An employee furlough refers to a temporary leave or modification of normal working hours for a specific amount of time. It’s a leave of absence given to an employee with the promise that they will still have their job once the leave is over.
There are numerous reasons why employers implement a furlough employee policy, such as plant shutdowns, seasonal work, company reorganisations and reduced demand due to COVID-19.
Don’t rush into implementing an employee furlough policy without talking to your lawyer or HR specialist first.
If you decide that putting employees on furlough is the best option for you and your employees, then you need to prepare a notification letter. Your furlough notice letter should contain the following:
- Address – This is a formal letter, a furlough notice should clearly state the date, employee’s name, and their address
- Purpose – State the purpose of the letter. Get straight to the point. Include the employee’s position, department, reason for the furlough, and information about any changes to employee benefits. It is advisable to tell the employee that this action does not reflect dissatisfaction in job performance
- Detail – Explain what a furlough is, determine the length of the furlough, and communicate employee benefits during this period to employees
- Future communication – Offer a way for the employee to keep in touch. End the letter on a positive note.
An example of a furlough letter to your employee
Here is an example of the kind of letter you might send to your employees (feel free to copy this);
(Send to employee’s address or email. Note you should discuss and record employee agreement to be Furloughed before you send this letter)
Dear [Employee name],
NI NUMBER AND / OR PAYROLL NUMBER
The purpose of this letter is to formally notify you that your position as [INSERT] on the [XXX DEPARTMENT] is being closed temporarily due to the downturn in business as a result of the COVID-19 Pandemic.
Your last official day of work will be [INSERT DAY]. Your salary and benefits will continue at their current level during the Furlough period. Please understand this action in no way reflects dissatisfaction with your job performance.
The length of this furlough is [insert future date or unknown currently].
We will provide regular information as the current Pandemic unfolds and when we return to normal working routines.
A Furlough is a short-term paid temporary leave of absence at 80% [AS APPLICABLE] of current salary. The furlough period and provisions may be changed or terminated at the sole discretion of the Company, and does not create any employment contract, express or implied.
During the furlough period, your pension and other benefits will continue [IF APPLICABLE].
Thank you for your contributions to the business and if I can help in any way, please contact me.
PLEASE NOTE: THIS IS AN EXAMPLE ONLY AND SHOULD NOT BE RELIED UPON UNTIL YOU HAVE CONFIRMED CONTENTS WITH YOUR LAWYERS AND / OR HR SPECIALISTS. WE RECOMMEND SEEKING HR ADVICE WITH ALL EMPLOYMENT MATTERS
This blog is for people who have income from self employment whether that be as a sole trader or partnership.
On Thursday, the Chancellor announced a further support package for the Self-Employed, the Self-employment Income Support Scheme (SEISS). We have tried to summarise the information provided as much as possible, and we understand that there will still be many questions from clients.
We believe that the main reason for the delay in this information being delivered is because it has been so difficult to devise a scheme that is fair to all, and a solution that could be implemented quickly and as efficiently as possible.
Firstly, we must clarify that being a Limited Company director does NOT mean that you are self-employed. Self-employed is defined as follows (taken from the HMRC website);
“A person is self-employed if they run their business for themselves and take responsibility for its success or failure.
Self-employed workers aren’t paid through PAYE, and they don’t have the employment rights and responsibilities of employees.”
Here are the main points of the scheme:
- You must be self-employed or a member of a partnership to qualify, and STILL be trading now
- Your loss in trading profits MUST be because of the Covid-19 pandemic
- Your trading profits MUST be under £50,000 for 18/19 OR the average (under £50,000) over years 16/17, 17/18 and 18/19 (they are the only 2 options, you cannot pick and choose years)
- This grant is available for 3 months and maybe extended
- The maximum payment per month is £2,500
- Self-employment needs to be the majority of your overall income to qualify.
