Are you fully utilising your Receipt Bank account?

Below are some of our favourite old and new Receipt Bank features:

Staff expenses:

Employees can upload receipts which’ll automatically be included in an expense report that is submitted for approval on your chosen date. Once approved, the report will import into QuickBooks or Xero, for more information click here.

Smart splitting expenses:

It is possible to allocate one receipt/purchase invoice to multiple expense/VAT codes. Click into the transaction in the inbox and scroll down to ‘Edit line items’, you can then allocate to as many codes as possible, i.e. travel, entertainment, etc, etc.

Bank Statement feature:

Tired of sending your accountant your bank statements?

Soon, a new feature will be available in Receipt Bank that will allow bank statements (CSV or PDF) to import automatically into Receipt Bank once made available from your bank.

Invoice fetch:

We can link Receipt Bank to multiple utility bill suppliers and many other suppliers through the use of invoice fetch. You simply need to login to the supplier (i.e. Amazon or PayPal) through Receipt Bank and all invoices will automatically import. There are over 2000 suppliers available, see the list here. Suppliers include BT, Dropbox, EE, GoDaddy, MailChimp and many more.

Here at ODA we relish the opportunity to continually find ways to automate the bookkeeping process, resulting in greater productivity and a reduction in human error!

How to avoid Companies House Penalties

In the recent few months, HMRC and Companies House have increased the late filing penalties payable by companies that file their accounts, and as such we feel that it is extremely important that you are fully aware and up to date on what these increases are and how they will affect your company should you continue to file your accounts late.

The current penalties for private companies are as follows:

Not more than one month late                                                                                  £150

More than one month, but not more than three months late                      £375

More than three months, but not more than six months late                      £750

More than six months late                                                                                    £1500

In addition, penalties will be doubled if the if the company files its accounts late in two successive years.

As well as the automatic penalties, the Registrar also has the power to strike a company off the register and take legal action against directors and secretaries personally, which could result in fines of up to £5,000 for each overdue document. Also, a director who is in breach of his duty to prepare and file accounts may be disqualified from being a director of any company for up to 5 years.




Switching accountants

How hard is it to move to a new provider?


You may be frustrated by the service, the fees or maybe just a breakdown in the relationship.  Because you’ve been with “Ye old stuck in the mud” firm for 100 years you can’t pluck up the courage to make that call.


Well you don’t have to be frightened. At ODA we’ll give you a standard template to send to “Ye old stuck in the mud” that respectfully informs them of the transfer of services to us.


We’ll then contact them and request the various HMRC reference codes, previous accounts filings and tax returns


You will have to sign our letter of engagement and provide proof of identity (sorry it’s the law), but that’s about it.


Interested? Why don’t you fill in your details here and one of us will call you back


Low Cost Trader (LCT)

In the autumn budget, the Chancellor snuck in a change to the calculation of the Flat Rate Scheme (FRS) which means the very people it helped most are now precluded.  All businesses using the FRS will have to perform an assessment to determine whether the new rules apply or not.

We’re still waiting for HMRC to issue the ready reckoner, so in the meantime, how do you figure out if a registered business needs to amend their VAT FRS percentage?

I suggest any business or contractor using the FRS should crunch the numbers to calculate their VAT liability.

There are two rules, if your VAT inclusive expenses are less than 2% of your VAT inclusive turnover you are a LCT and have to use 16.5% when calculating VAT liability.  If that doesn’t catch you, think about the second rule: if the 2% calculation is less than £1,000 then you too are caught.

So what are VAT inclusive expenses? The first thing you need to work out is where do you pay VAT? Start by looking at your invoices, but be aware that not all invoices have VAT numbers so they’re all out too. Public travel generally doesn’t have VAT so that’s another major expense for most traders, and out too. Help is on hand though - conveniently HMRC also say you have to exclude capital expenditure, food and drink and anything to do with your vehicle. So that leaves your agents’ fees, accountancy charges, phone, and maybe rent?

The HMRC website is silent on what period is used to complete the calculation. We use a recent 12 month period. It’s made more difficult if you’re not using real time accounting, so what about the last set of accounts? What if that’s not representative of your current business? Whatever method is used, we always recommend you keep a record in the event of a challenge by HMRC. As HMRC see how many self-employed they catch moving forwards, I’m sure there will be more refinements.


