an accountant's perspective


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Accountancy Basics Q & A

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There are a range of questions accountancy firms get asked on a regular basis from serious stuff like ‘my turnover exceeded £81,000 one month but this was a freak occurrence – what do I do?’ to ‘can I call my business Froggy Feet Footwear or do you think that has been taken already?’

ABC Accounting Services is more than happy to answer any questions you may have whether you are a client or not. To start addressing some of the more common accountancy questions we are going to provide a Q&A blog once a month. Any questions you send in will be addressed in these blogs because usually if one person has a query then there are tons of other people wondering the same thing.

Here are six common questions to get the ball rolling, do not be afraid to speak up, we really have heard everything!

  • When should I register for VAT?

If you are doing business in the UK as an individual, a partnership, a company, an association, a charity, a local authority or any other organisation/group of people acting under a chosen name, then you could need to register for VAT.

If your annual turnover is more than £81,000 (this figure can change on an annual basis) then VAT registration is compulsory. This also applies if you are anticipating your turnover to be higher than that amount in the next 30 days. If you turnover exceeds that amount temporarily then you must apply for an exception from registration.     

If you have received goods from other countries in the EU, registration for VAT is compulsory if the total value of the goods acquired has gone over £81,000 in the current year since 1 January.

For more on VAT: 

  • How do I close my business?

First of all make sure you plan it carefully and have gone through your reasons with our accountant. There may be solutions to problems you have not thought of. The first stage is to inform HMRC of your intent. They will settle matters related tax and National Insurance owing. You should also negotiate with HMRC, or have an accountant do it for you, as sometimes it is possible to extend deadlines for payments or perhaps claim back some tax or National Insurance depending on your circumstances.

The self-employed and business partners will just need to fill out a simple online form. It is more complicated for shareholders who may still have to file Company Tax Returns, pay Corporations Tax while closing the business and account for any capital gains made during the closing process. Employers have to submit a final Full Payment Submission (FPS) with the final payroll, making sure than any due PAYE tax and National Insurance deductions are paid.

Any VAT registered businesses will have to de-register.

  • What is CIS and how do I know if it is relevant to my business?

CIS stands for the Construction Industry Scheme. It regulates the procedures of making payments to subcontractors by contractors in the construction industry. A business that involves construction work and spends much of their funds on construction will also fall under CIS.

CIS encompasses all businesses which are active in the construction industry in the United Kingdom in the form of a partnership, a company, a limited liability partnership (LLP) as well as self-employed sole traders.

As a benchmark, if you spend over £1 million a year on average on constructions within three years, HMRC may consider you a ‘deemed contractor’ and you will have to register with CIS. CIS is also applicable to businesses that are not based in the UK but operate in the UK or UK territorial waters.

  • What is capital gains tax?

Capital Gains Tax is a tax that you pay when you make a profit by way of selling assets (shares or property). Your Capital Gains Tax may be reduced by a tax-free allowance and some additional reliefs. To calculate your Capital Gains Tax work out the gain or loss separately for each asset. Then add everything together to get the overall gain or loss for that tax year.

  • What are the advantages to being a sole trader?

The biggest advantage is that there are no formation costs. They are not legally required by law to have annual accounts or to file accounts for inspection BUT annual accounts are required for tax returns.

Sole Traders are not limited in the amount and purpose of borrowings and losses generated can be set against other income of the year and even carried back to prior years. Tax can be paid in instalments on January 31st in the tax year and July 31st following the tax year.

The down side to being a Sole Trader is that you are personally liable for any debts related to the business so any assets are savings are vulnerable to a claim made against you.

  • What are the advantages of becoming a Limited company?

The biggest advantage is that you literally place a limit on your liability. That limit is the value of the company, including any money you may have invested in, loaned to or are owing to the company. This means that the company has a separate legal identity away from your personal affairs so you are not liable for any claim that exceeds the companies limit as outlined above.

There are a number of advantages to limited companies including:

  • You can give a share of the business to others eg family
  • They tend to attract investments easier than Sole Trader businesses
  • Easier to obtain bank loans
  • No higher rate tax bands
  • Easier to sell the business
  • The business generally has more clout – social standing
  • It can assist in the protection of a name
  • Builds confidence in your business as people can check up on your company on the public records at Companies House

The main disadvantages of becoming a limited company are the extra costs of preparing of annual accounts, formation costs, and the loss of some financial privacy.


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Are you thinking big enough?

Think Big launched today and was a very well received and successful event. Belinda and Lizzie delivered a great workshop full of helpful tips, facts, anecdotes and advice on how to run a successful business. They brought a room full of self-employed people together and assured them that their lonely, stressful and constant rollercoaster of a life was something they all shared. It takes a tenacious, driven, creative and resourceful individual to run a business but with the right support and mentality it can be the most rewarding and liberating experience of your life. The message today was very much: you are not alone!

The morning was packed full of useful info and it was neither stuffy or boring in the way it was shared – we laughed, we self-analysed and we left feeling like our confidence had been boosted and our motivational levels had been recharged. If you would like to experience a Think Big workshop for yourself then check out the tour dates here: http://www.doitthinkbig.com/ready-to-think-big/

Here is what stood out to me this morning – five quotes to give you an idea of what it is all about. They are just a snippet of what was learnt and reaffirmed for all who attended:

1) ‘I saw what I wanted, looked into the best approach and I made it happen’

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2) ‘It is never about selling what you have, it is about giving the client what they need’

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3) ‘You have got to actually enjoy what you’re doing otherwise what is the point!’

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4) ‘Go with your gut – it is rarely wrong and you could avoid some very dodgy dealers if you just trust your instincts’

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5) Do not be afraid to say no! You do not have to do business with people who take advantage of you, put you down or are just plain rude!’

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Belinda was refreshingly straight talking and said what goes on in most business people’s minds. It was the perfect arena to air problems, learn from others mistakes and discuss the pitfalls and pleasures of business. If you want to talk shop then this is ideal because there isn’t always someone to turn to when you need advice or just a good rant – Think Big is giving you this lifeline. Belinda promises to be available when you need her and Lizzie is accessible during sensible opening times! But what we have here is a genuine resource for hard working people who could sometimes do with someone to talk things through with. It is not a big money making venture – it is an effort to give something back to a community that has seen Belinda expand and grow and earn success through a hard slog. She is thankful for where her journey has taken her and now wants to offer a helping hand to anyone who needs it – provided they are human beings who put passion, drive and heart into what they do. To take advantage of her wisdom and expertise, and that of Lizzie Jordan (Yello Story), then get booked into the next workshop – you will not be sorry – absolute bargain for the knowledge imparted on the day.

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