Presentation given by Paul Woodcock of PJW Accounting to businesses May 2015 in Rugeley on the common tax mistakes businesses make, inheritance tax and the use of XERO accounting systems to help your business grow more successfully.

1. Never leave a Tip
with the Taxman

2. What Are You Going To See
● Who Am I?
● The Common Tax Mistakes
● Inheritance Tax Reliefs
● Xero
● Final Thoughts

3. Who am I?
● Chartered Accountant
● Amateur Photographer
“The only difference between a
Taxman and a taxidermist is
that the taxidermist leaves the
skin.” Mark Twain

4. Common Tax
Mistakes Made in
Business

5. Common Tax Mistakes
Made in Business
My typical client: self-employed
with taxable income of £30,000

6. Income Tax
• Total tax due £6,532 -
Made up of:
• £3,880 Income Tax
• £2,652 National Insurance
“Income tax returns are the most imaginative fiction being written today.” Herman Wouk

7. Corporation Tax
By incorporating:
He saves - £1,588
• Corporation Tax - £4,944
“Income tax returns are the most imaginative fiction being written today.” Herman Wouk

8. And the Rest
• Using the family to save tax:
1. Employ his wife £2,000
2. Employ the children ?
• Use of home as office £400
• Use fixed rate for mileage £300
• Split the share capital £2,500
“Government's view of the economy could be summed up in a few short phrases:
If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize
it.” Ronald Reagan

9. VAT
Not currently VAT registered
•Current level of inputs - £2,350
•Set up a VAT registration - tax saved £2,350
•Bonus - looks like he has a turnover of £80k
•Double bonus - FRS - tax saved now £3,250
Where is the politician who has not promised to fight to the death for lower taxes- and
who has not proceeded to vote for the very spending projects that make tax cuts
impossible? Barry Goldwater

10. Capital Gains Tax
•Couple own a rental property
•Previous accountants never asked about CGT
•Tax rules were about to change
•Property only in husband’s name
•Tax due is selling after 5 April - £10,250
•Property sold prior to 5 April
•Tax saved £10,250
“Be wary of strong drink. It can make you shoot at tax collectors... and miss.” Robert A. Heinlein

11. Total Savings
•Incorporation £1,588
•Wife’s wages £2,000
•Split shares (potential) £2,500
•Use of home as office £ 400
•FPCS £ 300
•FRS £3,250
•CGT £10,250
•Total Savings £20,288
A democratic government is the only one in which those who vote for a tax can escape
the obligation to pay it. Alexis de Tocqueville

12. The Use of
Allowances
Inheritance Tax

13. Inheritance Tax
•Who likes to take about death?
•We do anything to avoid it.
•What's the potential consequences of our squeamishness?
•But 1st - How much is raised from IHT?
“Thinking about death is like looking at the sun. We all do it occasionally,
but it is only bearable for the briefest of moments” – Theodore Dalrymple

14. Example
•Widow – main asset £375,000 home in Lichfield
•Cash in bank - £125,000
•PETs - £50,000
•Husband died in 1995, gifting ⅔ of his NRB to children.
•Good tax planning at the time, but disaster now. Only ⅓
of current NRB was available to widow (i.e. £110,000).
•Tip – now use spousal exemption & make it clear in will
•NRB available £435k, leaving £115k chargeable (£46K)

15. Distaster Strikes
•Widow diagnosed with cancer Feb 2011. Dies Dec 2012.
•No time to plan away the IHT. No one discussed it!
•What could have been done?
•Annual Allowance - £3,000/year. Had it been given every
year from 1995, £51,000 would have been taken out of the
estate. Can be out of capital
•Small gifts exemption – 3 children; 3 in-laws, 8
grandchildren - £3,500/year. £56,000 out of the estate -
£22,400 saved. Can be out of capital

16. What is overlooked?
Gifts Out of Income
•Must be out of surplus income
•Based on a pattern of spending over 3 years
•Make a record of gifts made.
•Make you intentions known in advance in writing.
•Give the written document to your executors
•Examples – pay for school fees, take out a savings plan,
or insurance bond.
The tax collector must love poor people, he's creating so many of
them. Bill Vaughan

17. Conclusion
•The tax was entirely avoidable using these basic reliefs.
•But it wasn’t because the family avoided the subject.
•How do we get talking about it?
•Visit www.death-clock.org
•My death is scheduled for Saturday 5th June 2049
•That gives me 34 years to plan
The hardest thing to understand in the world is the tax code. Albert
Einstein

18. Accounting Made
Easy
Xero

19. Accounting:- what are the options?
● Bag of invoices
● Spreadsheets
● Software

20. So what makes Xero Different?
● Different options
● Bank feeds
● Adds-ons

21. Receipt Bank - £10/month
● Solves the paper bag problem
● Lets you focus on your business
● Upload by email; mobile; dropbox or post
● Receipt bank analyses your receipts and
uploads it to Xero.
● All you have to do is refresh the bank
feed.

22. Tripcatcher - £1.50/month
● Records your business mileage
● Can be entered by mobile or online
● Mileage and VAT calculated by app
● VAT automatically updated by app
● Claim automatically uploaded to Xero
● Saves time and maximises tax deduction

23. Chaser - £20/month
● Useful if you have poor payers
● Chaser takes all invoices from Xero
● Sends a reminder every 7 days
● You control who receives the emails
● Emails get progressively terse
● You can edit the text of the emails
● Client get a thank you when they pay.

24. Xero Summary
● Xero allows a closer relationship between
you and your accountant.
● The add-ons give you more time to
concentrate on what you’re good at.
● The whole package gives me more time to
concentrate on what’s important to you -
saving tax & giving business advice.

25. Final Thoughts
Chat To Me In The Break

26. How to get in touch
● Call me – 01889 586 431
● E-mail me – paul@pjwaccounting.co.uk
● Web – www.pjwaccounting.uk
● LinkedIn - Paul Woodcock
● Twitter - @PJWAccounting
● Facebook - www.facebook.com/pjwaccountingltd
● Google+ - www.plus.google.com/+PjwaccountingUk
● Tumblr – www.pjwaccounting.tumblr.com/