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Humans have been practicing accounting since time immemorial . Archaeologists have found clay tablets in Middle East¹ with writings and numbers as a form of accounting for wars, harvest and taxes.

The modern `double entry bookkeeping` system is thought to be Italian in origin. India had and still has sophisticated accounting system which is different from the double entry system.

Like all trades, accountants have being forming associations to advance their interests; earliest known example is Collegion di Rasonati in Venice formed in 1581. Members were auditors of ship building business in Venice Arsenale.

Word debit and credit are of medieval Tuscan² origin, a form of Latin language. According to that `he owes` is debit and `he trusts` is credit.

Debits are traditionally entered on the left-hand side of a ledger and credits on the right-hand side. Some reason the origins to be Christian in nature – in the Bible³; at the last judgement, when we are called to account, the sheep (the good) go up on Christ’s right and the goat (the bad) to the left.

So, whose balance shall we put on the left: that of the wretched customer who has not yet paid us, or that of the kind supplier who has trusted us to pay later? Hence debtors’ balances are entered on the left⁴.

Earliest surviving book which mentions double entry bookkeeping  is of Luca Pacioli. Please note Luca did not invent double bookkeeping, it had been practiced for more than 200 years before him.

Notes:

1. Some scientists believe first human civilisations started in Middle East in the Fertile Crescent.
2. Language spoken in Tuscany region of Italy.
3. As seen from the painting of last judgement by Michelangelo in Sistine Chapel in Rome. Poor me – I have walked past Sistine Chapel but not been inside.
4. This paragraph is so beautiful that I lifted it straight from the book – Accounting a short introduction by Christopher Nobes.

Bonus:

1. Luca Pacioli was also mathematician and left a interesting  probability theory puzzle called `Problem of Points` besides some chess puzzles !

Trivial benefits are tax exempt (i.e. no income tax or NIC is due either on employer or employee) provided the following conditions are met each time the trivial benefit is given:

1. Amount should be a maximum of £50 per employee
2. Should not be in the form of cash or a cash voucher
3. Should not be part of a contractual agreement with the employee
4. Should not be offered as a reward for work performance.

There is no limit of how many trivial benefits can be offered to every employee in a year, however there is a cap of £300 per year for directors and their family members.

Also trivial benefits does not need to be given to ALL employees.

Examples of Trivial Benefits:

1. Meal out offered for special events (e.g. birthday party for an employee)
2. Turkeys offered on Christmas for each employee, provided the average price is maximum £50 per employee or equivalent vegan vouchers for vegan employees
3. Bottles of wine offered for New Year, or vouchers for non-alcoholic drinks for those who do not drink alcohol.

Examples of non- trivial benefits:

1. Boss offering lunch to some employee who are over working in their lunch break, for the reason of finishing their tasks quicker. These are reward lunches, not trivial benefits.
2. Boss offering vouchers every month to those employee who meet or exceed their targets. Theses are awards, not trivial benefits.
3. Other work-related examples:
4. lunches in workshops/seminars
5. month end drinks
6. monthly meeting lunches/buffets
7. retirement party for the employee who retires (as this is a reward for his working years); Note: other employees can get a trivial benefit attending this party of their retiring colleague.

Please note in above instances other exemptions may apply.

Same benefit multiple times:

Multiple of the same trivial benefit is considered as one, with a cap of £50 per employee (e.g. boss offering sandwiches every week say of £3 each . So total equals £3 x 52 = £156 thus exceeds £50 limit)

Record keeping

Employers should keep clear records of Trivial Benefits – Dates, details and Amounts

Below is a very brief summary of taxes in the UK but gives an idea to a businessman who is planning to start a business.

Ongoing Taxes

One off taxes

Other matters

Matters specific to restaurant industry.  

Example:

Suppose you start a restaurant and after few years it starts making some profits, you will find that you have a new partner to share in your good fortune – Her Majesty’s Revenue and Customs (HMRC)

I have given below what an owner will make and what his new partner HMRC will capture.

Owner’s share:
Sales                                                   £2,000,000
Net Profits                                        £400,000             say 20%              
Corporation Tax                              £100,000             25% rate from April 2023
Distributable Profits                       £300,000
Personal/Dividend tax                   £100,000            
Net in hand                                      £200,000

I have taken net profits at 20% this is achievable in a well-run high end central London restaurant. This profit percentage is after paying payroll taxes, VAT and Business Rates.

HMRC’s share:
Business Rate                                   £100,000             Fixed not dependent on sales
VAT                                                     £400,000            
Payroll Taxes                                    £60,000              
Corporation Tax                              £100,000            
Personal/Dividend tax                   £100,000            
Total                                                   £760,000

Above figures have been estimated and rounded off to make them easier to understand but on the whole close to reality.

In case you decide sell or just drop dead, you will meet new characters from the `Book of the Taxes` called Capital Gains tax and Inheritance tax but don’t worry, not today.

Set up a business – GOV.UK (www.gov.uk)

Medical Insurance

Step 1: Ascertain whether benefit employer wishes to provide is exempt or not.

Which benefits are exempt? Click here for answer

Step2: If benefits are not exempt, we need to report them to HMRC and deduct tax and NIC but it depends on who pays for the benefit.

Conclusion: Best option is employer to arrange and pay provider directly. Please note cost of insurance and class 1A NIC will be tax deductible for employer as an expense.

Source:

Expenses and benefits: medical or dental treatment and insurance – GOV.UK (www.gov.uk)

Life Cover

No liability to income tax arises if the employer arranges and pays for a `retirement or death benefit`.

Retirement or death benefit – means a pension, annuity, lump sum, gratuity or other similar benefit which will be paid in the event of the employee’s retirement or death.

Smaller companies can think about Relevant life cover.

Source
Section 307 ITEPA 2003