

• Exchanging one form of crypto asset for another type of crypto asset 

• Purchasing products or services using crypto assets 

• transferring crypto assets to a third party 

The number of capital boosts will be the difference between the selling profits and the crypto asset’s capital costs – in other words, the sale price less than the purchasing price. 

How much cryptocurrency tax do you have to pay? 

Your tax bracket will determine the answer to that question: 

• Your capital gains tax rate will be 20% if you are a higher or extra rate taxpayer. 

• If you are a basic rate taxpayer, on the other hand, your tax rate is determined by your taxable income and the magnitude of the gain (after any allowances are deducted). 

Certain unique laws apply to high-frequency traders or firms, which we will discuss later. 

Example of calculating capital gains on a cost-basis: 

A capital gain is defined as the difference between the selling price and the cost of an asset when it is sold. The former is generally self-evident, whereas the latter takes some accounting knowledge. 

HMRC calculates using the share pooling technique. With the pooling approach, you essentially average the acquisition costs of all the crypto you have bought to compute the buy cost of the coins you are selling. 

EXAMPLE: 

Natalie paid £1,000 for one BTC. She paid £2,000 for 0.5 BTC six months later. Her entire bitcoin pool is 1.5, and her total permitted expenses are £3,000. 

Let us assume Natalie sells 0.5 BTC for £3000 after a few years. The following is how she would calculate her capital gains: 

	Amount
Consideration		£3000
Less allowable costs	£3,000 x (0.5 / 1.5)	£1000
Gain		£2,000

  

Natalie will have one BTC pool left after this sale, with a £2000 allowed cost. 

Be aware of the regulations regarding same-day and bed-and-breakfast reservations: 

  

The same-day and 30-day restrictions that apply to stocks apply to cryptocurrencies as well. That has to avoid “wash sales,” which are when you sell cryptocurrency and then buy it again to try to recoup losses and lower your tax bill. 

So, let us start with the same-day rule. Let us pretend you sell one cryptocurrency and acquire another on the same day. In such instances, the cost basis for your sale will be the price at which you acquired the cryptocurrency on that particular day. Even if the acquisition occurs before the sale, as long as both transactions occur on the same day, this will still be the case. 

The 30-day rule is similar, but the timing changes (as the name implies), and any crypto you buy within 30 days of a sale is utilized to determine its cost basis. There is a reason why the regulations are in place. They exist to guarantee that you do not sell your shares at the end of the tax year to generate losses that you can then write off before promptly repurchasing them. 

Transforming one cryptocurrency into another: 

  

HMRC indicates that trading one cryptocurrency for another is a taxable event as well. That is, you are essentially selling one asset that is subject to capital gains tax and buying another. The sales price for that transaction is determined by the market value of the cryptocurrency you receive. 

Using Cryptocurrency to pay for products and services: 

  

Using cryptocurrency to pay for products or services is treated the same as selling cryptocurrency by HMRC, and so is liable to capital gains tax. However, keep in mind that the market value of the cryptocurrency you use to make a purchase will be included in the sales profits. 

Transferring cryptocurrency between your wallets or accounts: 

While there is no tax responsibility when you move cryptocurrency between your wallets, it is crucial to remember that you must still keep account of such transactions. If you do not, HMRC may mistakenly believe they are disposals and tax them. 

  

Taxation on Initial Coin Offerings (ICOs) and Initial Exchange Offerings (IEOs): 

  

The process of acquiring tokens or coins in a yet-to-be-released cryptocurrency or firm is referred to as Initial Coin Offerings (ICOs) or Initial Exchange Offerings (IEOs). Investors pay for the new token with current cryptocurrencies like Bitcoin or Ethereum in this example. 

To put it another way, it functions similarly to a crypto-to-crypto trade. The crypto you trade for the ICO token will be subject to capital gains tax. The “sale proceeds” will be the market value of the current crypto on the date of the exchange, not the new coin. Furthermore, this market value will be the cost foundation for the new token you get from the ICO, which you may use to compute pooled expenses. 

How to Reduce Your Tax Expense? 

  

However, the news is not all negative. You can still avoid incurring excessive tax liabilities if you pay great attention to the regulations surrounding cryptocurrencies and tax, as you should with most HMRC-related matters. Our small company accountants provide an overview of what you may and cannot claim. 

