Presentation on Accounts & Taxation By Mr.
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Presentation on Accounts Taxation By Mr. Muhammed Azeem Dosani Introduction Hi my name is Muhammed Azeem Dosani. I am a partner at a local accounting firm, Fletchers Thatchers Dosanis. We specialise in providing services to doctors.
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01
Presentation on Accounts & Taxation By Mr. Muhammed Azeem Dosani<br>
02
Introduction Hi my name is Muhammed Azeem Dosani. I am a partner at a local accounting firm, Fletchers Thatchers & Dosanis.
We specialise in providing services to doctors.
Before we start, I would like to congratulate all of you. Some of you have passed your CSA & AKT, while others are on their way soon.<br>
We specialise in providing services to doctors.
Before we start, I would like to congratulate all of you. Some of you have passed your CSA & AKT, while others are on their way soon.<br>
03
Introduction to accounts Today I will presenting a lecture on accounts, that are relevant for medical practitioners and the industry itself.
-What are accounts?
I will explain this in the form of a short story so it is easy for everyone to relate.
When I was in year 3, I was taken on a picnic to a local park. I had a really nice day and really enjoyed myself. The next day, I was told to write an account of the day at the park. Before I started out, I thought accounts was a story, which is, in fact, true.<br>
-What are accounts?
I will explain this in the form of a short story so it is easy for everyone to relate.
When I was in year 3, I was taken on a picnic to a local park. I had a really nice day and really enjoyed myself. The next day, I was told to write an account of the day at the park. Before I started out, I thought accounts was a story, which is, in fact, true.<br>
04
Self- employment vs. Employment Locum
Partner in a practice.
Expenses can be claimed.
Options: Ltd co. Vs. Self-employment<br>
Partner in a practice.
Expenses can be claimed.
Options: Ltd co. Vs. Self-employment<br>
05
Qualitative factors to consider Legal advice
Subscription paid by the partnership when one partner has to go through disciplining committee proceeding locum. Money paid by the practice.
Everybody suffers financially.
Senior partners – age
Culture of the organisation & morale of the staff.
Partnership is like a marriage. If successful, it leads to peace of mind. If its unsuccessful (divorce), it is very stressful and could adversely affect health.<br>
Subscription paid by the partnership when one partner has to go through disciplining committee proceeding locum. Money paid by the practice.
Everybody suffers financially.
Senior partners – age
Culture of the organisation & morale of the staff.
Partnership is like a marriage. If successful, it leads to peace of mind. If its unsuccessful (divorce), it is very stressful and could adversely affect health.<br>
06
Introduction- continued An account is a story. It is a story of about the income, expenditure, assets & liabilities of a particular individual or organisation.
It provides valuable information that helps us in keeping the tax affairs up to date. It is an overview of how well an organisation has performed, whether its made more profit than the previous year, or the overall profitability has gone down.<br>
It provides valuable information that helps us in keeping the tax affairs up to date. It is an overview of how well an organisation has performed, whether its made more profit than the previous year, or the overall profitability has gone down.<br>
07
What are practice accounts It is a historical record of the financial performance of the practice.
The accounts are prepared using the books and records that the practice maintain throughout the year.
They consist of profit & loss accounts and Balance Sheet.
Some practices make periodic management accounts which help them to work out how much each partner should withdraw.
Profit & loss- record of practice income & expenses.
Balance sheet- provides practice with a value of their assets & each partner`s share of those assets .
Notes to the accounts- the accounts will include notes to support the profit & loss account and the balance sheet.<br>
The accounts are prepared using the books and records that the practice maintain throughout the year.
They consist of profit & loss accounts and Balance Sheet.
Some practices make periodic management accounts which help them to work out how much each partner should withdraw.
Profit & loss- record of practice income & expenses.
Balance sheet- provides practice with a value of their assets & each partner`s share of those assets .
Notes to the accounts- the accounts will include notes to support the profit & loss account and the balance sheet.<br>
08
Significance of Profit & loss account Shows profitability of the practice.
