By Lyndsey Hall
In a recent blog on ICAEW’s Business Advice Service website, Clive Lewis, the Institute’s Head of Enterprise posed six key questions for anyone starting out in business to ask their accountant. Here are Knowles Warwick’s answers to the questions you should be asking:
1. What structure is best for my enterprise? Sole trader, partnership or limited company?
This all depends on the level of income from the business. Limited companies give limited liability for shareholders and they are usually more tax efficient. It is advisable to seek professional advice before you start so that you can make the right choice for your business.
2. What records do I need to keep – for HMRC, and VAT purposes?
All sales and purchase invoices and business bank statements for 6 previous years, as well as the current year.
3. Who do I need to notify about my new business, and when?
You will need to notify HMRC within 3 months if you set up as a sole trader, partnership or company. The forms will tell them if there are tax and NIC implications, but Companies House will also notify HMRC if you set up a limited company.
4. What expenses can I claim against tax if I’m working from home?
This varies depending on whether you are employed or self-employed, for example employees and contractors working through a limited company can only claim for expenses incurred “wholly, exclusively and necessarily in the performance of the duties”, whereas expenses for a self-employed trader only need to have been incurred “wholly and exclusively in the purposes of the trade”, they don’t have to be “necessary” expenses. You can claim £4.00 a week without keeping any records, but if you are willing to keep proper records this could be increased by talking to an accountant.
5. When will I pay my first tax bill?
It all depends on whether you are a sold trader or limited company. Sole traders will pay their tax on 31 January following the end of the tax year in which the business started; so if you start 1 November 2013, the tax will be due 31 January 2015. Limited companies will pay tax 9 months and 1 day after their year end. To get an accurate date you would need to see an accountant.
6. When do I need to involve an accountant? And how much will they charge to prepare accounts and file a tax return?
It is advisable to speak to an accountant and tax adviser before you start your business; they will be able to suggest the best business structure to ensure you pay as little tax as possible. Many Chartered Accountants are available for a free initial meeting under the Business Advice Service.
So there you have it! Six of the most important questions to ask your accountant when starting a business; answered. For advice specifically tailored to your circumstances, get in touch with an accountant or tax advisor.