Individuals who have registered as self-employed from 6th April 19 will NOT qualify
Access to the scheme will be available no later than the beginning of June and HMRC will contact those that qualify directly, guidance specifies that you should NOT contact HMRC to check eligibility. A form will be completed, and the payments will be paid directly into your bank account. 3 months payments (for March, April and May) will be made in June. The scheme may be extended.
Some of the questions that we have had so far:
What if I haven’t filed my 18/19 tax return? – You have until 26th March 20 to file it – without penalty.
Will I have to pay tax on the money I receive? – Yes, the amount MUST be disclosed on your 20/21 tax return.
I haven’t made a profit in the last 3 years, what can I claim? – You will not be able to claim anything under this scheme.
How can I prove that I’ve lost income because of the Coronavirus?
Unfortunately, this is not something with a defined answer. People are being advised to take a “responsible approach”, and when your tax return for 20/21 is filed, checks will be made to find that you did make a reasonable loss. No information has been released on whether there will be penalties for any ‘inaccurate’ information submitted.
If you need help with your business in the interim, the Business Interruption Loans are available. These will need to be paid back, however they are interest free for 12 months.
We will of course help all our clients through this process however please bear with us as the details of how this will work are yet to be released. Please keep checking our Facebook page for updates.
- The Coronavirus Job Retention Scheme is a temporary scheme open to all UK employers for at least three months starting from 1 March 2020
- It is designed to support employers whose operations have been severely affected by COVID-19
- The scheme is open to all UK employers that had created and started a PAYE payroll scheme by the 28th February 2020 and have a UK bank account
- Full time employees, part-time employees, employees on agency contracts and flexible or zero-hour contracts all are eligible for this scheme
- The scheme also covers employees who were made redundant since 28 February 2020, if they are hired again by their employer
- It is important that the employee conducts no work for the business whilst on furlough pay
- This scheme does not apply to anyone hired after 28th February 2020. Therefore, these staff members cannot be furloughed and no reclaim for their wages can be made
- If an employee is working but on reduced hours or reduced pay, they will NOT be eligible for this scheme
The scheme is available from 1st March. Can I backdate my claim to 1st March?
- This scheme as mentioned above is also available for employees who have been laid off or made redundant before this scheme was announced, along with any employees who will be laid off as a result of this crisis in the next three months (subject to extension by the government)
- Therefore, if your business had started to struggle and you laid an employee off or made them redundant in early March you can bring them back into employment and furlough them, so they remain on the payroll but do not conduct any work for you.
- Your claim would then be from the date the employee was furloughed.
- For many this may be from the date this scheme was announced or possibly later in March when stricter lock down procedures came into force.
- However, some businesses were adversely affected from the crisis in early March so this scheme ensures their employees who had already been paid off or made redundant would be brought back and will receive 80% of their usual salary.
When can we process the reclaim and do we pay the staff wages before we receive this repayment?
- The scheme is expected to be up and running by the end of April.
- Please note this means no repayment grants for the wages will be available before this date. However, claims will be back dated to the date your employee was furloughed.
- This means employers will pay their staff the new agreed 80% salary and then when the repayment mechanism is up and running, they will receive a grant from HMRC to recover this cost
- We understand many companies will suffer from insufficient cashflow and may struggle to pay the wages out before the scheme is live. The government has also introduced the grants and Business Interruption Loans and companies should seek further information on this to help with their current cashflow issues. (Facebook videos and emails from Kirkwood Wilson should help here)
What to do as an employer?</h2?
- Employers should discuss with their staff and make any changes to the employment contract by agreement. When employers are making decisions in relation to the process, including deciding who to offer furlough to, equality and discrimination laws will apply in the usual way.
- As an employer you should write to your employees confirming that they have been furloughed and keep a record of this communication
- We can provide this letter template for you.
- Once your employee has consented to this form of leave, please provide this evidence to your payroll processor. I.e. Kirkwood Wilson, if we complete this for you.
What can we claim as an employer?
- An online HMRC portal will be used once up and running to claim 80% of furloughed employees usual monthly wages.
- At a minimum, employers must pay their employee the lower of 80% of their regular wage or £2,500 gross per month. An employer can also choose to top up an employee’s salary beyond this but is not obliged to under this scheme.
