Small businesses with a turnover less than the VAT registration threshold (currently £77,000 but increasing to £79,000 from 1 April 2013) will, from April 2013, be able to use a simpler method to work out their profits to charge to tax.
The new method will simply measure money in against money out of the business rather than use more complicated accounting principles that might see adjustments for debtors, creditors or stock. Some businesses will also be allowed to use flat rates to calculate certain business expenses and there may no longer be a need to distinguish between capital and revenue monies spent.
Whilst this simplification is welcomed, making it easier for business owners to see a direct correlation between the amount of their profit and the amount that is charged to tax not all businesses will benefit and its important that the position is reviewed regularly to ensure that you do not advertently fall foul of these simplified rules.
If you want to know more about what is proposed or need help to establish whether your business is affected, please call our Small Business Manager Nick Hillsdon for further advice on 01656 867167.