frequently asked questions and answers

If your tax return is submitted electronically then the deadline remains 31st January following the end of the tax year. However, the deadline for paper returns has now been brought forward to 31st October following the end of the tax year. If your tax bill is less than £2,000 (from 6th April 2012 this will increase to £3,000) and you want this collected via your tax code, you will need to submit your return by 30th December even if you file electronically. Please remember that tax repayments are issued more promptly when filing electronically.

If your taxable turnover is less than £1.6 million then you can pay VAT on your sales only once your customer has paid you, and this is cash accounting. This will ease your cashflow and will avoid having to pay VAT on potential bad debts. Purchase VAT is claimed once you have paid your suppliers. Cash accounting doesn’t suit everyone, even if you are eligible so please ask for advice.

Salaries attract both Employee’s and Employer’s National Insurance whereas dividends are tax free. Plan at the beginning of the year how much will be drawn as salary and top up your income with dividends. Dividends are flexible, providing your company is profitable, as you can have a dividend as often or as infrequently as you choose, shareholders may waive their dividends in favour of another shareholder and different classes of shares may be used to pay shareholders varying and unequal dividends. Always seek advice as the salary/dividend mix has a wide interaction with other taxes and legal considerations.

Once we have all the information, your new limited company documentation will be ready in 48 hours. You will need to take this documentation to the bank in order to set up your new bank account.

All businesses should be registered with HMRC within 3 months of trading, otherwise you may be liable to a fine. HMRC will be aware that you’ve set up a new limited company and will write to you to request certain information to register your business with them. Unincorporated businesses must initiate the registration, either by calling 0845 915 4515 for a registration pack or by registering on line here.

CIS cards and vouchers are no longer required. If you are going to work in the CIS industry then you must register your company (or yourself) by calling 0845 366 7899 or visiting here. You will be issued with your CIS number, which you must provide to anyone who uses your services. They will then verify your CIS number on-line and this will tell them how much tax to deduct from your invoice, and they will issue you with a statement confirming this. Your customer will pay this over to HMRC on your behalf and this will be taken into account when calculating your Self Assessment tax bill.

Holiday entitlement is 28 days, for a full time employee. Part time employees will receive a pro rated allowance and there are special rules regarding employees who work irregular hours.

You must pay your staff Statutory Sick Pay as a minimum and the daily rate is published each year by HMRC. SSP starts only on the 4th sick day but two periods of sickness close together may be linked and the three waiting days will not be required for the second sickness period. Small employers may be able to reclaim SSP from the HMRC.

Tax relief is available for most business expenses, so yes, if you purchase something before year end, then you will reduce your tax bill. Capital purchases, ie. Items that the business uses over a number of years, are treated in a different way to other expenditure, giving tax relief over a number of years. However, since April 2011 small businesses that purchase equipment will be able to get 100% tax relief, up to £25,000 of purchases each year.