- The employees usual wage calculation cannot include fees, commission and bonuses. It relates purely to salary / hourly wages (Which will be calculated on an averaged basis, discussed below)
- The cap of £2,500 per employee per month relates to gross pay.
- If an employee’s salary exceeds £2,500 per month then you can only claim the £2,500. The remaining amount payable to the employee would be at the expense of the employer.
- The claim for associated Employers National Insurance contributions and minimum automatic enrolment employer pension contributions on that employee’s wage is in addition to the £2,500 cap.
- This means if your employee’s salary at 80% is £2,500 you can still claim for the associated cost for Employer National Insurance and Employer pension contributions. As this claim is in addition to the £2,500.
- Many directors take a small monthly salary and higher dividends for tax planning purposes
- This scheme does not include dividends.
- Therefore, if a director is furloughed as the business has temporarily closing due to this crisis, they will only be entitled to a reclaim of 80% of their salary processed via the payroll system as at 28th February 2020
Tax on income
- The furlough pay is a replacement of earnings and therefore will be subject to usual income tax and other deductions (Therefore, your staff will still pay tax on their income)
Employee pension contributions
- Automatic enrolment contributions for the workplace pension will still be payable by the employee
- Unless they have already opted out of the scheme
How to calculate the 80% pay?
Full time and part time employees
- For full time and part time salaried employees, the employee’s actual salary before tax, as of 28 February should be used to calculate the 80%. Fees, commission and bonuses should not be included.
Employees whose pay varies
- If the employee has been employed for a full twelve months, you can claim for the higher of either:
– the same month’s earning from the previous year (I.e. March 2019)
– average monthly earnings from the 2019-20 tax year
- Employed for less than a year:
– claim on an average of their monthly earnings since they started work.
- Only started in February 2020:
– Use a pro-rata for their earnings so far to claim
What you need to make a claim
- Your ePAYE reference number
- The number of employees being furloughed
- The claim period (start and end date)
- Amount claimed (per the minimum length of furloughing of 3 weeks)
- Your bank account number and sort code
- Your contact name
- Your phone number
If we complete the payroll for you, we will have the majority of this information, as mentioned above it is vital you send us the dates in which you furloughed your staff members and also their written confirmation to the new retention scheme.
You can only submit one claim at least every 3 weeks, which is the minimum length an employee can be furloughed for. Again, if we complete the payroll we will help with the administrative burden when this portal becomes live.
How will I receive this money back?
Once HMRC have received your claim and you are eligible for the grant, they will pay it via BACS payment to a UK bank account.
Compliance with the scheme
Claims made must be made in accordance with payroll records.
Your employees must receive the full 80% of their pay declared, in no way as an employer can you benefit from such scheme. Therefore, no fees can be charged to your employees from the money that is granted.
What happens if business struggles after the scheme ends?
When the government ends the scheme, you must make a decision, depending on your circumstances, as to whether employees can return to their duties. If not, it may be necessary to consider termination of employment (redundancy).
Employee rights and entitlements
Employees that have been furloughed have the same rights as they did previously.
Including Statutory Sick Pay entitlement, maternity rights, other parental rights, rights against unfair dismissal and to redundancy payments.
Will the business be taxed on this repayment received?
Yes, the income received under this scheme is made to offset against the staff wages cost
This income will therefore be included in the business’s calculations of its taxable profits for Income Tax and Corporation Tax purposes.
Wage cost illustration
Example, Salary of £1,650 per month –
Amount to process via the payroll system £1,650*80%= £1,320 (GROSS)
This will be processed as ‘Furloughed pay’.
If the remaining 20% is going to be payable by the employer you would put the remaining £330 through the payroll system on the usual salary line.
The £1,320 furloughed pay above will them be declared on the HMRC portal as this is lower than the £2,500 cap and therefore the full amount is recoverable.
You will receive payslips for your staff members as normal, making the net payments to them like you do each month.
