r stride & co - my-driving-instructor-accountant.co.uk instructor... · r stride & co...

29
R Stride & Co Driving Instructor Manual VAT and the driving Instructor ii National Insurance Matters iii Tax (How, when, where, how much?) v Tax Investigations viii Profit Improvement xi R Stride & Co xviii Other Items xxii Business bank accounts Talking to the parents Cutting overheads Reducing tax liabilities Definition of business and private mileage Broadband and Home phone costs Missing Receipts Claiming for Use of Home Claiming for home computers What can’t be claimed for xxvii List of common claimable and non claimable items xxviii

Upload: ngoanh

Post on 05-Aug-2018

219 views

Category:

Documents


0 download

TRANSCRIPT

Page 1: R Stride & Co - my-driving-instructor-accountant.co.uk Instructor... · R Stride & Co Driving Instructor ... The card payment slip you are given does not need to be kept. ... Therefore

R Stride & Co

Driving Instructor Manual

VAT and the driving Instructor ii

National Insurance Matters iii

Tax (How, when, where, how much?) v

Tax Investigations viii

Profit Improvement xi

R Stride & Co xviii

Other Items xxii

Business bank accounts

Talking to the parents

Cutting overheads

Reducing tax liabilities

Definition of business and private mileage

Broadband and Home phone costs

Missing Receipts

Claiming for Use of Home

Claiming for home computers

What can’t be claimed for xxvii

List of common claimable and non claimable items xxviii

Page 2: R Stride & Co - my-driving-instructor-accountant.co.uk Instructor... · R Stride & Co Driving Instructor ... The card payment slip you are given does not need to be kept. ... Therefore

R. Stride & Co Accountants, Tax and Business Advisors The driving instructor specialist….

- ii - ii

General information relating to VAT, Tax and National Insurance

VAT

Under current law the vat threshold for businesses registering for vat is £83,000 (5th

April 2016 to 6th

April 2017) per annum of income. This means that 99% of all

individuals who commence in the driving instructing industry are under this threshold

and therefore do not need to be vat registered.

If you have other businesses as well as driving instruction or plan to take on a second

driver to help out your business, please contact us direct.

The only impact is that when you collect fuel invoices from the petrol station please

ask for a VAT invoice. The card payment slip you are given does not need to be kept.

In fact we advise that this is not kept as having two receipts sometimes confuses the

issue.

Important

When at the petrol station collect a vat invoice. We do not need the credit card slip

keeping

The reason we ask for a VAT receipt is that the voucher identifies what goods and

services you have purchased. The Inland Revenue will question non VAT receipts in

the event of an investigation if the fuel consumption does not relate to their

“standards”

Page 3: R Stride & Co - my-driving-instructor-accountant.co.uk Instructor... · R Stride & Co Driving Instructor ... The card payment slip you are given does not need to be kept. ... Therefore

R. Stride & Co Accountants, Tax and Business Advisors The driving instructor specialist….

- iii - iii

National Insurance

There are currently four classes of National Insurance

1. Class 1 NIC (National Insurance Contributions)

This is national insurance that employees pay when receiving their pay

from their job. Most individuals coming from jobs to self employment

will have paid this in the past. The rate is currently 12% of your gross

salary.

2. Class 2 NIC

Commonly known as “The Stamp”. This is currently £2.85 per week

(£2.80 up to 5th

April 2017)

Class 2 NIC historically has been collected via Direct Debit, but this has

changed. The whole years Class 2 NIC will be added to your year end tax

liability when I produce your tax return (52 x £2.80 = £145.60 for 2016-

2017 or £148.20 for 2017-2018)

3. Class 3 NIC

This is a voluntary national insurance for people who do not pay NIC and

wish to pay. If you feel you are in this category, please contact us. Most

driving instructors will not be required to pay this.

4. Class 4 NIC

This national insurance relates to the self employed (you !)

As you can imagine with most of the employed world paying 12% of their

income with you paying £2.85 per week the Inland Revenue are not going

to let you get away with so little National Insurance !

Therefore there is a “top up” national insurance to pay depending on your

business profits.

The rate is currently 9% of profits. I will refer to what defines profits later.

It is paid at the same time as your tax bill (see next section for dates) and

when discussing “tax payable” with our clients we always include this

figure but do not refer to it.

Therefore as far as you are concerned I will not refer to this tax charge

again.

Page 4: R Stride & Co - my-driving-instructor-accountant.co.uk Instructor... · R Stride & Co Driving Instructor ... The card payment slip you are given does not need to be kept. ... Therefore

R. Stride & Co Accountants, Tax and Business Advisors The driving instructor specialist….

- iv - iv

Other important National Insurance Facts

Duplicated national Insurance numbers

There have been a number of cases where duplicated national insurance

numbers have been identified. In order that your state pension is protected

and worked out correctly, I suggest that you contact the National Insurance

Department – State pensions on 0845 3000 168. This will determine if

your state pension is on forecast. We will talk later about retirement

planning.

Important

Make sure that you are up to date for class 2 NIC. By not doing so you

could negate any benefits

Page 5: R Stride & Co - my-driving-instructor-accountant.co.uk Instructor... · R Stride & Co Driving Instructor ... The card payment slip you are given does not need to be kept. ... Therefore

R. Stride & Co Accountants, Tax and Business Advisors The driving instructor specialist….

- v - v

Tax

The current tax rate is 20% of net profits after allowances for personal allowance for

2017/2018 at £11,500 per annum.

