Up until 20th February, HMRC’s guidance was that a smartphone, such as an iPhone or BlackBerry, didn’t count as a mobile phone for taxable benefit purposes, but as a computer.

Why would that matter?

An employer can provide an employee with one company mobile phone, which can be used for both business and private calls, with no extra tax or National Insurance to pay either by the employer or the employee.

On the other hand, if an employer provides an employee with a company asset, such as a computer, for private use or for mixed business and private use, then the employer has to pay Class 1A National Insurance on the value of that asset, and it’s a taxable benefit for the employee.

Assets provided for business use only, or with an insignificant amount of private use, would be exempted from this.

In other words - it could be more expensive to provide an employee with a company computer than a company mobile phone. And because a smartphone used to be classed as a computer, it could cost more to give employees smartphones than to give them ordinary mobile phones.

Not any more.

HMRC now say that they will treat a smartphone as a mobile phone rather than as a computer.

So if, as an employer, you provide your employees with one mobile phone and it just happens to be an iPhone or a BlackBerry, you no longer have to treat it as a computer and potentially pay Class 1A National Insurance on it.

And HMRC also say that because their initial interpretation was incorrect, a smartphone should always have been treated as a mobile phone - so if you’ve paid any Class 1A National Insurance on a smartphone that’s the only mobile phone you provide to an employee, you can reclaim it.

There are words of caution though!

HMRC have said that what they’re now considering to be a mobile phone is a smartphone using technology that’s current at the beginning of 2012. They’re hedging their bets here to allow for the guidance to be changed if technological advances continue apace.

They’ve also said:

“The definition [of a mobile phone] does not cover apparatus that is designed or adapted for a primary purpose other than transmitting or receiving spoken messages, even if that apparatus is also capable of being used in this way.

Examples of apparatus that does not fall within the definition of a mobile phone include satellite navigation devices, devices that are solely PDAs and tablet and laptop computers. In general, devices that use Voice Over Internet Protocol ('VOIP') systems to make and receive phone calls will not satisfy the primary purpose test.”

In other words, an iPhone is a mobile phone, an iPad isn’t.

This to me says that HMRC are moving with the times and accepting that a large part of the working population have smartphones.

How about tax relief on the use of free services like Skype next?

We’ve teamed up with Enterprise Nation - the small business support company that helps people start and grow their own business. By partnering with them, we’ll be bringing FreeAgent to a whole new audience and demonstrating how our system can help manage their accounts more effectively.

We’ve had a great relationship with Enterprise Nation for many years. They profiled our CEO Ed in 2007, not long after FreeAgent was first launched; and our Chief Accountant Emily has regularly written articles and accountancy tips for them over the past few years.

As we’ve been friends for so long, it was a logical step for us to take our relationship further - and we’re chuffed to bits to now be one of their official partners. It means that FreeAgent will now be promoted through the Enterprise Nation online StartUp Kit, and we’ll be doing a host of Q&A sessions with them in the coming months to give useful accountancy tips to small businesses and freelancers. We’re also planning a couple of webchats with them as well, so it should be pretty exciting stuff all round.

If you take a look at the Enterprise Nation website, you’ll find a wealth of information about them and the fantastic advice they provide to small businesses and start-ups. You can also read the recent blog post they’ve written which explains what they think about partnering with FreeAgent. It’s all great stuff and just makes us look forward to working with them more!

One area a lot of business owners find time-consuming is keeping on top of their expenses so I'm pleased to draw your attention to a new FreeAgent integration that can really help simplify this process.

ExpenseMagic is a receipt processing and expense management service that lets you use your mobile to keep track of your expense receipts with minimal effort. Just take a photo of the receipt and all the details will then be automatically pushed to your FreeAgent account, having already worked out the correct VAT reclaim rate for you.

Their iphone app also integrates with your calendar so you can easily add a diary record to any expense, to remind you of what a particular expense was for. All your data and images are stored in the cloud and are accessible anywhere and any time, exportable either on-demand or automatically every month.

To celebrate the launch of their FreeAgent integration, and to help you get your expenses up to date, ExpenseMagic are offering all of our users access to their service entirely free of charge up until the end of this tax year, 5th April 2012.

The free offering will have a fair usage policy of 100 receipts per person per month and can be claimed by simply logging into your FreeAgent account via the expense ExpenseMagic app which can be downloaded at www.itunes.com/app/expensemagic. Doing this will automatically credit your ExpenseMagic account to provide your access for free for this period.

For delegates or attendees at Making Social Part of Your DNA who haven’t given FreeAgent a go yet, we’ll give them a three month trial for free. So as long as you’re in the room, the trial is yours.

In addition, we’ll also be putting all of the names together and picking one lucky winner at random who will win an entire year’s subscription to FreeAgent. Yes, that’s a whole 12 months of using our award-winning accounting system for all of your invoicing, tracking time and expenses, analysing bank statements and building real-time accounts - and it’ll be completely free of charge!

