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John Nuth Accountants is based in Wiltshire, between Salisbury and Warminster that offers professional accounting advice for small and medium businesses.

Starting your own business? A few pointers to help you and your business to success

John Nuth - Tuesday, November 17, 2015

Starting your own business? Or perhaps re-assessing your existing business? Here are a few tips and some practical advice to help you start up and run a successful business.  

Each year in the UK, more than 500,000 people start a business of their own. Some survive, many don't but starting a business can provide you with a more rewarding life, but requires careful planning in order to succeed.  

There are many reasons why you want your own business, it may be a great idea that no-one else has thought of but for most it’s the chance to earn more money or to be your own boss. You may want a better work-life balance with greater flexibility or perhaps you have the impetus of having lost your job.  

Whatever the reason you'll need a good business plan. You'll also need a brand, a name and competitor knowledge. You'll need to understand your costs before you get going, and be able to manage your finances once you've started your business.  

When you're starting your business, take care of the key start-up tasks properly, and in the right sequence, and you’ll increase your chances of success and get off to a great start.  

1. Should I trade as a sole trader, a partnership or a limited company?  
There are pros and cons, as you would expect, to each – so it’s really a case of discussing these and your personal circumstances and finding the solution that is best for you. 

2. Should I be VAT registered?  
At present the VAT threshold is £82,000. This means if your turnover (i.e. sales or income) reaches that figure then you have to register but there are circumstances when you could benefit from a voluntary registration. Your accountant will help you decide when you need to register or if it’s beneficial for you to register voluntarily for VAT.  

3. What records do I need to keep?  
You need to know which records you have to keep and more importantly which expenses are tax deductible. And, if you’re starting a business there are some expenses, incurred whilst the business is being set up, that can also be deductible.  Discussing this with your accountant can save you time and money and as someone once said the easiest way to increase your profits is to pay less tax.  

4. When do I have to get my various returns to HMRC?  
It depends on which route you choose – sole trader, partnership or limited company – and whether you’re registered for VAT because the forms and returns and the due dates vary considerably. This is, of course, something your accountant will do for you and make sure you have no problems with HMRC  

5. How can an accountant help me?  
There is an old joke ‘how many kinds of accountant are there?’ Answer – ‘three, those who can count and those who can’t.’  Well in fact there are two kinds, those whom you see once a year and who produce a set of accounts and those who offer a more comprehensive package, a port-of-call for whenever you have a query or want some help or advice on something, and who makes sure that whatever forms or returns you need are produced accurately and on time and who can give you on-going assistance to make sure you pay only as much in taxation as is necessary.  

The first thing you need to consider when going through your list of potential accountants is whether or not any of them have some degree of familiarity with your business sector.  Also, look at the size of the firm. A small to medium-sized business accountant will specialise more in the kind of accounts issues common to smaller firms. They are also likely to charge less than a larger firm and give more direct access to more experienced partner.  Make arrangements to visit several firms in person to meet the people you will be working with and to make comparisons. A lot comes down to personal chemistry, and your accountant needs to be able to get into your business and show an interest in it as well as just doing your accounts if they are to advise you properly on the business. Equally a good accountant should want to make an appointment to come and see your business as a good understanding of the business is essential.  You’re likely to be working closely with your accountant and if you don’t get on at a basic level, your professional relationship may be more difficult than it needs to be. 

Ask if you can speak to other clients. This is like asking for references and will be a real test of the calibre of the firm. If they are confident that their service has impressed, they shouldn’t have a problem referring you to a few people. 

Tax Return deadlines – don’t be caught with missing it and paying fines and surcharges

John Nuth - Friday, October 23, 2015

It’s that time of year again! Your Tax Return will need to be with HMRC soon. If you’re self-employed or in a partnership the deadline for your paper based Self-Assessment Tax Return for 5th April 2015 is 31st October. For on-line submissions the deadline is 31st January 2016 The penalties can be quite severe:

Late Filing

Penalty

Missing deadline (if only by one day)

£100

3 months late

£10 per day up to a maximum of £900

6 months late

5% of tax due if £300 or more

Latest Changes to Employment Law

John Nuth - Friday, October 02, 2015

Each October new employment law legislation is introduced, resulting in some important changes for employers. 

Here we outline some of the key changes coming into effect on 1 October: 

National Minimum Wage increase 
The National Minimum Wage increases from £6.50 to £6.70 for workers aged 21 and over from 1 October 2015. The minimum wage will also rise for younger workers (those aged 18-20, and under 18s) with the minimum hourly rate being increased to £5.30 and £3.87 respectively. Apprentices also stand to gain from a wage increase as the hourly rate of £2.73 rises to £3.30 per hour. 

Smoking in cars containing children is banned 
Company vehicles are already covered by existing smoke-free legislation. However, from 1 October, drivers of private cars in England and Wales will be banned from smoking cigarettes if passengers aged under 18 are present. The new legislation will affect those employees using a company car for family purposes, so employers are advised to review their company car and smoking policies. 

