When starting in business, you need to consider the taxation too.
Taxation on profits
The business structure will determine the type and rate of taxation. Please note that the taxable profit will normally be different from the profit shown in the accounts. This is due to certain expenses which are not allowed for tax purposes and the timing of some tax allowances. Please be aware that the payment of corporation tax must be made online.
National Insurance (NI)
The rates of NI contributions are generally lower for a sole trader or partnership than for a director of a company. However, it may be possible for a director to avoid NI altogether by paying dividends rather than salary.
Value Added Tax (VAT)
It is important to account correctly for the VAT of any business and neglect may result in a significant loss.
When starting a business, you should consider the VAT. You will be obliged to register, if the value of your taxable sales or services exceeds the registration limit.
Employing staff
It may be necessary to employ staff to enable expansion of the business.
It is the employer’s responsibility to inform HMRC of the wages due to employees. Also, it needs to deduct income tax and national insurance and to account for student loan deductions under PAYE. Then these deductions must be paid over to HMRC. The payroll records should be maintained properly.
Since the introduction of Real Time Information (RTI) an employer must advise HMRC of wages and deductions ‘on or before’ the time they are paid over to the employee. You will also need to have knowledge of employment law.
Business premises
There are many issues to be considered in choosing business premises. You should consider the following:
- suitability for the business
- compliance with legal regulations
- local by-laws
- physical restrictions, such as access to business
Insurance
It is a legal requirement to have comprehensive insurance for business motor vehicles and employer’s liability insurance. There are other types of insurance to be considered such as public liability, consequential loss, business assets, Keyman and bad debts.
Pensions
There are favourable tax rules if you put money into a pension scheme. The latest reforms, under Pensions Act 2008, require UK employers in certain conditions to automatically enrol employees in a pension scheme. The employers and employees are required to make contributions to that scheme. There are various occupational pension schemes or the National Employment Savings Trust (NEST) can be used.
From 2012 the largest employers have to comply with the new pension regulations. The deadline for being compliant (‘staging date’) is determined by the number of people in their PAYE scheme. For smaller employers the staging date is between 2012 and 2018.