GP practice managers & partners are running the business and the objective is to make a profit.
New partners thinking about joining, will be interested in the profitability of the practice.
Profits need to be calculated for tax purposes.
Profits of the practice are allocated among the partners in the respective percentage/ share of the partnership.
Profits sharing ratios are usually based on number of sessions worked.<br>
GP practice managers & partners are running the business and the objective is to make a profit.
New partners thinking about joining, will be interested in the profitability of the practice.
Profits need to be calculated for tax purposes.
Profits of the practice are allocated among the partners in the respective percentage/ share of the partnership.
Profits sharing ratios are usually based on number of sessions worked.<br>
09
Balance sheet & Current account Balance Sheet shows a snapshot of the practice assets & liabilities.
Two halves of the Balance Sheet – top half lists the assets and liabilities, the bottom half shows each partners ownership of those assets- both halves will be equal.
Current accounts are very important as they show the individual partners money left in the practice.<br>
Two halves of the Balance Sheet – top half lists the assets and liabilities, the bottom half shows each partners ownership of those assets- both halves will be equal.
Current accounts are very important as they show the individual partners money left in the practice.<br>
10
Drawings Need to be set at a realistic level, take into account expected lost income and/or increased expenses.
Drawings need to be reduced to take into account of changes to superannuation-
rates gone up. Employers pension rate is going up ( 1% projected rise every year for the next 5 years).
Review throughout the year of the practice. If the practice is getting into cash flow problems, may need to reduce drawings.
- may need to inject some capital or borrow from banks.<br>
Drawings need to be reduced to take into account of changes to superannuation-
rates gone up. Employers pension rate is going up ( 1% projected rise every year for the next 5 years).
Review throughout the year of the practice. If the practice is getting into cash flow problems, may need to reduce drawings.
- may need to inject some capital or borrow from banks.<br>
11
Purpose of accounts Calculate profit to declare on the tax return to HMRC.
Useful tool in making financial decisions.
Calculating projected drawings.
Bank or financial institutions may require accounts for lending purposes.<br>
Useful tool in making financial decisions.
Calculating projected drawings.
Bank or financial institutions may require accounts for lending purposes.<br>
12
Purpose of accounts - 2 Accounts will usually be prepared annually to the practice year end. These days in medium/large practices, management accounts are prepared periodically, so decisions regarding partners drawings and tax and NIC payments can be made.
Accounts will include comparative figures, these will be the results for the previous accounting period.
Figures in brackets means they are deducted from another figure in the accounts.<br>
Accounts will include comparative figures, these will be the results for the previous accounting period.
Figures in brackets means they are deducted from another figure in the accounts.<br>
13
Superannuation for GP`s Superannuation based on GP`s NHS pensionable profits.
Gp`s to complete end of year certificate to declare profits.
PCT makes deductions each month based on an estimate of profits.
Once certificate is submitted, PCT will collect any shortfall or refund of superannuation.
Ensure PCT deducting superannuation using up to date estimate of profits.
GP & non GP partners responsible for both employees & employers superannuation.<br>
Gp`s to complete end of year certificate to declare profits.
PCT makes deductions each month based on an estimate of profits.
Once certificate is submitted, PCT will collect any shortfall or refund of superannuation.
Ensure PCT deducting superannuation using up to date estimate of profits.
GP & non GP partners responsible for both employees & employers superannuation.<br>
14
Superannuation - 2 Superannuation contribution rates:
- Employees contribution increased for 1st April 2015.
Based on tiered Contribution rates:
0-15k 5%
15k-21.5k 5.1%
21.5k-26.82k 7.1%
26.82k-47.845k 9.3%
47.845k-70.6k 12.5%
70.63k-111.37k 13.5%
111.37k-over 14.8%
Earnings cap removed for employee and employer contribution.
Employers contribution rate will increase for 14.3%<br>
- Employees contribution increased for 1st April 2015.