Section 54 of the Modern Slavery Act 2015 becomes law, subject to Parliamentary approval Issues such as forced or compulsory labour, servitude and human trafficking are examples of existing modern slavery. From October 2015, businesses with a turnover of £36 million or more per annum will be required to publish a modern slavery statement every year. Such employers will have to state the measures that they have taken to prevent modern slavery from existing in their business or supply chain. 

New Fit for Work service to begin accepting employer referrals   
The new Fit for Work service (FFW) introduced by the Government is to be fully functional by the autumn. The service aims to aid employees in returning to work after a period of sickness or absence. Advice from occupational health can be obtained through the Fit for Work website and telephone helpline. As part of the new service, employers will be able to refer their employees for free occupational health assessments if an employee has been absent from work for a minimum of four weeks.

Starting up a new business?

John Nuth - Friday, September 11, 2015

If you are starting a business, particularly if you haven’t been in business before, you are likely to be full of questions:

  •  - What structure should I use?  Do I need a Limited Company?
  •  - What type of expenses can a claim?
  •  - What records do I need to keep?
  •  - How much money should I save for tax?  And when will I have to pay it?
  •  - How can I save some tax?
  •  - Should I register for vat?

We’ll cover all these areas at your free initial meeting so you can start your business with confidence.

Once you are up and running we will work with you to clarify your business objectives and assist you in achieving the aims you set yourself when you first started your business.

We operate under a fixed fee agreement – with monthly payments to help with your cash flow – so you will always know what you are going to pay in advance, all normal communications are included.

Time to move Out of Your Home Office?

John Nuth - Friday, July 03, 2015

When your business has been living in the spare bedroom, moving it out into a home of its own can be exciting. It can also provide it with a lot of potential to grow in a way it could never manage in the confines of a home office.

However, there are a number of very significant costs that can arise as a result of moving your business into a real, purpose-built office. Make sure you consider these in full, weigh them carefully against your business’ growth potential, and preferably discuss the financial implications with your accountant before taking the plunge and taking out a lease on a new home for your business.

Rent

Obviously you will have to pay rent on your new premises (unless you purchase outright in which case you will have to consider the price and/or mortgage in much the same way). Think about how much you think your business can realistically grow as a result of moving into a real office, and think about whether this will really justify the cost compared to a rent-free spare bedroom – and be sure your business can afford it during the period before this growth has been fully realised. It is likely this will indeed be worthwhile if your business is truly ready to move out into the world, but if your business is not ready you should put these plans on hold until it is better-poised to take prompt advantage of extra room to grow.

Fitting Out

You may well have to fit out your nice new office according to your needs, and this can carry significant one-off expenses. If the office you are renting is entirely unfurnished, then you will need to think about the cost of things like desks, chairs, filing cabinets and even little things like bins. It is usually not only less disruptive but more cost-effective to fit out the office in full, including desks for employees you hope to take on, from the start. Even if the office is nicely furnished, you will still need to think about costs such as supplying any new employees you plan to hire with the necessary equipment to do their jobs, such as enterprise-standard computers.

Ongoing Costs

Once your office has been fitted out, you will be faced with several ongoing costs besides the rent. Business insurance may be greater than it was when you are in a home office, if for example you previously added your business’ assets to your home insurance. You will also be faced with utility bills – again probably greater than the amount added onto your household bills when your business was at home. There may also be costs associated with maintenance, repairs, and services such as office cleaning. It is a good idea to clearly delineate from the outset which maintenance costs will fall to you and which to your landlord, assuming you will occupy a rented rather than owned office.

HMRC plan to scrap £100 fines for late tax returns

John Nuth - Monday, June 01, 2015

The Government's £100 fine for late tax returns could be scrapped for hundreds of thousands of people who return the forms “a day or two” late, under radical government plans.

HM Revenue & Customs has admitted that its penalties regime may be too rigid, and is drawing up proposals to end fines for taxpayers who miss the deadline “by a day or two”.  New rules outlined for public consultation could see people who owe the government tax charged higher interest rates on their debts to encourage them to pay sooner, instead of being hit with automatic fines.

The proposal follows figures showing that 890,000 people missed the January 31 deadline for completing their income tax self-assessments and they now face an escalating scale of penalties, starting with an automatic £100 fine.

Many face fines simply for filing their self-assessment tax returns late, even if they do not owe the government any tax, HMRC said. Penalties for VAT breaches and failures to pay the right excise duty could also be in line for reform under the plans.

HMRC admitted that the vast majority of customers meet their obligations in full and on time, and that penalties are only applied to a small minority of people and businesses, and perhaps it should differentiate between deliberate and persistent non-compliers and those who might make an occasional error.

There is a suggestion of reforming the rules along similar lines to driving penalties, in which individuals are not fined at first but given harsher penalties if they repeatedly break the rules.

Should I be registered for VAT?