If you have other income e.g. pension income or other jobs in addition to driving

instruction your affairs are more complicated and therefore please contact me direct

for direct for specific advice relating to you. The rest of this section relates to a

driving instructor with no other income.

Example of what is taxable income :-

Per annum

Turnover (driving instruction income) 25,000

Franchise Fees 8,000

Petrol and Derv 3,000

Other expenses (mobile etc etc) 1,000 12,000

Profit 13,000

Wages (Drawings) transferred to private account 12,000

Cash left in bank at end of year 1,000

In the above example the Profit (£13,000) is the figure that you are going to be taxed

at 20% plus 9% (Class 4 NIC). A total of 29% subject to annual personal allowance.

How much do I save for tax ?

Most of our instructors always ask us what should they be saving towards their tax

bill. As the calculation to work this out is extremely complicated, we have come up

with a simple formula.

Takings multiplied by 15% = tax needed to save.

For example If you go out on Monday and Tuesday and have 6 lessons at £20 and also

collect 2 lots of £56, you should have £232 in cash/cheque. Bank this money as

normal in your business bank account an then with cleared funds transfer 15% £34.80

to a savings account

Hint

Save 15% of your daily takings and tax will never be a problem again !

Page 6: R Stride & Co - my-driving-instructor-accountant.co.uk Instructor... · R Stride & Co Driving Instructor ... The card payment slip you are given does not need to be kept. ... Therefore

R. Stride & Co Accountants, Tax and Business Advisors The driving instructor specialist….

- vi - vi

Any Savings Account ?

I suggest that if you have not used your ISA allowance then ask your bank or building

society to open an ISA for your tax saving. There are some good ISA accounts

around at the moment and with the low interest rates not having to pay 20% tax on

any interest received makes them more attractive.

When will I pay my first tax bill ?

If you have commenced business after 6th

April 2017 and before 5th

April 2018 your

first tax bill will become payable on 31st January 2019.

However please be warned that the second year of your business to 5th

April 2019 will

not become payable on 31st January 2020, but in two instalments on 31

st January 2019

and 31st July 2019.

See below

Tax Year Goes on Tax To be with Tax Payable Tax

Ended Return issued Revenue Paid

5th

April 2018 5th

April 2018 31st January 2019 31

st January 2019 Full

5th

April 2019 5th

April 2019 31st January 2020 31

st January 2019 Half

31st July 2019 Half

31st January 2020 Bal

5th

April 2020 5th

April 2020 31st January 2021 31

st January 2020 Half

31st July 2020 Half

31st January 2021 Bal

The Half payments are based upon the previous year with the balance (assuming

profits go up) the following January.

As you can see the tax payable for year 2 and 3 is paid before the year end of 5th

April

and is therefore estimated based upon the previous year. The system is quite complex

and therefore we recommend that accounts are provided to us as soon as the year end

passes so we can work out and forecast your tax. In the meantime keep saving 15%.

If you have been in self employed prior to 6th

April 2017 I shall be contacting and

talking with you about your prior tax affairs and discuss with you this separately.

Page 7: R Stride & Co - my-driving-instructor-accountant.co.uk Instructor... · R Stride & Co Driving Instructor ... The card payment slip you are given does not need to be kept. ... Therefore

R. Stride & Co Accountants, Tax and Business Advisors The driving instructor specialist….

- vii - vii

Summary

We provide at least a years warning with accurate tax payment for all our clients. In

some cases we are now providing accurate tax figures for January and July 2019 for

some clients !!! This would certainly be informative for you !

Page 8: R Stride & Co - my-driving-instructor-accountant.co.uk Instructor... · R Stride & Co Driving Instructor ... The card payment slip you are given does not need to be kept. ... Therefore

R. Stride & Co Accountants, Tax and Business Advisors The driving instructor specialist….

- viii - viii

Tax Investigation Issues

There are various ways that the Inland Revenue could start a tax investigation.

Some ways are outside your control, for example a random enquiry.

However most enquiries are started for a specific reason relating to your affairs.

The most important way you can help towards reducing this risk is have an accountant

who knows the business who will pre-empt and give advice on avoiding

investigations or at the last resort report in the “white space” on your tax return items

which vary from the “normal set of accounts” for a driving instructor.

Most accountants do not mention or talk to clients about avoiding tax investigations

and most either ask you to take out investigations insurance to cover their fees should

an investigation commence, or worse still just ignore it (billing you at a later stage

large fees)

• “White Space” is an area on your tax return where you can give explanations.

There is plenty of white space on your tax return. See page 6 of the self

employed pages

As part of our service we are heavily involved in trying to avoid our clients having

investigations and as a result our investigations has been reduced to Zero in current

clients over the past couple of years. Most accountants could expect between 20 or 30

aspects or full enquiries per year ! The only investigations we get are from clients

joining us with previous history !

The overall problem with tax investigations is that the client does not understand what

regulations they need to stay within. We provide all clients detailed guidance on tax

investigations which helps them keep within the guidelines.

There are various ways we and more importantly you can stop a tax investigation.