The end of the Flat rate scheme

For years contractors and small businesses have been using the VAT flat rate scheme (FRS) to calculate the VAT to be paid to HMRC. The huge advantage was it was simple and there was an added benefit if you didn’t have much VAT to claim on purchases.


In the Autumn budget in Mid November 2016 the Chancellor snuck in a change to the calculation of the FRS precluding the very people it helped most.  All businesses using the FRS will have to perform an assessment as to whether the new rules apply or not. In a nutshell if you have vatable expenditure of less than 2% of gross income you can only use the FRS rate of 16.5% irrespective of the type of business.  The nice people at HMRC will have an on-line tool to help us though this isn’t available until January.  Don’t think you can include capital expenditure or one off costs. The calculation of 2% only relates to everyday costs.




Contractor on the FRS using a rate of 14.5% will be paying £14.50 to HMRC for a gross invoice of £100 (£83.33 + £16.67 VAT). Assuming no vatable purchases saving of £2.17 per £100. Under the new scheme the contractor will be defined as a “limited cost trader” and will have to pay £16.50 on the same invoice to HMRC, that’s 17p you’ve just saved.


Of course you can transfer to the standard calculation and as long you only reclaim VAT on the applicable invoices all fine, you do know what they are don’t you?


 Anyone on the FRS have a couple of months to get their house in order as the new rules are due to take effect from April 2017.

R&D Tax Credits - What are they all about?

SME limited companies may be missing a trick?

If it can be proved that you are working on R&D then you could be entitled to Corporation Tax relief using the SME R&D Tax Credit Scheme.

You may not know that you are conducting some form of R&D, making you eligible to claim the tax relief. With the current rate of relief being 230%, it is worthwhile making some time to see if you could claim.

 HMRC define a R&D project as one that “…seeks to achieve an advance in overall knowledge or capability in a field of science or technology through the resolution of scientific or technological uncertainty - and not simply an advance in its own state of knowledge or capability.”

 What this basically means is that if you’re working on a project that has the potential to improve an existing product, create a new product, develop prototypes or develop a piece of software, then it’s likely a claim could be made. You do not need to have successfully made a breakthrough to claim either.  

 Step one is to review your development program, to see if it meets the HMRC criteria.

 Step two, figure out what are the qualifying costs. These can include staff costs, Subcontractors/Externally Provided Workers, Consumables, Utilities, Software Licences and Clinical Trials.

 The final step is submitting the claim to HMRC. This is done at the same time as your Corporation Tax Return and requires not only a breakdown of the qualifying costs but a technical justification of why you believe them to be part of a R&D project. Although writing the technical justification may seem complicated, there are some guidelines as to what to include from HMRC which make the task much less daunting. Once submitted, the technical justification does not need to be submitted again but for each year that the project exists, you will need to submit a qualifying costs breakdown.

Don’t let your mouth write no check that your tail can’t cash -Bo Diddley

Businesses at some point will possibly need finance for any number of reasons. Before embarking on sourcing the funds the business owners should consider the options. The cardinal rule is to match the funding requirement to funding source. If you need to raise finance for a capital project you’d probably not use your credit card!
Consider the questions you’ll need to ask yourself.

Changes in dividend rules effective from 6th April 2016

You may be aware there are some changes in the calculation of tax on dividends announced in the last budget.  

From April dividends will be taxed in a new way. Gone will be the 10% tax credit and the basic rate banding. Which effectively meant you didn’t pay any tax on dividends if your total earnings didn’t exceed c43K.

Under the new rules the first £5,000 of divided income won’t be taxed. Then the next £32,000 is taxed at 7.5%. But only after other income has been taxed into consideration.


We would suggest you review the amount of dividends taken so far in this tax year together with other income. If its less than £43,000 (plus any additional pension relief for higher rate tax payers) there may be an opportunity to save some tax if the dividends were paid in the tax year 2016/17.


10 things to remember when setting up or expanding a business

It’s coming to the end of the year and lots of people are wondering what 2013 might hold, some even might be thinking of a career change and becoming self-employed. Here’s a quick checklist before you make that step into oblivion….

1. Do the research, is there a market for the product/service?

Think about the whereabouts of potential customers, are they in reach?

