While accounting firms like GM Professional Accountants only hire experienced, pedigree experts to make up our accounting team, we know that many of our clients are not in a position to hire such levels of expertise.

As a result, we thought it would be helpful to turn the spotlight on financial skills testing.

If you are a software company hiring a computer programmer, you’d validate that he or she could code. If you are running a hospital, you’d validate that the next surgeon you hire knows his or her way around a scalpel.  Well, the same should be true for any team members you hire for your finance team.

There are a host of suppliers of online accounting tests, and a number of these provide specific skills tests to evaluate the abilities of a future hire to your finance team.  If you are hiring an entry level position, then your focus might be on basic numeracy skills.  If you are seeking a bookkeeper, you will need to ensure that your successful candidate knows a little more.  For more senior positions, you may want someone who knows Sage Line 50.

All of these skills can be tested.  Professional skills testing vendors provide assessments to validate candidate skills across a variety of roles, and accountancy skills testing is no different.

Hiring the right employee for your finance team, however, is not just about “hard” or technical accounting skills.  You’ll also need to evaluate how well the candidate will fit into your broader team.  There’s no point hiring someone who supports your financial balance sheet but damages your team balance sheet (and I apologise for the truly awful pun).  This is where psychometric testing can begin to play a part.  Again, mainstream skills testing vendors provide validated psychometric assessments that can be used to evaluate how well a potential hire will fit into your team.

The cost of a bad hire in the financial department can be huge – particularly for smaller firms.  Validating the ability of your potential hire before signing on the employment contract is an excellent way to maximise your chance of avoiding this!

Company Formation Agent Accountants for Startups

Ready to set up your Company?

It is vital  for your small business to get the company structure, share classes, shareholding, and articles of association accurate during the setting up stage at companies house.

At GM Professional Accountants, we pride ourselves in providing the most ample advice on the setup of new limited companies. We have offices based in London, Manchester and Essex.

During the setting up of a Limited Company, Company Formation is just the first step of many. You will need to consider start-up activities such as registration with HMRC business taxes, which is a service most conventional company agencies do not provide.

We provide comprehensive services that include tax and accounting compliance registration that include:

• VAT Registration
• Registration of Business addresses including Mail Forwarding Services
• Registration for PAYE

What to Expect from Our Company Set Up Services for your small business

• Online company formation in only three hours
• Company name availability search
• Documents by post or email
• Registration of the company for Corporation Tax, PAYE and VAT
• Business startup pack
• Recommendation on the most optimal business structure
• Accountants’ letter to help in the opening of a business bank account
• Articles and memorandum of association

The Different Types of a Limited Company

Private Limited Company by Shares – Most Popular

This is the most popular type of limited company and is the favourite for freelancers, small businesses and contractors. The limited company typically issues profits and shares via dividends.

If you are a member of a business that is limited by shares, the obligation that is owed is limited to the number of unpaid member shares if any.

If the company becomes insolvent, the shareholder is not legally required to make any contributions to offset any debts of the business.

Company Limited by Guarantee

This business structure is mainly favoured by charities.

If the company is dissolved, it is the shareholders responsibility to contribute to the total sum of money they agreed to guarantee for it.

If a company that is limited by guarantee is liquidated or wound up, then every member will need to contribute to the amount they guaranteed. This is to offset the debts the company owes while they were a shareholder. The amounts involved are typically relatively small.

Setting up Fast

If you have ever tried to set up a company, you know that it can be a frustrating experience as there is a lot if paperwork to fill in and forms to submit.

GM Professional Accountants Do It All for You

We can complete the paperwork and submit the forms so that you are set up for trading as soon as possible.

Filling out the Forms

We will take charge of all the paperwork. This will include the compliance requirements of the company formation such as Memorandum of Articles and Articles of Association.

Some of the businesses that favour this type of company formation include freelancers, small businesses and contractors. The limited company will typically issue their profits and shares via dividends.

Shareholders of companies limited by shares are limited to the amount unpaid if any on the members’ shares. Once the member pays their shares in full, the shareholder does not have any liability for the debts of the company.

Small business Virtual Accountant

Virtual accounting refers to a system where a qualified accounting expert offers their accounting expertise and services to businesses and individuals virtually instead of physically working at the business premises of the client.

Find out more

Virtual accounting provides all the benefits you would get if you hired a professional that would physically work from the office. However, given that the virtual accountant is a contractor and telecommuter, the service will often be cheaper.

Virtual services make this possible as they provide greater flexibility for the accounting professional and for the client.

Advantages of Virtual Accounting Services For Your Business

With virtual accounting services, a business can get its accounting handled by a professional accountant rather than having to contract a full-time accountant. This helps companies cut costs as they can pay for services only when they need accounting work done.

It is an excellent solution particularly for small businesses that may not have the budget to engage a full-time accountant yet need a professional to do their accounting.