So if you’re attending Making Social Part of Your DNA, simply pick up one of our FreeAgent branded place-mats when you’re at the event, and use the special code printed on them to set up your three month trial with us.

You’ve got a whole week to set up your trial and you’ll automatically be entered in the draw to win the year’s free subscription. We may even throw some jelly beans in as well, if you’re really nice to us.

We’ll also be tweeting during the conference, so please drop us a shout at @FreeAgent or use the hashtag #smwdna. See you there!

But this Valentine’s Day, why not think about how to improve some of the other relationships you have as well, including those with the people your business brings you into contact with?

Here's how how keeping your books up to date can not only help you keep track of your profit and cashflow, but also improve the relationships you have with the people in and around your business.

Identify toxic customers

If you issue invoices regularly, and make sure that you keep track of money coming into your bank from your customers, you’ll have a clear and accurate record of which of your customers pay you quickly – and who takes longer to pay.

Slow-paying customers can be toxic to your business. They put a brake on your cashflow, and even if you use FreeAgent’s automatic reminder tool to chase them for payment, you will still be anxious about when they’re going to pay you.

This anxiety is a waste of the energy you could be spending on your good customers, or winning new customers.

Valentine’s Day is a time of year to nurture good relationships, not bad ones. So is it therefore time to weed out your toxic customers - or at least speak to them directly to see if they might be able to pay you any faster?

Know when to pay suppliers…

If you keep track of any bills that you’re not going to pay straight away, you can make sure that you don’t miss your supplier’s deadline for payment.

Paying your bills on time will mean you are not being a toxic customer yourself, and your suppliers will be happy to go on dealing with you.

They’ll love you even more if you pay them early…

…which may not be straight away!

If you pay your suppliers before the bill is due, will that put a squeeze on your cashflow?

You might, for example, find you need that money to pay your staff wages later in the month.

Don’t rob Peter to pay Paul. Paul may be very happy with this but Peter certainly won’t be!

Get more from your accountant

Too many small business owners still depend on their accountant to either do their bookkeeping from scratch or to correct a lot of mistakes.

If your books are already accurate (and your accountant should provide training to help you get to this stage), then your accountant can act as a trusted adviser to your business, instead of a bean counter.

For example, given timely correct information, your accountant could tell you how to save tax, or help you make sure you’re charging your customers enough money. Isn’t that more valuable than adding up columns of figures?

If you mould a better working relationship with your accountant, you’ll love the benefits that this will bring for your business.

Keep on the right side of the taxman

HM Revenue & Customs may charge interest, surcharges and penalties if you file tax forms late, or don’t pay on time.

If your books aren’t up to date then you won’t know how much you can expect to pay – and you could find yourself confronted with a big tax bill and no time to put money aside to pay it.

Don’t forget, for example, that if you’re registered for VAT, the VAT you charge to your customers isn’t yours to keep. You must pay that over to HM Revenue. Consider keeping a separate bank account for that money so that you’re not tempted to spend it.

You’re unlikely to ever love the taxman, but you should at least try to have a better relationship with HMRC - so you’ll avoid any unforeseen tax heartache in the future.

Keeping your books accurate and up to date can really help improve your relationships with lots of people in and around your business. Shouldn’t this Valentine’s Day be the perfect time to start loving your accounts properly and letting these relationships flourish?

For Social Media Week 2012, we’re sponsoring the “Making Social part of your DNA” event in London - a one-day conference featuring a host of speakers from some pretty big-name players in the business world. It’ll see delegates from Salesforce, Virgin Atlantic, Dell and Cisco - among many others - teaming up to discuss how they are using social media in their businesses and how they are successfully collaborating with their audiences through these channels.

It’s a great opportunity for us to discover how other companies successfully engage with their customers and promote their businesses through social media. But, just as importantly, we’ll also get the chance to highlight the good work that we’re doing - including the many conversations that we have with our customers on Twitter and Facebook and the great feedback we get from our followers.

We’re fortunate that we have a dedicated (and very vocal!) group of FreeAgent users who are not only voracious social media disciples but who are also pro-actively helping us find new customers through our channels. And as a result, we’re at the stage where we regularly see new subscribers being referred to us through Twitter.

It’s a long-term goal to see the use of social media becoming an integral part of how we do business at FreeAgent - and to get to the point where it’s ingrained into the company’s bloodstream. We’re gradually getting there, so an event like “Making Social part of your DNA” is a great opportunity to see how we can take our social media channels even further. We’re delighted to be sponsoring the conference and hopefully everyone else who’s attending on Thursday will find it just as useful and informative as we do.

