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Information Factsheets
Starting Up In Business
This factsheet covers the factors to consider before trading begins.
Topics covered: business start-up, initial considerations, business plan, business structure, stationery, books and records, accounts, taxation (income tax, national insurance, VAT), employment, insurance and pensions.
Could I Really Make a Go of it?
Many people wonder deep down if they could really make a go of running their own business. It is not for everyone but the following is a list of attributes that successful business owners have. You do not need all of these characteristics but ‘go-getters’ have the majority of the qualities.
Business Structures - Which Should I Use?
Having made the decision to be your own boss, it is important to decide the best legal and taxation structure for your enterprise.
Topics covered: sole trader, partnership, limited company, limited liability partnership, co-operative.
Every new business should have a business plan. It is the key to success. If you need finance, no bank manager will lend money without a considered plan.
Every business from its commencement and through its development and growth will need finance.
Topics covered: bank loans and overdrafts, savings, shares, venture capital, retained earnings, factoring, hire purchase, leasing.
The financing of your business is the most fundamental aspect of its management. Get the financing right and you will have a healthy business, positive cash flows and ultimately a profitable enterprise.
When starting a new business, you will no doubt recognise the need for insurance. It can provide compensation and peace of mind should things go wrong but can also represent a significant cost.
General Business
The position of director brings both rewards and responsibilities upon an individual. Whether you are appointed to the Board of the company you work for or you are involved in establishing a new business and take on the role of director you will feel a sense of achievement.
Whether we are producing your accounts or carrying out your annual audit, being prepared for your abacus accountant will ensure our work is carried out smoothly and efficiently and with the minimum disruption to yourselves.
Company Secretarial Duties
The advent of the Companies Act 2006 has brought about a number of changes for companies. One such change is that from 6 April 2008 private companies can choose whether or not to have a company secretary.
The advent of the Companies Act 2006 has brought about a number of changes for companies. One such change is that from 6 April 2008 private companies can choose whether or not to have a company secretary.
Ensuring adequate finance is a fact of life if you run a business. Whether you are looking to expand, undertake a specific project or simply fund your day to day purchases, finance is essential.
There are many reasons why you may need to calculate the value of your business. Here we consider the range of methods available as well as some of the factors to consider during the process.
Major corporate frauds and collapses hit the headlines from time to time and many of these were high profile and the amounts involved quite spectacular.
The Bribery Act 2010 applies across the UK and all businesses need to be aware of its requirements which came into effect on 1 July 2011.
Corporate and Business Tax
IR35 Personal Service Companies
The ‘IR35’ rules are designed to prevent the avoidance of tax and national insurance contributions (NICs) through the use of personal service companies and partnerships.
Corporation Tax Self Assessment
Corporation Tax Self Assessment (CTSA) was introduced in 1999. It completed the self assessment reforms introduced for individuals some years earlier by extending the principles of self assessment to company tax returns.
Corporation Tax - Quarterly Instalment Payments
Under corporation tax self assessment large companies are required to pay their corporation tax in four quarterly instalment payments. These payments are based on the company's estimate of its current year tax liability.
Companies - Tax Saving Opportunities
Due to the ever changing tax legislation and commercial factors affecting your company, it is advisable to carry out an annual review of your company's tax position.
The issue of whether to run your business as a company or a sole trade or partnership is an important decision. The cumulative effect of changes to the tax system over a number of years up to 2004 resulted in significant tax savings if a business was incorporated. Changes in recent years have reduced these savings and the government has moved to discourage small businesses from incorporating by increasing the tax rates for small companies. In this factsheet, we summarise the relevant tax changes and show the potential tax savings currently available from operating as a company.
Franchising is becoming increasingly popular in Britain with an annual turnover of around £9.5 billion. The business community now takes franchising very seriously and it is accepted across a range of sectors. The advantages of owning your own business are obvious but so too are the risks. The franchisee is taking less of a risk than starting his or her own business. Less than one in ten franchises fail. This is because they are operating under an established and proven business model and supplying or producing a tested brand name.
The Construction Industry Scheme (CIS) sets out special rules for tax and national insurance (NI) for those working in the construction industry. Businesses in the construction industry are known as ‘contractors’ and ‘subcontractors’. They may be companies, partnerships or self employed individuals.
The cost of purchasing capital equipment in a business is not a revenue tax deductible expense. However tax relief is available on certain capital expenditure in the form of capital allowances.
Business Motoring - Tax Aspects
This factsheet focuses on the current tax position of business motoring, a core consideration of many businesses. The aim is to provide a clear explanation of the tax deductions available on different types of vehicle expenditure in a variety of business scenarios.
Home Working Costs For The Self-Employed
This factsheet focuses on how home working has become the answer for many and how the tax rules have kept up with these changes.
VAT
VAT registered businesses act as unpaid tax collectors and are required to account both promptly and accurately for all the tax revenue collected by them.
