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Frequently Asked Questions
Do I need an accountant?
If you’re confident in your ability to deal with your business finances, it’s possible to prepare and file your own accounts.
However, having an accountant can bring some big advantages. An accountant frees up your time by completing the following:
- Filing returns
- Account’s preparation
- Setting up new taxation services – PAYE, VAT & Self-Assessment etc
As your business grows, your accountant’s input will become more significant, covering essential areas like:
- Financial reporting
- Tax efficiency
- Business planning
An accountant can also save you money in many areas by increasing tax efficiency and improving cash flow. They can provide invaluable general support, by offering general business advice, discussing your ideas and future growth plans.
Above all, a good accountant provides you with the reliable financial information you need to make key decisions and keeps you informed of changes in the financial markets and regulations.
What is the Taxation system in the UK?
HM Revenue and Customs (HMRC) is responsible for administering and collecting taxes in the UK.
HMRC administers the following taxes:
- Income tax
- National Insurance
- Corporation tax
- Capital gains tax
- Inheritance tax
- Stamp, land, and petroleum revenue taxes
- Value-Added Tax (VAT)
When you register for self-assessment, you are notifying HMRC you need to complete the returns of a self-employed person for income tax and NIC Payments. You will be given a Unique Tax Payer Reference number (UTR), which will match the National Insurance number given to every person in the UK eligible to tax.
The different taxes have different taxation rates, exemptions and administrative processes. Please speak to out in house taxation team today for more information.
What is a company?
When client’s set-up a company, they are forming a separate legal entity from themselves. There are two legal roles in a company that must be fulfilled and notified to Companies House:
- Director – they are people, with legal responsibility for running the company. If the company incurs debts after the director realises the company is insolvent, they are personally liable for the debts incurred.
- Shareholder – They are the owners of the company. They can be issued dividends out of company profits – which they are personally liable to pay tax on. If a company has no profits, no dividends can be paid
Companies House must have the following returns, at least annually:
- Company Accounts
- Annual returns and statement of compliance
HMRC may also due a full set of accounts and business tax computation.
Why is Cashflow King?
Cash flows are the net amount of cash and cash-equivalents (cash & money in the bank etc) being transferred into and out of a business. Cash received are inflows, and money spent are outflows.
If a business is making substantial loss, but has enough cash reserves to keep trading, it is solvent and has time to make changes to the business so it can become profitable.
However, if you have a business that make substantial profits but no cash reserves to pay wages, rent, rates etc, the company is insolvent no matter how profitable. It will therefore be forced to cease trading.
These two examples highlight the importance of cashflow to any business, regardless of the business size or length of time trading. Cashflow is more important the profitability or any other Key Performance Indicator (KPI) – cashflow is king.
A cashflow projection is the most important element of any business plan. Please speak to an MCA Accountants advisor today for more help.
Do I need to register for VAT?
You must register for VAT if your VAT taxable turnover goes over £85,000 (the ‘threshold’), or you know that it will. Your VAT taxable turnover is the total of everything sold that is not VAT exempt.
You can also register voluntarily.
Some clients will benefit from voluntarily registration but most do not. This will depend on the nature of the business – Its good and services sold and the customers buying them. The owners and managers will also be an important factor in whether or not to voluntarily register.
Please talk to an MCA Accountants taxation expert today.
IR35 – what is this?
IR35 is an anti-avoidance tax rule introduced by HMRC. It is designed to stop people who would normally be classed as employees, charging organisations for their services through a personal company to avail of tax favourable tax rates.
HMRC has issued a lot of guidance on this issue and a flow chart to help clients and organisations determine whether or not they have been caught by IR35. It is now the responsibility of the organisation availing of the services to determine whether or not their sub-contractors are caught under the IR35 rules.
Please speak to out in house taxation experts today.