When you receive the grant from HMRC, this will be the gross salary total for all your furloughed employees.
This includes PAYE, Employees’ NI and Employees’ Pension. As the employer you would have already paid this out in your usual monthly PAYE bill, and therefore your grant covers this for you also as you only pay your employees the net figure.
Employer NIC and Employer Pension cost –
This will be calculated on an employee by employee basis.
Your payroll software will calculate this for you, again if we do your payroll, we will declare this on the portal to reclaim this cost back for you.
Hopefully this explains that employees on the furlough scheme, receiving only 80% of their wage results in the employer paying nothing.
The only difficulty firms will face is cash-flow issues as discussed above, please refer to other government financial support to help you through this difficult time.
As you may have read or seen on the news over the weekend, the Government has introduced the Coronavirus Job Retention Scheme which takes effect immediately. We have summarised the information available to us below:
What does ‘furlough leave’ mean?
Furlough leave is a term which already exists in US labour law and is where an employee is granted a leave of absence, in our case due to an inability for the employee’s company to provide work to them temporarily.
Which businesses are eligible?
All UK businesses are eligible regardless of size.
How does it work?
Employers can place employees on leave, meaning there is no requirement for the employees to perform work as well as presumably requiring employees not to attend the place of work. The Government will reimburse 80% of the wage cost of furloughed workers up to a cap of £2,500 per employee per month. Employers can, but are not obliged to, make up the 20% difference.
When does the scheme take effect from?
It can be retrospectively applied back to 1 March 2020 and is currently likely to remain in effect until 31 May 2020, although this may be extended depending on circumstances in the future. As the employer, you can implement furlough leave immediately.
Is employee’s consent required given, that they won’t be working and should the employer decide not to top up their salary after the Government contribution, resulting in a 20% pay cut?
Where possible, it is advised that you obtain the employee’s written consent to a variation of their contract which includes a 20% pay cut. Given the current situation, some employers may have no alternative to implement furlough leave which brings with it its inherent pay cut. This would naturally be a decision made by the employer and without consent from the employee. The business’ financial position may dictate this.
To encourage consent, employers might point out that the only other alternative is immediate redundancy. This is not a particularly comfortable position for employers to take (as it could result in a drawn out employment tribunal), it is arguably a “least worst case” scenario if it encourages the employee to accept furlough leave.
Could this lead to constructive dismissal claims?
In theory, yes. Ordinarily, a unilateral decision to reduce the worker’s pay, with a statement that entitlement to redundancy pay being delayed is likely to be a constructive dismissal. The Government’s furlough leave guidance makes it clear that employees remain subject to existing employment law and that implementation of furlough leave may be “subject to negotiation”. However, to claim constructive dismissal the employee has to resign. The question would be why would they resign and have no job, as opposed to a job that they can return to when allowed, and 80% of salary? Furthermore, the prospect of a return to full salary in the not too distant future will hopefully be enough to persuade them not to pursue this route.
Who makes the decision to go on furlough leave?
You as the employer.
You are also able to specify which employees the leave is applied to, although this in itself opens up the debate around office politics!
If Kirkwood Wilson completes your payroll for you, then you must ensure you make us aware of the employees that you have furloughed.
Can a furloughed employee perform some work from home?
At this point in time, we expect this to be no. We hope to have some clearer guidance around this over the coming days.
When can the business expect the reimbursement from the Government?
It’s expected the reimbursement portal will be live over the next 2 to 3 weeks, at which time applications will be possible. There is expected to be some delay before the reimbursement takes place, so our best guess at this time is by the end of April.
If the employer pays the 80% of salary and do not top up the additional 20%, could employees have a claim against you for unlawful deductions from wages? And will higher paid employees have a claim for salary in excess of £2,500 per month?
Without a furlough agreement then they could. However, given the load the crisis is likely to have on the tribunal system, any claim made is likely to take several months to conclude. It is hoped that in the meantime employees can recognise the moral imperative of accepting furlough leave given the current crisis.
Does a lack of work not just mean the employee is redundant?
