Web application development. Tourism at Sea. Common problems with software. buy a telephone or a mobile. Use a computer or a Mac. Use paper or a foloppy? Iphone or Nokia. What? ERP solutions for travel business. Tax consultancy at low cost.
Starting a new own business requires commitment, focus and energy. Tax and other compliance issues might seem to be of low priority but early consideration will avoid future problems. Tax is one of your operating costs. A cost which can be reduced with careful planning and early attention. Please follow the details -
Recommendations and Tax tips -
>> If you make a tax loss in the beginning this loss can be set against other income of the same or earlier tax years (eg against earnings from your previous employment). You can get a useful tax repayment so get your tax return in early.
>> You can obtain tax relief on business expenditure incurred before you actually start your business. You need to keep receipts to claim your pre-trading expenditure.
>> If you use your home for business purposes some expenditure is allowable. Never use a room or rooms in your home exclusively for business purposes or you may walk into a capital gains tax charge when you sell your home – seek tax advice.
>> Decide whether to register voluntarily for VAT even if below the turnover registration threshold. If your customers are VAT registered it will not be a cost for them. You will be able to recover VAT on your costs as well! Registration is also good for marketing as potential customers view your business in a better light!.
>> If your spouse works in your business make them a partner if otherwise you would be a higher rate taxpayer. This proposal is subject to commercial justification.
>> If your spouse or partner spends time helping you in the business (eg answering the telephone, marketing and/or administrative work generally) it is possible to claim tax relief provided (a) the work is actually being done and valued at a fair rate, and (b) payment is actually made to the spouse/partner and shown to have been paid. If your partner falls pregnant whilst employed increase her pay at the right time to maximize her entitlement to Statutory Maternity Pay (SMP).
>> When you are able to earn profits surplus to your living requirements, it may be more tax-efficient to operate your business as a limited company due to lower tax rates applying. You should also operate as a limited company if your business is capital intensive (eg building or printing) and is expanding.
>> Keep a separate bank account for your business. Avoid mixing your business and private funds if possible. Do not treat your business bank account as an extension of your private wallet!.
>> Engage a good tax adviser or accountant as they will save you money and give you great reassurance when dealing with the Inland Revenue. They will know of many tax-saving concessions that only an experienced tax adviser will know – ask for a testimonial from another client.
>> Ask your tax adviser to recommend bookkeeping software compatible with theirs and keep your books up to date regularly. This will ensure that you know where you are financially. It will also minimise the risks of penalties for late filing of tax returns with the Inland Revenue. Make sure you get receipts where possible and keep all receipts for 6 years (including personal ones), carefully cross-referenced to your books. Your tax adviser may have a pro-forma spreadsheet for simpler record keeping needs – ask them.
>> Register promptly with the Inland Revenue and Customs & Excise if you have to or want to be VAT registered.
>> Shop around for the best deal for bank charges – there are usually deals to encourage new businesses. Ask your tax adviser or accountant for a referral – it will carry more weight.
>> Contact your tax adviser for advice on a timely basis. Remember it is critical you provide them with the facts .
>> Telephone calls – if you do not have a dedicated business line distinguish private from business using itemised bills.
>> Keep a careful note of your car mileage. Analyse it between personal and business use.
>> Keep a clear and separate record of goods and services used for personal purposes. The relative importance of this depends on the type of business, but the Inland Revenue often pay particular attention to builders and retailers.
>> One of the advantages of self-employment is the reduced cost of national insurance (NI). In the early years, if your accounting profits are low you may be exempt altogether.
>> Expenditure on plant, equipment and machinery used in your business qualifies for tax relief under the capital allowances regime. Careful planning of the timing of such expenditure can maximise the tax relief.
>> You do not necessarily have to prepare accounts to 31 March each year. Take advice from your tax adviser as careful planning of the accounting date can reduce the taxable profits in the early years.
>> If you run a business as well as being employed the tax system can be confusing. If the annual turnover of the business is below £15,000 you do not have to provide full income and expenditure details to the Inland Revenue, but otherwise your tax affairs will inevitably become more complex. Care is also needed on the correct amount of NI contributions as both a self-employed and employed person. Otherwise you could easily overpay and the time limits for making a repayment claim are restrictive. and
>> Put aside approximately 18% of income to help meet your tax bills as they fall due (assuming you are not a higher rate taxpayer). There are heavy penalties for late payment as well as earning yourself a reputation with the Inland Revenue for being non-compliant.