Utilize your yearly capital gains tax allowance: 

  

Remember to budget for your allowance. Capital gains tax is only due if your profits exceed £12,000 (raised to £12,300 for the tax year 2020-2021). That is, you compute your capital gains and pay no capital gains tax if the result falls below the threshold. 

Compose for your cryptocurrency losses: 

  

A capital loss occurs when someone sells bitcoin for less than the cost basis. That loss can be deducted from any total gains, but you must first disclose it to HMRC. Losses can be reported either in writing or on your tax return. Capital losses can be claimed at any time after the end of the tax year in which they occurred, for four years. 

Remember that if you sell crypto to a connected individual, the real selling price isn’t the same as the sale profits; instead, the market value of the crypto on the day of the transaction is evaluated. 

Claiming losses for coins or cap coins that are no longer in circulation: 

  

It is not uncommon for someone to hold cash that has become worthless or of “negligible value” when crypto-assets are prone to extreme fluctuations. In this situation, the asset’s owner might claim insignificant value. The crypto assets are processed the same way they would be if they were disposed of, and then re-acquired for the sum specified in the claim. This enables you to write off a significant loss on an asset that has become illiquid. 

Remember that an insignificant value claim just requires the name of the now-worthless item, the amount at which the asset should be considered as disposed of (typically £0), and the supposed disposal date. Once submitted to HMRC, such a claim results in a loss that you can balance against gains. You can submit a claim to HMRC for both the loss and the insignificant value at the same time. 

Taking advantage of deductible costs: 

  

It is worth noting that you can subtract some permitted expenditures from the sales proceeds when computing a gain or loss, as follows: 

• The original purchase price (in pounds sterling) for the crypto asset. 

• Before a transaction was put to a Blockchain, the transaction fees were paid. 

• Any trade-related exchange costs. 

• Professional fees for drafting the contract for the asset’s purchase and sale. 

• Expenses associated with advertising for a buyer or a seller. 

• The costs of apportioning or valuing assets to determine gains or losses. 

It is important to remember that the following expenses are not deductible for capital gains tax purposes: 

• Any expenses that have previously been deducted from earnings for tax purposes. 

• Mining-related expenses, such as power and equipment. This is because, in the instance of persons mining cryptocurrency as a hobby, the expenses of power and equipment are not entirely attributed to mining cryptocurrency. When mining equipment is disposed of away, however, some expenditures are deductible. 

Final thoughts 

  

Finally, it is worth mentioning that in the event of mining as a company, the crypto assets will be included in the trading stock. If the assets are transferred out of trading stock, the company will be considered as if the crypto was purchased at the value of the trading account. When it comes time to dispose of the item, that value might be considered as an allowed expense. 

For additional tax information, visit our website, or get an accounting quotation right now! 

We hope you found this information helpful! Our expert accountants can assist you to get it right when it comes to tax, whether you are trading cryptocurrencies as a corporation or as a person. We are a group of trained and experienced accountants that provide comprehensive accounting support to businesses of all sizes and types. We are not your typical accounting business; we are accountants that specialized in technology. Get in touch with CBM accounting to get further tax information and services. We provide high-quality guidance for your business as per your requirements. 

For bills generated on or after March 1, 2021, a new domestic reverse charge will be implemented in the UK for the construction industry. This was previously scheduled for October 1, 2019, and October 1, 2020. 

To combat corruption in the construction industry, the reverse charge was implemented. 

Table of Contents 

When does the reversal of the fee take place? 

How is reverse charge and how does it work? 

What will I have to perform as the supplier of the supply? 

Constructing an invoice: 

The VAT return is being prepared: 

Getting the VAT return prepared: 

Additional things to consider: 

Alternatively, you can reach out to us for additional information on any of our services: 

When does the reversal of the fee take place? 

This will apply to supplies between construction service companies that are both contractors. 

• They must be CIS-registered and report payments through the CIS (Construction Industry Scheme). 

• The delivery of services is subject to VAT at the normal or reduced rate if the business is VAT registered. 

Only ‘specified supplies’ conducted between VAT-registered firms are subject to the reverse charge. If your invoice contains both CIS and non-CIS supplies, the reverse charge will apply to the whole supply. 

When billing the “end-user,” it will not apply (see below). 

How is reverse charge and how does it work? 

Subcontractors and contractors that provide building services usually charge VAT, and it is included in their invoice to the consumer. The VAT levied on the production is subsequently recorded and paid to HMRC through the VAT return. 