Under normal circumstances a reduction in work or closure of workplace would result in redundancy. Right now, this an unattractive route for most employers to take. Presumably most employers want staff to stay on with reduced pay so that they are in post when things start to return to normality. This appears a more appealing option for the employer than redundancy now and then having to incur the cost of recruiting new staff when business picks up again.
What if the employee insists they are redundant?
This answer is similar to the answer given above in relation to constructive dismissal. The employee would have to leave, bring an employment tribunal claim and then wait for a year for that claim to come to a full hearing. In the meantime they would have no job and no income, making it a very unattractive option for employees. The consideration is that taking a pay cut even for highly paid employees, for a few months is likely to be a better outcome for most employees.
What if we made an employee redundant in March? Can we reinstate them and furlough them?
This would appear to be ok. If payment of notice and statutory redundancy pay was made, the employer would presumably ask for this to be reimbursed before entering into the furlough leave arrangement.
If redundancy is the only option, do the normal rules apply?
Yes. Redundancy is only payable after 24 months’ service. Over this length of service could in theory result in legal action and a claim for unfair dismissal. It is therefore recommended that you use 23 months’ service as the barometer as notice periods can mean employees cross over the 2 years’ service line.
The information contained above is designed to give you some guidance with the new scheme. The information is generic and advice should be taken in each individual situation. There are a great number of uncertainties and assumptions included in the information above and Kirkwood Wilson accepts no liability for any action or inaction taken on the basis of this information alone.
It is important to remember that we, as your accountant, still have many questions surrounding the implementation of the help provided by the Government. As the information is released, we will digest it and pass it on to you, our client. At this time we suggest you keep an eye out for an email from ourselves, as well as following us on Facebook.
Please also remember that during this difficult time, we are here for you. Our staff are on hand to answer any of your questions, so please get in touch if anything is worrying you.
We’re in this together.
Caroline & Dan.
Support for businesses who are paying sick pay to employees:
The Government will pass legislation shortly to allow small and medium-sized businesses and employers to reclaim Statutory Sick Pay (SSP) paid for sickness absence due to COVID-19. The eligibility criteria for the scheme will be as follows:
- This refund will cover up to 2 weeks’ SSP per eligible employee who has been off work because of COVID-19
- Employers with fewer than 250 employees will be eligible – the size of an employer will be determined by the number of people they employed as of 28 February 2020
- Employers will be able to reclaim expenditure for any employee who has claimed SSP (according to the new eligibility criteria) as a result of COVID-19
- Employers should maintain records of staff absences and payments of SSP, but employees will not need to provide a GP fit note
- Eligible period for the scheme will commence the day after the regulations on the extension of Statutory Sick Pay to those staying at home comes into force.
We will keep you fully informed of any developments on when the repayment mechanism for employers will be finalised.
Support for businesses that pay business rates
There will be a business rates retail holiday for retail, hospitality and leisure businesses in England for the 2020 to 2021 tax year.
Businesses that received the retail discount in the 2019 to 2020 tax year will be rebilled by their local authority as soon as possible.
A £25,000 grant will be provided to retail, hospitality and leisure businesses operating from smaller premises, with a rateable value between £15,000 and £51,000.
Any enquiries on eligibility for, or provision of, the reliefs should be directed to the relevant local authority. Guidance for local authorities on the business rates holiday will be published by 20 March.
We will keep you informed of these developments as and when they happen.
Support for businesses that pay little or no business rates
Additional funding for local authorities to support small businesses that already pay little or no business rates because of small business rate relief (SBRR) has been announced by the Government. This will provide a one-off grant of £10,000 to businesses currently eligible for SBRR or rural rate relief, to help meet their ongoing business costs.
If your business is eligible for SBRR or rural rate relief, you will be contacted by your local authority – you do not need to apply.
Funding for the scheme will be provided to local authorities by government in early April. Guidance for local authorities on the scheme will be provided shortly.
We will keep you up to date with the latest news.