Based on tiered Contribution rates:
0-15k 5%
15k-21.5k 5.1%
21.5k-26.82k 7.1%
26.82k-47.845k 9.3%
47.845k-70.6k 12.5%
70.63k-111.37k 13.5%
111.37k-over 14.8%
Earnings cap removed for employee and employer contribution.
Employers contribution rate will increase for 14.3%<br>
15
Related tax rates & NIC Employment Self Employment
Personal Allowance £10,600 £10,600
Tax 20%(0-£31785) 20%(0-£31785)
40%(£31786-£150,000) 40%(£31786-£150,000)
45%( Over £150,000) 45% ( Over £150,000)
NIC 1 ( EE) 12%(£8060-£40,040) N/A
2%( Above £40,040) N/A
NIC 1 ( ER) 13.8%(£8,113-42,385) N/A)<br>
Personal Allowance £10,600 £10,600
Tax 20%(0-£31785) 20%(0-£31785)
40%(£31786-£150,000) 40%(£31786-£150,000)
45%( Over £150,000) 45% ( Over £150,000)
NIC 1 ( EE) 12%(£8060-£40,040) N/A
2%( Above £40,040) N/A
NIC 1 ( ER) 13.8%(£8,113-42,385) N/A)<br>
16
Tax rates & NIC NIC Class 1 A (Benefits) 13.8( All benefits) N/A
NIC Class 2 N/A £2.8(PerWeek)
NIC Class 4 N/A 9%(£8,060-£42,385)
2%(Above £42,385)
(NB:Tax Year 2015-16)<br>
NIC Class 2 N/A £2.8(PerWeek)
NIC Class 4 N/A 9%(£8,060-£42,385)
2%(Above £42,385)
(NB:Tax Year 2015-16)<br>
17
Self-Employment- GP`s Any private source of income can be declared under self-employment.
These include and are not limited to:
-Police reports.
-Cremation forms.
-Insurance reports.
-Locum income/out of hours work.<br>
These include and are not limited to:
-Police reports.
-Cremation forms.
-Insurance reports.
-Locum income/out of hours work.<br>
18
Self employment- Gp`s There are quite a few allowable expenses that one can claim back directly. The list includes and is not exhausted to:-
Travel expenses- i.e. Mileage allowance(HMRC allows a mileage allowance of 45p/Per mile) excess/less payment may be benefit/expense.
Subscriptions paid to BMA, GMC, RCGP, MPS & MDU fees.
Equipment e.g. Computer, Laptop, thermometer, stethoscope etc.
Use of home as office.
Superannuation.<br>
Travel expenses- i.e. Mileage allowance(HMRC allows a mileage allowance of 45p/Per mile) excess/less payment may be benefit/expense.
Subscriptions paid to BMA, GMC, RCGP, MPS & MDU fees.
Equipment e.g. Computer, Laptop, thermometer, stethoscope etc.
Use of home as office.
Superannuation.<br>
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Deductible expenses Training/course fees
Protective clothing
Rent and rates
Salaries
Donations
Insurance
Accountancy Fee<br>
Protective clothing
Rent and rates
Salaries
Donations
Insurance
Accountancy Fee<br>
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Deductible expenses Cleaning , Laundry
Other Expenses
Bank Interest and Charges
L.M.C Levies<br>
Other Expenses
Bank Interest and Charges
L.M.C Levies<br>
21
Self employment- GP`s -Wear & tear of equipment (Business use only)
Applicable rates may be 100%,18%, or 8%
-Payroll is processed weekly/monthly and tax, NIC as well as pension deducted is paid monthly.
-Record keeping
all invoices should be kept safe up to 5 years after the end of the relevant accounting year.
-Year end date is normally 5th April for self employed people and routine work involves:-
i) Preparation of Annual Accounts
ii) Submission of Self Assessment Tax Returns
iii) Tax calculation and Tax Payment.<br>
Applicable rates may be 100%,18%, or 8%
-Payroll is processed weekly/monthly and tax, NIC as well as pension deducted is paid monthly.