Be clear about the decision to take this course; if it’s a hobby business treat it as such.           If you want to secure your future then be really critical.

Ask friends and family for advice.

2. Does your idea need a patent?

There are loads of valid reasons why you don’t want to register your idea, right up to the    point somebody nicks it.

If you’re looking for investment it unlikely a business angel would be prepare to back the business if the product is not secured.

3. Make sure you’re not in breach of any restrictive covenants

If you are a director or an employee of a company check your employment contract to ensure you are not in breach of any restrictive terms.

4. Do some basic costings

Figure out both selling pricing and costs, is there enough margin?

At some point you will need to complete a business plan which can be time consuming but you probably won’t get any finance unless it is completed.

5. Check if there are any grants or tax incentives available.

There are often local grants for expanding businesses or taking on new staff.  HMRC   have a number of schemes available including EIS and EFG.

6.Join industry or regional networking groups

Subscribe to Linkedin and join groups in your industry, people love to share information.

They may not always be competitors but potential customers and suppliers.

Your local Chamber of Commerce is often a great source of information

7. Figure out how much financing you’ll need and where to get it

Do a cash flow forecast for at least 3 years. The first year is about set-up and getting a   foot in the market, the second is where the momentum begins, and the third is where you start to become established.

8.Think about the legal structure of the business

The is not all about tax, there are loads of factors to consider including costs

9.Don’t forget about the taxman

Frankly the days where you can trade under the radar are long gone. Just like CCTV, he’s watching and will catch up with you. Then you’ll have to pay back taxes, fines and   interest. He will not be content with just the tax you avoided paying.

So get it right first time, register.

This is a list of taxes that may apply to you

  • Betting and Gaming Duties
  • Capital Gains Tax
  • Construction Industry Scheme
  • Corporation Tax
  • Environmental taxes
  • Excise Duties
  • Income Tax
  • Inheritance Tax
  • Insurance Premium Tax
  • National Insurance Contributions
  • PAYE
  • Petroleum Revenue Tax
  • Stamp Duties
  • VAT

10. Contact OD Financial Services

Enterprise Finance Guarantee (EFG)

There is a lot of talk about the Seed Enterprise Imitative Scheme (SEIS) and Enterprise Imitative Scheme (EIS), I’ve even written a couple of blogs about them too. Let’s be honest about it, they are very appetising. But not every SME is eligible. In the last budget they introduced a new incentive for SMEs to help them expand called the Enterprise Finance Guarantee (EFG). Strangely it is exactly the same as the Business Enterprise Scheme (BES) the government introduced a few years ago. At least the banks and the government know how it works and it is just a bit of re-branding.

That aside, it really is an excellent scheme though not generally publicised, or for that matter actively supported by the high street banks in my experience. I’m told there has been a change recently. In fact since 2009 some 18,000 SMEs have been supported to the tune of £1.8b, according to the official website.

So what is it?

“The Enterprise Finance Guarantee (EFG) is a loan guarantee scheme to facilitate additional lending to viable small and medium size enterprises lacking adequate security or proven track record for a normal commercial loan.”

The government will guarantee 75% of lending to a SME, meaning the business has a 25% exposure if the venture is not successful.

Most business sectors are eligible though not all. The borrowing can be for almost anything business related:-

  • New term loans (unsecured and partially secured) for working capital or investment purposes including R&D.
  • Re-financing of existing term loans, where the loan is at risk due to deteriorating value of security or where for cash flow reasons the borrower is struggling to meet existing loan repayments.
  • Conversion of part of all or an existing utilised overdraft into a term loan in order to release capacity in the overdraft to meet working capital requirements
  • Invoice finance guarantee providing a guarantee on invoice finance facilities to support an agreed additional advance on a SME’s debtor book, to supplement the invoice finance facility on commercial terms already in place (available for terms up to three years).
  • Overdraft guarantee providing a guarantee on new or increased overdraft borrowing where the SME is viable but has inadequate security to meet a lender’s normal requirements for the level of overdraft requested (available for terms up to two years).

The business must operate in the UK, with turnover less than £41m (where did that random number come from?) and with repayment periods for 3 months to 10 years.

What they don’t say on the website is that they will only lend to existing businesses, no new enterprises.