Virtual accounting may also prove cost-effective for big businesses that may need extra assistance even if they have their own internal accounting department. Virtual accountants can work alongside company accountants to offer their services to reduce the workload for as long as the business needs them.

It provides a unique combination for companies that may not have the funds to hire extra accounting staff but still need additional help.

A small business that cannot afford a knowledgeable and experienced accountant full time or does not have the need to hire one will benefit a lot from engaging the services of a virtual accountant.

Many small businesses run into trouble and fail within three years for a number of reasons. These include an inability to hit upon a business model that produces enough revenue, and failure to differentiate themselves from other businesses in the space. With a virtual accountant providing critical accounting services, they will be able to be in touch with the realities of the marketplace while keeping their financial goals in sight.

Instead of hiring a full time accounting professional getting a virtual accountant can be huge as the professional will provide services that include:

Accountants Guide for EU VAT Purchases

The EU VAT guidelines are intended to make it possible for small businesses to trade in the EU area short of needing VAT registration in all EU nations. While the regulations tend to be complex, the alternate scenario would be more bureaucracy and work.

At its core VAT is a consumption tax. A business registered for VAT will have to pay VAT whenever it makes a purchase and then claim it back when they make their VAT returns, which includes all the purchases made. VAT registered businesses doing businesses with each other can shift the VAT to subsequent purchasers. As such, it is the final consumer who has to pay the VAT as they cannot pass it on or reclaim it. Since the consumer eventually pays the VAT, it is called the consumption tax.

EU VAT is intended to have the same effect and hence businesses registered for VAT and doing businesses with each other within the EU can transfer VAT to subsequent purchasers up to the consumer and never have to deal with the complex regulations of each country.

There are several critical distinctions to take into account though:

Business versus Consumer

EU VAT differs depending on whether the purchaser is a business or a consumer. For the purposes of VAT, it will also be dependent on their VAT registration status. Overall, a purchaser with no VAT number means they are a consumer and one with a VAT number means they are a business. As such, any business not registered for VAT will be deemed a consumer.

Services versus Goods

If you are selling or buying only in the UK then services and goods receive the same treatment on VAT returns. Any trading done outside the United Kingdom whether it be for goods or services will mean that VAT will default to place of supply VAT rules.

It is very straightforward for goods. Goods exported from the UK to other EU countries are subject to VAT rules in the UK, while goods exported from Germany to other EU countries are subject to German VAT rules. Therefore, goods will be subject to the VAT regulations of the country of the seller.

The assumption when you are providing services such as training or consulting is that these will be delivered in person. As such, the VAT rules are inverted with the place of supply being the location of the customer. For instance, a British company consulting for a French company will have the VAT rules of France applied since the place of supply is assumed to be France. UK VAT rules will not apply as the sale is deemed out of its scope given the location of the customer.

Sales

Sales to EU consumer (not registered for VAT)

Any consumer that is not registered for VAT will have to pay the final VAT either in the EU or the UK. For all intents and purposes, sales will be treated as a sale to a United Kingdom consumer. Normal practice is to add the UK VAT of 20% to the total amount.

Box 1 (VAT payable in the period on sales)

Box 6 (Total value of sales not including VAT)

Excluded on EC Sales list

This is good if only a small part of your sales are done outside the UK. But once you start making huge volumes of these sales or a significant increase in the value of such sales, you may need to register for VAT in the given EU state and be subject to the relevant country’s VAT. Each country has different thresholds.

If your EU sales value is more than £250,000 a year, you will be required to fill an Intrastate Supplementary Declaration.

Digital Sales to EU consumer

There are different processes and rules if you are selling digital services to consumers not registered for VAT within the EU. In such an instance, VAT needs to be charged using the local rate with returns made using VAT MOSS.

Sales to EU business (registered for VAT)

You need to have the VAT number of the customer for the transaction to be deemed a business transaction. If you do not have the number, then the transaction is a consumer sale. Both the customer’s VAT and the business’s VAT number have to be indicated in the sales invoice.

Any sales made by a business in the EU also needs to be indicated on the EC Sales List. The EC is a distinct quarterly or monthly return that may not necessarily conform to the schedule of your normal VAT returns. You can get this produced automatically in various accountancy packages so that all you need to do is submit.

Goods to EU business (Registered for VAT)

If you happen to be trading goods to an EU business that is registered for VAT, then you can get zero-rated for VAT, if you do not add any VAT on top of the net value. Most accounting systems will include a specific VAT specification for this. If you are selling goods, the UK is the place of supply and hence UK VAT applies but it is zero-rated. This means that the sale has to be included in the EC sales list.

