Author: Ketan Umretiya

Most business owners will know the difference between a profit statement and a balance sheet.

Both are created from a process known as double-entry bookkeeping.

If asked to consider two aspects of a £50 purchase from a stationery store, most would say that their cash reserves have dropped by £50 and the store’s cash reserves had increased by the same amount. This is true, but double entry bookkeeping looks at the two-fold aspect of any transaction from one point of view.

In the above example, the purchaser has incurred a cost for stationery and reduce their bank balance by £50. In bookkeeping parlance, stationery costs are debited with £50 and their bank account is credited with the same amount.

Debits are plus amounts and credits are minus amounts. Roll out this process to all transactions in a year and they will sum to zero. This zero result proves that your accounts balance.

In a profit statement, debits for costs are shown as expenses and credits for sales and other income sources are shown as sales or income. If debits (costs) are more the credits (income) you have made a loss, and visa versa, more credits than debits you have made a profit.

Your balance sheet, made up to the same date, will show all assets (debits) less all liabilities (credits). The difference between these two amounts will demonstrate if you have more assets than liabilities – you are solvent – or more liabilities than assets – insolvent. Most balance sheets label this figure as Net Assets/(Liabilities).

The bottom end of the balance sheet shows how the net assets/liabilities have been acquired or financed. Usually, this is your capital stake in the business (credits) plus any retained profits (credits).

Source: Other Mon, 07 Dec 2020 00:00:00 +0100

The Secretary of State for Business, Energy and Industrial Strategy, Alok Sharma has written a letter to businesses in the professional services sector. The letter (available in English and Welsh) provides tailored advice on what key actions businesses must take after the transition period ends on 31 December 2020.

The UK government confirmed earlier this year that it would neither accept nor seek any extension to the transition period and the EU has formally accepted this position. This means that the transition period will end on 31 December 2020. At the time of writing, no trade deal has been agreed with the EU although negotiations to reach an agreement with the EU appear to be continuing into the 11^th hour.

We have summarised the main headings in the letter below:

1. Get your professional qualifications recognised by EU regulators to be able to practise or service clients in the EU.

Starting the process to get your professional qualifications recognised by EU regulators by 31 December 2020 may help you to practise your profession (e.g. accountancy, engineering) in the EU.

2. Check if a visa or work permit is required to travel to the EU for work purposes and apply if necessary.

You may face delays or refusal at the border when travelling for business if you do not comply with the immigration requirements of the EU27 if travelling from 1 January 2021.

3. Be prepared on data protection and data transfers.

Your business may not be able to legally receive personal data from the European Economic Area (EEA) from 1 January 2021 if you have not put alternative safeguards in place to cover EU to UK personal data flows.

4. If you are planning to recruit from overseas from 1 January 2021, you will need to register as a licensed visa sponsor.

You may not be able to legally hire people from outside the UK if you do not have a licence. New employees from outside the UK will also need to meet new job, salary and language requirements. Irish citizens and those eligible under the EU Settlement Scheme are not affected.

The letter also reminds readers that webinars providing a range of support are available at: gov.uk/ transition-webinars.

HM Treasury has published a further Treasury Direction made under the Coronavirus Act 2020, ss. 71 and 76, which modifies and extends the effect of the Self-Employment Income Support Scheme (SEISS).The Direction mainly deals with the expansion of the SEISS from 1 November 2020 to 29 January 2021, officially referred to as the SEISS Grant Extension 3 (SEISS 3).

The self-employed will receive 80% of average trading profits for November, December and January. This will mean a maximum grant for the three months of £7,500 made available to those who meet the eligibility requirements. The claim window for applying for the grant opened on 30 November 2020 and closes on 29 January 2021.

To be eligible for an SEISS 3 payment, self-employed individuals, including members of partnerships, must meet the following criteria in relation to a trade:

1. the business of which has suffered reduced activity, capacity or demand in that period from that which could reasonably have been expected but for the adverse effect on the business of coronavirus or coronavirus disease, and
2. which the claimant reasonably believes will suffer a significant reduction in trading profits for a relevant basis period from that which would otherwise have reasonably been expected as a result of that reduced activity, capacity or demand.

Claimants must also have been previously eligible for the Self-Employment Income Support Scheme first and second grant (although they do not have to have claimed the previous grants).

An additional second grant will be made available from 1 February 2021 to 30 April 2021. The level of this second grant amount is subject to review and will be set in due course.