The SME still must have a viable business plan and must still meet banking criterion for lending. It is not a way to circumvent normal credit checks. The banks will still credit score in precisely the same manner as all other loan applications; including ability to repay and loan period. They may still ask for personal guarantees too but not on personal property.

The cost, the bank will charge their normal tariff interest and charges plus a further 2% annual premium that goes to support the scheme.

Disaster Recovery Planning

Watching the events in the US over the last few days got me thinking about disaster recovery planning.  To some degree all businesses need to have some formal procedures in place in the event the unforeseen occurs. Businesses must have an adequate recovery plan in order to ensure the continued survival of the company for the owners, staff and customers.

Here's a checklist

Be prepared

First and foremost have adequate insurance; it doesn’t take much to review it with your broker.

Put together a list of key stakeholders with contact details that can be accessed. We all have smartphones so create a directory. Better still use dropbox where key staff can access the information.

Complete regular back-ups in the cloud; and check they work


It’s difficult to plan a response if one can’t design endless scenarios. It’s probably not a useful exercise anyway.

The ability to respond has two elements: short-term and long term.  Look at the situation and decide what can be done to minimise the damage immediately and what resources are needed, available and within your means.


This is the longer term response, getting the business back to the position it was prior to the event.

Often when short-term and long-term objectives are mixed chaos ensues.

Mitigation and prevention

In an ideal world this should be the first priority but life’s not like that and generally under Health and Safety rules most of this should have been covered, no matter what industry.

A few weeks back I wrote about Dashboard Reporting and qualitative research. If you know there is a Hurricane Sandy on the way don’t ignore it

A final thought, there are always annual events, some good and some not so. Just because a particular situation hasn’t occurred before doesn’t mean the resources are not available. There is always help at hand.

Dashboard Reporting

There’s a new word that crept into the financial vocabulary a few years ago: “Dashboard”. It’s not a new way of working, just a new word. The software companies latched on to it, instead of having a management reporting module it’s now called a “Dashboard” and in fairness, it is more than just historical financial information shown in tabular format which made us all yawn.

The difficulty is defining what is relevant and what is overload.  A dashboard should be a snapshot, no greater than a page long, often with information shown as graphical presentation. Its purpose is to show how the business is performing against its objectives. The information should be current, not just relevant at the time of going to press.

The dashboard report should be more than just the financial results with colours. All dashboards comprise of four elements

Drivers Results
Quantitative research Qualitative research


The Drivers are the key performance indicators (KPI), generally not the financial data a business needs.

The Results are can be described as the numbers; profits, balance sheet data, comparisons.

Quantitative research gathers data in numerical form which can be put into categories, or in rank order, or measured in units of measurement.  This type of data can be used to construct graphs and tables of raw data. Generally the data is sourced from CRM (customer relationship management)systems.

Qualitative research gathers information that is not in numerical form, such as open-ended questionnaires, unstructured interviews and unstructured observations. Qualitative data is typically descriptive data and as such is harder to analyse than quantitative data. By far the most difficult and subjective. It’s importance is the link between benchmarking against historical data and applying the strategy for the business to go forward. It might even be as simple as an observation in market trends.

When designing a dashboard there are two final points to note.  The data must be measurable and secondly apply some form of warning system, traffic lights are the obvious choice, universally understood.

Tax Penalities

It has been said there are two things we can’t avoid, death and taxes. There is now a third to add: interest and surcharges when making late submissions of returns to the taxman. The idea of the taxman charging for late returns is a fairly new concept.

“ICTA88/S203 (9) provides that interest on late paid PAYE is not deductible in computing income, profits or losses for any tax purpose. Sub-paragraph 4B of paragraph 6 of Schedule 1 Social Security Contributions and Benefits Act 1992 has the same rule for interest on late paid Class 1, Class 1A and Class 1B NIC”.

In the good old days the taxman didn’t enforce this, he was just happy to get what was due. If it was late or extremely late, they rarely imposed fines or surcharges.

Then government cut-backs started to take hold in 2008 and HMRC like all government departments had its budgets cut. Somebody had a eureka moment and came up with the idea to use the legislation and started issuing penalty notices.

I remember attending a HMRC seminar back in 2010. The tax inspector giving the presentation was up-front about the new strategy of income generation.