Instead, when these regulations apply, the subcontractor or contractor shall inform the client that the delivery is subject to the reverse charge, and the consumer should account for the output VAT conversely. 

• This means that the client must account for both the output tax (in box 1 of the VAT return) and the input tax (in box 2 of the VAT return) (in box 4 of the VAT return). 

• This may provide a cash flow gain to the customer receiving the supply since the amount owed to the contractor/supplier will be lower 

• Providing that the contractor’s payment due date falls before the VAT due date. 

If you are offering construction services to a client who is not VAT or CIS registered, you should charge VAT as usual rather than using the reverse charge guidelines described above. 

End consumers are people who own property and receive building and construction services but do not provide such services in conjunction with other services, such as a property owner or a developer. The reverse charge does not extend to supplies to end-users who inform their supplier or construction contractor that they are end-user in advance. The end-user will be liable for accounting for the reverse charge even if it does not present evidence of its end-user status to its supplier. 

What will I have to perform as the supplier of the supply? 

Constructing an invoice: 

All of the statutory information that is typically necessary for a VAT invoice should be included in the invoice you submit. You should additionally include on the invoice that the residential reverse charge is in effect and that the client is responsible for VAT. 

The amount of VAT due should be indicated on the invoice, but it should not be incorporated under the heading “VAT charged” or even within the amount owed to you as the supplier. 

The VAT return is being prepared: 

You should not put anything in box 1 of the VAT return as the provider providing the supply, but you must record the net sale in box 6. 

If you are using an accounting system, be sure you are using the right tax code so the process moves into the right boxes. 

As the client receiving the supply, what do I need to do? 

Getting the VAT return prepared: 

You should account for the output VAT in box 1 of the VAT return as the customer receiving the supply, but nothing should be reported in box 6. In addition, you should declare the input VAT as usual in box 4 of the VAT return, and the net purchase figure in box 7. 

Unless you are using an accounting system, be sure you are using the appropriate tax code so the transaction takes place in the right boxes. 

Additional things to consider: 

We anticipate a gradual increase in fines for non-compliance from HMRC. HMRC may require the customer to pay the additional VAT if the reverse charge is not applied when it should be (i.e. the supplier charges VAT to its customer erroneously), even if the additional VAT has already been paid to the supplier and the supplier has accounted for and paid it to HMRC! 

Alternatively, you can reach out to us for additional information on any of our services: 

Contact our tax specialists if you have any more thoughts or would want to learn more about the reverse charge. Keep in touch with us. Further, CBM Accounting also offers a wide range of services to our customers. Our tax professionals can help you have a fuller knowledge of the tax services, financial planning, and management system. 

Accounting and bookkeeping might be the portion of the job that we detest the most as business owners. Many corporations can regard the two words as interchangeable. 

Trade debtors are an unavoidable aspect of the trade world’s largest reality. A trade debtor is created when you issue an invoice for products or services provided. The word can refer to persons or entities who owe you money in various cases. In other situations, the amounts paid will be referred to as trade debtors, and Trade debtors will in most circumstances. 

Trade receivables are similar to accounts receivable, with the exception that your company may be owed money for something other than products or services provided. For example, if you loaned money to another company, it will appear on your balance sheet as a receivable. When you sell a capital asset and are waiting for payment, the situation is similar. 

Although bookkeepers will classify things you sell as assets, they – and the invoices issued for selling them – are categorized differently from capital assets like machinery or vehicles. The distinction is that capital assets are retained for a longer length of time, whilst other assets, such as items in stock, are anticipated to be converted into cash in a relatively short time. 

The minor difference between trade debtors and trade receivables is often not an issue for most businesses, and many use one or the other to represent the same thing or use the words interchangeably without generating difficulties. 

 

Table of Contents 

Enhancing your invoicing game by trading debtors and receivables 

Trade debtors and trade receivables are two different types of trade debtors: 

Keep payment terms clear: 

Make time to send out invoices regularly, and make sure they are accurate: 

Determine who has control of the funds and send them invoices. 

What options do you have if a consumer refuses to pay an invoice? 

Trade debtors and trade receivables: claiming a debt that has not been paid: 

Our accountants can assist you: 

Enhancing your invoicing game by trading debtors and receivables 

The key thing for most of us, whether we call it trade receivables or trade debtors, is to keep track of the money coming in and going out of the business. So, given that the majority of businesses will be billing for excellent services, or a combination of the two, let us focus on how to keep your trade debtors or receivables from becoming bad debts. 

