Unsure about something? Need some advice? See if your question is answered below or fill in the form to the right and we will answer your question free of charge.
Our services as your accountant are ongoing throughout the year. This means that you can call for advice at any time without getting an extra charge. Below are a few of the many questions that we get asked from time to time, and which we will try to either answer immediately or request a meeting with you to explore your problem in greater depth.
Q: I am starting my own business- Sole trader or Company, which is better for me?
A: There is no one size fits all answer to this question as individual circumstances are different. We would strongly recommend that you take advantage of our offer of a free first meeting where we can explain the advantages and disadvantages of each option, before you make a considered decision on which way to go.
Q: You are a Sole Practitioner- what happens if you fall ill?
A: The Accountancy Institutes of all qualified accountants require that we provide for this possibility. We have a Continuity of Practice agreement with another Jersey accountancy practice whereby they will carry out any client work required during the period of illness, at no extra cost to yourself
Q: Are pensions taxable? And if so-why?
A: Pensions are considered to be income arising from employment, normally funded by tax-relieved contributions, and are taxable, even your Social Security pension. There are some special pension products which provide income from unrelieved capital contributions which can be tax free, with the approval of the Comptroller of Taxes. If you want to investigate pensions in more depth you should consult an Independent Financial Adviser.
Q: I am planning on going self-employed. How do I pay Social Security?
A: You pay via Class II contributions payable quarterly, calculated as 12.5% of your earnings of the year two years ago. You will receive tax relief on 52% of your contributions. You should visit the Social Security office and talk to an adviser who will explain fully how contributions are calculated and whether you have any options based on your circumstances, and we advise that you do this before you start self-employment.
Q: How do you charge for your services?
A: We always agree a fixed price for your accountancy and tax work requirements, and sign a fee agreement with you. We normally require that you pay a monthly amount by standing order, with the annual amount payable discounted down from the fixed fee amount, or of course you can pay our fee in one go once we have completed your work. Many clients prefer to pay monthly as it assists with cash flow.
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Q: What does acting as my tax agent mean and entail?
A: A tax agent handles all communication with the Tax Office from submitting tax returns to receiving tax assessments and ITIS notices. You no longer deal direct with them regarding your tax affairs. Instead we forward all communications we receive to you, and advise the correct course of action. We make all written responses to the Tax Office on your behalf. You appoint a tax agent by writing to the Comptroller of Taxes, and we provide a standard letter for you to do this. Companies, partnerships as well as individuals can appoint a tax agent.
Q: With tax I have heard "Marginal Rate" being used- what is it?
A: Jersey has a two tier income tax system, meaning that your tax bill is calculated as the lower of income, less a few available allowances, at 20%, or income in excess of your tax free allowance, called your threshold, at the marginal rate which is currently 26%. In practice most taxpayers will fall within the marginal rate where your effective rate of tax, that is tax paid divided by total income, is between 0% and 20% and is broadly speaking your ITIS percentage rate. The maximum ITIS rate is 35% where you have tax arrears whilst the maximum effective tax rate is 20% which normally only applies to higher earners.
Q: I am making a profit but I have no cash in the bank- why ?
A:The most common mistake for non-accountants is to equate profits and cash. A profitable business can be overdrawn at the bank since not all outgoings directly affect the profit and loss account but instead are reflected in the balance sheet only. Examples are owner’s drawings for living expenses or the purchase of expensive machinery. For the latter you are basically swapping cash for an asset which will earn future profits. The most important message we give to business owners is to concentrate on managing cash flow and the bank account, and if an overdrawn situation arises seek our advice as soon as possible. Your business may be loss-making of course, but there are many other reasons why an apparently profitable business is always overdrawn at the bank We can help you manage these and keep your bank manager happy.
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