Do I need an accountant?

You might think that a start-up or small business isn’t big enough to warrant an accountant.

But unless you’re an expert in tax and finance – or in short, an accountant yourself – this simply isn’t the case. An accountant provides your business with a great deal of essential support.

If you are just starting a business, your accountant will take the form of another business adviser. They will be able to give advice on your business plan and the tax issues of registering a new business.

Some accountants offer book-keeping services, but if they don’t or if you wish to handle this yourself, you can get help with setting up manual or computerised book-keeping systems. And most importantly, you need an accountant to assist on things like whether it is necessary to register for VAT or PAYE and the procedures involved.

As your business grows

An accountant isn’t just there to help you manage your money. Whether you are starting up or a growing business, they can advise you on the best way to arrange additional finance without putting your business at risk.

Once you have the finance in place there needs to be some control to ensure growth of your business is handled in the right way. Many of your concerns will be financial – adequate working capital, good stock control, invoicing and so on – an experienced accountant’s advice will be invaluable in such matters.

And can you honestly say that you are on top of all the essential business tax issues? Well probably not – but that’s an accountant’s job. Taxation is a large business expense and an accountant can effectively minimise these costs.

Finding a competitive professional chartered accountant

Omni Chartered Accountants, Wolverhampton, offer a highly competitive and professional service to clients across the UK. We pride ourselves in giving advice on a one-to-one basis and we are very happy to provide you with a free initial consultation – you can request a free of charge call back from our website or call 01902 837 408 – alternatively, click here to contact us online and we will come straight back to you!

Self-employment tips – part one

One of the main benefits of becoming self-employed is the ease with which you can start up and run your new business.

In part one of our special feature, we take a look at some of the important things that you may wish to consider before taking the plunge.

You can even become a sole trader (another term for self-employed) whilst working as an employee for someone else, so you can test the water and see if you’re suited to working for yourself.

Here are first top tips for when you decide to go self-employed:

How to register as self-employed with HMRC

Once you set up as a sole trader (or work as a partner in a partnership if there’s more than one of you), you will be responsible for paying your own income tax and National Insurance (NICs).

You must register as self-employed with HMRC within three months of starting trading, even if you already pay tax via the self-assessment process each year. You can register online or call HMRC on 0845 915 4515 if you’d prefer to speak to someone.

If you are unsure whether or not you need to register with HMRC, here is some help to establish whether you are employed or self-employed.

Once you start operating as self-employed, you will need to pay your own National Insurance contributions (NICs).

Do you need to register for VAT?

As of April 2015, if your business has an annual turnover of £82,000 or more, you must register for VAT.

At any stage of the business cycle, if you look like you’re going to hit this annual VAT threshold over the coming 12 months, you must also register. The threshold usually rises by a few thousand each year. Make sure you let HMRC know within 30 days, or risk paying a fine.

In many cases, you might decide to register for VAT even if you don’t need to. You may gain more credibility by having a VAT number, and you’ll be able to claim the VAT back on eligible purchases you make.

You might also consider the flat rate VAT scheme, which makes accounting for VAT much simpler. Your accountant will be able to advise you if you’d be better off on the Flat Rate or standard VAT scheme.

Need advice?

If you need advice about becoming self-employed, we are here to help – request a free of charge call back from our website or click here and we will contact you to discuss your situation.

Can I switch from being a limited company to sole trader?

Here’s a typical question…

“I bought and took over a small business back in 2010, which was a limited company. Turnover has diminished so a lot less admin is needed. Is it possible to change a limited company to sole trader?”

Here’s the answer!

Can I switch from being a limited company to sole trader?

1.    Striking off a limited company from the Company Register

A limited company can cease trading at any time but as it has a separate legal entity it has to be removed from (or 'struck off') the Register of Companies.

Before that can happen, financial reports up to the date of cessation must be prepared and filed and any outstanding corporation tax paid. If there are any unrelieved corporation tax losses (losses accumulated not yet offset against taxable profits), these will be lost.

2.    Asset disposal and liability settlement

In addition, any remaining assets must be disposed of and liabilities must be paid. Assets can be 'sold back' to you. This includes items such as a website and email address.

3.    Dealing with the VAT and PAYE

If the company is VAT registered you should check if it is possible for the registration to be transferred to the Sole trader. As you purchased a business there may be some goodwill remaining which will have to be written off. Any PAYE scheme must be closed.

4.    Closing company bank account

After the final payments of tax and other liabilities, etc. the bank account must be closed. It is possible to apply to HMRC that any distributions (usually the bank account balance) can be treated as a capital gain subject to capital gains tax instead of income tax. Generally there is a tax saving on this.

However this can be complicated so you should talk to your accountant for the best advice. In any case, this can only be done when the company is closing down and not at any other time.

5.    Notify HMRC and other parties

If the business is transferred to a sole trader you will need to notify the existence of the new business to various agencies such as HMRC. Arrangements to have insurances transferred to the sole trader business will also have to be made.

The payments on account regime for Income Tax for sole traders is particularly onerous in the first year or two of trading, so you will have to put by a percentage of income (approximately 20 per cent) to make the payments when they fall due.

Seeking advice makes this whole process easier!

Of course, this whole process can seem quite a daunting one, so it makes sense to seek professional advice if you can.

Omni Chartered Accountants are experts in all areas of small business accounting and taxation advice, and can offer free of charge advice to help you make the right decision and also offer a cost-effective solution to dealing with the stages that are required to make the transition from Limited Company to Sole Trader.

Call 01902 837408 today or request a free of charge call-back from our website for an initial consultation – alternatively, click here to contact us via our dedicated client contact form.