| When you start a new small business it is a good | | | | as a limited company or stay as a sole trader. As |
| idea to give serious thought to your tax | | | | a sole trader you will only be paying income tax, |
| obligations right from the beginning. It is easier to | | | | just like when you used to be employed. |
| administer if you plan ahead and hard to catch up | | | | However, instead of your employer deducting tax |
| if you leave it too long. | | | | and national insurance like before, you now are |
| If you do not comply with your tax obligations | | | | responsible for paying this tax. |
| this can be very serious. Not only can Revenue | | | | Your tax and national insurance will be assessed |
| and Customs come chasing for unpaid tax years | | | | on your annual tax return, depending on your |
| after it was due, but they can also charge | | | | yearly profits, but the tax will not be paid regularly |
| penalties and interest which together can exceed | | | | each month or week like when you were working. |
| the amount of unpaid tax. | | | | Now you will have to make provision and retain |
| Trying to prove to the tax man that you did not | | | | enough tax to pay over when it is due. Now tax |
| make as much profit as they are assuming can | | | | is paid in two equal installments in January and July |
| be very difficult years later, particularly if your | | | | - you need to make sure you put the right |
| accounting records are not up to scratch, lost or | | | | amount away so that you are not left short! |
| destroyed. | | | | If you run your business as a limited company, |
| Therefore, once you have decided to commence | | | | you will also need to account for corporation tax. |
| your business, your first priority should be to | | | | This means a whole new set of tax returns and a |
| inform Customs and Revenue. You should make | | | | need to decide on whether you will take a salary |
| sure that you do this within three months of | | | | or receive dividends from the business. This route |
| starting your new business. At the same time, | | | | can seem a little daunting, but it does provide |
| you should consider what records your business | | | | more security should things go wrong in the |
| must keep and begin recording transactions | | | | future. You should be prepared to look carefully |
| immediately. Even if you think that not much is | | | | into the ins and outs of your taxation position, or |
| happening at the start, it soon becomes difficult | | | | at least employ a good tax accountant. |
| to catch up weeks and months later. | | | | The last main business tax to consider is value |
| Any business will need to keep, at the very | | | | added tax. If you are trading and your supply of |
| minimum, a record of income and expenditure | | | | goods or services exceed an annual threshold - |
| supported by underlying vouchers and receipts. In | | | | currently 68,000 GBP - you must register for this. |
| a small business this would consist of a cash book | | | | This adds another obligation to the administration |
| and files of bank statements, sales invoices and | | | | of your business. Now you must charge an |
| purchase receipts. In a larger more complex | | | | additional amount for value added tax on |
| business, the accounting system would be more | | | | everything you sell - at a rate of 15% in 2009. It |
| complicated and also serve to control the | | | | must be paid over to Revenue and Customs, |
| accuracy of the record keeping as well as | | | | typically every three months. The benefit is that |
| providing a system of fraud prevention and | | | | you can offset this amount by any similar tax |
| detection. | | | | you have paid on your purchases. |
| Now that your business is up and running and you | | | | Beginning a business comes with a number of tax |
| are keeping appropriate records, your taxation | | | | administration duties. Not only do you have to |
| obligations will arise depending on the size and | | | | worry about making a profit, you also need to |
| type of the business that you are running. | | | | keep the tax man happy. Do not underestimate |
| Your tax will be different if you decide to set up | | | | the importance of this! |