Starting in Business – A Tax and Finance Overview
Starting a new business is very exciting it’s a new capture in your life and may well be the fulfilment of a lifetime’s ambition. Get it right and you could build a business that could be worth a substantial amount of money one day and give you security in your retirement. However, it is undeniable that business life is highly competitive these days and raising money can be difficult. There is lots of uncertainty out there particularly regarding Brexit!
Get the Basics Right
It is really important therefore that you get the basics right from the start. Whilst you want to be focussed on launching new products and services, gaining new customers and building your sales, it’s also important to get the financial structure right. You need to put in place the right accounting systems so you have all the key numbers when you need them and know your figures are accurate and complete at all times.
Let’s start by assuming you have formed your business, opened a new bank account and are ready to go. One of the first things to get right is to choose an accounting system that is right for your business and will keep track of your key numbers wherever you are 24/7.
We would strongly recommend that you look at the latest generation of cloud based accounting systems such as Xero and Quickbooks as these are really inexpensive and being on the cloud are always updated and backed up, without you needing to subscribe to monthly updates etc.
Systems and Training
It is important that you set up your systems in the right way from the very start. We can help you by demonstrating the key features giving you practical training and also help link your bank account, which can be synched with the accounting software. We can also help you set up customer and supplier details and your chart of accounts. We can then help you build a dashboard so that you have ready access to all the key numbers from any mobile device.
Accounting Dates and Incorporation Planning
Whilst it is less important under self assessment, it’s still worth thinking carefully about the year end accounting date and we can help you plan for this by going through the key tax planning points. You may wish to incorporate as a limited company, and take advantage of the lower rates of Corporation Tax which will fall to 17% over the next two years. This compares to a marginal rate of 45% under income tax. Incorporation also gives you the advantage of the limited liability and avoids risks with self employment where you will be personally liable for all debts.
If you are currently a sole trader or in partnership we can go through the process to incorporate and also most importantly undertake proper tax planning to ensure that there are no unexpected tax liabilities particularly relating to Capital Gains Tax.
It is important that you are aware of the important tax deadlines that arise during the year. Corporation Tax is payable 9 months after your year end date and a Corporation Tax Return (Form CT600) must be filed annually within 12 months. Your accounts need to be filed at Companies House within 9 months of the year end although the date can sometimes be shorter in the first year.
When you are ready to start employing staff it is vital that you set up a PAYE scheme and we can assist with registering with HMRC. We can also manage your payroll using our cloud based payroll bureau. We can deal with Auto Enrolment which is mandatory for all businesses and deal with all payroll returns on your behalf.
If you anticipate your sales will exceed the current VAT registration limit of £85,000 it is important that you register VAT and charge your customers accordingly at the standard rate of 20%. If you are in doubt as to whether you will exceed the VAT threshold or alternatively have supplies that maybe exempt from VAT or zero rated it’s vital to obtain professional advice. We can also advise you on the merits of the flat rate scheme which is a simpler method of calculating your quarter VAT and also on the cash basis so that you pay VAT on receipt of payments rather than on sales and expenses.
Raising Finance – Getting the Planning Right
Most businesses find that they need to borrow funds to fund growth or perhaps to finance plant and equipment. Over the last 10 years it has become much harder to borrow from the high street banks and a number of alternative funders have grown up such as cloud funding.
Before you approach any bank or alternative lender it is really important that you have a proper business plan which sets out your roadmap for growing the business and forecasts for profit and loss and cashflow. At Harrop Marshall we have strong relationships with a number of banks and asset based lenders and it can also advise on the pros and cons of cloud based funding. We can help you draw together your business plan and assist with building forecasts.
My-FD – Your Virtual Finance Director
If you are on a cloud accounting platform we can take things further by integrating your accounts with Spotlight the market leading financial planning software. We have wrapped this up into a virtual finance director solution which we call My-FD. To find out more about My-FD and how it can help you build a structured plan for growing your business contact Tim Bowler at firstname.lastname@example.org
The Next Step
If you would like to discuss anything in this blog or would like our help in taking your business forward with accounting tax and business advice lets arrange a complimentary meeting.