Tax Credits are money that HM Revenue and Customs (HMRC) pays to people who have responsibility for children, working families or single people who are in low-paid work. Tax Credits come in two varieties, Working Tax Credit (WTC) and Child Tax Credit (CTC). To receive Tax Credits you have to claim them. One claim covers both types of Tax Credit.

2. Who can claim Tax Credits?

Working Tax Credit can be claimed by couples with children, lone parents and people with a disability who are over 16 and work for at least 16 hours per week. It can also be claimed by anyone over 25 who work at least 30 hours per week. There is a special 12-month entitlement to Working Tax Credit for people aged 50 or over who are returning to work after a period on benefits.

If your family circumstances are complex, there is further guidance on the TaxAid website, http://taxaid.org.uk/ under Single and joint claims, couples and residence.

Child Tax Credit can be claimed by individuals or couples over 16 who are responsible for at least one child under 16, or for a young person aged 16 to 19 who is in full-time non-higher education or approved training. (See Looking after children and young people on the TaxAid website for details).

Other points to remember are:

• You must make a joint claim if you are a couple; you cannot make a single claim instead

• Claims can normally only be back-dated three months

• Claims need to be renewed by 31 July.

To check if you are entitled, try the HMRC website questionnaire at http://www.hmrc.gov.uk/taxcredits/do-you-qualify.htm

3. How do I claim?

You can claim by telephoning the Tax Credits helpline for a claim form:

In England, Wales and Scotland 0845 300 3900 (text phone 0845 300 3909)

In Northern Ireland and the European Economic Area 0845 603 2000 (text phone 0845 607 6078)

Lines are open from 8am to 8pm, 7 days a week.

Claims are made for an income tax year i.e. from 6 April in one year to 5 April in the next. If you claim late, the award can only be back-dated for three months.

4. How much do I get?

How tax credit entitlement is made up

Awards are made up of a number of elements. Adding together the elements gives the maximum entitlement. This is then reduced if your income exceeds certain thresholds.

The elements of Working Tax Credit for 2009/10 are the basic element (£1,890) with additional elements for disability (£2,530), severe disability (£1,075), second adult (£1,860), lone parent (£1,860), and for working 30 hours or more (£775). There are also elements for those over 50 returning to work after claiming benefits (50-plus elements, £1,300 (working 16-29 hours per week) and £1,935 (working 30 or more hours per week)).

Child Tax Credit has a family element (£545) and an additional element for each child (£2,235). The family element is increased to £1,090 (for a maximum of 12 months) where there is a child under one year old. There are additions for disabled children (£2,670) and a further addition for severely disabled children (£1,075).

Awards are means-tested

Tax Credit claimants who also get some means-tested benefit, such as income based Jobseekers’ Allowance receive the maximum tax credit entitlement. Other claimants will find their award is reduced if their income exceeds certain thresholds (see 5 below).

Awards are initially based on the income of the previous tax year, but are revised if income falls, or if it rises by more than £25,000.

To find out how much you might get, try the tax credit calculator on the HMRC website http://www.hmrc.gov.uk/taxcredits/calculator.htm

5. The impact of income

What happens if my income exceeds the limits?

Your tax credit award us reduced if your income exceeds certain thresholds. The most commonly used limit is that for working households. This is £6,420. If household income exceeds this figure, the tax credit award (apart from the family element) is reduced by 39p for every pound of extra income.

Non-working households are often on a means-tested social security benefit, in which case a full tax credit award is given – with no restriction for income. Non-working households not in receipt of such benefits will find their tax credit award reduced if income exceeds £16,040.

Special treatment of the family element of Child Tax Credit

For the family element of Child Tax Credit a different limit applies. The income limit is £50,000 (but can be higher in some circumstances). The family element is reduced by 6.67p for every pound of income above this level.

6. What counts as income for Tax Credits?

Income for Tax Credits is calculated in broadly the same way as it is for Income Tax purposes, but there are a number of differences. For example, the first £300 of savings and pension income is ignored.

If you are self-employed and your business makes a loss, the loss is treated differently for Tax Credits than it is for Income Tax or Class 4 National Insurance. For joint Tax Credit claims the loss can be set off first of all against the other income of the claimant who makes the loss and then against the income of the other party (or parties) to the claim. Any remaining loss can be carried forward.

Detailed guidance on income for Tax Credits is available on the TaxAid website, Calculating Income page.

7. Is there help with childcare costs?

Up to 80% of childcare costs can be met up to a maximum of £140 (80% of £175) per week for one child and up to £240 (80% of £300) per week for two or more children.

A single parent will qualify if they work at least 16 hours per week and a couple if they both work for at least 16 hours per week. These rules are relaxed if either or both of the couple are disabled.

Further information on childcare is available from the HMRC website at http://www.hmrc.gov.uk/taxcredits/children-childcare.htm and from Childcare link (http://www.childcarelink.gov.uk/).