We teach you these simple tips, no other accountant in the country even attempts to

discuss “anti-tax investigations”

Page 9: R Stride & Co - my-driving-instructor-accountant.co.uk Instructor... · R Stride & Co Driving Instructor ... The card payment slip you are given does not need to be kept. ... Therefore

R. Stride & Co Accountants, Tax and Business Advisors The driving instructor specialist….

- ix - ix

There are also factors that you might not have even considered… take the following

scenario…

A Tax Investigation is taking place and the revenue are convinced that your lifestyle

exceeds your income declared on your tax return. They have at the initial meeting

asked about your personal lifestyle

Your books and records appear accurate (you have followed our book keeping

suggestions) but they are looking for cash withdrawn for personal expenses (e.g. that

Chinese on a Friday night)

You normally take personal cash from your private (or joint with spouse or partners)

account for personal expenditure, but on one occasion your wife or partner goes to

Tesco’s for the weekly shop and at the till requests “cash back”

This cash back will not be shown anywhere as Tesco’s just record the transaction as a

food purchase. The only mention is on the till receipt they give you. Have you (or

your partner) kept these till receipts to prove the withdrawal of cash?

A tax investigation could take place up to three or four years after this event and for

you to remember why cash does not seem apparent that week could be in favour of

the Revenue.

They would just conclude that no cash has been taken from the bank and therefore

they feel you have taken cash as income and not recorded it !

Important

In summary a personal event could jeopardise your tax investigation !!!

Summary

We have an in-depth “Anti-Tax Investigation” policy in place. We shall start to look

at tax investigation matters in more detail in “pack 2”

Page 10: R Stride & Co - my-driving-instructor-accountant.co.uk Instructor... · R Stride & Co Driving Instructor ... The card payment slip you are given does not need to be kept. ... Therefore

R. Stride & Co Accountants, Tax and Business Advisors The driving instructor specialist….

- x - x

Personal Mileage and Fuel consumption issues

One of the largest discussions at any tax investigation meeting is the use of the car for

personal use and also the fuel consumption.

If consumption is high for any reason e.g. large geographical area, automatic vehicle,

reduced lesson prices e.g. 5 lessons for £76 then the return could be picked up for

further enquiry.

We have previously mentioned “white space” to explain these discrepancies but care

with the following will help any future investigation.

Personal Mileage

Please ensure that you follow our personal mileage recording recommendations in our

book keeping manual. Simple records will serf ice, you do not need to record mileage

every time you get in the car.

Fuel consumption objectives

Although fuel consumption varies to takings depending on a huge number of factors

(consult us for further advice) the average driving instructor should be aiming for

around 12.5% fuel costs to takings

e.g. Takings of £500.00 x 13% = £65.00 fuel

The 13% is obviously based upon a number of factors e.g. location (rural/urban),

postcodes covered, type of driving etc etc Talk to us about your situation.

Please note that the recent increase in fuel costs at the pump the 13% is based upon

£1.10 per litre. For every 10p increase in the pump cost increase the percentage by

1.1% (rough guide)

Does your accountant discuss fuel consumption percentages with you, and does he

know what it should be for you ?

If the latter is not done, how can he comment on the tax return in the “white space” if

there is a problem

Page 11: R Stride & Co - my-driving-instructor-accountant.co.uk Instructor... · R Stride & Co Driving Instructor ... The card payment slip you are given does not need to be kept. ... Therefore

R. Stride & Co Accountants, Tax and Business Advisors The driving instructor specialist….

- xi - xi

Profit Improvements and Your Business

There are ways of making money and profit and there are ways of maximising income

and profit.

I have spoken at a number of Driving Instructor Meetings who once I have discussed

the following and other methods driving Instructors who have been trading for years

did not realise the implications, and gone away and increased income by up to 40% !

Making money by cutting overheads and ways of reducing tax liabilities are discussed

later but first lets concentrate on maximising income and profit….

General Overview

As a driving Instructor there is a possibility to increase takings by 20% to 40% and

decrease fuel usage by up to 30%.

In order to do this we must look at the pattern of how the daily work load is

performed.

Increase in takings

On a normal day (sample from 9am to going home by 5pm) with 1 hour lessons with

½ hour gap in between the daily takings are as follows:-

9 10 11 12 1 2 3 4

� £20 � � £20 � �£20� �£20� �£20�

Making a total of £100 for a normal day

If we increase this to a 2 hour lesson the following happens

9 10 11 12 1 2 3 4

� £40 � � £40 � � £40 �

Making a total of £120 for the same period

Making an increase in income of 20% for working no more hours. If a longer day is

worked then this can increase to 40%

Gone are the days of working silly hours, with this method you can reduce the

number of hours you work but still receive more income !

Page 12: R Stride & Co - my-driving-instructor-accountant.co.uk Instructor... · R Stride & Co Driving Instructor ... The card payment slip you are given does not need to be kept. ... Therefore

R. Stride & Co Accountants, Tax and Business Advisors The driving instructor specialist….

- xii - xii

Decrease in Fuel Costs

We have already previously mentioned that the objective is to achieve less than 12.5%

of fuel consumption to Turnover.

There are a number of factors which could show a larger percentage figure than this,

namely increased private use, vehicle inefficiency, geographical area, lesson planning.

Remember 1% saving will result in a £300 extra cash in your bank account at the end

of the year. We have come across instructors with a 18% fuel consumption usage..

That’s around £1,650 of extra fuel a year…!!!

In general the more gaps between pupils the more fuel will be used. In our research

by implementing the above improvements and also increasing to 2 hour lessons a 30%

decrease in fuel consumption can be achieved.

Lets look at how to save fuel consumption in further detail

Private Use

Obviously the more private usage of the vehicle the amount of fuel increases and

therefore the overall fuel consumption increases. Apart from using another vehicle

this area can not be improved upon.

