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Dividend Allowance

01.02.2016

From 6th April 2016 the Dividend Tax Credit will be replaced by a new, tax-free, Dividend Allowance. The new Dividend Allowance means that you won’t have to pay tax on the first £5,000 of your dividend income. The allowance is available to anyone who has dividend income. Headline rates of dividend tax are also changing. You’ll pay tax on any dividends you receive over £5,000 at the following rates: • 7.5% on dividend income within the basic rate band • 32.5% on dividend income within the higher rate band • 38.1% on dividend income within the additional rate band This system is designed to ensure that only those with significant dividend income will pay more tax. Dividends received by pension funds that are currently exempt from tax, and dividends received on shares held in an Individual Savings Account (ISA), will continue to be tax free. From April 2016 you have to apply the new headline rates on the amount of dividends you actually receive, where the income is over £5,000 (excluding any dividend income paid within an ISA). The Dividend Allowance will not reduce your total income for tax purposes. However, it will mean that you don’t have any tax to pay on the first £5,000 of dividend income you receive. Dividends within your allowance will still count towards your basic or higher rate bands, and may therefore affect the rate of tax that you pay on dividends you receive in excess of the £5,000 allowance. Liberty Accounts enables limited companies to record both shareholder(s) and shareholding(s) and then, through our Dividend Wizard, to produce both the Dividend Tax Voucher(s) and related Minute in seconds. Updates have been applied for the new legislation so that only dividends paid before 6th April will have Dividend Tax Credit shown on your voucher(s). Your financial adviser will be able to provide guidance on the new legislation. Reference - HMRC Dividend Allowance

 

From: product-news

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Receipts and Payments vs Accruals accounts

18.01.2016

Charities with a gross income below £250,000 and who are not registered as a company have the option, as long as their governing document does not require their charity’s annual accounts to be prepared as accruals accounts, of preparing receipts and payments accounts. In essence receipts and payment is a simpler reporting option only detailing cash transactions during the year whereas accruals accounting considers invoiced income and billed expenditure (whether paid or not). Specific differences from accrual accounts are detailed further down in the page. Typically, because of the simpler reporting requirement, receipts and payments accounting is used by charities who use manual solutions, e.g. spreadsheets, to record their transactions. It is however generally regarded that accrual accounting provides a clearer picture of the charity’s activities and financial affairs. Changing between one reporting structure and another has, until now, been seen as a difficult task and avoided by those administering a charities financial records. Now things are different Whichever option is preferred by your organisation Liberty Accounts provides you with that reporting option - without the loss of any system functionality! For example, you can still run both customer and supplier ledgers and record invoices and bills, due for future payment, which therefore allows for better management of your cash flow. Switching between receipts and payment and accrual reporting is simply the selection of the appropriate reporting option. When may accrual accounting by preferable? There are some occasions where, although the law allows receipts and payments accounts to be prepared, it may be preferable to prepare accruals accounts. The following are examples of such occasions: • donors may require accruals accounts to be prepared as a condition of their grant; • trustees may need to explain more about the use of their resources than simply cash movements. This may arise when: - a charity has significant non-cash assets, or fixed assets which the trustees would like to value and depreciate in the accounts; - a charity has received significant non-cash donations (gifts in kind or valuable gifts of services); or - a charity operates a total return policy in relation to permanent endowment investments; • the charity, despite having an income under the threshold, is growing in size or complexity, for example, the charity may use a trading subsidiary, or the charity is involved in joint operations with other charities. • the charity has significant receipts or payments arising from asset and investment sales and purchase, and the trustees consider that the preparation of accruals accounts would explain these transactions more clearly; • the charity carries out its activities mainly by making programme related investments by way of equity or loan rather than by making grants to beneficiaries and the trustees consider that the preparation of accruals accounts would explain these transactions more clearly. In each of these cases, accruals accounts can provide a clearer picture of the charity’s activities and financial affairs than receipts and payments accounts. Differences from accruals accounts Receipts and payments accounts include some items that do not appear in accruals accounts. These extra items involve either exchanging cash for other assets or exchanging other assets for cash. Examples include receipts from the sale of fixed assets or investments. Although such items should be included in receipts and payments accounts, they should form a separate category from other items in the accounts as they do not represent resources moving into or out of the charity. Similarly receipts and payments accounts exclude some items that are included in accruals accounts. These excluded items mainly involve changes in the value of assets, such as investments, buildings, creditors and debtors, which are not accounted for in receipts and payments accounts. This means that receipts and payments accounts will not contain any amounts for depreciation, gifts in kind, bad debts or gains and losses on sales of investments or fixed assets. A statement listing assets and liabilities is required in receipts and payments accounts (in place of a balance sheet required for accruals accounts). However, no asset valuations are required, unless a valuation is essential to a meaningful description of the asset - such as cash or deposit account balances. Valuations (even approximate ones) may be provided if trustees wish.

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Reference - Charity Commission Receipts and Payments Accounts Introductory Notes

 

From: charity-news

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GoCardless Integration

24.11.2015

Liberty Accounts GoCardless integration provides a mechanism whereby can offer a 'Pay Now by GoCardless' button on emailed customer invoices. This enables your customers to easily and, hopefully, quickly settle their invoices and help improve your cash flow. This video demonstrates both the set-up and process of using this feature.

 

From: videos

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Dividend Allowance