1) Failing to Inform HMRC
Did you know you only have 3 months to inform HMRC you have started trading as a self-employed individual.
Failure to inform can lead to substantial penalties.
One simple meeting with us can take all the hassle away from the registration process with HMRC, we can process all the paperwork on your behalf.
2) Incomplete record keeping
A number of new businesses fail to keep sufficient records, this can be from not keeping track of all income and expenses to incorrectly calculating VAT.
HMRC can charge you a penalty if your records are not accurate, complete and readable.
It is key to have complete records in the event of tax enquiry, failure to do so often leads to additional tax charges.
We can advise you exactly how your records should be prepared and even provide you with a bookkeeping template or training on relevant software.
3) Selecting the right type of finance
When starting out on a new business venture raising finance can be key, with so many options available many business start-ups do not select the appropriate option for their venture.
Due to high Apr rates and fixed monthly repayments a straight forward loan or credit card may now always be the best answer, especially in the early stages of a start-up when cash flow maybe tight.
New businesses should also consider local grants on offer and options such as the EIS investment Scheme, which can also offer great benefits to the investor as well.
4) Considering business structure
There are many business structure formats;
– Self employed
– Ltd Company
It can be a tough choice when deciding what structure to adopt.
The most important point here is to seek professional advice early.
The tax savings or costs can run into the £1000’s by not selecting the appropriate business structure at the right time.
A common example of this problem can be seen when a new business starts off as self-employed and generates a reasonable level of profit in the first year of trading.
In this scenario a new business with a £30,000 profit in the first year of trading would generate a tax bill of £6,000 (based on 15/16 rates), and because this is the first year a payment on account of £3,000 would also be due, this would leave the new business with a total outlay of £9,000.
This level of tax could have a serious impact on a new business especially if past profits had already been reinvested.
This problem could of easily been easily avoided if a Limited Company structure was put in place from the start, If this had of been done then the tax charge would of started at just £4,000, This is a massive £5,000 difference just by selecting the correct business structure.
5) Processing of employees
Many new start-ups may not have had to deal with employing staff, but if that time comes there are a number key problem areas to consider;
– Are you compliant with the minimum wage
– Is the correct holiday allowance being given
– Have you registered with HMRC as an Employer
– Has all PAYE & NI been calculated correctly and filed with HMRC to meet RTI requirements
– The need to register the employees for a pension
A simple meeting with us can ensure all these areas are covered with ease.
6) To meet filing deadlines
A new limited company start up that is vat registered with employees would have at least nine filling deadlines to meet each year.
These range from filing VAT and Tax returns to HMRC to abbreviated accounts and annual returns to companies house, and to make things even more complicated each deadline will be at a different stage of the year.
Missing any deadline will normally result in a financial penalty and these could easily add up to £1000’s a year.
If you appoint an accountant from the outset they can take the stress away from remembering the numerous filling deadlines.
7) To claim R&D Relief
R&D relief is often overlooked by new business start-ups, and the financial costs of doing so can be huge.
R&D relief is available for a number of scenarios and in particular for the development of a new product, procedure or service if it is as technological improvement or advance over existing items on the market place.
All costs of developing such an item / procedure can be increased by 130% for tax purposes, therefore £20,000 worth of expenditure would become £46,000 and generate a tax saving of at least £5,000.
Therefore if you’re planning to bring a new product, service or procedure to the market place then its best to seek advice early on to ensure you benefit from the extra tax relief available.
8) Paying too much tax on company cars
Quite simply buying a car inside a company without fully understanding the tax consequences can be very costly, and that’s tens of thousands of pounds costly if you’re unlucky.
A car purchased inside a company for work and personal use will lead to a benefit in kind tax.
This is a tax that will be assessed personally on anyone who drives the car, the amount of tax will ultimately depend on the car purchased and the individual’s circumstances.
Due to the potential tax costs involved it will always be best to speak to an accountant before making a decision on any vehicle purchase.