If you do use the vehicle for private use, please ensure that all your fuel is purchased

and recorded in the business records even if you take a long trip and fill up a couple of

times. Just record the fuel as normal in your book keeping book and also record

private mileage as normal.

When we analyse your fuel consumption at the year end we will provide two fuel

consumption figures, with and without private usage. These will be discussed in

further detail when we prepare your first accounts.

Vehicle in-efficiency

This is a little considered area, but never less a huge consideration. There are a

couple of main considerations:-

• Make sure that all service intervals of the car are stuck to. On a number of

occasions we find that cars are not serviced properly and this leads to

inefficiency

• I recommend that even with new cars being able to go 12,000 miles without

services that simple oil changes are performed every 6,000 miles. Amazing

the difference this makes to performance.

Page 13: R Stride & Co - my-driving-instructor-accountant.co.uk Instructor... · R Stride & Co Driving Instructor ... The card payment slip you are given does not need to be kept. ... Therefore

R. Stride & Co Accountants, Tax and Business Advisors The driving instructor specialist….

- xiii - xiii

• Ensure that tyre pressures are correct. This is a simple one… get your pupils

to test the pressures.. Its good practice. Make sure these are tested on a

weekly basis.

• Try to keep sun-roofs and windows closed. Opening of these does make a

huge difference to fuel consumption

• Finally, don’t forget to teach your pupils driving efficient techniques. Going

beyond what is needed to get your pupils to pass the test will make you more

professional and become the best. This will be noted by your pupils and of

course this leads to further recommendations !

Geographical Area

This is the major player in fuel consumption. This can be split into two defined areas.

Home geographical area

Obviously there is nothing we can do with regard to the location of your house and

the location of your pupils. As you can probably realise if you live in the heart of

Birmingham near to the Bull Ring Centre and your pupils all live within 10 miles then

the fuel consumption will be far less than someone who lives in Wales and would

therefore need to travel from his/her village to the nearby town (e.g. Swansea)

Our computerised database system has an automatic link to google maps and when we

prepare and consider your fuel consumption during the preparation of your tax return,

this is considered. We then explain to the Revenue location details in the “white

space”. Simply noting this on the return could stop a tax investigation before it even

starts !

Location of Pupils

This is one area that all driving instructors can change. Please ensure that you keep

all pupils in certain areas (e.g. west of the town in which you live) on the same day

apart from pupils who live in other areas (east of the town)

This can simply be done by giving restricted choice….

Don’t ask “When would you like your lesson next week ?”

Always say “When would you like your lesson next week on Monday or Tuesday ?”

If you give a restricted choice to pupils and arrange all pupils in areas on the same

days, this will drastically reduce your mileage and therefore fuel consumption.

In our tests pupils will choose random days if left to their own choice, but will pick

your restricted choices 95% of the time if given the option !

Page 14: R Stride & Co - my-driving-instructor-accountant.co.uk Instructor... · R Stride & Co Driving Instructor ... The card payment slip you are given does not need to be kept. ... Therefore

R. Stride & Co Accountants, Tax and Business Advisors The driving instructor specialist….

- xiv - xiv

Test your fuel usage !

Fill your vehicle up to the top on Monday morning first thing, then undertake a series

of lessons. Try to make sure that there are no discounted lessons e.g. 5 for £56.00

After a couple of days lets say you have done 10 lessons at £25.95, a total of £259.50

income (assuming £25.95 per hour) then fill the car up to the top again.

Multiply your total income by 13% ** (£259.50 x 13% = £33.74) . If the fuel used is

less than this amount you are on track, if your fuel cost is higher than £33.74 then you

are using too much fuel. See in the section above on what can be done.

** see notes above on increasing percentage due to increased fuel costs at the petrol

station.

Two Hour Lessons

Obviously there is a greater need to make sure all your pupils start and continue on

two hour lessons, as this could make a massive impact on your income and

expenditure and could make as much as £6,000 per annum in your bank account at the

end of the year.

From a pupil point of view there are also great advantages (see later), but from

practice pupils give any number of excuses why they can not afford a £51.90 double

lesson.

Firstly we have to convince pupils to take two hour lessons…

Trying to explain the reasons just complicates matters, and therefore we have

designed a flowchart (a laminated version is included in your starter pack) and keep in

the car for this use.

Don’t try to explain the theory, show your pupil. People understand better when

presented in graphical terms rather than just explained.

Hint

The parents normally pay for lessons. When picking up the pupil for the first time go

and introduce yourself to the parents and show them ! Don’t forget they maybe

coming to you as you are discounting the first few lessons (e.g. 5 for £76) and then

plan to move on. You could stop this scenario from lesson one, just by introducing

yourself and showing them your techniques !

Page 15: R Stride & Co - my-driving-instructor-accountant.co.uk Instructor... · R Stride & Co Driving Instructor ... The card payment slip you are given does not need to be kept. ... Therefore

R. Stride & Co Accountants, Tax and Business Advisors The driving instructor specialist….

- xv - xv

There are two flowcharts….. (see appendix’s)

The first shows how the pupil gets 25% extra driving tuition for doing two hour

lessons rather than one hour lessons.

If they are not convinced at that then the reverse side of the flowchart shows an even

greater percentage taking into account recap and progression time.

Overall benefits for the pupil

With a 35% increase in learning skills the pupil will be ready for the test in a faster

time, with faster past rate, recommendations will go through the roof, as your pupils

will be passing your name to others. This all leads to a steady increase in business

over the first couple of crucial years.