Support for businesses through the Coronavirus Business Interruption Loan Scheme
A new temporary Coronavirus Business Interruption Loan Scheme, delivered by the British Business Bank, will launch shortly to support businesses to access bank lending and overdrafts. The government will provide lenders with a guarantee of 80% on each loan (subject to a per-lender cap on claims) to give lenders further confidence in continuing to provide finance to SMEs. The government will not charge businesses or banks for this guarantee, and the Scheme will support loans of up to £5 million in value. Businesses can access the first 6 months of that finance interest free, as government will cover the first 6 months of interest payments.
Details will follow and we will support any clients needing assistance with obtaining this support.
Support for businesses paying tax
All businesses and self-employed people in financial distress, and with outstanding tax liabilities, may be eligible to receive support with their tax affairs through HMRC’s Time to Pay service. These arrangements are agreed on a case-by-case basis and are tailored to individual circumstances and liabilities.
If you are concerned about being able to pay your tax due to COVID-19, call HMRC’s dedicated helpline on 0800 0159 559. Please contact us if you want our help here.
As a family run business, the wellbeing of our team is and has always been paramount. Our priority right now is making sure that our team is safe and that we are able to service all of our clients as usual. We understand that this is an incredibly worrying time, and we wanted to take a moment to assure you that we’re following the advice from the Government, NHS, and World Health Organisation. Things are changing daily and weekly, but here’s a little update from us.
All our team were sent home on Tuesday and by lunchtime, we were all set up and working from home.
We are still taking phone calls as usual on our normal number and Ashleigh is able to help just the same as before. The only difference at the moment is that the person that you need to speak to will have to call you back, which in most cases is straight away.
Emails and all cloud based platforms are still working as usual, so, for example, the process of uploading receipts to ReceiptBank is working as usual. Access to Xero has not been affected.
It has been fantastic to see just how resilient we are as a team, and it really does prove that as a team we can do anything. We are using Teams and WhatsApp to communicate throughout the day as well as scheduling in a team catch up every few days by video call.
Updates to help your business
At the moment, we are all obviously waiting for the daily 5pm update from the Government, and we will try to get something out as soon as possible when the updates are there. These will be posted on our social channels (Facebook, Instagram, and LinkedIn). In between updates, we are of course here to help guide you through this minefield as best as we can.
We hope that whilst everyone’s situation is different, you are able to focus on the positives, no matter how small, and know that this will come to an end.
Stay safe and look after one another.
Caroline and Dan.
Given the recent situation that has arisen with COVID-19, we thought it would be helpful to provide you with our first update following the Government announcements.
SSP is now payable to employees from day one if they are absent due to COVID-19 (rather than having to wait and not receive anything for the first 3 days).
Companies can reclaim SSP payments to employees for up to 2 weeks. Anything over that period will NOT be reclaimable.
We aren’t 100% sure, but we anticipate that the SSP will be reclaimed by receiving a credit against your PAYE liabilities. i.e. there’ll be no immediate cash flow benefit to this, but when PAYE becomes due, the amount payable for a period will be reduced by the SSP refund credited to your PAYE account.
Business Interruption Loans
These loans are available up to £5m.
These will be available from next week and businesses must apply through their high street bank and not with the government.
The loan is basically guaranteed by the government up to 80%. We think this will only be available to businesses who will be able to prove they have experienced losses. You won’t just be able to get a nice cheap loan!
The loan has no interest on it for the first 6 months.
All businesses in the retail, hospitality, and leisure sector will pay NO business rates for the next 12 months. The local authority will deal with these over the next few weeks.
This grant is available to ANY business that is eligible for small business rate relief (SBRR). The business must either rent a property or own a property.
You are eligible for SBRR if your business:
– Has a property with a rateable value of less than £15,000
– And, your business has only one property (generally – in some instances it is still available if you have more than one property).
You can find the business’ rateable value on the rates statement for the year.
Anyone eligible for this grant needs to do nothing; the local authority will contact the business in the coming weeks.
This grant is available for businesses in the retail, hospitality, and leisure sectors that have rateable values between £15,001 and £51,000.
