Saturday, August 21, 2010

Insurance - Why is it Important?

This could be a hypothetical situation. You have the opportunity to become the annuitant of the best real estate purchase since they discovered gold in Nevada and California. For months you have been looking for your first land investment and heard about a 40 acre alfalfa farm in the county north of a major city that fronts on a paved two-lane access road. You inspect the property and love it. Then you call the phone number on the sign. The ostensible owner tells you it's a $33,000 all cash deal and since he is leaving town day after tomorrow, he needs one-half good faith cash down immediately and a quick 48 hour close.

You give the seller a $16,500 cashier's check, begin proceedings at a local escrow and title insurance company and are informed the title work will take at least 10 working days. The seller says that's fine with him and he'll notify escrow where to send the paperwork after he leaves town. Have you figured out what happens next? If you're an astute investor cognizant of escrow and title paperwork and proceedings you already know the game. The seller disappears with the deposit money and the prospective buyer becomes the victim of a scam. Once the title report is completed and made public to the buyer it showed a Federal tax lien and a local mechanics lien, both unpaid. It also showed a local county utility lawsuit for a power easement on the back of the property that was never granted. All of these problems occurred because the buyer did not wait to see what was in the title insurance paperwork.

For the uninformed the broad definition of title insurance is a contract between a buyer of real property and a local title company that basically guarantees and indemnifies against financial loss or damage or problems resulting from defects and other problems concerning the legal ownership of real property. It is a complete history of any property from day one to the present. This report not only shows legal ownership but all liens, judgments, and property easements placed on said property and whether they are still in effect or have been released. Insurance fees are not all the same. They vary from state-to-state. Actually, some local title companies set their own fees. In other states fees are regulated by state law and a minimum rate is set but not always adhered to by the insurance company. These title fees are paid at closing and are usually paid by the buyer. However, in some cases deals are made whereby the seller, in order to close the deal, will pay all buyers closing costs. Depending on the title work involved, the state where the closing was opened and the sales price of the property, fees can range from $800 and up.

Ten Tips on Managing Your VAT Liability

Paying a Value Added Tax (VAT) liability can be a large burden for small businesses. This article is aimed at owners of small businesses in the UK and focuses upon how their VAT burden can be successfully managed.

Ten tips on managing your VAT liability:

  1. If you do not need to compulsory register for VAT, calculate if it would be worthwhile to de-register for VAT.
  2. If you are not registered ensure that you review your requirement to register on a monthly basis, as there are financial penalties for late registration.
  3. Make sure that you are calculating your VAT liability correctly. Many business pay VAT on items they shouldn't and don't reclaim all the VAT that they are entitled to.
  4. Keep up to date with VAT legislation changes that effect your business. It may be worth considering retaining an accountant to keep an eye on this for you.
  5. File all VAT returns on time and make sure that VAT payments are made prior to deadlines. There are financial penalties for not meeting VAT deadlines.
  6. If you are experiencing cash flow difficulties and can not make your VAT payment on time, then contact HMRC to negotiate payment terms.
  7. Calculate if using the flat rate VAT scheme would save you money. This is for businesses with a turnover under £150,000. It saves administration and could be financially beneficial.
  8. Consider if you would benefit from cash accounting for VAT purposes. If your taxable turnover is under £1,350,000 a year this method allows you to account for VAT on the basis of cash received and paid, rather than the invoice date or time of supply.
  9. Would you benefit from using the annual accounting method. If your turnover is under £1,350,000 under this scheme you make only one VAT return per year.
  10. Should you be using a retail scheme. These schemes are for retailers and they are an alternative if it's not practical to issue invoices for a large number of supplies direct to the public.
VAT is a complex and specialist area of taxation if you are in any doubt over how it applies to you or your business then it is recommended that you contact an accountant or VAT specialist with expertise in this area. You can also contact HMRC direct for advice.

This article is an introduction to certain aspects of VAT legislation only and it is not intended to be comprehensive.

The author does not guarantee the accuracy of any information provided in this article and recommends that you do not take any action, whatsoever, based on the information provided. By the fullest extent permitted by law, the author does not accept any responsibility for any actions you may or may not take based on information contained in this article. This article contains general information and is not a substitute for specific independent professional advice. In addition it is emphasised that much of the information provided in this article is time sensitive and the rates and legislation associated with VAT will change.