By Rob Case, head of Tax at Randall & Payne 

Every VAT Registered business at some point will ask should I charge VAT on that, but when you are unsure what should you do?

It is very difficult to know some of the finer details, or intricacies, of VAT.

So what are the potential problem areas?

Food - The legislation around food is probably the worst written law I know. Everyone knows about the Jaffa Cake case, but there are countless examples of inconsistencies with seemingly similar products (can we link to the website article about food?). If you are supplying food products I would suggest taking advice.

Property - Letting surplus space or a room, is most likely to be exempt for VAT (unless you have Opted to Tax), but that can depend what you supply with it. Are you supplying food and drink with it? What about service charges, telephone and utilities recharges? The treatment depends upon the specific circumstances and agreement, but it is easy to fall foul and get it wrong.

Often with property sales the value of transactions is high, and therefore the VAT, so getting the position right is really important and often it is not considered early enough in the transaction.

Delivery - Do you supply delivered goods? Perhaps you make a separate charge for delivery, but what rate of VAT should apply? Ultimately that will depend upon the underlying goods being supplied and also the contractual position with your customer. It is probable that the delivery could be Standard Rated, but equally there are circumstances where it could be different and if your customer is a private consumer it could impact the price they pay.

Recharges - If you have an agreement to recharge expenses you incur in fulfilling a contract, which includes train or air travel you have taken (zero rated), what rate do you charge to your customer? The trap to avoid is to automatically follow the VAT treatment of your costs. Just because you were not charged VAT, doesn't mean that you should not charge VAT on your recharge. If it is effectively an additional charge for your services, then the VAT rate follows the main element of your supply.

What if I am supplying multiple things?

Perhaps you supply a vehicle for hire and insurance for its use, or food in a decorative container that is designed to be reused, or maybe a new caravan with some furniture in it. Where there are multiple items with potentially different VAT rates you must take care to ensure you charge the right VAT and this again is a complex area the subject of countless case law over the years.

Should I charge the Standard Rate of 20% VAT by default?

The onus is on the supplier to charge the correct amount of VAT. If one of the VAT exemptions or reduced rates (0% or 5%) apply then they override the Standard Rate, so whilst it may seem sensible to charge 20% VAT where you are unsure, that could be incorrect and the consequences can be significant.

VAT incorrectly charged is not technically VAT, HMRC have the powers to refuse your customer's input VAT reclaim, but also could refuse to refund the supplier. Also don't forget HMRC can then potentially charge penalties too, it's like having their Jaffa Cake and eating it!

And finally, what about Brexit?

International matters cause greater complexity and compliance requirements for businesses. Brexit will not only change the ultimate jurisdiction of the tax, but subject to the deal agreed there is real concern about the potential significant additional administrative and financial burdens put on business, which are likely to mean the slow movement of goods across borders affecting supply chains, projects and serviceability of customers.

If you have any concerns about VAT or want to talk about the specifics of your VAT position, please contact Rob Case, on 01242 776000 , email rob.case@randall-payne.co.uk or visit www.randall-payne.co.uk.

Business expert: Business valuation Q&As

8th October 2018

By Ollie Newbold, head of corporate finance at Randall & Payne 

Having provided numerous business valuation reports over the years we have often been asked similar questions regarding valuation work, so thought we would share our thoughts in this complex area.

What is a business valuation?

A business valuation typically assesses the price that a business would achieve from negotiations between a willing buyer and a willing seller.

When would I need a valuation?

Business valuations can be used for a range of purposes, including preparing for sale, admittance of a new shareholder, agreeing a value with HMRC, divorce etc.

What is the benefit of having a valuation?

Maximising Value: Valuations are an ideal method of identifying which aspects of your business are driving value up and areas of weakness that may be eroding value. By identifying these factors, you are positioned to focus on the changes that need to be made in order to have the best chance of receiving the maximum consideration when you decide to sell.

Strategy: By analysing the current economy and market conditions, specifically in the sector you are operating in, you can gain an understanding of where your business fits within the market. From this, you are able to identify and focus on strategies that will enable you to adapt to the current climate rather than be adversely affected by it.