“Use my driving instructor he only took 13 weeks and I passed my test not 40 weeks

that you took ! Did you know 2 hour driving lessons make you a better chance of

passing your test”

[average time to pass a test using 40 one hour lessons less 35% = 26 weeks or 13

weeks at 2 hour lessons]

If the above does not convince them after all who would want to pay £1038 to pass a

driving test when £674.70 would do !!!

[40 hours at £25.95 = £1038.00 compared with 13 two hour lessons (13 x £51.90) =

£674.70]

Also consider the actual driving test, when are the most test failures. How many

times have you heard the following:-

“I was doing fine, just 5 minutes back to the test centre and I did a silly error at the

last roundabout !”

Most test failures are in the last 15 minutes of the test… why is this ? Basically most

pupils who do this only have taken 1 hour lessons !

If all their driving experience they have driven for an hour and then suddenly test day

is two hours…. ½ hour to get there and 40+ minutes for the test, they are beyond their

1 hour comfort zone.. they have never driven that long before… no wonder they make

silly mistakes

Page 16: R Stride & Co - my-driving-instructor-accountant.co.uk Instructor... · R Stride & Co Driving Instructor ... The card payment slip you are given does not need to be kept. ... Therefore

R. Stride & Co Accountants, Tax and Business Advisors The driving instructor specialist….

- xvi - xvi

Important

Does your pupil want to increase their chances of passing their test… If the answer is

“yes” inform them that two hour lessons are a must !

Problems with two hour lessons

Affordability

The standard problem is affordability… £51.90 a week compared with £25.95 a week.

If cash flow is an issue, don’t forget you can always suggest lessons every two weeks

instead ! Yes we realise that the recap time will increase and the progression time

will decrease but the pupil will still be overall still be better off.

Hint

If £51.90 a week is a problem, get your pupils to have a two hour lesson every two

weeks instead

Concentration

We realise that this can be a major impact on your decision to take longer lessons.

Come pupils will deteriorate in the latter half (second hour) of the lesson especially in

the first few lessons. There however can be a number of things that can be done to

alleviate this problem….

So you need a 10 minute break after an hour to regain concentration, well why don’t

you park up and rest !

Well of course all the other driving instructors shoot past saying “Oh look at them

parking up, we drive for the full hour and not waste your money !!!”

So here is one simple technique:-

Consider safety !

In all of Europe (except Britain) it is compulsorily to have a safety driving pack, that

includes fire extinguisher, warning triangle, first aid kit and high visibility tabard, and

now even breath testers for alcohol. Why… because its common sense !

Lets take one of those items… the high visibility vest and see how we can use it to

your advantage !

Purchase two high visibility jackets and after an hour when your pupil is struggling,

stop at the side of the road. Both of you get out of the car, take out the vests from the

boot, get on the jackets and then go and check on one of your “show me tests” e.g.

inspect water levels.

Page 17: R Stride & Co - my-driving-instructor-accountant.co.uk Instructor... · R Stride & Co Driving Instructor ... The card payment slip you are given does not need to be kept. ... Therefore

R. Stride & Co Accountants, Tax and Business Advisors The driving instructor specialist….

- xvii - xvii

This short break will enable your pupil to be refreshed….!

Why the high visibility vest… well you are being professional, you are being the best!

Most accidents can occur when other road users run into you ! By wearing a high

visibility vest you are instantly reducing the chance of being injured. After all what

do most members of the public do when they see a high visibility vest… apply the

breaks, as they think it could be a policeman !

Hint

Introduce driver safety from day one, not only will it help stop concentration

problems in two hour lessons, but look fantastic to other road users (and potential

customers) but one day you never know….“a life will be saved”

Remember a few years ago on motorways…. Now members of the public when

breaking down, get out of the car, cross the barriers and climb the embankment…

safety is slowly getting through !

Page 18: R Stride & Co - my-driving-instructor-accountant.co.uk Instructor... · R Stride & Co Driving Instructor ... The card payment slip you are given does not need to be kept. ... Therefore

R. Stride & Co Accountants, Tax and Business Advisors The driving instructor specialist….

- xviii - xviii

R Stride & Co

We have taken a number of driving instructors to a different level with help and

advice and in addition taken other franchisee driving schools to increased

profitability.

Over the years we have discussed the tax and business affairs of numerous driving

instructors and have a major in depth knowledge in this field. A small portion of

which are contained in these notes.

You have already seen that we have given you a vast knowledge of advice and we

have different approaches from the normal accountant who is in trade.

1. Using paperless office scenario we use technology to offer a higher level

of service. We do not employee secretarial staff . Our telephone lines are

answered by qualified accountants not a machine, who have access (via

technology) instantly to your affairs, giving a response immediately.

2. We prompt and remind you at key points of the year so deadlines are

always adhered to. Simple things to us are forecasting of tax payments

beyond the next 12 months!!!

3. Our fees are simple. Set at the outset ! No Increased once joined !No

hidden charges, including not being charged if you have a tax investigation

! Ask your current advisor what he is planning to do to stop tax

investigations and what charges are involved if you are picked up!

4. A full telephone (office hours) and email (outside office hours) support

with advisers who are experts in your field.

5. An interactive website with lots of general information included, including

direct access 24 hours a day to your own data, accounts, tax forecasts, job

status

6. More importantly we are business advisors. Most accountants may take a

few minutes out to speak with you regarding your business and then go

onto signing accounts and tax returns. Business and tax advice and

planning is our major concern with tax returns secondary.

