Small Business FAQ's - TML accountants, Gosport, Hampshire
TML Chartered Certified Accountants

 

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11:22 pm, 23rd October 2017

 

Small Business FAQ's

 

This page is intended to be an information resource for small businesses and their owners. The links below provide answers to frequently asked questions, access to technical briefings and useful web addresses. If you can't find what you are looking for here please use our enquiry form to email us your problem.

Tax Issues

 

 

Which Tax Office deals with my Income Tax affairs?

What are the rates of tax for this tax year?

What is Self Assessment?

What are the important dates under Self Assessment?

I am taking someone on - what do I have to do?

What is Construction Industry Scheme (CIS)?

     

VAT Issues

 

 

Should I be registered for VAT?

What is the Cash Accounting Scheme?

When might I face a VAT penalty?

What is the VAT penalty rate?

I would like to know when purchasing goods and services, which have VAT added and which don't.

     

Other Issues

 

 

What are the Working Time Regulations?

What are the National Minimum wage amounts?

How does the Data Protection Act (DPA) affect my business?

I am a company director, what are my responsibilities?

What details are required on a company's letterhead?

What is the best way to plan for my Retirement?

 

 

Which Tax Office deals with my Income Tax affairs?

If you are self employed you will be dealt with by a Tax Office locally.
Employed persons and persons receiving pensions from former employers are dealt with by the Tax Office dealing with the employer's Head Office. Your local Tax Office will be able to tell you which Tax Office deals with your affairs, or, if you are employed, your employer will also know.

   

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What are the rates of tax for this tax year?

Click Here to view the Tax rate for this year

   

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What is Self Assessment?

Under Self Assessment it is clearer what you have to do to get your tax right first time, when you have to do it, and what happens if you don't meet the deadlines.

It applies to everyone who gets a tax return. However most people do not get a tax return and pay through PAYE or other deduction at source arrangements.

Self Assessment tax returns were first issued in April 1997.

The Self Assessment tax return is made up of a basic core return together with separate supplementary pages - which ones you get will depend on your circumstances and the type of income you receive.

One of the biggest changes is that your tax bill will be based on the figures that you provide on your tax return without us first checking them in detail and agreeing them. We will check them later, within a year of the final deadline for sending the return back to us (31 January).

You need to fill in your return giving full details of all taxable income and gains you received in the year, and claim any allowances as well. This means that you are responsible for ensuring that you pay the right amount of tax, even if you do not actually work out the tax yourself.

We will work out your tax bill for you, (in fact, we'd prefer to do this) but you can work it out yourself if you wish.

We will send you a statement showing what you owe and what you've paid.
There will be one tax bill and one set of payment dates.

   

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What are the important dates under Self Assessment?

Click Here for important dates that you need to know for Self Assessment

   

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I am taking someone on - what do I have to do?

Click Here to view the HMRC guide for taking on employees

   

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What is Construction Industry Scheme (CIS)?

Businesses operating in the construction industry are known as contractors and subcontractors and they may be companies, partnerships or self-employed individuals.

Contractors pay subcontractors for construction operations and subcontractors are those businesses that carry out building work for contractors.

The Construction Industry Scheme sets out the rules for how payments to subcontractors for construction work must be handled by contractors in the construction industry and certain other businesses.

Under the Scheme, all payments made from contractors to subcontractors must take account of the subcontractor’s tax status as determined by HM Revenue & Customs. This may require the contractor to make a deduction, which they then pay to HM Revenue & Customs, from that part of the payment that does not represent the cost of materials incurred by the subcontractor.

Click Here for more information.

   

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Should I be registered for VAT?

Value Added Tax (VAT) is a tax charged on the sale of most goods and services. Examples of taxable supplies include sale of goods, hire purchase, rental, exchange, and gifts in kind. These are charged at one of three rates:

Zero rate 0% (applied to goods such as books & newspapers, children's clothing and new house construction).
Reduced rate 5% (charged on domestic fuel and power).
Standard rate 20% (applied to goods and services that are not exempt, zero or reduced, rated).