8. What if my circumstances change?

There are some changes you have to report to HMRC within one month

A change in your status, such as a change in a relationship, which bring your entitlement to Tax Credits to an end

• A reduction in childcare charges of £10 a week or more for at least 4 weeks or a cessation of childcare charges. (This includes receiving employer childcare vouchers which mean the childcare costs you actually pay are reduced)

• You cease to be entitled to reside in the UK, or leave the UK for more than 8 weeks (12 weeks if as a result of illness or death of a relative, or your own illness)

• Your working hours fall below the 30- or 16-hour limits

• You cease to be responsible for a child or young person

If your claim ends because of a change in a relationship, you can make a new claim if you still qualify for Tax Credits in your new household.

If your circumstances change in other ways during the year then it is sensible to tell HMRC. This will help ensure that you are paid the correct amount and don’t lose any amounts you may be entitled to. Such changes would include changes in income or changes to the number of children you are responsible for.

For further details see http://www.hmrc.gov.uk/taxcredits/tell-us-changes.htm

9. What happens if I am paid too much or too little?

Underpayments

If you have been paid too little Tax Credit, any amount due will be paid to you in a lump sum, once you have renewed your claim.

Overpayments

If you have been overpaid, you will normally have to repay this, though there are special rules if you face hardship or the overpayment was the result of an error (including incorrect advice) by HMRC (or other Government agency).

There is a special form (TC846) which you can use to ask HMRC not to pursue collection of an overpayment where there has been an error. It can be accessed at http://www.hmrc.gov.uk/forms/tc846.pdf.

The HMRC policy on overpayments is set out in Code of Practice 26. This can be found on the HMRC website at  http://www.hmrc.gov.uk/leaflets/cop26.pdf

There is fuller guidance on the options on the TaxAid website in the article ‘I have a tax credit overpayment. What can I do?’

10.  Where can I find out more?

You can find out more from the HMRC website tax credits section. There is also a comprehensive guide to Tax Credits in the TaxAid website tax credit section.

This article has been prepared by TaxAid as a general introduction to the subject. It is recommended that you take professional advice in your own specific circumstances.

TaxAid is a charity which offers free, confidential advice on tax to those on low income. For more information about

There are a few common mistakes which some businesses make when carrying out their bookkeeping. Avoiding such mistakes can help your business to flourish and progress with less stress.

1.      Many businesses do not save or record receipts that are less than £10. Though they are not for considerable amounts of money they can prove to be highly beneficial when they are all added up at the end of a year and you are claiming tax deductions for them. Therefore, make sure you keep a record of all of your business expenditure and if needs be keep a separate file for the smaller receipts.

2.      If the owner maintains the books and records of the business this can sometimes be cost beneficial, however, they will need to have a sound knowledge of the bookkeeping basics, otherwise they may waste a lot of time entering the information incorrectly and consequently have to pay someone to sort out their mess. If you have no basic knowledge of bookkeeping, or any time to acquire it, then it may be advisable to hire a bookkeeper or get your accountant to look after it for you.

3.      Many small business owners pay for a few of their business expenses out of their ‘personal’ money and fail to get them reimbursed from the business account. In essence there should be a clear line drawn between business expenditure and personal expenditure.

4.      Lack of communication with the bookkeeper is one of the most common types of mistakes that many business owners make. Indeed, it is very important to communicate with your bookkeeper on a regular basis. There may be outstanding issues on which they need your advice, or they may be able to provide you with crucial financial information regarding an important business decision you need to make. Having regular sit-down sessions with your bookkeeper will also allow you to check whether all the accounting books and records are up to date or not.

5.      Not reconciling the bank accounts, debtors, creditors, VAT and other control accounts of the business. These reconciliations are not done by many bookkeepers. However, they represent crucial checks in confirming that all the transactions relating to a particular account are complete, for instance, if a bank reconciliation is not prepared, several omissions in the cash book records for the business may be overlooked.

6.      Not deducting the right sales VAT when recording invoices. Any sale invoices and sale records processed should be checked to see that the VAT amount is correct, if this has been calculated incorrectly this could lead to problems with HMRC as regards payments made to them and also problems with sales figures being incorrect in the books and records.

7.      Finally, not keeping a check of petty cash funds is a major problem. Many businesses do not keep a track of petty cash expenditure and often take amounts out of the cash float without recording them. If petty cash expenditure is not monitored and controlled accurately by a bookkeeper this may lead to a business not claiming all of its business expenditure and thus it may end up paying more in business tax.

Contact us today if you think we can help with your book keeping needs

A professional bookkeeper will free you up to be able to spend time making money instead of counting it. A business owner’s job is to continually drum up new clients. This is increasingly difficult while dealing with a bunch of figures, numbers, and spreadsheets. Even those with experience are not trained to the level of a professional bookkeeper and may require more than three times the amount of time to complete the books as it would a professional bookkeeper. Time is money! So time spent balancing records is time lost to generating new revenue. The money made by actually working more than makes up for the fee charged by a professional bookkeeper.

Also and possibly more important, a professional bookkeeper will get the records correct the first time. Business owners’ with prior record keeping experience still have other things on their mind such as the client base and keeping up with expenses. A wandering mind is bound to commit errors, and mistakes can only lead to time wasted correcting them. HMRC employs accountants who are experts in finding mistakes and making sure they penalize you for it. Audits and error correction processes detract from the time in which you could be making money. A professional bookkeeper can toil away all day keeping accurate, timely records while you spend your time working and contacting clients.