How can we help you if your business is based further away ?

Normally we invite all our clients to see us at least twice a year. Initially we invite all

driving instructors for a 2 to 3 hour one to one seminar in all aspects of the business,

and then follow this up with two or three meetings during the first year to discuss

book keeping issues, business and tax planning. At the end of the year an in-depth

review is taken on all aspects of “what can we improve”

Obviously as you may live further away this would be impractical for you.

Page 19: R Stride & Co - my-driving-instructor-accountant.co.uk Instructor... · R Stride & Co Driving Instructor ... The card payment slip you are given does not need to be kept. ... Therefore

R. Stride & Co Accountants, Tax and Business Advisors The driving instructor specialist….

- xix - xix

Initially we will give you a starter pack which consists of the following:-

• Dedicated book keeping book

• Dedicated drivers instructors diary

• Laminated charts for 2 hour lessons

• Sweets and baby wipes !

• This dedicated drivers instruction manual (pdf from website)

• Our dedicated book keeping instruction manual (pdf from website)

We then follow this up with a series of dedicated packs especially designed so that

you get a massive amount of advice. Return each pack for the next one to arrive…

Packs contain amongst the following headings:-

• Registration with the revenue

• Previous history

o Were you employed (on the right tax code ?)

o Were your last accounts compliant ?

• Our unique “anti-tax investigation” system

• Have you a will ?

• Pension and retirement planning

• Tax Planning

• Advertising techniques

• Personal financial planning e.g. outstanding credit cards, loans,

mortgages

Each pack is designed that you will get more information about certain areas that the

normal accountant does not even cover !

Important

We will give you more advice in each pack than the normal accountant does all year !

At the year end if you do not wish to come to see us, again we will arrange for your

books to be picked up and delivered safely to us (please ask if you require this

service), and then supply you with a full pack both business and tax review in detail

posted. Graphs of previous business, tax credits information all included…A further

telephone consultation will be undertaken if required.

Don’t forget you have access to me and my team at any time within the set fees for no

added cost.

Page 20: R Stride & Co - my-driving-instructor-accountant.co.uk Instructor... · R Stride & Co Driving Instructor ... The card payment slip you are given does not need to be kept. ... Therefore

R. Stride & Co Accountants, Tax and Business Advisors The driving instructor specialist….

- xx - xx

What Happens Next ?

Stage 1 As you have already asked for this manual via our website we will

send you a registration pack (to register you with the revenue if

required)

Stage 2 We will send you our book keeping system and communicate with you

on how to use it.

Stage 3 We will communicate with you to sort out your previous tax affairs

Stage 4 We will send you our “anti-tax investigation” pack

Stage 5 We will register you on our website so you have access to all the other

information sheets we have prepared

Stage 6 We will continue to communicate with you over the forthcoming

months until next 5th

April (2018) and make sure you are “on track”

Important

All this information we have just given to you, which no other accountant will, is just

the start….

Page 21: R Stride & Co - my-driving-instructor-accountant.co.uk Instructor... · R Stride & Co Driving Instructor ... The card payment slip you are given does not need to be kept. ... Therefore

R. Stride & Co Accountants, Tax and Business Advisors The driving instructor specialist….

- xxi - xxi

Other areas

Definition of Business Bank Account

Throughout this manual and also the book keeping manual I keep referring to business

bank accounts.

It is not necessary from an Inland Revenue point of view to have a “business” account

but purely a second account that is used entirely for business.

Please keep your business and private affairs separate.

E.g. on a daily/weekly basis as per our book keeping instructions please enter your

income in your diary and book keeping book. If lets say between Monday 9am and

Tuesday 5pm you enter and receive £259.50 in income then bank this money as

normal. Then when funds have cleared, use internet banking or other means and

transfer 15% (in this case £38.92) to a savings account. This will be sufficient for tax

savings at a later date.

Please ensure that no private payments are made through the business bank account.

The only payments should be as follows:-

• Franchise Fees

• Fuel

• Mobile Telephone bills

• Class 2 NIC

• Other business expenses

The Inland Revenue are not allowed to ask for private bank statements.. They do try,

but can be refused. If you use an account that is used for both private and business

they are legally allowed access to it !

The reason we try to avoid them seeing your private account is that with access to this

information they can then analyse it.. e.g. “we notice you have a Chinese takeaway

every week, but for a four week period you have not ! – We think that you still had

the takeaway but paid cash… paid by unrecorded takings”

Talk to the parents

Today, the majority of driving lessons are being paid by parents, and therefore good

communication must be made directly with them. Of the clients we talk to and

recommend that they speak to the parents tend to do better in the long term

financially.

Page 22: R Stride & Co - my-driving-instructor-accountant.co.uk Instructor... · R Stride & Co Driving Instructor ... The card payment slip you are given does not need to be kept. ... Therefore

R. Stride & Co Accountants, Tax and Business Advisors The driving instructor specialist….

- xxii - xxii

Simple techniques involved:-

• On picking up your pupil for the first time go and meet the parents

• Parents love feedback… create or use progress reports

Remember that most parents are cost conscious and could just be booking initial

lessons at reduced introductory rates and then plan to move on… you must make sure

that if the pupil (son or daughter) is to stay with you, then you must convince the

parents that you are the best and they have to stay with you…

Simply regular talks (or communication) to them….. its that easy !

