Flexible, Personal Accounting Services

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Frequently Asked Questions

If there is something else you would like to know that we haven't listed here, please call or send us an email.

What are statutory accounts?

These are year-end accounts that are submitted to the relevant authorities, such as the Inland Revenue and the Companies Office. Company accounts can be complex and require a variety of disclosures to be made in addition to the profit and loss account and the balance sheet. It is therefore important to appoint an advisor who will prepare these accounts for you and give you the appropriate guidance and information.

What is management accounting?

Management accounting can be vital to becoming a successful company. It’s about analysing costs, producing realistic forecasts and budgets (planned costs and sales) and comparing your company’s actual performance with those forecasts and plans. It can make a huge difference to how well your company performs and improve your decision-making immeasurably.

What’s the difference between management accounting and what my accountant does at the end of the year?

Your financial accountant is there to keep the Inland Revenue and any external stakeholders happy by recording financial information at the end of the year. A financial accountant focuses on tax. A management accountant, on the other hand, is there to help you throughout the year by regularly providing you with useful information that will enable you to make good decisions and optimise your company’s performance.

What is a limited liability (Ltd) company?

It is a separate legal entity, a company whose shareholders have limited their liability to the value of the shares they hold.

What is a partnership?

This is when two or more people agree to carry on a business together intending to share profits.

What is a sole trader?

This is the simplest type of business. There are no shareholders, just the owner’s money and borrowings. A sole trader may also be known as a sole proprietor.

Why should I use you rather than someone providing a bookkeeping service in their spare time?

With us you get bookkeeping with a management accountant’s eye – so you get advice, insights and training that you wouldn’t normally get from a bookkeeper. You also get the peace of mind that comes from knowing you are dealing with a company that has professional indemnity insurance and will be able to appreciate the bigger picture of your business.

How much time will you be likely to spend at our office, and how much can you do from yours?

If we are going to provide you with a regular bookkeeping or management accounting service, we generally like to spend some time in-house with you initially. This lets us get to know your company and find out how everything works. After that we can do most of the work from our own office. But this is all negotiable.

How do you transfer paperwork and information?

This depends on your location and requirement but we have successfully used email, post, or arranged to meet customers at a mutually convenient time and place.

What are the current taxation rates?

Personal Tax Rates

Income Level

0 to 14,000

14,001 to 48,000

48,001 to 70,000

70,001 and Upwards

Tax Rate %

10.50%

17.50%

30.00%

33.00%

 

Company Flat Tax Rate 28%

Trustee Flat Tax Rate 33%

What is Provisional Tax?

A common misconception is that your first year in business is tax-free. Although you may not be making tax payments during your first year, the year is still taxed.

You’ll have to pay this tax by 7th February the following year or 7th April if you have a tax agent with an extension of time.

If the residual income tax (RIT) your business has to pay after its first year of operating totals more than $2,500, you might have to pay your next year’s tax in instalments during the following year. These payments are known as provisional payments.

Provisional tax requires business owners to think ahead and budget effectively for payments.

Provisional tax is often confused as being separate to income tax, but it is in fact the same thing – just paid through the financial year in instalments, instead of in one final payment.

When you pay provisional tax, you pay instalments to the IRD based on the method of calculation you have chosen. If you don’t make a choice, Inland Revenue will allocate you the standard method.

After you file your tax return at the end of the financial year, Inland Revenue compares your Residual Income Tax (RIT) with the provisional tax payments you have made during the year to determine if there is any remaining RIT to pay. If you have over-paid, you will receive a refund and if you have underpaid, there will be further tax to pay.

What is Residual Income Tax (RIT)?

Your residual income tax is the amount of tax to pay after deducting any PAYE, imputation credits, withholding tax and resident withholding tax credits.

When Do I Pay Provisional Tax?

This progress payment is paid three times a year for most taxpayers.  The due dates are 28th August, 15th January and 7th May.  For clients who pay their GST on a six monthly basis they pay two instalments of provisional tax on the 28th Oct and 7th May. If it is not paid, or if it is short paid then you can be faced with extra penalties and interest.

What happens if I don’t pay?

If you short pay your provisional tax it can, in some cases, have very severe interest consequences. If your final tax bill is much greater than what you have paid as provisional tax then there are times when you will have to pay interest backdated to start from when the first instalment of provisional tax was due. This can happen even when the first instalment was correctly calculated and paid in the first place. It can even occur when unexpectedly large profits arise towards the end of the tax year.

Short payments may also incur penalties if insufficient care was taken when estimating. But you are not penalised with not having taken reasonable care if you have over-paid your provisional tax.

Conclusion

Provisional tax is simply paying your current years taxes on a pay as you go basis, in instalments. At the end of the year when you prepare your tax return you will get a credit for the provisional tax paid. You can estimate your tax if your circumstances have changed from the previous year but beware – there are penalties for getting it wrong. So, if you have any concerns about meeting your tax payments you need to see your accountant who has the facility to make payment arrangements with the tax department and to negotiate penalties.

What is GST?

GST stands for Goods and Services Tax.  It’s a tax built into the price of virtually all products and services that you buy or sell.  The current GST rate is 15%

As a GST-registered business, you collect GST on behalf of the Government by building it into the prices of your products and services, and then you claim GST back on the products or services you have bought as business expenses. If you are not GST-registered, you can’t do this.

So the basic principle of GST is you end up paying Inland Revenue the difference between the GST you collected on what you sold and the GST you paid on the supplies you bought for your business by filing regular GST returns with Inland Revenue throughout the year. Your GST returns will show that you either have GST to pay or you will be receiving a GST refund.

Do I have to register for GST?

Once your business starts to turn over more than $60,000 a year, you’re required to become a GST-registered business. However, for some businesses it’s worth voluntarily registering from day one. For example:

  • If your expenses are greater than your income in the early phase of your business, then registering for GST may mean you can claim GST refunds.
  • If you are an exporter, you will be able to claim GST on your expenses but your exports will be zero-rated, so you will be in a GST refund position.

If you charge GST you must register regardless of your turnover. 

We suggest you get advice on whether to register for GST or not.  Please call us or send us an email and we can provide you will the best advice for your situation.