Helping you to mind your own business
What issues should you consider when you are in business? If you are starting - or already operate - a business, Argo Business Compliance can help you with professional advice, always aimed at effectiveness and efficiency.
Our knowledge and support is not confined to accountancy and the routine intricacies of the tax regime. We assist new ventures and existing businesses with a range of services, including:
Preparation, submission and filing Annual Accounts
Bookkeeping and Accountancy advice
Taxation (VAT, PAYE, Income tax, corporation tax)
Payroll and remuneration optimisation
Management Accounts and monitoring reviews
Commercial reviews and financial assessments
References for Mortgage Applications and similar
Cash-Flows and Business Plans
Business compliance is an essential, permanent, and recurrent discipline, often mistaken as being the boring side of business routines. Compliance has to be given the ultimate full prominence it really does warrant, to enable a business to deliver and sustain success over the medium and longer term.
Everyone knows and accepts the importance of ‘keeping your eye on the ball’. Compliance is the foundation that establishes and reinforces trust and assurance, which are the basic essential foundations for safeguarding the future of the business, and to build and develop your enterprise and efforts.
We can discuss your plans and assess the most appropriate business structures, and thus will depend on a number of factors including the consideration of taxation implications, the legal entity, ownership, and risks/liability.
We aim to help you and your business succeed. Argo Business Compliance understands the perils and pitfalls in business and can offer a sounding board, support, and guidance every step of the way through your journey.
It is the ambition of many people to run their own business. Some may have been made redundant and find themselves with free time and financial resources. Others make the decision to start up in business to be more independent, address political inequity, and the work/life balance, or to actually obtain the proper full financial reward for their efforts.
Whatever the reason, a number of dangers exist. Probably the greatest concern is the possibility of business failure.
Read on for a little bit of guidance on some of the factors which need to be considered before trading begins. This summary cannot cater for every possibility and any decisions should always be supported by proper professional advice.
In order to make your business a success there are a number of key factors which should be considered.
You will need managerial, financial, technical and marketing skills. If you do not have these skills personally, they can be found in a partner or employee, or acquired through training.
Your product or service should have a proven or tested market, but must not conflict with the patent or rights of an existing business.
In addition to these general considerations, there are a number of more specific matters.
The business plan
The business plan is the key to success. If you need finance, no bank manager will consider lending money without a sensible plan.
Your plan should provide a thorough examination of the way in which the business will commence and develop. It should describe the business, product or service, market, mode of operation, capital requirements and projected financial results.
Putting money into a pension scheme can be a way of saving for retirement because of some favourable advantage through the tax rules. There are also obligations towards facilitating pension saving for employees.
There are many pitfalls to be avoided in choosing a property. Consideration should be given to the following:
suitability for the purpose
compliance with legal regulations
physical restrictions such as access.
Books and records
All businesses need to keep records. They can be maintained by hand or may be computerised but should contain details of payments, receipts, credit purchases and sales, assets and liabilities. If you are considering purchasing computer software to maintain your records, obtain professional advice and get reviews and opinions from other users.
When starting in business, taxation aspects must be considered.
Taxation on profits
The type and rate of taxation will depend on the form of business structure. However, the taxable profit will normally differ from the profit shown in the accounts due to certain expenses which are not allowed for tax purposes and the timing of some tax allowances.
National Insurance (NI)
The rates of NI contributions are generally lower for a sole trader or partnership than for a director of a company but the entitlements can also differ. In a company, it may be possible to avoid NI by paying dividends rather than salary. There are also some incentives available to small enterprises.
Value Added Tax (VAT)
Correctly accounting for VAT is an essential part of any business and neglect may result in a significant loss.
When starting a business you should consider the need to register for VAT. If the value of your taxable sales or services exceeds the registration limit you will be obliged to register. If you are VAT registered you will also need to consider appropriate software to ensure that you comply with the Making Tax Digital requirements for reporting to HMRC.
There are minimum requirements for the contents of business stationery, both paper and electronic, which will depend on the type of business structure.
For the business to get off the ground or to enable expansion, it may be necessary to employ staff.
It is the employer's responsibility to advise HMRC of the wages due to employees and to deduct income tax and national insurance and to account for student loan deductions under PAYE. The deductions must then be paid over to HMRC. Payroll records should be carefully maintained.
Under Real Time Information an employer must advise HMRC of wages and deductions 'on or before' the time they are paid over to the employee.
Employers are also required to automatically enrol all eligible employees in a pension scheme and to make contributions to that scheme on their behalf. Enrolment may be either into an occupational pension scheme or the National Employment Savings Trust (NEST).
You will also need to be familiar with employment law.
The books and records are used to produce the accounts. If the records are well kept it will be easier to put together the accounts. Accounts must be prepared for HMRC and if a company is formed there are strict legal requirements as to their layout. The accounts and company tax return must be submitted electronically to HMRC in a specific iXBRL format.
A company and a LLP will need to make the accounts publicly available by filing them at Companies House within a strict time limit. Penalties do arise if the accounts are delayed.