Legal: We are often engaged by lawyers to undertake valuations for use in probate, divorce proceedings and as Expert Witnesses, producing reports in a concise and understandable manner.

How do you approach a business valuation?

Without extensive research and company fact finding, it is hard to gauge an accurate understanding of a business and identify the areas of weakness which may be having a detrimental impact on value. Our valuations not only look at your business and the inherent factors which may be making your business more or less valuable, we also look specifically at the industry as well as the wider economy to support the valuations and consider external impacts. We subscribe to a trusted market research site and a transaction database in order to gain a full understanding of the industry and look at recent transactions that have occurred within your sector. This gives us a realistic view of the structure and value of the transactions that are being undertaken. By adopting this approach to valuations, our clients can be assured that their valuation is based on key supporting evidence.

Can I obtain a cheaper alternative online?

Randall & Payne focus on understanding the value drivers in your business and will ask the detailed questions that a website is not able to. Understanding some of the intricacies which cannot be achieved by simply inputting numbers or checking a box can have a significant impact on the valuation and its robustness.

In addition, we have experience of preparing numerous valuations over many years, throughout different economic conditions. This knowledge and experience allows us to thoroughly consider whether the valuation of the business 'feels right' based on experience.

Finally, if there are aspects of the valuation that you want to discuss in greater depth or understand further, we are always happy to do so.

If you are interested in having a business valuation or discuss the answers to any of the above questions, please contact Ollie Newbold, Head of Corporate Finance, on 01242 776000   email oliver.newbold@randall-payne.co.uk or visit www.randall-payne.co.uk.

Business expert: Solving the recruitment dilemma

1st October 2018

By Will Abbott, head of business advisory at Randall & Payne 

Solving the recruitment dilemma will always be a challenge in business - turning the problem on its head and doing more with the resources we already have is a great place to start.

Recruitment is an issue in almost every business across all sectors that we work with. We seemed to be faced with the contradiction of relatively low wage inflation but a shortage of people to do the work we have. Due to low confidence, employees have been reluctant to change jobs, although this now appears to be changing. This of course is a double-edged sword, increasing opportunities to attract people from other firms whilst increasing the risk of losing good people from our teams.

If this is the problem, what is the solution?

Much has been written about the differences between generations and many businesses have recognised this. Motivation goes beyond money and community impact, well-being, flexible working, lifelong learning and culture are just some of the influences when individuals are making job choices. It does no harm to reflect on which of those areas we can do more of, although business managers are often quick to point to the cost of these initiatives, especially when the benefits are less tangible.

For me the real key is productivity. The UK continues to lag behind other countries in lifting productivity and as the economists will remind us, in the long run productivity is almost everything. It is simply the case that most businesses could be more efficient but rarely find the time to look seriously at how they operate, with a clear goal to improve performance.

Whilst staff shortages will invariably drive the adoption of new technology including robotics and AI, every business has the opportunity to increase efficiency in its processes, without necessarily making large investments.

Three things we should regularly review are:

1. Every business is working with loss making customers so you need to look beyond the price paid. Is the customer highly demanding, disruptive to process as well as hard on price? It may be counter-intuitive but the numbers will demonstrate that it is possible to make more profit by doing less work, if you cull some of your less desirable customers. The bottom 20% of your customers will be taking up valuable staff resource that could be better deployed elsewhere, as well as draining morale. Recognising the customers that don't fit and encouraging them towards a more suitable supplier will pay dividends for your business.

2. Due to changes in the market or customer needs over time, processes become bloated and often we continue to carry out tasks that add no value to the customer. Put simply, if we cut out the 20% of the time when we add no value, we could all be working four days a week and generating the same output. Yet the priority is often to generate more sales to drive profit, when the business is already struggling to cope with the work it has.

3. Scope creep is one of the most common and damaging causes of reduced profitability that we see in businesses. Often people are driven by the desire to help customers under the guise of delivering great customer service. "Going the extra mile" is often touted as a differentiator and the team are happy to carry on doing just that, solving unanticipated problems within the original scope of the contract, oblivious to the additional drain on resources. Tackling this requires both discipline and an appreciation of the extra value being delivered. We are quick to acknowledge if things have not gone well, but slow to take the credit when we have over delivered.

