Crunchers Accountants

Crunchers Accountants

Beware of Mixed Messages

Archive for August, 2015

Beware of Mixed Messages

We sometimes get asked at Crunchers questions like:
  • How much should we charge?
  • Do you think we should add x,y or z product or service to our range?
  • Should we deliver an online service?
In our opinion these kind of questions often arise when a piece of strategic thinking is missing from a business.

The planning that is missing is identifying a target market and building the price, product range, presentation and service around that target market.

The danger is that without this foundation piece of work, the business can deliver mixed messages to customers and subconsciously put them off.

For example, you run a garage.  You deliver a first class product in terms of the quality of the work, and charge a top price for the job, but the service is poor and the workshop is a mess.  Clients who are prepared to pay a top price for top quality work will be put off and clients who don’t mind about the mess won’t pay the price.

Or to flip the equation around, let us say you sell cheap product at a low price, from a shop that looks like it is a high class boutique – the people who would buy your product won’t step through the door and the ones who step through the door aren’t in the market to buy cheap tat.

Ok, so these are extreme examples, but is how consistent is our service, product, price, branding and delivery to our clients?

The point is that the mixed messages confuse people and stop them from buying.  The answer in our opinion is getting everything pointing in the same direction, all of a piece so that your target market understand that your product or service is aimed at them.  It puts them at ease and gives them the confidence to make a purchase.

Price is an important part of the equation and it is often misunderstood that price should be based on cost or a market price.  In fact our recommendation is to make your price ‘of a piece’ with product, presentation and service.


Alternative Accounting – New Video


A short video is a great way to pitch yourself online and to get your content out.  Video is easy to consume and can be just what someone needs to understand how your service or product solves their problem.

The good news is that it’s now possible for start-ups and small brands to compete online with video by using systems like  Here is a video we produced about Alternative Accounting.

As you know, Crunchers are Alternative Accountants and we are looking to do more for clients that accounts and tax returns. Would you pay us to produce a video for you? If you would, let us know what you think is a reasonable price.

Feel free to call or email me if you’d prefer not to post a comment below. And, if you’d like to have a profit improvement session with us, let us know – the checklist and software will be available are in the final stages of production.


Budget Commentary

It seems the July Budget holds little of cheer for small business owners.

As one contributor on AccountingWeb asked: ‘Surely a Conservative Government didn’t just launch the biggest raid on small business owners in living memory?’

Two measures in particular:  the change to dividend taxation and Employers Allowance (See Budget Report for details),  affect a particular profile of business owner – namely owners who are sole Director and employee of a Ltd Company.

By our estimate the average business owner in this situation will need to find an extra £2k income to maintain their income from April 2016.

One immediate consequence of the changes is that the tax benefits of operating through a Ltd Company vs Sole Trader have disappeared for a large number of small businesses.  At Crunchers our rule of thumb was that when taxable profits rose above £25k there was a financial advantage to being incorporated even taking into account higher accounting fees and extra admin.

From Apr 2016 the tax advantage for trading through Ltd Co will be much less obvious and in many cases non-existent.  Certainly Ltd Co will continue to allow Company Directors to choose when profit is withdrawn to avoid going over higher rate thresholds, but the benefit is much less clear cut.

From next year, the decision regarding whether  or not to incorporate a business will become far more about some other considerations:
  • Does the business need limited liability?
  • Does the business need  a flexible vehicle for outside investment?
  • Does the business need the added accountability and therefore credibilty that statutory regulation provides?
There is a sense that the Ltd Company framework is returning to the intention behind its original inception.  Anyone wishing to trade without the less tangible benefits of limited liability, having a flexible vehicle for investment and add credibility may well choose sole trader or partnership status.

In our opinion, therein lies a silver lining for small business.

The Ltd Co structure is an administrative burden and can be a distraction to growing a business.   At Crunchers we have long argued that it is far more important to concentrate on making a business profitable.

The government is in fact promising to streamline small business admin and to its credit has been taking steps to deal with some of the tax avoidance that is available to multinationals, thereby leveling the playing field for small business.

In the background we sense commitment for a streamlined tax system with a level playing field in terms of tax for Sole Traders, Ltd Companies, Multinationals.  Perhaps that is a vision we can support after all.

Budget Report

In the Spring Budget we found precious little to report and it is now clear that the Chancellor was saving it until after the election.

This is probably the most significant budget for small business in many years and what follows is our summary of the announcements most likely to affect small business owners.  The article below gives our thoughts on the changes and what it means for small business.

Personal Tax
Dividends – we start with probably the biggest change for small business owners which is a change in the way dividends will be taxed. From next April, the tax credit on Dividends will be scrapped and the following new taxation introduced. The first £5,000 will be tax free.  Dividends in excess of this allowance will be taxed at 7.5% for Basic Rate taxpayers, 32.5% for Higher Rate taxpayers and 38.1% for Additional Rate taxpayers.

For Company Directors this is a major change in personal tax and effectively ends a tax incentive to earn through dividends vs profit as a sole trader.  We estimate around £2,000 increase in personal tax for Basic Rate Company Directors who have been using dividends as their main form of earning from the companies they run.

Personal Allowance – the Government will be increasing the allowance up from £10,600 to £11,000 in 2016 which is in line with Conservative Party election promise to increase the personal allowance to £12,500 by 2020.

Tax Thresholds – the Higher Rate threshold will increase from £42,385 to £43k in 2015-16.

Inheritance Tax – from 2017 the Inheritance Tax threshold will increase to £500k from £325k currently which when combined by a married or civil partnership couple amounts to the headline figure of £1million.

Tax Credits – from 2017 Child Tax Credits will be restricted to two children for children born from Apr 2017.

Pension Contributions – anyone earning over £150k will have pension contributions, currently at a £40k maximum, restricted from Apr 2016.

Business Tax
Corporation Tax – the Chancellor announced reductions in Corporation Tax down to 19% in 2017 and 18% by 2020.

Employment Allowance – in another significant development for small business owners, the Chancellor announced that from 2016 the Annual Allowance will increase to £3k but will be no longer be given to Directors who are sole employees of their companies.

Buy to Let – From Apr 2017 rules on buy to let taxation are changing.  Relief on the costs of finance (ie interest payments) is being phased out over four years.  This may make some buy to let investments unprofitable and it is recommended that anyone with buy-to-let investments begin tax planning for this change.  Wear and Tear Allowance is being withdrawn to be replaced by relief for the cost of actual replacements.

Goodwill Amortisation – From 8 July 2015 Corporation Tax relief on the purchase of Goodwill has been curtailed.

The View Ahead
As well as the above announcements the Government has indicated that it will be looking at and bringing in changes in the following areas:
  • Tax Relief on Travel and Subsistence
  • Simplifying Taxation for Small Business
  • Self Employed Class 2 National Insurance Contributions
  • Simplifying Employee Expenses and Benefits