So I’ve Set Up A New Limited Company – What Next?

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Many businesses choose to incorporate for several reasons, including liability protection and tax planning.

But what should you do next, once you have gone through the initial effort of setting up your new limited company?

Within a few weeks of incorporating you will receive an introductory letter  from Her Majesty’s Revenue and Customs. You should send back:

  • Form 64-8 –  You can  provide HMRC with your accountant’s details by completing this form. It is important that this is submitted promptly, as HMRC will not discuss your affairs with your accountant without one.
  • If your company is dormant, simply write back to HMRC at the address shown on their letter to tell them so. You won’t then need to file any tax returns for your dormant company unless/until it starts trading.

Once you start trading there will also be tax planning issues to consider, including:

  • Goodwill valuation – If you have incorporated a sole trade or partnership business you may be able to include the cost of buying the reputation of your business from you personally. This cost, set off over a number of years, may also be  allowable against corporation tax if the sole trade or partnership started after 2002.
  • Remuneration planning – How are you going to pay yourself? It would normally be appropriate to register your company as an employer so that you can pay yourself a basic salary. You will also need to consider when you will be able to pay dividends, how much you could pay and be able to deal with the required dividend minutes and warrants.
  • VAT registered status – You may need to consider registering the company for VAT. There are a number of different VAT schemes that could be appropriate, each with its own benefits.

It is always good practice to plan in advance, and although many of the above issues may appear daunting to tackle, we at Green & Co can provide you with the support needed to make this a stress-free process.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

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Green & Co Gets Heard In Torfaen Business Voice

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The latest edition of Torfaen Business Voice features our managers (Jane Wootton, Barbara Power & Chimene Haines) at the last Torfaen Women in Business Event (page 5), and coverage of our Investors in People Gold Accreditation (page 10).

Read more about it here.

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Prize Draw Winner – August 2014

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 The winner of the feedback prize draw for August 2014 is Gavin Edwards of Caldicot Fleet Maintenance Recovery Ltd. A box of chocolates is on its way to him.

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Computer Problems – No Excuse For Non Compliance

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Two cases which have recently gone through the Courts give clear indications that HMRC will not accept problems with your computer as a reasonable excuse for non compliance.

In the first case, an Employer operated the wrong code, as a result of which an employee paid insufficient tax on his salary. HMRC issued an assessment to collect the unpaid tax from the Employer who appealed claiming that they had not received HMRC’s email notifying the code change. This was because the Employer had been experiencing problems with their computer systems. Their appeal was dismissed by the First Tier Tribunal on the grounds that when an employer registered for online filing, it accepted that communications would be conducted electronically unless it opted out. The burden of proof of non-delivery lay with the taxpayer who had been unable to provide any evidence of this and accordingly the appeal was dismissed.

The second case involved an annual employer return for 2010-11 which was submitted on paper because the Company did not have access to the internet at the time. HMRC imposed penalties on the grounds that no online return had been received. The paper return was invalid because such returns had to be filed electronically. HMRC also had no record of receiving the paper return. The taxpayer’s appeal was dismissed because the Company had not provided a satisfactory reason as to why there was no internet access to submit the return via the internet.

Clearly if anyone wishes to rely on computer glitches, etc for non compliance, concise records need to be kept to back up the position.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

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Why Your Business Needs An Accountant

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Accountants in the Past

Accountants have  undoubtedly been employed in some form or another since as far back as we can remember.  In the Middle Ages, someone had to calculate how many eggs the chickens could lay  and estimate how much grain to store for the winter, as well as counselling the King on the cost of war and how to replenish the state coffers.

The dawn of the Renaissance in the 12th century fuelled  an explosion in trade, with merchants becoming busier and wealthier. New ways  of maintaining  detailed records of transactions were established,  as well as the notion of creating financial statements to evaluate  success  and plan for the future.

The later  agricultural and industrial revolutions further altered the financial structure of life and the role of the “counting man” evolved into something more significant.  In  post-war 20th Century, with the rise of commercial enterprise, the production of sound  financial information became an essential ingredient in  promoting market confidence, securing investment, and a necessity for good public relations.  The  importance of engaging the services of a proficient accountant became a priority in the world of business.

Accountants Today

Today’s accountant can offer a variety of services to both the small business and the larger enterprise, using a wealth of experience, knowledge and expertise as well as a promise of confidentiality and a pledge to  look after your best interests.