Cutting overheads

In addition to profit improvements as mentioned previously in respect of increasing

income and reducing fuel costs the next way of increasing overall profit and income is

to reduce overheads.

There are some general rules:-

1. Don’t just spend money for the sake of it. Remember that purchasing that Sat

Nav system for £400 but only using a couple of times is not worth the tax

relief you are going to get (£16 !!!)

2. Remember that for every £10 of expenses not spent that’s £10 in your bank

account at the end of the year ! Don’t just buy that pack of stationery if you

are not really going to use it !

3. In addition to franchise fees and fuel (and other associated motor costs if

independent) your next biggest cost if mobile telephone. We will be

reviewing your telephone costs at the year end, but simply rules as follows:-

a. Contracts are better than pay as you go in our opinion

b. If you are exceeding your standard contract go up a contract level

4. Leasing a car is a better option than purchasing from a “piece of mind”

approach, and is generally better for tax purposes in the long term.

FOR FURTHER QUESTIONS AND ANSWERS SEE OUR Q&A SECTION ON

THE WEBSITE

Page 23: R Stride & Co - my-driving-instructor-accountant.co.uk Instructor... · R Stride & Co Driving Instructor ... The card payment slip you are given does not need to be kept. ... Therefore

R. Stride & Co Accountants, Tax and Business Advisors The driving instructor specialist….

- xxiii - xxiii

Reducing tax liabilities

The common problem is worrying about reducing tax liabilities for clients. From

your point of view, please do not worry about this, that is what we are here for ! We

do not just process the paperwork you have sent us, we review the entire accounts and

tax return to reduce your liabilities.

There are three main areas of expenses that we and you need to consider when

finalising your year end accounts and therefore reducing tax liabilities:-

1. Essential costs (physically paid)

This group of expenses is obvious. Items that are essential for the running

of the business and are generally not missed. Please try to ensure that

these expenses are paid direct from the business bank account

• Fuel

• Franchise Fees

• Mobile costs

Even if invoices (receipts) are missing then these can be claimed as

evidence is usually sufficient as a payment from the bank statement

If payment of these items is made by other bank accounts (cash column),

credit cards (credit card column) or cash (cash column), please ensure that

they are properly recorded in the “credit card” or “cash” columns in the

book keeping book.

2. Non-essential costs (physically paid)

This group of costs are sometimes the generally missed items. Please refer

to the book keeping instructions manual where they are explained. In

general:-

• Car cleaning (either coin operated machines with no receipts or car

cleaning products for cleaning at home)

• Car parking (parking meters etc)

• Travel outside the business vehicle (mileage in private car and

other travel and accommodation)

• Postage and small amounts of stationery

We shall notify you if such items appear to be missing and if necessary

please make notes on a separate piece of paper that you wish to query.

Page 24: R Stride & Co - my-driving-instructor-accountant.co.uk Instructor... · R Stride & Co Driving Instructor ... The card payment slip you are given does not need to be kept. ... Therefore

R. Stride & Co Accountants, Tax and Business Advisors The driving instructor specialist….

- xxiv - xxiv

3. Virtual Expenses

This is a strange category. From your point of view you do not have to

worry about this area of expenses. It generally relates to items that you do

not physically paid out cash, but wish to claim for it.

Examples include

Use of home telephone bill not paid by business account

Use of gas/electric and other costs associated with using your home for

business.

In order to claim for these items we will obviously communicate with you,

but in order to feed us with the required information please ensure that

pack 3 has been returned. This is a booklet we will give you asking for a

number of areas. If you have not completed this booklet before you send

your year end accounts to us, please complete or ask us for a further copy.

Important

Ensure that our “Anti-Tax Investigation” book is completed before you

send us your year end records so its easier for us to claim the maximum of

tax relief’s for you.

Defining Private Use of Motor Vehicle

1. Write down the mileage of the car when you first pick up the car in your

book keeping book

2. Write down the mileage of the car on the 5th

April annually. This will give

you the total mileage of the car per fiscal year

3. Remember to write down start and stop mileages if you swap cars, or your

car goes in for service and you hire another.

4. Most journeys during the working week will be business use and these

include the actual lessons and getting to and from lessons. These do not

need to be recorded.

5. Private mileage is defined as followed:-

a. Mileage from home to destination for entirely private nature

b. Deviation from your business route for a private nature

Page 25: R Stride & Co - my-driving-instructor-accountant.co.uk Instructor... · R Stride & Co Driving Instructor ... The card payment slip you are given does not need to be kept. ... Therefore

R. Stride & Co Accountants, Tax and Business Advisors The driving instructor specialist….

- xxv - xxv

6. Home to first pupil etc

Home to first pupil is business mileage as you operate your business from

home.

Broadband and Phone calls

1. Broadband is not allowable business expenses assuming that you

previously had broadband installed at home. As it is a fixed cost, there is

therefore no extra expense for the business when you start in self

employment.

2. If broadband was not installed at home prior to commencement of self

employment, please talk to us.

3. Home telephone bills can be claimed in the proportion that is used for

business use. Care has to be taken in this area especially if the home

telephone is part of an inclusive package of TV, Broadband and Home

Phone. Please discuss this with us.

Missing Receipts or No receipts

1. Do not panic if a receipt has been lost or you have forgotten to collect at

the retailer. Still enter the item in your book keeping book and claim for

the expense. Put a piece of paper in as a substitute and write on it “missing

receipt”

2. The Inland Revenue will take a sensible approach. E.g. if “Shell Garage”

appears on the bank statement and there is no receipt there will not be a

problem.