If you’re interested in booking tickets to the event on February 16th - or just want to find out more information about Social Media Week in general - you can get all of the details on the Make Social Part of Your DNA website. We’ll also be posting a post-event review featuring all of the best bits we learn at the conference, so keep your eyes peeled on the blog for this in the near future.

But across the Atlantic, today’s date represents a long-standing, annual tradition that supposedly predicts when the year’s Springtime weather will arrive: the Groundhog Day holiday.

The legend goes like this: if the skies are cloudy on February 2nd then a groundhog will leave its burrow and herald the start of the Springtime. But if the sun is shining, the creature will see its shadow and retreat back to its burrow, signalling six more weeks of winter.

Of course, many people will also associate the Groundhog Day holiday with the famous Bill Murray film about a man stuck in a time loop, where he has to live the same day - and make the same mistakes - over and over again.

For small businesses and freelancers, staying on top of their accounts can represent a similar scenario. It’s sometimes unclear how long the bad weather will last before things start to get easier - and you’re scared of making the same mistakes over and over again.

So here are a few tips to help make your accounting a little easier over the next year, and ensure you avoid a Groundhog Day scenario for your business.

Keep your books in good order

It’s easy for small business owners to quickly fall behind on their accounts. They have a hundred other things to consider in order to keep their business moving forward, and often these take priority over what appears to be the boring task of bookkeeping.

But you shouldn’t just wait until you have a tax or VAT return due before considering how much money you owe. Some forward thinking at the start of the year will help you stay on top of your finances, ensure you know how much your business is making, and may even make your bookkeeping a manageable - if not enjoyable - experience.

Make sure you’re keeping proper records and know exactly what you can claim in expenses. Have a robust, simple system like FreeAgent in place, so you can easily manage all of your payments and keep on top of your earnings, invoicing and tax throughout the year.

Remember by keeping your books accurate and up to date, you’re not just keeping the tax man and your accountant happy - you’re ensuring that you always know how your business is performing. You’ll have a constant overview of your cashflow, profitability, expenses and tax, so that you’re in full control of your business every step of the way.

Be prepared for your taxes (and avoid penalties)

You may have heard of HM Revenue’s “Time to Pay” scheme, which can give you more time to pay your tax - but anecdotal evidence suggests that this isn’t always very helpful.

Instead, try to put money aside each month to pay your taxes on time. You can even use a different bank account to keep this money safe if that would help you remember not to spend it.

If you file your returns and pay your taxes on time, this will not only avoid interest and penalties from HM Revenue, but will improve your relationship with them. It’s always best to work with HM Revenue rather than against them when you can.

And it’s better to prepare for your tax return rather than running around frantically at the last minute trying to complete it before the deadline.

Get an expert opinion

It’s easy to think you can do everything yourself, but there could well be times when you’re tearing your hair out trying to stay on top of your company finances. Whether it’s calculating your VAT, claiming the right expenses, preparing your tax return or simply maintaining your records, you may find you need some guidance from an expert, rather than trying to muddle through on your own

Don’t be afraid to call in the help of an accountant to advise you about your bookkeeping and make sure you’re on the right track. Getting help at an early stage could help you avoid making the same mistakes time and time again.

Happy Groundhog Day!

Normally they would fine anyone who files after the 31st January deadline.

They have also announced that they won’t charge interest to anyone who pays their tax by 2nd February.

But what they haven’t said is that this represents a change in the actual deadline itself - and their own website still gives the deadline for tax returns as 31st January.

Why does that matter if I won’t be fined for filing late?

HMRC normally have a year from the date that your tax return was filed to open any enquiry they may wish to make into your return.

But if your return is filed late - and filing on 1st or 2nd February still counts as filing late, because HMRC haven’t changed the official deadline, they’ve only said they will not impose fines and interest - then HMRC have longer to open an enquiry.

So if you file on 1st or 2nd February, HMRC could potentially open an enquiry into your return any time until 30th April 2013.

For that reason, and for your own peace of mind, we would still recommend filing your return online by 31st January.

Use FreeAgent to help you add up your figures for your self-employment.

HMRC has announced, due to pre-planned strike action, that a two day extension has been granted for late return submissions - meaning that anyone who submits their return and pays their tax up to 2nd February will not receive an automatic fine. But despite this respite, it’s still important to get your tax return submitted as soon as possible.

If you’re a business owner or freelancer who carries out work from your own home, you are entitled to include part of the running costs of your home in your accounts, which will save you some tax.

So if you’re still unsure about what you can and can’t claim for your home expenses, here are some tips to consider when completing your tax return:

Apportioning the costs

How much of the running costs of your home you can claim, depends on the type of business you have and what you actually do at home.

For example, if you’re a jobbing gardener you might spend an hour or two a week writing up your books at home, but spend the rest of your working life at your customers’ premises.

But if you’re a web designer, you may well do 90% of your work at home and only occasionally visit clients.

