As a new business owner there are many regulatory requirements to comply with, not least the need to register with HM Revenue and Customs (HMRC) for relevant taxes and schemes. Problems and penalties could arise if registration is not completed in a timely fashion. This month we summarise some of the more prominent requirements.
HMRC has moved towards electronic forms and online notifications but you can appoint your adviser, as your tax agent, to deal with these tasks on your behalf.Business tax
It is necessary to notify HMRC of your existence by completing forms CT41G (companies) or CWF1 (sole traders/ partnerships). You can also register online with HMRC to notify self-employment. The company form CT41G is sent to all new companies after they are incorporated. The form notifies HMRC of your accounting date, your accountant, and also enables a PAYE (Pay As You Earn) scheme to be set up, which is a requirement if you are to be an employer. If you fail to register within the first three full months of commencing business, you may face a penalty.National insurance
Depending on the level of profit, sole traders and partners may have a liability to Class 2 and Class 4 NIC. Class 2 NIC will now be collected annually as part of income tax and Class 4 payments. The government has also made a commitment to remove Class 2 contributions over the coming parliament. However, this is likely to be reflected by higher Class 4 NIC rates or other changes.Value added tax
You need to consider if it is beneficial to be VAT registered from the outset. If you are registering for VAT, form VAT 1 needs completing, and if you are a partnership, form VAT 2 also needs to be completed giving details of all the partners. The current VAT registration threshold is £83,000. If you are likely to turnover more than this during the first 12 months of trading, you should register immediately. It may still be beneficial to register depending upon the VAT status of your customer base and your business activities. It is important to take advice on this topic. To register online or for further information go to: https://www.gov.uk/vat-registration/how-to-register
Lovewell Blake is holding a free business start-up clinic on the third Tuesday of every month in our Halesworth office. To seek advice and to ensure you comply with the relevant requirements contact Matthew Waters on 01986 873163 or by email.