Since then the tax office has been cranking up its strategy. It started by issuing late fines of £100, in the early days if appealed they would often be rescinded. Today if a tax return is filed late or not paid on time, a fine is issued includes surcharges or interest and often both as a matter of course. These fines apply to both individuals and businesses and for all forms of tax.

Ignorance of the rules is not a defendable response. Look at the increase in the number of people having to complete self-assessments. Everybody needs to be vigilant, any change in circumstances should be reviewed from a tax perspective - perhaps have that phone call with the tax office.

Appealing is not always straightforward nor does it automatically have the desired effect of HMRC reversing its position.

We have had two successful appeals recently. The first was for a self-assessment fine of £1,200. The other was for Class 2 NIC demand. This was rather nasty where the debt recovery department wanted six years of payments amounting to almost £700 we negotiated a settlement of £120.

So what can you expect to pay if you’re late?

It depends on the type of tax due, but expect to pay at least 3% interest whereas if you are eligible, HMRC pays interest of 0.5% (tax free!!!)

You can also look forward to receiving penalties which vary depending on the severity; suffice to say it’s expensive.

On a separate blog there is a list of these penalties. If you’re late with any tax returns from 1 April 2010, penalties will apply to the following taxes and duties:

  • Betting and Gaming Duties
  • Capital Gains Tax
  • the Construction Industry Scheme
  • Corporation Tax
  • Environmental taxes
  • Excise Duties
  • Income Tax
  • Inheritance Tax
  • Insurance Premium Tax
  • National Insurance Contributions
  • PAYE
  • Petroleum Revenue Tax
  • Stamp Duties
  • VAT

A couple of final points, if you have a tax bill and are not in a position to pay, HMRC can be accommodating. We have assisted many clients over the years and can speak on your behalf.

Any fines or interest imposed are deemed to be non-deductible for the purposes of completing any tax return.

HMRC Summary of Main Penalties




Length of delay Penalty you will have to pay
1 day late A penalty of £100. This applies even if you have no tax to pay or have paid the tax you owe.
3 months late £10 for each following day - up to a 90 day maximum of £900. This is as well as the fixed penalty above.
6 months late £300 or 5% of the tax due, whichever is the higher. This is as well as the penalties above.
12 months late £300 or 5% of the tax due, whichever is the higher.
In serious cases you may be asked to pay up to 100% of the tax due instead.
These are as well as the penalties above.



PAYE Annual Returns

forms P35 and P14 must reach HMRC is 19 May  £100 per 50 employees for each month or part month you delay filing your return
form P11D(b), it must reach HMRC by the filing date of 6 July  £100 per 50 employees for each month or part month you delay filing your return


Penalty charges for late monthly and quarterly PAYE / NI and  student loans payments

No. of defaults in a tax year

Penalty percentage

Amount to which penalty percentages apply



Total amount that is late in the tax year (ignoring the first late payment in that tax year)





10 or more




Turnover less than £150,000


Surcharge to pay (calculated as a percentage of your unpaid VAT)

Surcharge period

First default

No surcharge. Help letter issued.

None, but if you miss another VAT deadline within 12 months of the issue of a help letter you will formally enter the surcharge system.
Second default

No surcharge. Surcharge Liability Notice issued.

12 months
Third default in a surcharge period

2% (unless it is less than £400, in which case you won't be charged a surcharge at this rate)

12 months from the date of the most recent default
Fourth default in a surcharge period

5% (unless it is less than £400, in which case you won't be charged a surcharge at this rate)

12 months from the date of the most recent default
Fifth default in a surcharge period


12 months from the date of the most recent default
Sixth and subsequent defaults in a surcharge period


12 months from the date of the most recent default


Turnover more than £150,000


Surcharge to pay (calculated as a percentage of your unpaid VAT)

Surcharge period

First default

No surcharge. Surcharge Liability Notice issued.