VAT zero-rated – show VAT as £0.00 and charge net value

Box 6 – Total value of sales not including VAT

Box 8 – Total value EC sales exclusive of VAT

Include in EC Sales List

Services to EU business (Registered for VAT)

If you are selling your services in the EU, the obligation of charging VAT rests with the customer. If it is a service you are selling, UK VAT will not apply since the customer location is the place of supply. Goods are zero-rated for VAT, meaning that you do not add any value to the net value of goods. You will still need to include your sales of services in the EC Sales List. Most accounting software includes a category that makes this possible.

0% VAT – show VAT as £0.00 and charge net value

Box 6 – Full value of sales not including VAT

Do not indicate in Box 8

Indicate in EC Sales list

The flat rate VAT?

If you qualify for the flat rate arrangement, then input VAT will not apply. The obligation for VAT will be determined as a percentage of the gross sales turnover over the tax period. To get your gross sales add in the 20% of VAT, which means that the owed VAT is a percentage of the total, for instance, an IT consultant will have to pay 14.5%. The percentage is intended to act as cover for VAT on acquisitions but excluding the tedium of having to go through all transactions.

If you are exporting services or goods to an EU business registered for VAT, you can avoid VAT by zero-rating the sale. But how does this influence the flat rate turnover determination?

Selling goods to the EU – Add them in the EC Sales list

Selling services to the EU – Add them in the EC Sales list but since UK VAT does not apply, exclude them from the flat rate turnover.

Buying services or goods from the EU – Sales turnover is the basis for the calculation of VAT and hence it does not matter whether EU purchases have VAT or not.

Purchases

What if you are buying services or goods from the EU? The same rules are applicable though now in reverse.

For imports greater than £260,000 of merchandise in a given year from the EU, an Intratat Supplementary Declaration will have to be submitted.

Consumer Purchases (VAT registration not provided to the supplier)

If a business does not give the seller their VAT number, then the business is deemed a consumer. Just like on the sales side the seller’s rate includes VAT and forms part of the final price.

As a consumer, the final VAT lies with you and you cannot pass it down the line. The item will be treated like it had been bought from the United Kingdom without any VAT applied.

Box 7 – Total value of acquisitions

Procurement of Goods from a Business in the EU (Registered for VAT)

You need to give your VAT registration to the seller who also needs to have a VAT number in their country for the purchase to be deemed a business transaction.

Buying of EU goods typically gets VAT charged just as if you made the purchase from the UK from a British supplier. As such, the 20% charged in sterling will apply. You can either use the published rate or find the exchange rate published by the HMRC to calculate how much is owed.

It might seem strange that the seller gets to charge 0% while you get to claim a VAT rate of 20%. But what you need to know is that the VAT rate of 20% is included in BOX 2 when you are submitting returns on EC acquisitions. Box 2 makes up the input VAT total. Therefore the VAT amount on the sales side cancels out the VAT on the purchases side, which results in a net effect of zero VAT. Overall, you should get a fair deal as the overall transaction will have a zero VAT impact just like that of the seller.

Box 2 – VAT owing on EC purchases during this period

Box 4 – VAT reclaimed on acquisitions during this period

Box 7 – Total value of acquisitions

Box 9 – Aggregate value of EC acquisitions plus VAT

Buying of Services from a Business in the EU (Registered for VAT)

This is the reverse of the sale of EU services as discussed previously. The place of supply for services from the EU is the customer location. Regardless of the country from which the service is bought from, UK VAT applies and you are responsible for filing VAT and not the seller.

The reverse charge is what is used to deal with such purchases. It does sound complex given that transactions are treated as both purchases and sales on the VAT return. It does look as if you are buying the service from yourself. The item is included in the VAT on purchases total and the purchases total as well as the VAT on sales total and the sales total. This will result in zero VAT except for a situation when not all purchases may be included.

The seller should have furnished an invoice excluding any VAT. Include the total amount paid in addition to the 20% VAT. The VAT amount includes the purchases (input) total and the sales (output) total, which will result in zero effect on VAT owed.

Box 1 – VAT owing on sales in this period

Box 4 – VAT reclaimed on acquisitions in this period

Box 6 – Aggregate value of sales without VAT

Box 7 – Total value of acquisitions

Excluded in boxes 2 or 9

A stipulation

This article is targeted at small companies with few transactions within the EU. If you run a more complicated business or are planning on large volumes or regular trade with the EU, getting specialized advice is critical.

Wrapping Up

Sale to EU (not registered for VAT) – treat as UK sale. Exclude on EC Sales list. Add 20% VAT.

Sale of merchandise to EU (registered for VAT) – zero rate VAT. Include on EC Sales list. EC sales section on the VAT return.

Sale of Services to EU (registered for VAT) – Zero rate VAT. Include on EC Sales list. Not on the EC sales section.

Buying of Goods from EU (registered for VAT) – Include on EC Acquisitions in the returns. Add 20% VAT.

Buying of Services from EU (registered for VAT) – Exclude from EC Acquisitions. Include in purchases.

GM Professional accountants have offices located in London, Manchester and Essex.