• Almost every small business may benefit from changing how they bill for services or items provided. 

• It is sometimes overlooked although it should be one of your top objectives in reality. 

• This is because cash flow cannot exist without invoicing. 

• It is critical to have a dependable system in place for invoicing your clients on time and regularly to maintain that element of your business thriving. 

Investing the effort to create strong habits in this area may have a significant impact on how a business operates. This is not simply true when it comes to increasing your cash flow. When you have the appropriate system in place, you will spend significantly less time dealing with payment issues. 

Trade debtors and trade receivables are two different types of trade debtors: 

Not everyone who works in business-like chasing money, handling the books, or even discussing expenses. Many entrepreneurs dread this part, and many people start a company because they enjoy working, not because they enjoy bookkeeping. That is where having consistent, transparent systems in place can save you a lot of time when it comes to running your company. Here are a few things you can do to get things moving in the right direction. 

Keep payment terms clear: 

Always get off on the right foot with new clients. It is critical to establish clear terms right away. As a result, both parties will know exactly where they stand, and there will be no later wrangling or disputes. It is beneficial to have things transcribed. While this may appear embarrassing to some business owners, the truth is that it just eliminates most of the potential for future unpleasantness. You will also have something to turn to if an issue develops if your payment conditions are written down. 

Be honest with yourself regarding your payment terms. Although it is tempting to believe that you must be helpful to retain and attract customers, bear in mind that excellent products and services are the best way to do it. Set no conditions that make day-to-day trading an uphill fight. Allow the client some time to pay, but not too much. The majority of small enterprises are up and running in 30 days. 

Make time to send out invoices regularly, and make sure they are accurate: 

You cannot function without it; therefore take the time to invoice clients regularly. Consider this: if you are expecting to be paid in 50 days, the clock will not start spinning until you have sent an invoice. Your suppliers, like your employees, will not wait, so ensure your invoice as soon as a project is finished or items are supplied. 

Rather than risking confusing your clients, take the time to double-check invoices for mistakes and provide more information than you feel is important; neglecting to do so will certainly result in payment delays. 

• It is a good idea and one of the most straightforward steps you can take to improve times. 

• To include your bank details on every invoice. 

• Not every delay is down to reluctant payers, so provide everything your customer needs to pay the invoice quickly. 

Determine who has control of the funds and send them invoices. 

This is another easy yet extremely efficient method for being paid faster. Send the invoice to someone other than your usual contact. They are most likely a buyer, but it does not make them liable for payment. Find out who it is and email them immediately to avoid any unnecessary stages in the payment procedure. 

Keep track of any past-due payments. 

You have set clear payment terms, supplied and invoiced for goods or services on time, so you are entitled to be paid on time too. You should never feel embarrassed about chasing payment if you have a good system in place. 

In the vast majority of situations, it will be a simple oversight. It is simple to send a first reminder a day or two after bills become due if you use accounting software. After that, you will need to phone the individual in question and give them a mild, courteous reminder. 

What options do you have if a consumer refuses to pay an invoice? 

Even if you have to track down the occasional payment (which is inevitable when operating a company), you should never go beyond that. So, what should you do if it becomes apparent that your consumer will not pay? 

When this happens, you will need to follow a certain procedure. Begin by giving the client a copy of your original payment conditions agreement, which will come in handy at this point. You must remain calm and polite, but strong in your tone and indicate that you will not let the situation go. 

Make it clear that if the debt is not resolved within seven days, you will file a claim in the appropriate court. Mark the letter, and use that as the basis for any future earnings. 

Trade debtors and trade receivables: claiming a debt that has not been paid: 

If your seven-day request remains ignored or underpaid, you will have to take things a step further. You can submit a statutory payment demand when the amount due exceeds $5,000. This is a common document that requires payment within 21 days. You can file a lawsuit after that time has passed. Statutory payment requests are typically highly successful since failing to comply with one allows you to file a bankruptcy petition against the debtor. 

• A firm can file a claim in small claims court for up to $100,000. 

• Save all debt-related paperwork, such as a signed order or contract and your 7-day payment demand. 

• You may submit a claim online, and if you are victorious, the debtor will be responsible for both the debt and the court fees. 

Our accountants can assist you: 

You might be able to get away with a spreadsheet to monitor your invoice if you are a small or new firm. If your business is developing, meanwhile, we strongly advise you to use an invoice tracking system, which is typically offered as part of service accounting software. 