It is preferable to choose an accountant who is a member of one of the recognised bodies  – e.g. Institute of Chartered Accountants in England and Wales (ICAEW) or Association of Chartered Certified Accountants (ACCA)  – as he is governed by strict guidelines on professional behaviour. He is  obliged to keep up to date with legal requirements and accounting practice, is covered by professional indemnity insurance,  and has  the benefit of being able to draw on the support and knowledge of other  members when needed.

Aside from producing financial reports on the success (or otherwise) of your business activities, your accountant will also offer you support and advice with book-keeping, funding options, capital investment, employing staff and can undertake company secretarial duties on behalf of corporate entities.

Planning is  important for your personal and financial future and your accountant can help you deal with the complexities of issues such as the timing of capital expenditure, minimising inheritance tax and capital gains. He will advise you on ways to streamline or expand your business, depending on how profitable it is.

Most significantly for the majority of people who engage an accountant, he can handle all of your tax affairs.  The British tax system is complex, sometimes ambiguous and a little intimidating to the lay man. There are often special rules affecting different areas of trade, such as Farming and the Construction Industry, and there are accountants who specialise in these fields.

A good professional accountant will have an established relationship with HMRC and a working knowledge of the taxation system  so that he can act as an effective intermediary between you and the tax man.  He will know what reliefs  to claim and when to claim them, what the tax inspector will accept and what he will question,  and how best to utilize any allowances – all of which will help you to avoid  paying unnecessary tax – both now and in the future.

What About The Cost?

Obviously, your accountant will charge you for the service he provides, but it is more than likely that you will recoup the cost of his fee in the amount of tax he saves you.  On average Green and Co have saved their clients almost £2,000 in tax per £1,000 of fees charged, and the saving for farming clients is even higher at around £4,000!

Fees are usually time-based, but Green and Co now offer clients a Fixed Price Agreement before beginning work each year.  The agreement offers  a fixed fee which covers you for all work you expect us to undertake on your behalf, regardless of the time involved.  This means you can call on us at any time without worrying about incurring extra charges.  The fee is graded according to the level of service you require, and is payable in monthly instalments to ease your cash flow and make budgeting simpler.   The agreement can also offer free  insurance cover if exceptional extra work is needed in the event of a tax enquiry by HMRC.

Engaging the services of an accountant is undoubtedly a worthwhile investment and, as a bonus,  it will also free up some of your time – often your most valuable asset.  This  allows you  to focus on working at your trade or business, rather than worrying about deadlines , completing returns or pacifying your bank manager.

For more information about the services we can offer you and our fixed price agreements please visit our website, or call us on  01633 871122.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

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Severn Bridge Toll – Should It Be Scrapped?

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This week’s South Wales Argus ‘The Big Question’ features our director, Ed Gooderham answering this question:

“The Lib Dems have announced this week that if they get into power in next year’s General Election they will scrap the tolls on the two Severn crossings into Wales. So this week we are asking – should the tolls be scrapped and what would be the impact on the Gwent area if they were?”

This is a big issue as many businesses decide to relocate to the England side of the bridge because of the toll fees. If the tolls were removed this would make the Gwent area more appealing and reduce one tax on the Welsh economy.

Read the online original here: The Big Question.

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The Battle Rages On…

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The ever present, ever contentious issue of capital expenditure versus revenue expenditure has made another appearance in a recent tax tribunal. The case of Hopegear Properties Ltd v HMRC follows on from the Cairnsmill Caravan Park Case in that we see another victory for the tax payer surrounding the issue of allowable repair expenditure.

HMRC challenged works expensed by Hopegear which involved the repairing and widening of the main entrance road to an industrial estate. The expenditure included the repairs and widening of the main entrance road itself, repairs to footpaths and re-laying of fibre optic cables, related landscaping costs, changes to an existing car park, and the construction of a temporary access road for the duration of the repairs.

It was accepted by the Tribunal that the widening work on the road and other expenditure directly relating to that widening was capital expenditure, however the work on the car park and footpath were deemed to be repairs.

It was ruled that only part of the site was repaired and therefore it was irrelevant that the road wasn’t patch repaired (HMRC argued that the absence of patch repair work implied enhancement of a capital nature). The temporary diversions were deemed incidental to expenditure on the main entrance road and the cabling only affected part of the cabling system on the site. It was therefore accepted that this work was revenue expenditure.

In addition, the tribunal considered whether the works carried out led to a  reconstruction, significant improvement, replacement or renewal of the asset and concluded that it had not, thus reinforcing the judgement.

It is important to be aware that the deductibility of repair expenditure is a very complex area and very little can be taken for granted. It is always advisable to seek advice before carrying out such works, in order to avoid unexpected tax bills.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

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