Guidance on this will be provided to the local authority by 20th March so clients can contact them from next week for more information.
Information is coming out daily and we will share as much as possible as soon as it becomes available. Until then, if you have any questions, please don’t hesitate to contact us and we will help wherever we can.
Shopping locally is something we all do, whether it is a conscious effort or another unconscious decision that we make. Being able to pop round the corner for the necessities in life is easy and something that we all rely upon. We can all agree that we wouldn’t go miles out of our way to buy our shopping for the week, so why would you do this when choosing your accountants? Locality is a crucial element to receiving top quality, reliable services, so we think choosing accountants in Lancashire might be the best decision for you and your business. Read on to see what the team here at Kirkwood Wilson have to say about this.
Benefits of choosing a local accountancy firm
When choosing the right accountancy firm for you, firstly, you want to ensure that you will have easy access to their experts. After all, if you are expected to leave your money in their hands, you want to make sure you can build a secure relationship with your accountant.
By aligning yourself with a local accountancy firm, you are allowing your business more chances to build a strong professional relationship with your accountant than would be possible if you invested in an accountants some distance away from you and your business.
Familiarity helps to strengthen bonds and relationships, which means having a local accountancy firm close to hand could strengthen your professional relationship with your accountant.
Another benefit that many wouldn’t consider is the local economy. By investing in a local accountant, your business will be making a conscious effort to keep money circulating in the local economy. By keeping money within the local economy, the positive impact in terms of jobs and prosperity can have a truly beneficial impact for all the businesses and people in the area.
Why choose an accountants in Lancashire?
Here at Kirkwood Wilson, we have many clients in and around the Burscough, Lancashire area and we know the true value of working with local clients. The team at Kirkwood Wilson put their clients first, as an utmost priority. We are happy to say that we tailor our services and packages around you to ensure you receive a bespoke package that is exclusively tailored to your needs.
We pride ourselves on our ability to offer high-quality services, from reliable business advice to up-to-date digital accounting services. For more information on the best accountants in Lancashire or advice on our digital accounting services, contact us today.
Moving away from manual accounting practices, miscellaneous receipts, and excel spreadsheets can be a daunting task. However, getting up to date with the era of digitalisation, will not only make your business compliant with HMRC ‘Making tax digital’ (MTD) initiative but, can also reap numerous benefits for your business. Here at Kirkwood Wilson, we are specialists in digital accounting and are here to take you through the benefits of digital accounting and explain how our expertise can benefit your business today!
What is digital accounting?
As of April 2019, all VAT registered businesses over the taxable turnover threshold of £85,000 were required to keep digital tax records and submit VAT returns via MTD compliant software. This initiative prompted a roll out of digital accounting software and a surge of online cloud accounting systems. HMRC also advised that companies that earn below the VAT threshold can also sign up for MTD for VAT voluntarily, as it would soon be a requirement for all businesses.
Digital Accounting provides the opportunity to transition your business away from manual bookkeeping to keeping all of your business’s financial information in an electronic format. Digitising your accounts will get you ahead of the game and will make tax returns, invoicing, and making payments a much simpler task.
At Kirkwood Wilson, we are a Xero gold partner and experts in Xero online. Xero is an online, cloud accounting system and also compliant with MTD. We are also experts in Sage and QuickBooks, so we can help you make the best decision about which software is most suitable for your business.
So, what are the benefits of digitising your accounts?
- Streamline your business processes
- Increased reliability – digital accounting allows you to keep your data secure
- Suitable for all businesses and industries.
Streamline your business processes
Manual accounting practices always involve a risk of human error and it is virtually impossible to store financial information in one place. This becomes a struggle when it comes to compiling a report or financial summary.
A digital accounting system will store your all of your information in one place, which gives your business access to real time financial data; from cash flow to balance sheets in a few clicks.
Xero online will provide you and your employees with instant access to your finances from any location and any time, as long as you have access to an internet connection. It can also provide daily summaries of your finances, send invoices, track projects, and so much more, saving you valuable time to focus on other business operations.