John Nuth - Friday, April 24, 2015

VAT registration is an area that is often misunderstood by business owners. While many are obliged to register for VAT, others choose to do so voluntarily. But when must you register, and when might voluntary registration be a good idea?

Do I have to register for VAT?

If, during the course of any 12 months, your ‘taxable supplies’ exceed the VAT registration threshold, you are legally obliged to register for VAT.

The VAT registration threshold is set at £82,000 for the 2015-16 tax year. ‘Taxable supplies’ are anything that is subject to VAT. So, if your turnover of taxable supplies exceeds £81,000, or if you know that it will, you must register.

There are a couple of things to remember here. First of all, the threshold applies to turnover rather than profit – so many firms will be obliged to register very quickly. Furthermore, ‘taxable supplies’ includes any product or service that is liable for VAT, at any rate – including 0 per cent. It only excludes items that are VAT exempt. It is therefore important that you understand the different VAT rates, and their impact on your business.

When is voluntary registration a good idea?

Many firms choose to register for VAT voluntarily, before they reach the threshold. This is a big decision that can have lasting implications for the financial health of your business, so it is vital that you think it through properly.

There are a few main reasons that you may wish to register for VAT voluntarily.

• Reclaiming VAT. Although you will have to charge VAT on your goods and services once you are registered (known as output tax), you will also be able to reclaim VAT that you are charged by other businesses. This is known as input tax. As long as your input tax exceeds your output tax in a given period, you will be able to reclaim the difference from HMRC.

• Building impressions. Some firms choose to register for VAT in order to appear larger than they are. Your clients will probably be aware of the £82,000 threshold – and if you are not registered they will know that your turnover is lower than this. You may therefore consider registration as a way of increasing your standing amongst competitors, and in the eyes of clients.

Salary, dividend or pension contribution?

John Nuth - Friday, February 27, 2015

When you work for your own company you can decide how much salary to pay yourself, how much to pay into your pension fund, and what proportion of the remaining profits to take as a dividend. The split is important as it will affect the tax and national insurance payable by you and your company.

If you elect for a salary just sufficient to be covered by your personal allowance (£10,600 for 2015/16), will be tax free, assuming you have no other income. However, if your company has more than one employee (including directors), a salary of over £10,000 (for 2015/16) will mean the recipient has to be automatically enrolled in the company's pension scheme, under the auto-enrolment rules.

You must pay national insurance contributions (NIC) at 12% on your salary above £8,060. So if the company pays you £10,600, you take home £10,295 after NIC deductions. The company will also pay employer's NIC of £343.34 on that salary. However, most companies are entitled to an employment allowance of £2,000 p.a. to set against NIC due for all the employees. This means the company doesn't pay over employer's NIC until the £2,000 allowance is used up.

You could pay yourself a salary just under the NI threshold of £8,060, so you receive an NI credit towards your state pension, but you don't actually pay any tax or NI. However, at that annual salary level you will be "wasting" £2,540 of your tax free personal allowance, unless you have other income to cover it. The 1/9th tax credit attached to a dividend can't be repaid even if the dividend is covered by your tax free personal allowance.

Finally, don't forget your company can make contributions into your pension scheme and get a tax deduction for the cost. From 6 April 2015, if you are aged 55 or more you will be able to draw all funds from that scheme, although 75% of the fund will be taxable in your hands.

The implications of drawing funds out of a pension scheme can be complex and irreversible, so you should take advice from a financial adviser registered with the financial conduct authority (FCA) before making any decisions concerning pensions.

Penalties for late Tax Returns

John Nuth - Friday, February 06, 2015

One advantage of using an accountant to help you with submitting your self-assessment tax return is that they will assist and prompt you with meeting your statutory filing and payment obligations, therefore avoiding penalties for late tax returns.

Changes made by HMRC to their penalty regime now makes this more important than ever.

Starting with the 2010/11 tax year, HMRC has significantly increased the penalties imposed if you send in your self-assessment tax return late. The reasoning for these new and extremely punitive penalties is that previous penalty levels were set too low and did not provide sufficient incentive for people to get their returns in on time. More cynical observers might suggest that they have spotted an opportunity to impose yet another form of stealth tax.

Tax penalties and fines

If you submit your return online the deadline is 31 January, and the longer you delay, the more you'll have to pay.

  • One day late:  You'll automatically receive a £100 fine. This applies even if you have no tax to pay or have paid the tax you owe
  • Three months late:  A fine of £10 for each following day up to a 90 day maximum of £900. This is in addition to the fixed penalty above, so the overall fine could be £1,000
  • Six months late:  A fine of either £300 or 5% of the tax due, whichever is the higher. This will apply in addition to the penalties above
  • 12 months late:  Another £300 fine or 5% of the tax due, whichever is the higher will be added to your bill on top of the penalties above. 

In serious cases, if you're more than 12 months late with your tax return, you may be asked to pay up to 100% of the tax due as well as any tax you owe, doubling your payment.

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