Which business structure should I use?
Whilst some generalisation can be made about starting up a business, it is always necessary to tailor the strategy to fit your situation. Any plan must take account of your circumstances and aspirations.
Whilst business success can never be guaranteed, professional advice can help to avoid some of the problems which can befall all businesses.
We would welcome the opportunity to assist you in formulating a strategy suitable for your own requirements. We can also provide guidance and advice on bookkeeping, management accounts, VAT return and payroll preparation at an early stage.
If you are starting, or if you have recently started a business contact Argo Business Compliance to find out how our services can assist you.
It is accepted that good planning breeds success.
We consider the options available to you as there are tax and legal implications which have a bearing on the choice you make. Argo Business Compliance can help you re-assess and decide on an appropriate business structure.
It is important to decide the best legal and taxation structure for your enterprise. The most suitable structure for you will depend on your personal situation and your ambitions, objectives and future plans. The decision you make will have repercussions on the way you are taxed, your exposure to creditors and other matters.
One of the keys to success is to get the right structure and it is never too late to revisit and understand personal ambitions and business objectives; and to consider the best format for your particular needs whether it be as a Limited Company, a Partnership or a Sole Trader.
The business affairs are separate from the personal affairs of the owners, but there are legal regulations to comply with.
When starting a business, to set up a Limited Company offers the individual protection by limiting their liability. Any loan or credit agreements would be in the name of the company offering a degree of safety to the individual.
Added to this, there is a perception that a Limited Company is a superior entity than a sole trader which may assist in winning new business. However, there are statutory requirements in and around operating a Limited Company that inevitably means increased levels of paperwork.
A limited company is a separate legal entity from its owners. It can trade, own assets and incur liabilities in its own right. Your ownership of the company is recognised by owning shares in that company.
If you also work for the company, you are both the owner (shareholder) and an employee of that company. When a company generates profits, they are the company’s property. Should you wish to extract money from the company, you must either pay a dividend to the shareholders, or a salary as an employee.
The advantage to you is that you can have a balance of these two to minimise your overall tax and national insurance liability.
Companies themselves pay corporation tax on their profits after paying your salary but before your dividend distribution. Effective tax planning requires profits, salary and dividends to be considered together.
There are many advantages as well as disadvantages to operating through a limited company. You need to consider the relative merits of ‘incorporation’ as well as the downsides of operating as a company.
New companies can be purchased in a ready-made form usually referred to as ‘off the shelf’ companies. These types of formation are becoming less frequent however as the speed of which companies can now be created takes on average 3 hours rather than days.
There are additional administrative factors in running a company, such as statutory accounts preparation, company secretarial obligations and PAYE (Pay as You Earn) procedures. A big advantage of owning a limited company is that your personal liability is limited to the nominal share capital you have invested.
This is the simplest form of business since it can be established without legal formality. However, the business of a sole trader is not distinguished from the proprietor's personal affairs.
As a Sole Trader, the individual is the business and, as such, would be personally responsible for any loan or credit agreements. Even though a Sole Trader can be VAT registered and have employees, there is a slant that this is a smaller operation than a Limited Company. However, there is a much reduced level of administration.
This is the simplest way of trading. There are only a few formalities to trading this way, the most important of which is informing HMRC. You are required to keep business records in order to calculate profits each year and they will form the basis of how you pay your tax and national insurance. Any profits generated in this medium are automatically yours. The business of a sole trader is not distinguished from the proprietor’s personal affairs so that if there are any debts, you are legally liable to pay those debts down to your last worldly possession.
Argo Business Compliance provides the level of support to meet the business needs both for the current position and for future development of Sole Traders.
A partnership is similar in nature to a sole trader but because more people are involved it is advisable to draw up a written agreement and for all partners to be aware of the terms of the partnership. Again the business and personal affairs of the partners are not legally separate.
A partnership is an extension of being a sole trader. Here, a group of two or more people will come together, pool their talents, clients and business contacts so that, collectively, they can build a more successful business than they would individually.
The partners will agree to share the joint profits in pre-determined percentages. It is advisable to draw up a Partnership Agreement which sets the rules of how the partners will work together.
Partners are taxed in the same way as sole traders, but only on their own share of the partnership profits. As with sole traders, the partners are legally liable to pay the debts of the business. Each partner is ‘jointly and severally’ liable for the partnership debts, so that if certain partners are unable to pay their share of the partnership debts then those debts can fall on the other partners.
Limited liability partnership
A further possibility is to use what is known as a Limited Liability Partnership (LLP).
A limited liability partnership is legally similar to a company. It is administered like a company in all aspects except its taxation. In this, it is treated like a partnership. Therefore you have the limited liability, administrative and statutory obligations of a company but not the taxation and national insurance flexibility. They are particularly suitable for medium and large-sized partnerships.
One of the obligations of being a Director of a UK Limited Company or being an incorporated Trader is to submit an annual Self-Assessment Tax Return. The tax year runs from 6th April to 5th April in the following year.
Argo Business Compliance can help you with your tax return.