HMRC say that you need to apportion the running costs of your home on a “fair and reasonable” basis between the private element of that cost - the part that relates to your actually living there - and the business element.

One method that’s often used is to work out how many rooms you have in your home, and how many of those rooms you use for business - and how much you actually use that room for business.

It’s not a good idea to use any part of your home solely for business activities all the time and never use it for any private activities, because capital gains tax will then be due on the part you use just for business if and when you sell your home.

For example, my own office at home is also my music room, and I could easily prove that to a visiting HM Revenue inspector because there’s a piano in there.

But the room must be used for business only for part of the time.

There are 10 rooms in my home. I only use one for business, and 90% of the use of that room is for business. So I would add up all the costs I can claim, and multiply that by 1/10 and then by 90%, to get my accounts figure for business use of home.

But what running costs of the home can I actually include in my accounts?

Costs you can claim

Here are some of the costs you might incur to run a home, which you may then be able to claim part of in your business accounts:

Rent

You can’t charge your business rent when you’re self-employed, because legally you are the business. But if you are renting your home from a landlord, then you can claim a proportion of the rent for your business.

Mortgage

If you’re buying your home through a mortgage, you can claim a proportion of the interest only, not the capital repayment.

Council tax

You can claim a proportion of your council tax cost.

However, depending on how much you use your home for business, you might have to pay business rates rather than council tax.

Repairs to the property

If the repair relates solely to the part of the property that’s used for business, you would include this cost in your accounts in full, subject to the business use of that room.

So for example, if the ceiling in my office-cum-music-room was repaired and that cost £200, I wouldn’t need to divide that by 10 because the repair was only for that room – I would just multiply by 90%, and include £180 in my accounts.

If the repair is to the whole house, for example a repair to the roof, you can include that in the same proportion as you would the rent or council tax – so in my case, the repair cost x 1/10 x 90%.

But if the repair is just for a part of the house that’s not used for business, such as replastering of a bedroom, then you couldn’t claim any part of that repair in your business accounts. 

Telephone and broadband

Remember that what you can claim for your telephone and broadband is not apportioned on the basis of the number of rooms in your home, but on what your actual usage of the line is.

You can claim the full cost of all your business use of the line, and a percentage of the line rental, based on how much you use the line for business purposes and how much is for personal use.

Water

If your home water supply is used a lot for business, for example if you run a car valeting service, then you would need to apply to the water company for this to be separately charged, and you could claim the full cost. 

But if your business use of water is only minor, you can’t claim any of the cost for your business.

Claiming costs of working at home is not as simple as it initially sounds. If you’re in any doubt as to what you can claim, you should seek further advice from an accountant.

Are you unsure about what figure should you be putting in the box for “business income” in the self-employment pages of your tax return, which must be filed by 31st January? (This is box 8 of the short self-employed pages, and box 14 of the full self-employed pages.)

If so, here are some useful tips to help you make sure you include the right amount of income on your tax return:

1) Check the dates

Most self-employed businesses prepare accounts each year to match the date of the tax year.

That means that, for this tax year, you need to include all your business’s income that was earned between 6th April 2010 and 5th April 2011. 

2) Earned income, not received

You must include income in the tax year it was earned – not when your customers paid you.

So, if you issued an invoice for work done in March 2011 and your customer paid you on 30th April 2011, that invoice has to be included in your income for the tax year to 5th April 2011 – because that was the tax year in which you did the work.

3) Earned income, not invoiced

This one’s a bit harder.

If you’re selling services rather than goods, you need to work out your income on the basis of when you did the work.

So, if you completed a piece of work in March 2011 but you didn’t invoice your customer for it until 30th April 2011, you have to include that income in the tax year to 5th April 2011 - because the work was done before the end of the tax year.

If you had partly finished a project before the tax year ended but there was still some work to do in April, then you need to include the income that would have been due on the work completed before 5th April.

This is a bit complicated so if you are in any doubt, you should seek further advice from an accountant.

4) Business income only

When you’re filling in the self-employed pages of your tax return, make sure you only include trading income from your business.

That means you should leave out income from the following sources:

• Employment (from any job you have in addition to running your business. Remember your own business does not count as employment)
• Rent of a personal property
• Transfers into the business bank account from a personal account
• Bank interest (even if it’s earned on a business account)
• Money that you put into the business
• Inheritance

This list is not exhaustive, so do seek advice from an accountant if you are still unsure about what qualifies as business income.

5) Exclude VAT

If your business is registered for VAT, remember that the figure for trading income will be your sales exclusive of VAT.

If your business is on the flat rate scheme, however, then this figure would be your sales net of flat rate VAT.

Even something that sounds as straightforward as “add up all your income for the tax year” has hidden pitfalls. Therefore make use of a tool such as FreeAgent to keep your books and it will add this figure up for you ready to go into your tax return!