CBM accounting will centralize all of your company’s invoice information and provide you reminders when payments are due, making it less likely that you will miss a payment. We can assist your firm in setting up and training on how to use the 

Technology by our one of the country’s leading Accountants. 

To learn more about how CBM accounting can assist you with your business, contact us or use our fast accounting quotation tool. 

how to add xero data to a business dashboard

A key component of a company’s financial recording and reporting system. While the chart of accounts can be similar across businesses in similar industries, you should create a chart of accounts that is unique to your individual business. You should ask yourself, what do I want to track in my business and how do I want to organize this information? For example, we often suggest our clients break down their sales by revenue stream rather than just lumping all sales in a Revenue category. 

 

Hardware-Printers could be further broken out in Hardware-Printers-HP and Hardware-Printers-Canon. At that point, further detail may be more harm than help and lead to inaccurate accounting. It is generally better to have less detail and keep it accurate than to have inordinate amounts of detail that tend to be inaccurate. For example, under GAAP, a fixed cost like equipment depreciation would be a direct cost for a manufacturer. However, in a managerial-focused environment, fixed costs are often kept out of gross margin, to keep it from being distorted by swings in sales. Gross margin is the profit after subtracting direct costs from sales. 

Table of Contents 

How a chart of accounts works in construction 

Here’s Warren Buffett’s Best Advice to Prepare for a Bull Market – The Motley Fool 

How to Set Up a Chart of Accounts for Bookkeeping 

Clean Up Your Chart of Accounts by Automating Your Payables 

Example of a Chart of Accounts 

How to Use Your Chart of Accounts 

How a chart of accounts works in construction 

Some accountants recommend sticking with a GAAP-oriented chart of accounts and generating management-oriented financials through custom reports. These custom reports cobble together numbers from various sections of the chart of accounts to get the financial statement layout management is looking for. They know (especially the entry-level providers) most people would struggle to set up a quality chart of accounts. To fix that, they automate the setup part and build a pre-fabricated chart of accounts into the software. Recently, I was helping a technology company owner improve his financial reporting. Financial reporting standards dictate that there are two broad categories of accounts in a company’s chart of accounts. 

Within the accounts of the income statement, revenues and expenses could be broken into operating revenues, operating expenses, non-operating revenues, and non-operating losses. In addition, the operating revenues and operating expenses accounts might be further organized by business function and/or by company divisions. A chart of accounts is a list of all accounts—including asset, liability, expense, revenue, and equity—that are included in a business’s general ledger. The size of the company will largely determine the number of accounts listed in a company’s COA. 

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Here’s Warren Buffett’s Best Advice to Prepare for a Bull Market. 

The chart of accounts is therefore the foundation of the financial statements. Your chart of accounts allows you to get an overview of all the debts you owe to others—the company’s liabilities. In your liability accounts, you’ll see all your short, medium, and long-term loans, and interest payable on those loans. And if you have any employees, your chart of accounts lets you know what your business owes for wages payable. 

How to Set Up a Chart of Accounts for Bookkeeping 

Indirect costs are overhead expenses that relate directly to sales yet cannot be traced directly to a specific product or job. Examples include factory supervisor wages, incidental supplies (e.g., tape, glue, screws), machinery repairs, shop building insurance, etc. Expenses such as tax preparation fees, marketing, and legal expenses would not be considered indirect costs, but rather operating or general/admin expenses. In certain industries such as advertising, farming, or consulting, most of the costs run together under the broad category of operating expenses. 

The first recognizes income from a project once it’s totally complete. Residential developers may be recognizing their income in this way, as they only get paid when a house sells. If you’re a contractor, there are two fundamental ways to recognize income — completed contract or percentage of completion. The chart itself consists of a list of numbered accounts, with their name and a short description of what’s included in that account. You can see a few accounts that are unique to the business, such as Cooking Supplies, and other accounts that are common only to retail business, such as Cash Discrepancies and Merchant Fees. \nThe sample Chart of Accounts, shown, was developed using QuickBooks. 

 

Customize the COA by adopting a suitable pattern for account numbering based on your company’s size, departments, structure and operations. Remember that the best chart of accounts structure is the one that serves your managerial accounting purpose. The COA is customizable; hence, it serves the need of every business organization. A COA is a financial tool that provides an extensive understanding of cost and income to anyone who goes through the company’s financial health. There are five primary types of accounts, i.e., asset, liability, equity, income and expense. 