So, recruitment may not always be the answer - reviewing the current skills, processes, customer-base and working environment, then making necessary improvements, will help to retain your key staff, who will be highly motivated and perform their jobs more efficiently. A happy workforce and a stress-free environment will increase productivity, which may then alleviate the need to recruit, or word of mouth from your retained workforce may lead to new recruits and solve the recruitment dilemma.

Will Abbott heads up the business advisory and coaching team at Randall & Payne Accountants in Cheltenham, Gloucestershire.

Find out more at www.randall-payne.co.uk or call 01242 776000.

24th September 2018

By Rob Stokes, Partner at Randall & Payne 

Whatever your media choice you cannot escape the cloud accounting message - be it radio, TV, business magazines or the free magazine from a hotel chain.

The adverts are aimed at the one-man band sole trader all the way up to multi-site multi-million-pound turnover business, showcasing the software available and offers. The articles explain what cloud accounting is, usually in great technical detail, but in our experience, when speaking to clients about converting to the cloud, many questions remain unanswered.

Here are the frequently-asked questions and the advice Randall & Payne have given:

What's the difference between cloud and desktop accounting software?

To use desktop accounting software, you must install it on your computer - standalone or server - and run it there. All the data relating to your accounts is also stored on your computer, subject to your back-up procedures. Cloud accounting software runs on the internet, there's nothing to install on your computer. To access the software you visit a website and sign in with a username and password, enabling you to use cloud accounting software from virtually any computer, most tablets and smart phones - anywhere you have an internet connection.

Why would I benefit from switching to cloud accounting?

• The primary benefit of using cloud accounting is mobility. Cloud accounting software tends to be more user-friendly and requires less technical expertise to set up. Being able to log on to your accounts from any device with an internet connection means you can generate invoices on the go or process payments immediately, saving you time and effort. Data capture and entry are more automated apps reducing the time spent on that element of your business.

• Your data is always safely secured and backed up online, so you never need to worry about your computer crashing and losing your data.

• You will also be compliant with HMRC's Making Tax Digital for VAT regulations arriving from 1 April 2019.

• Another potential cost saving for a business is the fact there is less requirement for IT hardware with the use of cloud packages.

• A good internet connection is important but you no longer need to ensure your in-house server is up to the latest specification to use resource intensive desktop applications.

Do we need to know about accounting to use accounting software?

No is the simple answer. Most cloud accounting packages are designed for non-accountants to use. The right accounting software can make your accounts more accessible and easier to understand. You will find that accounting software helps you identify trends, spot opportunities and give you confidence that you understand where your company stands.

You will need some basic accounting knowledge to use it - if you put inaccurate information in to your accounting software, you'll get inaccurate figures and information out. So it is still wise to have some basic knowledge, like your accounts payable and accounts receivable. But another of the advantages of the software is the ability of us as your accountant to log into the live data with you should questions arise.

How do I choose the best cloud accounting package to suit me or my business?

We can help you evaluate what you need from a package by considering your existing accounting methods, take into account your plans for the future and for you personally. We can ensure the software package, with any add-ons fits your needs and works with your business processes.

We will ask key questions about you and your business which will help to ascertain which software package you should use or trial. We also suggest getting key employees involved when evaluating different packages as they may be able to provide a different perspective or offer helpful insights into how the software might be used.

What would happen if I had a technical problem?

We are here to help you during working hours and with our experience it would likely be a simple issue we have resolved before. However most established providers such as Sage and Xero have dedicated support teams available 24/7, 365 days a year.

Will Cloud accounting help with tax issues?

Yes in terms of providing the base data with which to calculate potential tax liabilities. One of the benefits is shared access with us as your accountants and with the help of automation, the accounting information being more regularly up to date, we can help plan for potential liabilities.

How secure is my data?

Your data is hosted on secure servers with multiple sites in order to provide resilience against server failure. Most if not all cloud accounting software providers use 128-bit encryption and also two-level user authentication for access.

If you have any questions which haven't been covered, please give me a call or come for a chat over a coffee. We are located at Chargrove House on the Shurdington Road, Cheltenham. Contact Rob Stokes on 01242 776000  or rob.stokes@randall-payne.co.uk, www.randall-payne.co.uk.