The Fizz! Blog

Can my company pay for this cost? A useful heuristic

If you’re wondering whether it’s appropriate for your company to pay for something, think back to a time when you were employed by someone else.

If you’d made an expense claim for it, would they have repaid you without thinking twice?  If so, in most cases it’s going to be fine for your own company to be paying it.

Or would they have told you where to go?  In that case, it’s probably not fine for your own company to be paying for it!

Someone recently told us of someone they know who is always finding some conference or other in the vicinity of a place they want to go, on the grounds that attendance for a day will make their entire holiday legitimately payable by their company and tax-deductible.  Of course it won’t!  And the technique we’ve outlined here works perfectly.  If you tried to claim that from a third party employer, not only would they not pay it, they’d probably take disciplinary action!

Maybe you had a mean employer before, who’d outrageously refuse perfectly legitimate expense claims.  But if you had a normal, reasonable employer, something they’d not have paid for is generally unlikely to work as a cost for your own company.

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If you have a limited company, avoid using the word “claim”!

Often, people trading through a limited company will say “I am a limited company”. They are not a limited company, they are a human who owns a limited company. Their accountant should keep picking them up on it and correcting them, not to be pedantic, but because cementing the difference in your mind is important.

Company owners early in their “journey” (sorry) will often ask “can I claim cost X?”. A better perspective is to think “is this a cost which should properly be paid by my company?”. The rent on the Fizz offices isn’t somehow “claimed” against tax. Fizz just pays it, obviously! Fizz doesn’t “claim” the salaries of our staff. It pays them. Equally, when the directors are out and about travelling for meetings and the like, we just pay for our train tickets with a company debit card to begin with, straight out of the company bank account. Job done. There’s no reason, in the limited company world, for the word “claim” to be used, other than in the specific context of employees making formal expense claims for things that they’ve necessarily paid themselves and need to be reimbursed for.

Companies don’t claim things, they pay for them. If you can separate the company and yourself in your head, then life becomes a lot easier.

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Some thoughts on price increases

• Try and increase your prices every year.  It’s a much easier sell than occasional upward lurches.
• There’s no need for long-winded explanations justifying an increase in terms of all the costs in your own business that have gone up.  Everyone knows and understands that already.
• You almost certainly know who will push back on an increase, if anyone.  So it’s got little or nothing to do with the level or fairness of the increase itself.
• In general, fewer people will push back than you think.  If nobody pushes back, the increase wasn’t enough!
• Price lists help, even if it’s an internal list that you don’t share with customers. “Because that’s the standard price we charge for that thing” is actually a largely bomb-proof answer to the question “Why is that the price for that thing?”.
• Price lists also help if you’ve realised someone is paying way under the odds for something.  If you’re able to honestly tell them what the standard price is, it’s clear why you’re increasing it.  If you don’t go all the way up to the standard, they might well actually be grateful that you’re still cutting them a deal.
• If your prices are lower than similar businesses, you're sending a signal to many people that you're worse than the others.
• If your prices are higher than similar businesses, you're sending a signal to many people that you're better than the others.
• We bet we’ve several clients who could double their prices and be no worse off.  As long as you retain at least half of the customers, you’re at least as well off and will be working less!
• All this applies to B2B and to B2C - whether you’re selling to other businesses or private individuals, it’s all the same.

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How can I find out how much bank interest I’ve received?

Earning interest on cash in the bank is a good thing for savers, needless to say! But it does mean that a lot of people do now have to disclose interest to HMRC on their tax return, never having done so before. And, based on the frequency with which we’re asked about it, it can be quite tricky to figure out how much you’ve received in a tax year. In the olden days, banks would generally send you a paper certificate giving you the numbers. That’s pretty rare now.

There’s a good chance you can get the equivalent certificate/numbers from the banking app on your phone, but that’s not always the case. Based on a small sample at the time of writing, we reckon two of the three mainstream banking apps we looked at could provide an annual interest summary, though in neither case was it exactly where we’d expect to find it. A fourth told us via chat that they could post a certificate out on request, but also told us we could download it from a particular bit of the app - it wasn’t there, though.

If it’s not on the app, you might well be able to get the certificate/summary from online banking.

If not, then - you’re just going to have to look at your bank statements for the year and add the interest up! Sorry.

www.fizzhq.com

If you had the cash, would you buy the thing?

Quite often, people come into possession of a thing, and it doesn’t initially occur to them that they don’t have to keep the thing.

If someone inherits a house worth £500,000, say, their initial reaction is very often that they’ll rent it out. If they’d inherited £500,000 cash, would they have bought a house just like that one to rent out? Not in a million years! So, logically they should just sell the house (there’ll be no tax to pay if they sell it as soon as they get it) and use the £500,000 cash to do whatever is better for them.

If someone on PAYE gets £150,000 a year of net pay and £100,000 of shares in their listed employer, normally their instinct is to hang on to the shares. But if their net pay was £250,000 a year cash, would they use £100,000 of it to buy shares in a single company, upon which their own income is also reliant? Not in a million years! They should probably sell some or all of the shares (again, tax-free if they do it right away).

When events like this happen, take a step back and think about what you’d do with cash. Because you could actually do that.

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