12 months
Second default in a surcharge period

2% (unless it is less than £400, in which case you won't be charged a surcharge at this rate)

12 months from the date of the most recent default
Third default in a surcharge period

5% (unless it is less than £400, in which case you won't be charged a surcharge at this rate)

12 months from the date of the most recent default
Fourth default in a surcharge period


12 months from the date of the most recent default
Fifth and subsequent defaults in a surcharge period


12 months from the date of the most recent default


Penalties for inaccurate returns

Reason for the error Disclosure of the error to HMRC Minimum penalty (as a percentage of the tax) Maximum penalty (as a percentage of the tax)
  NB A disclosure is unprompted if at the time you tell HMRC about it you have no reason to believe HMRC have discovered it, or are about to discover it.    
Careless Unprompted 0% 30%
(you fail to take reasonable care) Prompted 15% 30%
Deliberate Unprompted 20% 70%
(you knowingly send HMRC an incorrect document) Prompted 35% 70%
Deliberate and concealed Unprompted 30% 100%
(you knowingly send HMRC an incorrect document and try to conceal the inaccuracy) Prompted 50% 100%


 Limited Companies

Penalties for not filing your Company Tax Return on time

Months after deadline

Cumulative Penalty










Penalties for not telling HMRC your company is liable for Corporation Tax

Type of failure Maximum penalty payable
Non-deliberate 30% of the potential lost revenue
Deliberate but not concealed 70% of the potential lost revenue
Deliberate and concealed 100% of the potential lost revenue


Companies House fines

Length of delay (measured from Penalty : Penalty :
the date the accounts are due) Private company Public company
Not more than 1 month



More than 1 month but not more than 3 months



More than 3 months but not more than 6 months



More than 6 months






Double Taxation Agreements

I’ve got a number of clients that have income and investments both in the UK and overseas. They want to know where do they declare these earnings and how? Other questions I’m often asked are why someone they know doesn’t pay tax or why do they appear to pay less than their fair share?

To determine where you pay your personal tax depends on the answers to a few questions.

For tax purposes where you live is not a simple question. There are three possible answers to that: Ordinary Residence, Residence and Domicile.  Just to make it more interesting there is no tax definition for Ordinary Residence or Residence.

However, it is generally understood that Ordinary Residence is where you live, socialise or do business (though not casual). It is not uncommon to have Ordinary Residence in one or more countries.

Residence is where Joe Public pays their taxes.

Then it becomes interesting, a UK taxpayer pays tax on all their earnings worldwide, including Capital Gains and you pay as it “arises”. If the individual is not an Ordinary Resident or not Domicile (non-Dom) there are special rules on their foreign income and gains. These rules are of course complicated, but generally the tax payer has a liability on income remitted to the UK.

One of the tests HMRC use to decide is the number of days a person stays in the UK. If that person remains here for more than 183 days in a tax year they are resident and have to pay tax. There are even more complicated rules on transiting which mean that basically you can’t leave the airport. Generally this is used by contractors going overseas to work .

The big bucks are the non-Doms. There are various types of domicile status, you may not have a permanent residence or nationality, but you will always have a Domicile. Domicile is not a tax, but a legal term defined by case law.

Persons who do not have Ordinary Residence or are non-Dom usually pay tax on a remittance basis, IE what they bring into the country.  There is provision for these persons to pay on an arising basis but personal circumstances will decide what is best for each individual.

A few years ago there was a bit of a kerfuffle about high profile persons living in tax havens whilst resident in the UK. There are an estimated 200,000 non-Doms in the UK. The government introduced a levied of £50,0000( previously £30,000) RBC (Remittance Basis Charge) against non-Doms deciding to take this election.

A RBC comes into effect if an individual is a non-Dom and has more than £2,000 foreign earnings not remitted to the UK.  The big test is whether you are a long-term resident of the UK.

(This also applies to foreign nationals working here on a secondment, they are deemed to be a resident for UK tax purposes).

There are also other considerations to take into account re overseas earnings that muddy the waters, for example interest on savings in excess of £100 and employed income greater than £10,000.

But if the total of your unremitted foreign earnings is less than £2,000 it doesn’t have to be declared. More complications when completing a self-assessment, and whether the tax payer is paying “arising” tax or “remittance” tax!

If you have been resident in this country, move abroad and then return to the

UK at a later date which is less than five full tax years since your date of departure from the UK, you will have been temporarily non-resident in the UK.

It is possible that any 'relevant foreign income' (RFI) which you brought to the

UK during the time you were not resident in the UK, will be chargeable to UK

tax in the year you become resident again in the UK. Pretty much all these earnings are taxable unless they are employment earnings.

