Starting a business is an exciting and challenging experience and one which also carries a fair degree of risk. During the start-up phase, you will need to make all kinds of decisions that could be critical to the long-term success of the enterprise. You’ll need to consider such things as the type of business and its attributes; your target market and competition; profit potential and how you will extract those profits; the rate of business growth; and the impact of running the business on your personal life. At some point, you’ll also need to consider how you will exit the business when the time comes, and realise its value. We can provide expert, tailored advice and help you avoid common mistakes.
Writing a business plan –
One of the first things you need to consider is your business plan. This is not only for the benefit of potential investors, but to help you stay on the right course in the short, medium, and long term. It should include the business structure that best meets your needs (such as sole trader, partnership, limited liability partnership, or limited company); your intended funding sources; tax-efficient borrowings; whether a PAYE scheme is necessary; and whether the business should be VAT registered.
We can guide you through these important decisions, and help you to complete the appropriate registrations. We can assist with cash flow forecasts, helping you to spot potential cash shortfalls, and provide regular updates so you can monitor your business’s performance.
Choosing your business structure –
Deciding on the most appropriate structure for your business isn’t necessarily straightforward. Sole traders, partnerships, limited companies, and limited liability partnerships all have their own pros and cons, with different implications for control, perception, support, and costs. For example, careful consideration is needed regarding whether or not to retain personal ownership of any freehold property on incorporation. We can help you to decide on the best structure for your business.
Deciding on a year-end –
It’s also important to choose a year-end that suits your business. Is there a time of year when it will be more convenient to close off your accounting records, ready for us? What time of year would be best for stock-taking? Is your trading seasonal? From a tax perspective, choosing a year-end early in the tax year for an unincorporated business usually means that an increase in profits is more slowly reflected in an increased tax bill, and over time the delay between earning profits and paying the tax can create a source of working capital for the business. On the other hand, a decrease in profits will more slowly result in a lower tax bill. Speak to us for advice about choosing your year-end.
Registering with HMRC –
When you start a business, it is important to inform HMRC of your new self-employed status as soon as possible. If and when you take on employees you need to register for and set up a PAYE scheme and accept all the responsibilities and obligations that go with it, including compliance with Real-Time Information reporting (and remember for this purpose you will most likely be an employee of your limited company if you incorporate). You will also have to comply with the pensions auto-enrolment obligations, although exemptions apply to director-only companies so do get in touch for advice in this area.
Please talk to us as soon as you envisage having employees so we can help you set up a PAYE scheme and comply with your payroll obligations, or take on the task on your behalf.
Starting a Business – Action Plan
√ Prepare a robust business plan
√ Ensure that you have access to suitable funding
√ Check your right to use your chosen trading name
√ Choose the right business structure
√ Register with HMRC
√ Register for VAT
√ Register your business name
√ Trade and professional registrations
√ Choose your year-end
√ Plan to reduce your tax liability
√ Develop your branding
√ Involve the family
√ Plan to avoid fines and penalties
Claiming expenses
As your accountants and tax advisers, our job is to help ensure that you benefit from all of the allowances and reliefs available to you. You will pay tax on your taxable profits, so a crucial element of tax planning is to claim all deductible expenses, many of which will be included in your accounting records.
If you are self-employed and carry on your business from home you can claim tax relief on part of your household expenses, including insurance, repairs, and utilities. You may also be able to claim for the cost of travel and accommodation when you are working away from your main place of business, so you should keep adequate business records, such as a log of business journeys. In addition to ensuring that your accounts are accurate, these records may also be requested by HMRC. An appropriate computer package might be worth considering, to aid concise and effective record-keeping.
You may also wish to consider the voluntary cash basis for calculating taxable income for small businesses, which allows eligible self-employed individuals and partnerships to calculate their profits on the basis of the cash that passes through their business. Businesses are eligible if they have annual receipts of up to £150,000 and they will be able to continue to use the cash basis until receipts reach £300,000. This is something we should discuss with you in detail if you are eligible. Allowable payments include most purchases of plant and machinery, when paid, rather than claiming capital allowances.
Unincorporated businesses are able to choose to deduct certain expenses on a flat rate basis. However, this is worth discussing before opting for it, as the flat rates are not generous.
At ACCOTAX, we work with a number of startups, if you are looking for a Startup Accountants in UK, you don’t need to look further. Simply call us no on 0800 644 1258 to speak to one of our tax experts.