This adds up to a load off your shoulders. When your mind is at ease because you realize you don’t have to spend hours after a busy work day recording

numbers, your actual work during the day will benefit. It is also nice to know that a bookkeeper has taken care of the minute details and you won’t have to worry about costly errors. Everyone needs some personal time, and having a bookkeeper take care of the books leaves you time to spend with friends and family.

At the end of the day, what a bookkeeper can do for your business is save you time, and as a result money. Not only do you save money, you make more because you can dedicate your efforts to working and generating income. That is how business should be.So contact us today. We guarantee you will not be disappointed

Where do you find such a person?! You might try the Yellow Pages, check the listings of accounting bodies, ask family, friends or, maybe your banker? All are good places to start!

But how can you be certain that these people on the list are reputable and right for your business?

Accounting firms come in all shapes and sizes.

Tier 1 firms  – international firms who tend to work with large businesses.

Tier 2 firms -  international firms operating throughout the world who tend to prefer to work for businesses of a reasonable size.

Tier 3 first – firms with several partners, sometimes with national and international affiliation who tend to work a lot more with small businesses.

Smaller firms – firms with one, two or maybe three partners who specialize in small business or with people who earn salaries and wages.

When selecting an accountant, you should be looking for someone who specializes in your size of business, has some experience in your industry and who gives timely, pro-active and useful advice at a fair and reasonable cost. It is also someone who shows they care for you and your business and who you feel you can build a longer term relationship with – someone you are comfortable with and can come to trust.

You need, therefore, to put some effort into selecting the right person and firm.

Step 1: List What You Need from an Ideal Accountant

What do you want from your accountant?

Is it just to complete your annual accounts and tax returns – or are there other matters that are important to you?

Make a list of the services that you think you might want from your prospective accountant. This way you can draft some questions that are relevant and

pertinent to your specific needs.

Step 2: Lookout for the Credentials of Certified Public Accountants

Make a list of say 4 or 5 firms.

Check their web sites – how informative are they? Do they seem to provide services for a small business like yours? If they have no web site – ask yourself -

how progressive and up to date are they likely to be?

Step 3: Evaluate the Reputation of a Good Accountant

Ring each of them (or reduce the number to 2 or 3 firms) and ask to meet with a person who might be able to help you, or speak to them immediately if they are available. Explain who you are and ask if they can offer their services to a business such as yours, and whether you meet to discuss those services and costs. This meeting should be at no cost to you and be, perhaps, about an hour in length.

Assess your experience with them so far – how were you greeted -  Were they pleased to talk to you – Where they friendly and helpful?

Step 4: Discover your Needs with the Accountant by Asking Specific Questions

Make a list of your questions.

Use the following as a guide only – add or subtract anything that you want to ask of the accountant you are going to meet.

1. Do they handle small business clients?
2. Explain your business and your current situation and plans for the future.
3. Ask for examples if they have identical or similar businesses to yours and ask what they have done to help them – especially businesses of your size and stage of development. Ask about, say, financing the buying of Plant and Equipment, or how they might assess whether those businesses should be sole traders, a partnership, company or a trust? Are they able to explain to you why such a structure was right – and (briefly) how that might apply to you? Can they give examples of how they have improved the profitability of some of their clients’ businesses, or, can they set up a record keeping program that fits your needs.
4. Can they give examples of where they have been pro-active with their small business clients – say end of year tax planning, business improvement planning, newsletters, client seminars, sending business or tax articles to clients…?
5. What is their response time policy – to questions and queries from business clients like you?
6. What other services do they offer
7. How do they operate? Meaning – who is that you are likely to talk to if you have a simple processing problem? What about if you have a more complex problem? Who do you deal with and how will they process your end of year tax and accounting work?
8. What are their fees likely to be? What are their charge out rates? Do they offer a fixed annual fee for end of year tax work? This should be a “value” question for you rather than just a cost question – especially in regard to planning and problem solving work.
9. Will they travel to your business premises if you want them to? Will they charge for the travelling time?
10. Ask – “why should you use your firm?” This will test them as to whether they have been listening to you and can tailor their response to answer any queries or issues you have raised during your meeting.

Step 5: Do a Reflection on your Face to Face Meeting Experience with your Accountants

How did the meeting go?

Did you feel comfortable with the people that you met?

Did they show a genuine interest in you and your business?

Did they demonstrate that they understood your business?

Did they show initiative in answering some answers to your questions – or discuss or raise some issues that you did not ask questions on? In other words did they show they might really understand your business and how to give you useful advice?

Are their costs likely to be acceptable? Costs are always an issue – but if you are getting good timely advice that is helping you to grow your business and/or saving you business costs and keeping your taxes to a minimum – then you are probably getting value for your money.

Remember – if you want more it will cost more, and, good advice rarely comes cheap.

If you are having trouble deciding – then rate each key issue (you have to decide what is key) out of – say – 10 and then mark each firm on each issue – the highest score should give you an indication as to who you want to do business with.