Almost everyone will be entitled to receive a personal tax allowance except for non-Doms or UK residents who have earnings over £2,000 from foreign sources. Personal tax allowances are given for a whole tax year even if you are only in the UK for part of the time.

Double Taxation Agreements (DTA)

Different countries have their own tax rules and laws. When you have income and capital gains from one country and are resident in another, you may have to pay tax in both countries under their different tax laws. To help avoid being taxed twice - 'double taxation', the UK has negotiated double taxation agreements with many countries. Depending on an individual’s status they may be eligible for a person tax allowance and other allowances as well as being able to offset the tax paid overseas.

Just to keep you interested, there are other specific rules pertaining to entertainers and sports personalities both coming to the UK or UK nationals going overseas. These persons also have additional relief not enjoyed by the majority of us. There are also exceptions which apply to seafarers and certain oil and gas workers.

If an ordinary resident intends to leave the UK either permanently or for reasons of work they have to complete a form P85. This form serves several purposes including allowing tax refunds to be completed but more importantly gives HMRC the ability to assess your Domicile and Residency for tax purposes.

Lastly just watch out for National Insurance Contributions (NIC) depending on where your income is coming from, if from abroad that country may have some obligations to which the tax payer may have to adhere.

Directors’ Duties

They say it’s great to be a Director of a company, it’s a sign of status; get your business cards updated; change your profile on Linkedin? So what really is a Director? Anyone who is part of the senior management team where their actions demonstrate or portray a position of authority.

Directors may also be known by different titles, Trustees for example. To be obligated under the Companies Act 2006 a person does not need to be registered at Companies House, may not have completed an AP01, (Appointment of a Director Form). These people are often known as Associate Directors.

What does all this mean?

There are a number of legal obligations under the Companies Act 2006. Directors need to be aware that if the Act is contravened they could be personally liable for the breach. Depending on the severity, this could range from being barred from acting as a Director to time in prison.

The main sections of the Act are s171 and s172.

s171 Duty to act within powers.

A Director can’t commit the company to a contract outside its constitution. For that matter neither can a Director act outside of their role, For example, a Sales Director couldn’t sign a contract to acquire a new business in an un-associated industry.

s172 Duty to promote the success of the company.

A Director must act in the best interests of the company and its stakeholders including creditors.

This is probably the hardest to disprove. By the time a Director is in breach they have probably already been sacked, or at least put on gardening leave.

s173 – s182 deal with how to resolve conflicts, generally where there is the potential for a breach of s172.

s173 Duty to exercise independent judgement.

This means you are allowed to disagree; it allows a Director to take independent advice.

S174 Duty to take reasonable skill care and diligence.

It’s all about being prudent, although if a Director has specialist knowledge of the subject matter they can exercise their skill, ie an Accountant acting as the Finance Director.


s175 Duty to avoid conflict of interest


Probably the most important area, often with a non-Executive Director. It doesn’t matter if the conflict currently exists or it could be a potential one.

A potential conflict from a current or new relationship includes family members and their actions too.

When the Director becomes aware of any conflict, they must inform the Board. If a conflict with s172 looks likely the Board will need to make a decision. If this situation arises make sure everything is documented.

Be aware this also refers to previous directors. Although a Government Minister can happily go off get a seat on a board of some listed company in the city.


s176 Duty not to accept benefits from 3rd parties.

This is not just about a jolly to the races, it’s about the influence of the Director in making decisions or absenting themselves from the decision-making. We have to be practical about it, after all, the Companies Act isn’t going to stop business entertaining.

A company could consider putting a policy in place outlining acceptable benefits which could be companywide and not restricted to the Directors. Where there is the likelihood of a breach, do ensure there are mechanisms already in existence to enable reporting to a higher authority.

s177 Duty to declare interest in a proposed transaction.

Obviously all Directors have to declare any interest.  Do make sure it is recorded.

Although if the other Directors are aware of the interest and the transaction is part of their service contract there is an exemption.

S182 Duty to declare interest in an existing transaction.

Same as s177 this is a catch-all to ensure compliance with s172.


What's a limited company?

So you’ve taken the plunge and now you’re self-employed.  You’re out one evening and somebody says you should be trading as a limited company. What’s that? It’s one sort of legal status a business can trade as. The choice of status itself is not a simple question to answer. A business needs to consider numerous complications ranging from tax to prestige to exit strategies.