HM Revenue and Customs (HMRC) have introduced a number of VAT schemes over the years designed to reduce the administrative burden on small businesses. One such scheme is the annual accounting scheme.
Cash accounting enables a business to account for and pay VAT on the basis of cash received and paid rather than on the basis of invoices issued and received.
The flat rate scheme for small businesses was introduced to reduce the administrative burden imposed when operating VAT.
It is quite possible within the VAT system for a business to be in the position of having to pay over VAT to HM Revenue and Customs while not having received payment from their customer.
Employment Issues (Tax)
Travel and Subsistence for Directors and Employees
Travelling and subsistence expenditure incurred by or on behalf of employees gives rise to many problems.
Today the remuneration of many directors and employees comprises a package of salary and benefits.
The current regime for taxing employer provided cars (commonly referred to as company cars) is intended to encourage manufacturers to produce cars which are more environmentally friendly and to give employee drivers and their employers a tax incentive to choose more fuel-efficient vehicles.
National insurance contributions (NIC) are essentially a tax on earned income. The national insurance (NI) regime pides income into different classes: Class 1 contributions are payable on earnings from employment, while the profits of the self-employed are liable to Class 2 and 4 contributions.
Share Ownership for Employees - EMI
Retaining and motivating staff are key issues for many employers. Research in the UK and USA has shown a clear link between employee share ownership and increases in productivity. The government has therefore introduced two ways in which an employer can provide mechanisms for employees to obtain shares in the employer company without necessarily suffering a large tax bill.
The basic procedures to help you set-up and run your payroll.
Employment and Related Matters
The National Minimum Wage and National Living Wage
The National Minimum Wage (NMW) was introduced on 1 April 1999, is applicable to workers aged 24 and under and changes annually on 1st April. The National Living Wage (NLW) was introduced on 1 April 2016, is applicable to workers aged 25 and over and also changes annually on 1st April. There have already been a number of instances of employers being penalised for not complying with the legislation. The Revenue is the agency that ensures enforcement of the NMW and NLW.
Statutory Sick, Statutory Maternity and Statutory Paternity Pay
Statutory Sick Pay (SSP), Statutory Maternity Pay (SMP) and Statutory Paternity Pay (SPP) are important regulations to understand as they enforce minimum legal requirements on employers. Each operates in a different way. This factsheet sets out the main principles of the regulations and what an employer needs to consider.
Most claims for discrimination in recruitment have no maximum limit. Can your business afford compensation of perhaps £20,000 because you made a simple mistake?
Most claims for discrimination in recruitment have no maximum limit. Can your business afford compensation of perhaps £20,000 because you made a simple mistake?
European and British employment legislation has been significantly strengthened in recent years in favour of the employee.
Recent surveys indicate that the adverse impact of absence on business profitability today is significant, with thousands of man hours lost every day. Recent statistics show that the average annual cost to employers is £13.4bn (£544 per employee) and businesses lose 33 million working days during the year.
It is very likely that owners and managers of many smaller businesses are not aware of just how demanding health and safety regulations can be.
In line with the Immigration, Asylum and Nationality Act 2006, it is a criminal offence to employ anyone who does not have an entitlement to work in the UK, or undertake the type of work you are offering. Any employer who does not comply with the law may be facing a fine of up to £10,000 per offence.
On 1 October 2006, the Employment Equality (Age) Regulations 2006, one of the most far reaching pieces of legislation this century came into force to prevent discrimination against workers, employees, job seekers and trainees on the basis of their age.
Under the Working Time Regulations 1998 workers are entitled to paid statutory annual leave and prior to 1 October 2007 a worker was entitled to 4 weeks’ statutory paid leave. As a result of amended regulations statutory paid leave was increased to 4.8 weeks annually (or 24 days for an employee working 5 days per week) from 1 October 2007 and increased to 5.6 weeks from 1 April 2009.
Personal Tax
Married couples are subject to a system of independent taxation under which husbands and wives are taxed separately. This can give rise to valuable tax planning opportunities. Furthermore, the tax position of any children is important.
If you are thinking of making a gift to charity, this factsheet summarises how to make tax-effective gifts. You can get tax relief on gifts to UK charities if you give:-
• under Gift Aid
• through a Payroll Giving scheme, run by your employer, or
• by making a gift of certain shares or land.
This factsheet explains whether you or your spouse/partner are entitled to the Child Tax Credit and the childcare element of the Working Tax Credit.
The purpose of the Enterprise Investment Scheme (EIS) is to help certain types of small higher-risk unquoted trading companies to raise capital. It does so by providing income tax and CGT reliefs for investors in qualifying shares in these companies.