-Record keeping
all invoices should be kept safe up to 5 years after the end of the relevant accounting year.
-Year end date is normally 5th April for self employed people and routine work involves:-
i) Preparation of Annual Accounts
ii) Submission of Self Assessment Tax Returns
iii) Tax calculation and Tax Payment.<br>
22
Self-employment Gp`s -Tax calculations, tax payments and its important dates:
i) Filing deadline, 31st January every year
ii) First POA should be paid not later than 31st January
iii) Second POA be paid not later than 31st July following the tax year<br>
i) Filing deadline, 31st January every year
ii) First POA should be paid not later than 31st January
iii) Second POA be paid not later than 31st July following the tax year<br>
23
Pros and cons of a Ltd Co. -1 Which income can be declared in the Company
i) Out of hours work/Locum etc.
-2 Year end Activities
i)-Preparation and submission of annual accounts / Annual Return
ii) Calculation of tax and its payment
iii) Tax need to be paid not later than 9 months following the company’s year end.
-3 Profit can be retained depending upon personal income of director.
-4 All expenses mentioned under self Employment heading can be claimed
-5 Dividend gets 10% tax credit in personal tax returns<br>
i) Out of hours work/Locum etc.
-2 Year end Activities
i)-Preparation and submission of annual accounts / Annual Return
ii) Calculation of tax and its payment
iii) Tax need to be paid not later than 9 months following the company’s year end.
-3 Profit can be retained depending upon personal income of director.
-4 All expenses mentioned under self Employment heading can be claimed
-5 Dividend gets 10% tax credit in personal tax returns<br>
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Pros & Cons continued -6 There will be no superannuation deducted if the client is a limited company.
-7 Accumulated profit can be drawn out as CGT on cessation of the company
-8Salary of spouse etc. can be claimed for administrative work.
-9 Profit of the company can be drawn out as Salary, dividend, CGT etc
-10Following Tax Rates apply to the Ltd company.
2016 2015
0-300k 20% 20%
300k-1500k 20% 21.25%
Over 1500k 20% 21%<br>
-7 Accumulated profit can be drawn out as CGT on cessation of the company
-8Salary of spouse etc. can be claimed for administrative work.
-9 Profit of the company can be drawn out as Salary, dividend, CGT etc
-10Following Tax Rates apply to the Ltd company.
2016 2015
0-300k 20% 20%
300k-1500k 20% 21.25%
Over 1500k 20% 21%<br>
25
Pensions/Superannuation 1.Contributions made are allowable deductions to calculate the profit of Self Employment/Company
2.Pension contribution will be deducted from your salary before calculating PAYE Tax for employee
3.Annual Allowance charge
i) Annual Allowance: Growth in your pension benefits ( Closing Value-Opening Value)
ii) Tax may be payable if Annual pension growth is more than Annual Allowance
ii) Annual Allowance can be carried forward for 3 Years up to £50,000
iii) Pension Provider can pay Annual Allowance Charge if more than £2000, out of your pension pot. One needs to write to it before 31st July<br>
2.Pension contribution will be deducted from your salary before calculating PAYE Tax for employee
3.Annual Allowance charge
i) Annual Allowance: Growth in your pension benefits ( Closing Value-Opening Value)
ii) Tax may be payable if Annual pension growth is more than Annual Allowance
ii) Annual Allowance can be carried forward for 3 Years up to £50,000
iii) Pension Provider can pay Annual Allowance Charge if more than £2000, out of your pension pot. One needs to write to it before 31st July<br>
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Pensions/Superannuation-2 iv) Annual Allowance limit
Annual Allowance
Before 5th April 2011 255,000
6th April 2011 to 5th April 2014 50,000
6th April 2014 onwards 40,000
v) Reduced Annual Allowance if money is taken out of pension pot.
