Tax Services for Small Business

When launching a new small business in the UK some of the key tax obligations you need to consider include:

• Registering with HMRC for self-assessment to report your business income. This requires filing a personal tax return annually.
• Understanding if you need to VAT register your business based on expected turnover – the current VAT threshold is £85,000. We can assist with VAT registration, completing VAT returns and advising on VAT accounting schemes.
• Setting up a payroll scheme and reporting system if you plan to take on employees – this covers PAYE tax deductions, auto-enrolment pensions, CIS reporting for contractors and Real Time Information submissions. Staying on top of employment tax rules is crucial.
• Keeping organised business records – invoices, receipts, accounts, bank statements etc – both for management insight and to evidence business expenses. Thorough records help avoid tax errors.
• Making quarterly advance tax payments based on forecast figures to avoid penalties for underpayment. We can handle these calculations for you.
• Filing your annual Self Assessment tax return as a sole trader or partnership detailing your taxable business income and allowable expenses. For limited companies an Annual Company Tax return must also be completed.
• Claiming available tax reliefs and allowances relevant to your business such as Annual Investment Allowance, R&D credits, government incentive schemes and capital allowances on equipment.

As your accountants and tax advisers, we can help guide you through these key small business tax compliance responsibilities to ensure your new venture gets off to a smooth start.

Allowable expenses will depend on your particular business activities but common examples include: vehicle costs like mileage, fuel, tax, servicing; purchased equipment and machinery; utilities and bills for your business premises; insurance premiums; training and professional course fees; staffing costs like salaries and benefits; advertising and marketing spend; bank, loan and credit fees; legal and professional advisor fees; travel, accommodation and entertaining costs for genuine business purposes; bad debts from customers; repairs and renewals; stationery, phone and internet costs.

As your accountants we’ll review your individual circumstances to identify and maximise all permissible deductions you are entitled to based on your small business model. Having detailed records to substantiate claims is crucial if ever challenged by HMRC. The goal is reducing taxable business income as far as reasonably possible within the expense claiming rules.

Essential tax records a small business must retain include: daily records of sales and purchases; invoices issued to customers and received from suppliers; receipts for expenditures; bank statements and accounts showing all transactions; diaries of business mileage; register of assets purchased like equipment and vehicles; stock records; payroll and employment data if applicable; tax returns and calculations; VAT records if registered and any other documentation that evidences income or expenditure to satisfy HMRC if audited.

We recommend keeping digital records where possible as this provides more organised access and storage compared to physical paperwork. As your accountants we can provide bookkeeping software, templates and storage solutions to help small businesses maintain the necessary records for tax compliance. Keeping proper evidence to justify figures reported to HMRC reduces risks of penalties for errors or omissions.

The penalties regime for small business tax compliance failures includes:

• £100 automatic penalty for missing the self-assessment filing deadline, further penalties after 3, 6 and 12 months. Interest on any tax paid late.
• VAT default penalties for late submission or payment. Interest on overdue VAT.
• Income tax and corporation tax geared penalties between 0% – 100% of tax underpaid for inaccuracies depending on if failures are careless, deliberate or fraudulent.
• Employer late filing penalties for PAYE submissions from £100 up to £400 per month. Interest and further fines for PAYE or NIC errors.

Penalties aim to encourage compliance, so innocent errors treated more leniently. Taxpayers with persistently poor compliance could face greater penalties and investigation. Using an accountant provides a defence against some penalties.

Don’t panic. Contact us immediately as your tax advisers. We deal with tax enquiries regularly and will handle communication with HMRC on your behalf from this point. We’ll identify precisely what information they require, assist you with gathering supporting documents and provide professional representation at any interviews. Our goal is resolving the enquiry efficiently with the minimum tax impact by highlighting any inaccurate assumptions made by HMRC based on our expert knowledge. We’ll also negotiate firmly on any penalties proposed to reach a fair settlement. Our experience navigating investigations helps relieve the stress and achieve the best outcome.

Important tax considerations if looking to expand your small business include:

• The optimal trading structure for your situation as you grow – should you incorporate as a limited company? What are the tax advantages/disadvantages?
• Income tax planning strategies – can profits be reinvested tax efficiently? Should you extract dividends rather than salary?
• Claiming relevant tax reliefs for investment and innovation like R&D tax credits or the Annual Investment Allowance.
• Understanding the VAT impact of projected increased turnover – when will you need to register?
• Additional payroll and employment tax obligations by taking on staff.
• Tax efficient ways to extract profits from the company in future.
• Inheritance tax mitigation when growing the overall value of the business assets.

As your trusted tax advisors, we’ll discuss tax planning opportunities tailored to your small business growth objectives so expansion is achieved as tax efficiently as possible. The goal is minimising liabilities that may arise by forecasting the tax implications in advance.