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The last Budget of Gorden Brown was a bold political move that presented him in a good light right before his Prime Minister bid. He abolished the 10p rate of tax, and lowered the 22p tax bracket to 20p – a move to show Labour cuts taxes.
It wasn’t until he was elected, that it came to light that the tac changes had meant the lowest paid workers of the country were now paying more tax.
There was outcry, and under intense political pressure, tax rebates were offered which come into play on September 2008. These aren’t cheques in the post like the American system, since such a move could encourage more debt. Those people who know money is coming on average spend more than they are going to receive in debt before it comes.
The UK rebate was paid in income tax changes, so a worker would only see an increase in a pay-packet, or next time they audit for self employed people.
So what is all this talk about UK tax rebates, and does it affect you?
* 5 million low paid workers were losing out due to the abolition of the 10p tax rebate – this is roughly classed as all those who earn less than £17,000 a year.
* The rebate will cost around £2.7 billion to the UK coffers.
* The tax rebate will be given via the pay-slip PAYE, or next year if you’re self employed when you declare your taxes.
* The rebate was done by changing how much taxable income you are tax free on – increasing from £600 to £6035.
* There are still losers – those earning £8-10,000 were to lose £200 a year from the new tax laws – the rebate should give back £120 so they will still be losing £80 compared to pre-budget.
* People earning from circa £17,000 to £40,835 gain from the rebate, as they were better off before anyway under the 10p tax rate abolition and now get the rebate on top.
The Government are now heavily publicising this move, to try and gain them favours with the public before a big downturn in the economy looms. Darling the Chancellor even went on record, in an unprecedented step, saying:
“the economic downturn would be “profound and long-lasting”,
“…has insisted it is his duty to be straight with the public, after telling a newspaper the UK faces its worst economic crisis in 60 years.”
“…that voters were “pissed off” with Labour’s handling of the economy, a key issue at the next election, and said it was “absolutely imperative” that ministers communicated their intentions better.”
This is the MP whose job it is to known everything about the economy of the UK. If he says we’re in trouble, we’re in trouble.
The words given to the MPs to say in TV interviews are like mantra’s – to every question asked of Darling after he had been “briefed” his answer included:
* I’m being honest
* Every other country in the World
* Unique Circumstances
* Credit Crunch
* Rising Oil and Food Prices
* We helped Northern Rock
* Tax Rebate next month
* Helping People getting back into work
* Fundamental of Economy Sound
“Who’s going to win Eurovision this year?” “Honestly, every other country in the world has rising oil and food prices, I remember when we helped northern rock I was going to give a tax rebate next month…blah blah blah…I think they should bring back Cliff Richard.”
I don’t have a TV so I don’t need to listen to repetitious spin a lot. Lets break it down a bit:
* I’m being honest – Why do I get jittery when a politician starts with that?
* Every other country in the world… – Asia seems to be unaffected thus far
* Credit Crunch – such a buzzword for people at the moment. Basically free credit to everyone will eventually cause problems, you can’t keep borrowing forever.
* Rising Fuel and Oil Prices – Why did we invade Iraq – wasn’t it for WMD or for “$20 a barrel oil”? Because both failed.
* We Helped Northern Rock – Nationalising a bank under intense pressure after failing to find it a buyer, placing £1.3 billion more in national debt.
* Tax Rebate next month – What tax rebate? The one where companies can claim back VAT they shouldn’t of paid in the first place because they overpaid?
Or the rebate to make up for the blunder of not noticing abolition of the 10p tax rate would put the lower paid workers out of pocket?
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Lockbox banking is a banking option that has been adopted by a good number of medium and large scale businesses which have extensive operations and a lot of customers. These banking options allow customers who have accessed the goods and services of a business to send the payments directly to the bank and not to the business itself, through the post office. It is a banking option that is only offered to commercial customers and not retail customers due to the amount of money that is generated and handled over.
This type of banking is very beneficial to medium and large scale businesses in the sense that it relives these businesses of the task of handling money, counting it, drawing up checks and then depositing it in the bank. As may be expected these is an intricate task that requires a substantial man-power to handle these payment in a timely and accurate manner. This is not always possible for large and medium scale businesses and there is the possibility of loss of money that may upset the accounts of the business. Thus with lockbox banking options a business does not have to employ extra labor to handle its payment and what’s more is that banks use automated machines that are able to process the payments in a feasible manner.
Banks that offer lockbox banking options have set up a system that allows them to clear up the lockboxes at frequent time intervals through out the day. This means that large scale and medium sized businesses do not experience a backlog of unprocessed payments in cash or as checks. Banks also use the automated machines to process data and thus develop a report that is delivered into the account of the businesses. The fact that report s and copies of checks are delivered to the businesses ensures that there is sufficient proof of transaction in the event that a dispute arises.
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An audit is performed by a third (official or appointed) party. Most people consider it a major issue, but it is not really. There are two main parties who can do a physical audit:
1. SARS (South African Revenue Services) – through the use of their own CA’s but you should ask them for identification first!
2. Independent auditors. This will be because your business entity requires so by law eg: a Pty (Ltd) or on behalf of banks and other official institutions.
Remember that YOU appoint an auditor in these cases. Ask, because a closed corporation or sole proprietor does not need an audit by law.
An audit means that either SARS or a registered auditor (a chartered accountant who is registered to do so) has a closer look at your administration and makes sure that it is in line with legislation (VAT, CGT and labour laws) and/or GAAP (General Accepted Accounting Principles). In short, just think of it as a tune up, and you can learn from it at the same time – if you manage your own books. To make the audit as smooth as possible there is one basic rule:
Be prepared
The infamous “admin in a shoebox” will not impress and will be subject to a thorough investigation without exception. But, if you just file your ‘stuff’ neatly (doesn’t have to be professional) it will help a lot. If you make use of a bookkeeper or accountant then she/he should attend the audit in your place. Do NOT do it yourself even though you are the person who is responsible in the end!! Your bookkeeper or accountant has to attend the audit without charging you. Make sure that this is part of your original contract with them, otherwise you could be in for a nasty surprise, especially when the auditor asks them to do more work on your behalf. More so if you are not aware of what is going on. Ask and, if necessary, speak to the auditing party and/or an independent expert.
In the end there are two (or three) scenarios:
a) An independent auditor will ‘sign off’ your financials (Audited Annual Financial Statements) and they will normally submit it for you to whoever needs it (banks, shareholders, members etc.).
b) SARS will always assess the audit and make corrections, if any. Arrangements with SARS should be explicitly stipulated in writing to you. Any payments due after the audit/assessment should be adhered to, but investigated. SARS employees are also human and therefore able to make mistakes.
c) The third scenario is where you do NOT want to be. Realize that SARS can penalize you with imprisonment if so required, so stay on track!
As an accountant myself I can only advise you to use the means available to you. Use an accountant or registered book keeper, make use of E-filing as supplied online by SARS and talk to the Labour department. I know it sounds, looks and feels like a painful process but use the people who are in the know. In the end it will pay for itself.
And, as always, if in doubt about anything:
Ask a professional!
Focus on what YOU are good at. Let somebody else make a living too and keep you out of trouble, and acknowledge the fact that you do not understand all of it. Believe it or not but legislation is hard on us and with the new rules of GAAP coming up the IFRS (International Financial Reporting Standards) are not to be treated without respect and I’d have to say not without a good painkiller to hand either!
Remember the following:
‘Good’ books are a reflection of how good you and your company are. ‘Cooked’ books are a reflection of how good you want to be.
Happy auditing!