Increased reliability – keeping your data secure
Digitising your accounts and using an MTD compliant online accounting system will offer more reliability than manually handling paper documents in a filing cabinet. In the event that your business’s financial information goes missing, there will be no need to worry after digitising your accounts and years of financial information won’t be lost in a flash.
With digital accounting you can backup your data securely, meaning that all information is stored in a remote location and can be retrieved any time of the day.
Suitable for all businesses and industries
Of course if you are under the taxable threshold of £85,000, you might be hesitant or not see the urgency to digitise your accounts, as the April 2019 deadline did not apply to you.
However, it is worth bearing in mind that digitising your accounts will move your business into the 21st century, allowing you to focus on your core operations. In addition with HMRC’s mission to be “one of the most digitally advanced tax administrations in the world”, it won’t be long until your tax returns will be required to be digitalised.
Additionally, we understand that it is important for businesses with numerous departments to be interlinked and up-to-date with key financial information. With paper-based accounting, it can be a timely process updating all departments on the latest financial reports. With online accounting software, any stakeholder, with access rights, can access financial information, leading to fluidity throughout your business.
How can Kirkwood Wilson help in making your accounts digital?
As experts in digital accounting, we can offer you expert advice about Xero online cloud accounting system. One of our experts can talk you through the range of benefits that Xero has to offer. We can also advise, how best to integrate digital accounting practices within your business and how to make you HMRC Making Tax Digital compliant.
Not only do we specialise in Xero, here at Kirkwood Wilson we understand that online accounting systems can be daunting, especially with the varied options and platforms available. We also offer training in QuickBooks and Sage to help you decide on the best approach to digitising your accounts.
To find out more about digital accountancy or enquire about our digital accounting services including Xero, Sage and QuickBooks training, contact Kirkwood Wilson today Call 01704 546 000 or email [email protected].
HMRC’s ‘Making Tax Digital’ (MTD) policy has been introduced to enable businesses and individuals to organise their taxes correctly by utilising modern digital software. Xero is making tax digital, through their cloud-based ‘making tax digital’ compatible software. As we all know, in today’s modern age most things are moving online to make life easier and to provide a more environmentally friendly, paper-free approach to filing documents. This is why HMRC’s Making Tax Digital was conceived and in order to accurately implement this policy, Making Tax Digital compatible software is a big must for you and your company.
Making tax digital compatible software
A significant element of HMRC’s Making Tax Digital policy is that businesses are required to implement a fully digital tax system. Therefore, it is vital that appropriate software is installed and utilised to comply fully. This is where Xero comes in.
As provided on HMRC’s list of Making Tax Digital compatible software, Xero has been verified as completely MTD compliant.
Is Xero Making Tax Digital Complaint?
Xero has specifically created new features that are designed with you in mind to ensure that the Making Tax Digital implementation is as easy and pain-free as possible. These new features are available in every package that Xero has to offer – at no extra cost. This is why we recommend Xero as the most suitable option when you’re considering ‘Making Tax Digital’ compatible software.
Xero and Making Tax Digital
Since Xero has been working closely with HMRC over the last three years, they have recently implemented their MTD for VAT solution to assist businesses with becoming HMRC Making Tax Digital compliant and to support them through this changeover. Xero has worked hard to produce a new VAT process that works in line with the MTD policy – just what every business needs!
The new VAT Solution includes:
- Additional reports
- VAT outlines
- The means to post VAT adjustments
- The ability to submit in real-time to HMRC
Xero software has been specially designed to make the move towards Making Tax Digital for VAT as effortless as possible. Xero not only caters to your invoicing, payroll, billing, and expenses needs, but it can also implement your online VAT processing system.
Xero has even put together a free training course for anyone who feels they require a walkthrough of the MTD journey, so they have everything needed to become an expert in MTD for VAT compliance!
Here at Kirkwood Wilson Accountants, we recommend Xero as our number 1 choice for Making Tax Digital compliant software.