Venture Capital Trusts (VCTs) are complementary to the Enterprise Investment Scheme (EIS), in that both are designed to encourage private individuals to invest in smaller high-risk unquoted trading companies affected by the equity gap. While the EIS requires an investment to be made directly into the shares of the company, VCTs operate by indirect investment through a mediated fund. In effect they are very like the investment trusts that are obtainable on the stock exchange, albeit in a high-risk environment.
Property Investment Tax Aspects
Investment in property has been and continues to be a popular form of investment by many people. It is seen as a route by which:-
• relatively secure capital gains can be made on eventual sale
• income returns can be generated throughout the period of ownership
• mortgage finance is covered in repayment terms by the security of the eventual sale of the property and in interest terms by the rental income.
Successive governments, concerned at the relatively low level of savings in the UK economy have over the years introduced various means by which individuals can save through a tax-free environment.
In recent years, the stock market has had its ups and downs. Add to this the serious loss of public confidence in pension funds as a means of saving for the future and it is not surprising that investors have looked elsewhere.
Under the self assessment regime an individual is responsible for ensuring that their tax liability is calculated and any tax owing is paid on time.
This factsheet sets out the rules which deal with the taxation in the UK of income arising outside the UK, for non UK domiciled individuals. The rules changed significantly from April 2008.
IR35 Personal Service Companies
The 'IR35' rules are designed to prevent the avoidance of tax and national insurance contributions (NICs) through the user of personal service companies and partnerships.
Capital Taxes
Trusts are a long established mechanism which allows individuals to benefit from the assets without assuming the legal ownership of those assets so that others (the trustees) have day to day control over the assets. A trust can be extremely flexible and have an existence totally independent of the person who established it and those who benefit from it.
A capital gain arises when certain capital (or 'chargeable') assets are sold at a profit. The gain is the sale proceeds (net of selling costs) less the purchase price (including acquisition costs).The taxation of capital gains has been significantly revised from 6 April 2008. Below is the tax treatment for Capital gains followed by the rest of the factsheet which reviews and explains the current tax position?
Inheritance tax (IHT) is levied on a person’s estate when they die, and certain gifts made during an individual’s lifetime.
Stamp Duty Land Tax (SDLT) was introduced on 1 December 2003 and replaced Stamp Duty in respect of land transactions. Stamp Duty was an old tax which required the existence of a document, such as a conveyance. SDLT is a very different type of tax and the new regime is intended to be robust. This factsheet sets out some of the basic things you need to know about the tax.
Capital Gains Tax and the Family Home
This fact sheet explains the relief available on the disposal of your private residence. But it is only an introduction. If you are in doubt about your circumstances you should ask your local abacus accountant for advice.
Inheritance tax (IHT) was introduced almost 20 years ago and broadly charges to tax certain lifetime gifts of capital and estates on death.
Pensions
Personal and Stakeholder Pensions
Personal and Stakeholder Pensions are common types of 'registered pension schemes'. A registered pension scheme allows the member to obtain tax relief on contributions into the scheme and tax free growth of the fund.
Occupational Pension Schemes: Trustees' Responsibilities
Many employers offer their staff an opportunity to save for their retirement through an occupational (or company) pension scheme. We outline in this factsheet the main responsibilities of occupational pension scheme trustees.
ICT
Find out what all those strange terms mean.
Internet and Email Access Policy
In order to protect the firm, its employees, and customers and suppliers, all members of staff should be given a copy of the firms policy regarding acceptable use of IT resources – particularly internet and e-mail access. This will form part of the contract of employment – to the extent that any breaches of the policy could result in disciplinary action, and in some cases dismissal.
Selecting the right accounting package can be difficult, particularly as there are so many packages on the market.
Data Security and Data Protection
Although it does not show on the balance sheet as an asset, the data stored on the PC or PC Network can be invaluable to a business – small or large. Here we look at some of the issues to consider when reviewing the security of your computer systems.
Specialist Areas
Charities: Trustees' Responsibilities
To be considered to act as a trustee for a charity is a sign that as an accountant and professional you are considered to be honourable and trustworthy. Many of the abacus accountants are already either a trustee of a various charities or act as accountant and advisor to a number of charities.
Money Laundering and the Proceeds of Crime
For various reasons over the last eight years tougher new rules have been introduced by government to crack down on money laundering and the proceeds of crime.
New regulations aimed at preventing money laundering became effective early in 2004. Known as the Money Laundering Regulations 2003 (the Regulations), these placed new onerous registration and procedural requirements on businesses that deal in goods and accept large cash payments. These were updated and replaced with effect from 15 December 2007 by the Money Laundering Regulations 2007.
Limited Liability Partnerships
From 6 April 2001, there is a business vehicle in addition to companies, traditional partnerships and sole traders. It is now possible to run your business using what is known as a Limited Liability Partnership (LLP).
Community Amateur Sports Clubs
Since April 2002, many local amateur sports clubs have been able to register with HMRC as Community Amateur Sports Clubs (CASCs) and benefit from a range of tax reliefs including Gift Aid.
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