Defined Contributions Scheme £10,000
Defined Benefit Scheme £30,000
vi) Enhanced Pension Savings Annual Allowance: £40,000 Plus unused Annual Allowance up to 3 years<br>
Annual Allowance
Before 5th April 2011 255,000
6th April 2011 to 5th April 2014 50,000
6th April 2014 onwards 40,000
v) Reduced Annual Allowance if money is taken out of pension pot.
Defined Contributions Scheme £10,000
Defined Benefit Scheme £30,000
vi) Enhanced Pension Savings Annual Allowance: £40,000 Plus unused Annual Allowance up to 3 years<br>
27
Pensions/Superannuation - 3 vii) Life time Allowance
Before 6th April 2012 £1.8 M
6th April 2012 to 5th April 2014 £1.5 M
6th April 2014 to 5th April 2016 £1.25 M
6th April 2016 to 5th April 2017 £1.00 M(rise/fall with inflation from 2018)
vii) 2016 Protection
Life time Allowance ( £1.25 M) can be protected with HMRC
viii) Before 5th April 2015 Excess of Life time Allowance was taxed as follows.
Chargeable to tax as income @55% Lump sum – (Lifetime Allowance + unused Annual Allowance of last three years)<br>
Before 6th April 2012 £1.8 M
6th April 2012 to 5th April 2014 £1.5 M
6th April 2014 to 5th April 2016 £1.25 M
6th April 2016 to 5th April 2017 £1.00 M(rise/fall with inflation from 2018)
vii) 2016 Protection
Life time Allowance ( £1.25 M) can be protected with HMRC
viii) Before 5th April 2015 Excess of Life time Allowance was taxed as follows.
Chargeable to tax as income @55% Lump sum – (Lifetime Allowance + unused Annual Allowance of last three years)<br>
28
Pension/Superannuation-4 2015 Major changes
4.
i) Flexible access to pensions from age 55
ii) Taxed as income Lump sum less 25% of lump sum tax free
iii) Taxed as income Smaller Lump sums less 25% of each withdrawal tax free when the individual needs
iv) One can take only 25% tax free lump sum of total pension pot
v) The income from an annuity would be taxed as normal income If one buys annuity
vi) Annual Allowance is £40,000 and reduced further to £10,000 for the individual who have flexibly accessed a pension.<br>
4.
i) Flexible access to pensions from age 55
ii) Taxed as income Lump sum less 25% of lump sum tax free
iii) Taxed as income Smaller Lump sums less 25% of each withdrawal tax free when the individual needs
iv) One can take only 25% tax free lump sum of total pension pot
v) The income from an annuity would be taxed as normal income If one buys annuity
vi) Annual Allowance is £40,000 and reduced further to £10,000 for the individual who have flexibly accessed a pension.<br>
29
Trusts -Why trusts?
Set up trusts to escape one generation from tax liability.
-Types of trusts
Bare Trust, Interest in possession, Discretionary Trust, Accumulation Trust, Mixed Trusts, Settler Interested Trusts, Non Resident Trusts
- The way to pass on income tax liability to next generation
-Tax rates and tax refund Dividend(£) All other income(£)
(A)Accumulation/Discretionary Trust
0- £10,000 10% 20%
Above £10,000 37.5% 45%
(B) Interest in possession Trust 10% 20%
NB: 10% is tax credit on dividend from company<br>
Set up trusts to escape one generation from tax liability.
-Types of trusts
Bare Trust, Interest in possession, Discretionary Trust, Accumulation Trust, Mixed Trusts, Settler Interested Trusts, Non Resident Trusts
- The way to pass on income tax liability to next generation
-Tax rates and tax refund Dividend(£) All other income(£)
(A)Accumulation/Discretionary Trust
0- £10,000 10% 20%
Above £10,000 37.5% 45%
(B) Interest in possession Trust 10% 20%
NB: 10% is tax credit on dividend from company<br>
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How can we help you? 1-Accounts and Tax planning
2- Management accounts
3-Analytical review on accounts<br>
2- Management accounts
3-Analytical review on accounts<br>