Please note that the Zero rate is not the same as Exempt or Outside the Scope of VAT.

Services that are exempt include insurance, education and some sales & leases of property.

If your sales reach, or are likely to reach the current VAT threshold of £79,000 per year, then you must register for VAT. There is also an option to register for VAT even if your sales have not reached the current threshold allowing you to claim back VAT on purchases if:

  • you make zero rated supplies - because your customers will not have to pay VAT
  • your customers are themselves VAT registered - because they may be able to claim back VAT you charge them.

If your VAT taxable turnover for the year is less than or equal to £77,000, or if you expect it to fall to £77,000 or less in the next 12 months, you can either:

  • stay registered for VAT
  • ask for your VAT registration to be cancelled

VAT is a very important part of business and cannot be ignored. It can be very confusing and you may wish to seek expert help from a local accountant or a business adviser. You should be aware that the VAT threshold and rates may change from time to time and are the responsibility of the Chancellor of the Exchequer.

Annual Registration Threshold - from 1.4.13£79,000(1.3.12 - 1.4.13 £77,000)
Annual Deregistration Threshold - from 1.4.13£77,000(1.3.12 - 1.4.13 £75,000)

   

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What is the Cash Accounting Scheme?

The Cash Accounting Scheme allows you to:

  • pay VAT on your sales when your customers pay you
  • reclaim VAT on your purchases when you have paid your suppliers

This is different from standard VAT accounting, whereby you:

  • pay VAT on any invoices you have issued, even if you have not received the payment from your customer
  • reclaim VAT on any invoices you have received, even if you have not yet paid your supplier

You can use the Cash Accounting Scheme if your estimated VAT taxable turnover during the next tax year is not more than £1.35 million. Your VAT taxable turnover includes any standard, reduced and zero-rated sales and other VAT taxable supplies, but excludes VAT itself, supplies that are exempt from VAT, and capital asset sales.

Once you start to use cash accounting, you can continue to do so until your VAT taxable turnover reaches £1.6 million.

You cannot use the Cash Accounting Scheme if:

  • you are not up-to-date on your VAT Returns and VAT payments
  • you have been convicted of a VAT offence or charged a penalty for VAT evasion in the last year
  • your VAT taxable turnover is over £1.35 million per year

Even if you use the Cash Accounting Scheme, you must still account for VAT using standard VAT accounting when you:

  • buy or sell goods using lease purchase, hire purchase, conditional sale or credit sale
  • import goods or acquire goods from other EU states
  • remove goods from a Customs warehouse or free zone
  • issue a VAT invoice that isn't due to be paid for six months or more
  • issue a VAT invoice in advance of providing goods or services

   

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When might I face a VAT penalty?

HMRC may issue a penalty whenever there has been a significant or repeated lack of care in preparing VAT Returns, leading to errors in the true amount of tax payable or repayable.

A penalty may apply where you submit an inaccurate VAT Return which:

  • shows too little tax due
  • or claims a repayment which is too large

A penalty may also apply where all of the following occur:

  • you have not submitted a return
  • HMRC assesses you for the tax due for the period
  • you fail to tell HMRC within 30 days that the assessed amount is too low

However, both of these penalties are subject to objective tests.

   

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What is the VAT penalty rate?

The VAT penalty rate varies depending on the circumstances, such as whether you miss a VAT Return or a VAT payment deadline, whether there are inaccuracies on your VAT Return, or a range of other circumstances.

Please refer to this link for more details: Click here

   

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What are the Working Time Regulations?

The basic rights and protections that the Regulations provide are:

  • a limit of an average of 48 hours a week which a worker can be required to work (though workers can choose to work more if they want to).
  • a limit of an average of 8 hours work in 24 which nightworkers can be required to work.
  • a right for night workers to receive free health assessments.
  • a right to 11 hours rest a day.
  • a right to a day off each week.
  • a right to an in-work rest break if the working day is longer than six hours.
  • a right to four weeks paid leave per year.