3. If you spend some money on an expense e.g. car wash machines, car

parking machines etc, that do not provide receipts then you may still claim

this cost. Enter the amount spent in your expenses list in your book

keeping book.

4. Remember that when cleaning the car yourself at home you may not claim

labour costs for yourself, just the cleaning materials. Payments to children

maybe allowable, please discuss this with us.

Claiming for Use of Home

1. During the preparation of your accounts we shall be claiming for use of

your own home for business use. Do not worry this does not effect any

council tax or future capital gains on the sale of your private residence.

2. Please ensure that you complete our “anti-tax investigation booklet” in

pack three so that we may claim the proper amount.

Page 26: R Stride & Co - my-driving-instructor-accountant.co.uk Instructor... · R Stride & Co Driving Instructor ... The card payment slip you are given does not need to be kept. ... Therefore

R. Stride & Co Accountants, Tax and Business Advisors The driving instructor specialist….

- xxvi - xxvi

Claiming for Use of Personal Computers or Laptops

1. If you wish to claim for a previous purchased (to the start of self

employment) computer, laptop or printer please let me have the following

information:-

a. The original date it was purchased

b. The original cost

c. An approximate value of the item at the start of business

d. The percentage you will be using the equipment for business.

What can’t be claimed for:-

1. Clothing

The Inland Revenue will not allow any costs towards clothing for business

purposes other that safety wear or uniform.

Examples of safety wear are fluorescent jackets and steel toe capped boots.

Uniform must have logo’s in prominent places and cover most of the

front/back of the item. E.g. a small logo printed on the back pocket of

trousers is not allowable.

2. Dry cleaning, washing etc etc

Again as this relates to personal items not allowable above, then this is not

allowable

3. Personal Hygiene

Any items relating to personal hygiene e.g. barbers, deodorants, grooming

etc again are of a personal choice and these items are not allowable for tax

purposes

4. Eye tests and doctors costs

Costs relating to personal issues e.g. testing of eyes, purchase of glasses,

doctors etc are again not allowable.

Page 27: R Stride & Co - my-driving-instructor-accountant.co.uk Instructor... · R Stride & Co Driving Instructor ... The card payment slip you are given does not need to be kept. ... Therefore

R. Stride & Co Accountants, Tax and Business Advisors The driving instructor specialist….

- xxvii - xxvii

Common Allowable Expenses

Are you claiming for all of these ?

• Franchise Fees or car rental / leasing payments

• Fuel

• Other motoring costs e.g. road tax, insurance, servicing, repairs, MOT,

cleaning and parking

• Advertising

• Stationery and Postage e.g. pens, paper, stamps, business cards

• Mobile phone costs

• Home telephone costs (if used and maybe proportionally)

• Accountancy Fees

• Renewal of ADI/PDI licences (not initial joining costs)

• Computer costs e.g. Software, toner and print cartridges

• Bank Charges and Interest on your business account

• Hire purchase or loan interest for the purchase of your car or other equipment

• Trade magazines and other subscriptions

• On going training an Continuing Professional Development costs

• Teaching Aids e.g. Highway codes, magnetic boards, iphone apps

Common Non Allowable expenses

• All initial training costs to gain your PDI or ADI licence

• Insurance policies to cover earnings due to sickness or accident

• Hosing costs, rents, mortgage, running expenses, extensions, alterations

• Work clothing and footwear unless showing a prominent company logo

• Food, drinks or snacks unless working in an area which requires an overnight

stay.

• Any entertaining of clients or pupils

• Glasses, sunglasses, contact lenses or other health related costs

• Medical expenses or gym membership

Page 28: R Stride & Co - my-driving-instructor-accountant.co.uk Instructor... · R Stride & Co Driving Instructor ... The card payment slip you are given does not need to be kept. ... Therefore

R. Stride & Co Accountants, Tax and Business Advisors The driving instructor specialist….

- xxviii - xxviii

Appendix A – Pupil flowchart for 1 hour verses 2 hour lesson

What does a pupil get for a 1 hour lesson……?

The 10 minute slots at the beginning and end of the hour relate to time taken to get in

the car, adjust the seat, mirrors, admin time etc etc. On a 1 hour lesson on average

you get 40 minutes driving.

What does a pupil get for a 2 hour lesson…..?

So for spending £51.90 instead of 2 lots of £25.95 they get 25% more driving

time.

On average it takes 40 hours to pass a test, but taking two hour lessons, this can either

dramatically reduce this time or spending the extra time in lessons ensure a better

chance of passing.

Page 29: R Stride & Co - my-driving-instructor-accountant.co.uk Instructor... · R Stride & Co Driving Instructor ... The card payment slip you are given does not need to be kept. ... Therefore

R. Stride & Co Accountants, Tax and Business Advisors The driving instructor specialist….

- xxix - xxix

Appendix B – Pupil flowchart for 1 hour verses 2 hour lesson with recap.

What does a pupil get for a 1 hour driving lesson…….?

Taking into account the first 15 minutes of driving as a recap the pupil only receives

25 minutes of progression time for every hour spent driving….

What does a pupil get for a 2 hour driving lesson…………… ?

So for spending £51.90 instead of 2 lots of £25.95 they get 30% more

progression time…

What does this mean for your pupils:-

Average time to pass a test is 40 hours. 40 hours @ £25.95 ph = £1038.00

30% time saved 28 hours @ £25.95 ph = £648.75