Are Pension Contributions for Me?

Have you thought about your retirement? 

If you want to enjoy it, pension contributions would be one thing to consider.

Firstly let me summarise the different types.

-          Occupational pension scheme         -               Pension contribution is deducted from gross pay.

-          Salary sacrifice                                    -               Pension contribution is deducted from gross pay

-          Personal/Stakeholder scheme         -               Pension contribution is deducted from net pay.

Regarding the first two, these work very similarly but the salary sacrifice has additional benefits to the employee.

An occupational scheme would work as follows.  For example, an employee receives monthly gross pay of £1000 and wishes to pay £100 into a pension scheme.

That individuals payslip would look like this:-

                Gross pay                                             £1000.00

                Less pension contribution                 (£100.00)

                Taxable pay                                         £900.00

The individual would pay tax on £900 per month and nics on £1000 per month and £100 would be paid into their pension scheme.  The tax relief has already been received at source.

For a salary sacrifice scheme, this works exactly the same as above except for two things.  1- As this is a sacrifice of salary then the tax and nics will be due only on the £900 (not £1000 for nics)  and 2- The employer can add the tax and nic savings to the pension contribution made for the employee.

In the above example, there would be a tax saving of £20 (£100 x 20%) and nic savings of £12 (£100 x 12%) equalling £32.  This £32 saving made for the employee can then be added to the pension payment making the pension contribution made per month £132 (£100 + £32).

For the personal and stakeholder scheme, the pension contribution is simply taken off last from the net pay.  So in the above example again, tax and nics will be calculated on £1000 then £100 will be deducted afterwards as the pension contribution.

The £100 is then paid to the pension provider, who gross this up, claim from the government another 20% and add on top.

One advantage to note regarding a stakeholder pension scheme is that the employee can take this with them if they leave for another job.

Usually it is employer who chooses pension provider and pays pension contributions to them on behalf of employee.

Change the VAT Quarter Dates on QuickBooks

It is tricky to find the way to change the VAT quarter settings on QuickBooks. We needed it when our VAT quarter was chaged by HMRC.

Your VAT agency within supplier list (in our case HMRC) determines your payment schedule. Once you set your schedule, do not change it unless you've received notification from your VAT agency. Your payment schedule may change if your VAT agency wants you to remit your collected VAT more often.

To do this task:
- Open the VAT agency supplier record.
- Click Supplier Centre.
- Click the Suppliers tab.
- Right-click the supplier you want to edit and then click Edit Supplier.
- Go to the Company menu, choose Lists, then choose Supplier List.
- Double click the VAT agency (e.g. HMRC VAT if you created your company file in QuickBooks 2010).
- In the Edit Supplier window, click the VAT Agency Info tab.
- If you do not see the Supplier is a VAT Agency checkbox on the right side of the window, you need to turn on VAT in QuickBooks (under Edit / Preferences).
- In the Edit Supplier window, click the VAT Agency Info tab.
- If you do not see the Supplier is a VAT Agency checkbox on the right side of the window, you need to turn on VAT in QuickBooks (under Edit / Preferences).
- In the Period section, select your new payment schedule based on the notification from your VAT agency: e.g., Monthly, Quarterly, or Annually.
- Then, set the Period Ending information as indicated by the VAT agency.
- Click OK.

Answering Tricky Questions when Filing VAT on Sage

When filing VAT on Sage I am usually convinced that the right answers have been given to all questions as the resulting figures are correct. But very often I have doubts at the back of my mind because of confusing questions, terminology and options that I have to go through. At one point enough was enough and we decided to find what exactly every single detail means.

1. Include Reconciled or not?

When you go to Modules / VAT / Select VAT quarter date, you will come across a box ‘Include Reconciled’ next to 'Calculate' button. Make sure you do NOT tick it.

So what does 'Reconciled' mean here? Somebody would think it is an option to include bank reconciled items. It is not so. In this case 'Reconciled' means an item that has been filed (flagged) in the previous VAT returns. Therefore we do not want to include it again in the next VAT return...

 2. Do we include previous VAT unreconciled items or not?

If there are any VAT unreconciled items from the previous VAT return period (i.e. transactions that were entered on the system in the previous VAT return period AFTER it was filed), a question will pop up asking to include previous VAT unreconciled items or not - press ‘Yes’.

These transactions might be those where supplier bills arrive late and you need to enter them with the date which falls into previous VAT return period. Or may be there was a double entry cheque posted which was unreconciled in the bank account at the time, you didn't realise it thinking that the cheque hasn't been cashed yet, accounted it for VAT in the previous return and then had to delete the cheque and include VAT reversal in the next VAT return.

3. Do we flag transactions for VAT?

When you press 'Reconcile' you will get a question: 'Flag transactions for VAT?' – select 'Yes'. This question basically asks if we want VAT return transactions to be VAT reconciled (flagged) so that they are not included in the next return again...

4. What do Yes or No answers mean in the upper right hand corner on our VAT return report?

Check that there are following answers on VAT return reports in the upper right hand corner:

Inc Current Reconciled:

- No (because we have not inluded VAT reconciled (flagged) items that have been filed previously)

Inc Earlier Unreconciled:

- Yes (if there were any transactions entered on the system in the previous VAT return period AFTER it was filed)

- No (if there were no transactions entered on the system in the previous VAT return period AFTER it was filed)

Have you come across any other tricky situations when working with Sage accounting software? Please feel free to share you own experience in comments below.

Sage 50 Accounts

Ideal for Managing your Cash Flow, VAT and Financial Reporting.

Flat Rate VAT Scheme Advantages

It is important to figure out if Flat Rate VAT Scheme actually is the best solution for your business specifics.

Are you applying for Flat Rate VAT Scheme to make a saving and VAT filing process cost effective?