Some sectors have specific rules for their own workers.

For more information, please see this link:

https://www.gov.uk/maximum-weekly-working-hours

   

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What are the National Minimum wage amounts?

The National Minimum Wage is the minimum amount of pay per hour that almost all workers are entitled to by law.

It doesn't matter how large or small an employer is, they still have to pay the minimum wage.

The minimum wage rate depends on a worker's age and if they are an apprentice. The recipient must be at least school leaving age to receive it. The school leaving age varies according to where you live in the UK - please refer to this link:

https://www.gov.uk/know-when-you-can-leave-school

The national minimum wage is set by the Chancellor of the Exchequer each year on the advice of the Low Pay Commission.

The current (2013) hourly rates are:

21 years and over

£6.31

18 to 20 years

£5.03

Under 18 years

£3.72

Apprentice *

£2.68

* This rate applies to apprentices under 19 years or those in their first full year of apprenticeship.

   

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How does the Data Protection Act (DPA) affect my business?

Please see this brief guide to data protection for small businesses

   

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I am a company director, what are my responsibilities?

Every company director has a personal responsibility to ensure that statutory documents are delivered to the Registrar as and when required by the Act. In particular:

  • accounts (only for limited companies);
  • annual returns;
  • notice of change of directors or secretaries or in their particulars; and
  • notice of change of registered office.

   

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What details are required on a company's letterhead?

The full company name, registered number, registered office address and place of registration (e.g. registered in England and Wales) must be shown on all business letters and order forms.

   

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I would like to know when purchasing goods and services, which have VAT added and which don't.

If VAT has been added, traders are obliged by law to show this on your receipt.

The exact method varies - if you have your car serviced, you would expect to see the amount of VAT set out separately and the rate shown. If you go to a supermarket, they may just indicate by putting a star against the VAT registered items.

A Valid VAT receipt must show the VAT registration number, which is nine digits long.

   

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What is the best way to plan for my Retirement?

Everyone hopes to maintain the same standard of living in retirement as they presently enjoy while working, but to achieve this requires considerable forward planning. Here are some important questions you need to ask yourself:

Exit strategies

If you are in business, the first thing you need to consider is your exit strategy. Will you withdraw from the business, leaving it for the next generation, or will you hope to sell the business? If you intend to hand the business over, do you have a workable succession plan? If you intend to sell, how will you value the business, find a suitable buyer, etc.? Are you aware of all the tax implications of the timing of disposals?

Savings and investments

Do you have the right balance between savings and investments, and between high and low risk exposures?

Life assurance and long-term care

Do you have adequate life assurance, and have you made provision for long-term care and medical insurance for you and your spouse in your later years.

We can help you answer all these questions and recommend solutions tailored to your particular needs.

Pension provision

Have you made adequate pension provision, and do you have the right type of pension? Are you aware of all the pension possibilities open to business owners and directors? Are you making full use of all your allowances?

Estate planning

 Not a pleasant thought, but we must make adequate provision for family and friends who survive us. The legislation that governs passing on your estate to your chosen beneficiaries requires you to plan well in advance.

Since none of us knows when we shall die, this means making the necessary provisions now. The earlier you make the arrangements, the greater your chance of taking full advantage of the tax opportunities available and thereby maximizing the amount that goes to your beneficiaries. After all, the thought that a substantial slice of the wealth you have worked so hard to accumulate will end up in the Government's coffers is quite demoralizing!

It is equally important when planning to transfer your estate that you make adequate provision for yourself and your spouse in your later years. Striking this balance calls for considerable skill and foresight - and a detailed knowledge of the tax regime.

We provide a discrete estate planning service that includes:

  • Help with drafting and reviewing your will
  • Making full use of exemptions and lower tax rates on lifetime transfers
  • Optimising lifetime transfers between spouses
  • Transferring business property
  • Transferring assets into trust
  • Arranging adequate life assurance to cover potential inheritance tax liabilities

We strongly advise you to begin your estate planning right away

   

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For a free initial consultation please contact us