By far the simplest is a SOLE TRADER, which is you on your own.  Really small businesses generally trade under this banner.

It’s worth noting that in some circumstances, when investigating the viability of a business before taking on a more secure legal status, that pre-trading expenses incurred can be offset once the business is formed.


  •  It’s quick to set up
  • No legal forms to complete
  • Don’t have to pay for any professional advice when setting up
  • Annual audit fees generally less
  • National Insurance rates are lower than if a director of a limited company
  • You benefit from your hard work
  • If you sell any business assets chargeable for Capital Gains Tax purposes you can make use of the annual allowance


  •  No distinction between you and the business. If it goes bust, creditors can go after your personal asset, which could be your house
  • May prove difficult to obtain credit from suppliers as no records are maintained on any public register
  • Income Tax and National Insurance are chargeable on profits and not drawings
  • There could be issues with Inheritance Tax if you pop your clogs

The second form of business status is a PARTNERSHIP where two or more people come together with a common view to go into business. They often bring complementary skills or other qualities to the venture where they will both benefit.

Partnerships were very common until a few years ago with professional firms, but then Enron went bust and their auditors Arthur Andersen were sued. The partners went looking for a legal form which secured their personal assets, more on that in the next section.

In general the pros and cons are similar to those of a sole trader, although in addition you may need to consider:-


  •  Enables persons with  different skills work together formally
  • The cost of set up can be shared
  • Could be seen by the outside world as a more professional business
  • The partners can set their own rules which can be simple and flexible


  •  Difficult to value the business in the event of it breaking up
  • No legal statues to rely on

The debts of the business have to be settled by the partners, in the event of any partners not having sufficient assets the others have to meet the obligations

Enron’s collapse was the tip of the iceberg, and all over the world accountants started forming LIMITED LIABILITY PARTNERSHIPS commonly known as LLP.

In the UK, LLP was formalised by an Act of Parliament in 2000. An LLP is a hybrid of a partnership and that of a limited company

Some points to note are:

  • At least two partners must be designated as members and have additional responsibilities.
  • An LLP must register at Companies House and file an annual return.
  • If you are a member of an LLP, the profits are taxable as they would be if you were a self-employed person and you are liable for Class 4 and Class 2 National Insurance Contributions.

LLPs, rather than a limited company, are also formed in the UK by white collar contractors, mostly for tax reasons.


  • Has for most partners a veil of protection for their personal assets
  • Formal structure and rules
  • Could be good for marketing, public perception of the business


  • Policed by Companies House, annual returns are required
  • More expensive to set up
  • For that matter same to wind up

Most businesses trade under the umbrella of a LIMITED COMPANY.

For all the SMEs out there, don’t get ahead of yourselves. By far the most common form of limited company is called a private limited company.

To trade on a stock exchange the business will have to be a public limited company (PLC). There are many more obligations on a PLC, but the one major difference is that a PLC can trade its shares publically.

So don’t go thinking your fledgling business is going to be the next Google and this will be the legal vehicle to pursue that dream of drinking cocktails on the beach. First and foremost a limited company is a separate legal entity to the shareholders. It’s an artificial person with its own rights and obligations.

Remember the Hatfield rail crash? Network Rail and the division of Balfour Beatty that maintained the track were charged with corporate manslaughter in connection with the accident.


  • Limited liability for debts.
  • Organisation may have an unlimited lifespan.
  • Capital can be raised by issuing shares.
  • A board of directors and management team control the business.
  • Directors are salaried and pay tax in the normal way (along with Class 1 National Insurance Contribution).
  • The business may be perceived as more professional than sole trader status.


  • Costs associated with setting up and administering the business are higher.
  • Stringent accounting and auditing procedures apply.

There is one other type of limited company, the COMMUNITY INTEREST COMPANY, commonly known as a CIC, has only been in existence for a few years.

This is a company whose objectives are primarily social rather than profit making. In order to become a CIC you must:

  • Pass a community interest test to show that the purpose of the business is primarily social.
  • Make sure that the memorandum of articles shows that you intend to benefit the community.
  • Use the profits and assets for the benefit of the community not just to benefit you or your employees.


  • Access to sources of finance aimed at social enterprises.
  • Branding as a social enterprise which may provide a marketing advantage.