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Over the last few years there has been an uprise in the number of people using Tax Schemes to avoid tax; some intentionally whilst others have been caught out by less than scrupulous Promoters of Tax Schemes advertising a “pay less tax” service which they claim is legal. Unfortunately most, if not all, will find these claims to be false, not immediately but after many years and sometimes with devastating consequences. Isn’t tax avoidance legal? It’s a common view that tax avoidance is legal and tax evasion is illegal. The problem is that there isn’t a clear definition of what…
Once you’ve got to grips with the finances of your business so that you know how much money you can extract to live on it is important to address the taxes that you’ll owe. Knowing roughly what you owe to HMRC is really key to avoid getting yourself in a muddle, spending more than you should and receiving an unexpected tax bill when your accounts and tax returns are filed that you just don’t have the funds to cover. So, except in the case of low earners, there will be funds in the business bank account which are not yours.…
Hailed as the flagship HMRC project that would eliminate the annual self assessment tax return, Making Tax Digital (MTD) has been fraught with issues, overspend and delays. It was George Osborne in a Budget in 2015 who introduced MTD as a Government initiative to update the UK’s tax system. It was intended that MTD would result in a fully digital tax system with tax payers making quarterly electronic submissions and accounting records being held digitally. Phase One – VAT The first stage of MTD concentrated on VAT. All VAT returns, supported by digital records, have to be filed online through…
Appointing an accountant to help you with your accounts and tax returns is something that you may decide to do not least if you operate a limited company or don’t have the time to spend on the accounting yourself. However before you do this it’s important to understand a bit about accountants, what they have to do, what not to say to them and how to manage them. The term accountant is not regulated Unlike solicitors, who are regulated by the Solicitors Regulation Authority (SRA) in England and Wales and the Law Society of Scotland, in the UK accountants can…
When a company is set up (known as incorporated) it is added to the official Register of Companies at Companies House and shown as “Active”. The way to close a company depends on whether or not it can pay its bills. If it can pay its bills then you can: If the company cannot pay its bills, meaning that it is insolvent, then there are two ways for your company to be closed down but before the process is started professional advice from an accountant, solicitor or insolvency practitioner should be taken to ensure the most appropriate approach to close down is…
The life of a sole trader is relatively simple and straight forward when it comes to the set up and regulations that this type of business structure needs to follow. How to set up as a Sole Trader Unlike a Limited Company there is no formal process in place for a sole trader to set up their business. A sole trader simply just starts to trade. They do however need to register with HMRC to complete a self assessment tax return which will be used to record the profit from the business and work out any taxes that are due.…
Operating as a Limited Company involves a level of formality and responsibility that simply cannot be ignored if you want to avoid issues further down the line. Getting a grip of the accounting and tax affairs of your Limited Company business needs to start from day one. If such rigour and responsibility isn’t your thing then appoint an accountant or even consider operating via the much simpler structure of a sole trader. Before we delve into the nitty gritty of Limited Companies it is worth taking a moment to explore the two main types of companies being Private Limited Companies…
Every business regardless of size needs to keep accounts and file tax returns. Without any training how do you know where to start, what system to use and what bookkeeping routine you need to follow. This article guides you through some basics and provides you with a routine to follow to keep your business finances on track. Doing the books, also known as bookkeeping, is the expression given to recording the financial transactions associated with your business. Back in the day this would take ages with the writing up of all invoices and receipts into old fashioned ledgers along with…
A business of any kind can claim the costs that it incurs to generate its income. However, and contrary to popular opinion, it is not a free for all when it comes to claiming costs. Rules must be followed with the first one being very obvious. Costs Rule One The first, and main, rule on costs, and a question that should become second nature to you, is: “Was the cost incurred wholly and exclusively for business purposes?” In strict terms this means that the sole purpose for incurring the cost was for the business only. Hence there is no checklist…
If you work for yourself you are “self employed”. A self employed person working on their own can operate as a sole trader or a one person limited company. It’s worth noting that there are other types of business structure such as partnerships, limited liability partnerships, community interest companies, charities and so on. However the main two types of business structure used by the vast majority of self employed people are sole trader or limited company. Unless you have a compelling reason to deviate from this norm then choosing one of these two types of mainstream business structures really would…