New business

by **Power** on Sat Feb 27, 2010 6:39 pm

Hi all, hope someone can help a bit here

I started a new business last May (09) and still have not got an accountant. Time has just flown by (must be having too much fun!)

Now turnover isnt great as new (around £25k) When am I (or am I late) to show my figures to the Taxman?

Also as I am self employed (no staff) can I put say £50 per week away for future investments (new equipment) or do they look at all profit (minus fuel, cleaning products etc) as my wage?

Thanks in advance

by **mullet** on Sat Feb 27, 2010 7:22 pm

You are lucky ... nothing to do at the moment for tax/self assessment. The basis period for your first year of trading is the date of commencement to the following 5 April, i.e. 05-04-2010. Have you contacted HMRC at all yet? You need to be set up in their self assessment system so that you receive a tax return. You need to choose an "accounting date" ... 5 April makes it easier for you and HMRC but you might prefer a different date for a variety of personal or tax reasons. Your first year's return is due in by 31 October 2010 if on paper, or 31 January 2011 if submitted via the internet.

I can't remember the precise rules for Class 2 NICs but I think you have to register within 3 months of commencement or you incur a penalty. No doubt someone else can confirm or correct this.

by **Power** on Sat Feb 27, 2010 8:52 pm

Thanks very much. As far as what is taxed, if I take 25k 1st year, but spend 10k on advertising etc do I pay tax on 15k? What is not taxable :?:

by **mullet** on Sun Feb 28, 2010 9:30 am

Sorry, didn't answer the final bit of the original post.

As far as what is taxed, if I take 25k 1st year, but spend 10k on advertising etc do I pay tax on 15k? Yes, but then deduct your personal allowance for the year to arrive at taxable income.

What is not taxable? Any expenses incurred wholly and exclusivly for the purposes of the trade. In broad terms, any expenditure incurred in earning the profits is allowable. Any personal expenditure on you is not allowable. Buying plant and machinery is not allowable as a deduction against income, but there are capital allowances available. TBH, if you are asking this question you need an accountant to help you get it right.

Also as I am self employed (no staff) can I put say £50 per week away for future investments (new equipment) or do they look at all profit (minus fuel, cleaning products etc) as my wage? Try not to use the term "wages" when referring to your own income, as that might lead you to claim your own drawings as "wages", which is an allowable deduction. There is no deduction for your own drawings, which are simply the extraction of profits. You can put away what you wish, but if you have not spent it on allowable items then it has to be reported as profit. Fuel and cleaning products etc are generally allowable.

by **RAL** on Sun Feb 28, 2010 10:40 am

1. You need to register with HMRC within start of your self emploment, otherwise there is a penalty of £100
2. You need to pay Class 2 NIC weekly of £2.40 unless your earnings is less than "small earning exception"
3. You also pay Tax and Class NIC 4 on your taxable profit.
4. If you pay yourself wages, which is in effect drawings, so it is NOT ALLOWABLE DEDUCTIONS for tax purposes.
5. Also you have an obligation to inform HMRC that you have taxable income, so they can issue self assessment tax returrn. You need to within 6 month of tax year i.e. for 2009/2010 by 06/10/2010.
6. Sole traders affairs can be straight forward, however as "msp" suggested you may need an accountant help.

by **Power** on Sun Feb 28, 2010 12:44 pm

Thanks all, when looking for an accountant (tmrw!) what should I be looking for as there are loads out there :shock:

A well established firm etc?

by **RAL** on Sun Feb 28, 2010 4:18 pm

Power wrote:Thanks all, when looking for an accountant (tmrw!) what should I be looking for as there are loads out there A well established firm etc?

Well, accountants term is not protected like solicitors or attorney, so anyone called themselves accountant. First ask your friends if they know or have experience of an accountant.
Whether accounant is a qualfied and member of reputable professional bodies (such as ACCA, ICAEW, ACA, CIMA, CIOT) the list can go on. ACCA, ICAEW and CIMA are CCAB.
Make sure accountant has a practising certificate if belongs to a professional body.
The accountant should have PII cover in place.
Try to go for fixed fees and agree everthing in advance. (a member of professional body should tell you upfront about the fees and charges)

What type of firm? It depends on your preference and your liking. You will find that just established firm can provide you as good as established firm. Bigger the firm, higher the fees and expensive. A sole practitioner may cost less than well established top 25 firms.

The list can go on and on. However what you need to do is go and see about 3 accountants, see what they like, whether you like them, compare their fees and chose one you feel comfortable working with. BTW I am an accountant.

by **Power** on Sun Feb 28, 2010 6:06 pm

Thanks Ral, was speaking to someone else about this, he started up oct 08 and not sorted tax yet, is he likely to be wacked?

by **RAL** on Sun Feb 28, 2010 6:44 pm

Power wrote:Thanks Ral, was speaking to someone else about this, he started up oct 08 and not sorted tax yet, is he likely to be wacked?

Like everything else, answer is it depends!

If heas not registered as a self employed, likely he will get £100 penalty (Failure to register for nic purpose)
As he started in Oct-08, he should have filed his first tax return for the period Oct-08 to 05/04/09, and this should have been filed by 31/01/2010 and any tax due should have been paid as well.

If any tax due, then penalty could be upto 100% tax unpaid at 31/01/2010. This penalty is limited to tax dues.

Sooner he sort out is better. Contact me if you need help in sorting out.