Considerations When Starting a Business – Part 3
When starting in business, taxation aspects must be considered.
Taxation on profits
The type and rate of taxation will depend on the form of business structure. However, the taxable profit will normally differ from the profit shown in the accounts due to certain expenses which are not allowed for tax purposes and the timing of some tax allowances. 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 but the entitlements can also differ. In a company, it may be possible to avoid NI by paying dividends rather than salary.
Value Added Tax (VAT)
Correctly accounting for VAT is an essential part of any business and neglect may result in a significant loss.
When starting a business you should consider the need to register for VAT. If the value of your taxable sales or services exceeds the registration limit you will be obliged to register.
For the business to get off the ground or to enable expansion, it may be necessary to employ staff.
It is the employer’s responsibility to advise HMRC of the wages due to employees and to deduct income tax and national insurance and to account for student loan deductions under PAYE. The deductions must then be paid over to HMRC. Payroll records should be carefully maintained.
Under Real Time Information 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 be familiar with employment law.
There are many pitfalls to be avoided in choosing a property. Consideration should be given to the following:
- suitability for the purpose
- compliance with legal regulations
- local by-laws
- physical restrictions such as access.
Comprehensive insurance for business motor vehicles and employer’s liability insurance are a legal requirement. Other types of insurance such as public liability, consequential loss, business assets, Keyman and bad debts should be considered.
Putting money into a pension scheme can be a way of saving for retirement because of the favourable tax rules.
The latest reforms, under Pensions Act 2008, have brought about a requirement on UK employers to automatically enrol all employees in a pension scheme and to make contributions to that scheme on their behalf. Enrolment may be either into an occupational pension scheme or the National Employment Savings Trust (NEST).
Compliance with the new regulations started from 2012 for the largest employers . The deadline for being compliant (an employer’s ‘staging date’) is determined by the number of people in their PAYE scheme and for smaller employers is between 2012 and 2018.