Clean Up Your Chart of Accounts by Automating Your Payables 

A firm is a business organization—such as a corporation, limited liability company, or partnership—that sells goods or services to make a profit. Doing so ensures that accurate comparisons of the company’s finances can be made over time. These sample charts will give you an idea of the different accounts you’ll set up and the system for adding new account numbers. If manually done, an organization should come up with its own numbering system for each account’s corresponding account number. We are a subcontractor and the GC we are working for is asking us to sign and notarize progress payment line waivers for amounts they have not paid us for, is this legal? 

Tax and audit CPAs adjust your reports to fit their purposes anyway, so go ahead and make a complete break. The new goal is financial reports that provide the metrics you need to run your operation throughout the year. It is hard for me to be critical because 90% of business owners can probably relate to never having looked at their chart of accounts. Even many controllers and CFOs are weak on how to structure a robust chart of accounts that easily and plainly produces the financial information management wants to see. 

Example of a Chart of Accounts 

The problem, however, is that unless you have automated accounts payable software, finding the correct account isn’t always such a simple task. The completed contract method is mostly used by owner-builders and spec developers because the sale price is not known until the project is complete.. Using this method, revenues and expenses are recorded when the sale is closed. 

Most companies choose a metric such as labor hours and estimate a rate per labor hour that “uses up” these indirect costs over the course of a month or year. For example, consider a simple manufacturer who last month had $1,000 of manufacturing supplies and $1,000 of shop repairs, for a total of $2,000 of indirect expenses. Based on that, the company decides to allocate indirect cost to future projects at a rate of $10 per hour ($2,000 total costs/200 shop labor hours). 

 

A chart of accounts allows for more accurate reporting and prevents data entry errors. It also helps with maintaining financial privacy since only authorized personnel can view the reports and they only see the information relevant to their department. This refers to the specific accounts to be used in making journal entries such as cash, accounts receivable, accounts payable, retained earnings, utilities expense, and revenue. 

How to Use Your Chart of Accounts 

\nIf you’re setting up your Chart of Accounts manually, be sure to leave a lot of room between accounts to add new accounts. GAAPGAAP are standardized guidelines for accounting and financial reporting. Horizontal analysis is used in financial statement analysis to compare historical data, such as ratios or line items, over a number of accounting periods. Accruals are revenues earned or expenses incurred which impact a company’s net income, although cash has not yet exchanged hands. Examples of expense accounts include the cost of goods sold ,depreciation expense, utility expense, and wages expense. In the end, the chart of accounts, the budget, and management preferences all must align in an effective accounting system. 

A cost center is a function within an organization that does not directly add to profit but still costs an organization money to operate. Thankfully even a full-scale reboot does not require an astronomical amount of time or energy. When you add a new account number, space out the numbering system to leave room for growth. For example, you might number your business accounts 1001 – Cash account, 1010 – Business checking, 1015 – Business savings. Then when you need to add accounts, you can fill in the gaps between one business account number and another. To do this, she would first add the new account—“Plaster”—to the chart of accounts. 

The discussion flows and inevitably someone says “It would be nice if we could see…” The CFO gets an exasperated expression on their face and writes the request on their notepad. The https://bookkeeping-reviews.com/d Query Language comprises several different data types that allow it to store different types of information… 

• As an aside, for companies subject to US tax regulations, Meals is an example where you’ll want an easy way to give your tax accountant a stand-alone total amount at year-end. 

• Yes, each business should have its own Chart of Accounts that outlines the specific account categories and numbers relevant to their operations. 

• A firm is a business organization—such as a corporation, limited liability company, or partnership—that sells goods or services to make a profit. 

• If you use a system like Xero or Wave Accounting, a chart of accounts will be provided to you during the setup process. 

• The importance of a chart of accounts lies in its ability to organize financial records. 

In a well-designed chart of accounts, that offset account is typically grouped with the accounts that receive the actual supplies and repairs expense. That way if actual supplies and repairs total $2,700 for the month, you can see at a glance that indirect cost was overapplied to projects ($3,000 applied, compared to $2,700 actual). As each hour of labor cost is posted to the system, the estimated indirect cost of $10 per hour is also automatically posted. 

For an organization, it is important that all transactions are categorized correctly because they will be used as the basis for generating reports about the business. As transactions are entered into the accounting software, they are posted to the appropriate accounts in a double-entry system. Financial statements provide a summary of these transaction amounts for a given time period.