To make a claim, write to your local Tax Office and give the following details:
Your name and Unique Taxpayer Reference - you'll find this on documents such as your tax return or Self Assessment Statement.
The date you sent your return.
The reason why the return was late.
Of course, you can also ask your accountant to assist with this, should such a situation arise which is outside of their control.
Hopefully the above information has helped give some clarity on some of the most common questions asked. For more information or a general chat about your business plans please call us on 0158 296 6690 / 0750 843 0006 / 0796 158 7596 or email: firstname.lastname@example.org
If you do not pay PAYE i.e. are not a permanent employee you’ll need to fill out a self-assessment tax return. Also if you have a second income from overseas income, you’re a landlord or you have income from savings or investments. In a nutshell if you have any income that HRMC needs to know about you need to fill out a self-assessment form.
If you are self-employed (including being in a partnership), If you are a company director or a minister of religion (bet you didn't know that), Although, if HMRC ask you to complete a tax return you must do so. This will normally be to make sure you are paying the right tax and getting the right allowances, If you don’t already complete a tax return form, you’ll need to do so if you receive any of the following, Income from savings and investments of £10,000 or more, Income from untaxed savings and investments of £2,500 or more, Income from property (before deducting allowable expenses) of £10,000 or more, You receive income from overseas, Income from the estate of a deceased person on which tax is still due and If you or your partner receive child benefit and your income is over £50,000.
Income tax can be paid in various ways depending upon the type of income and whether you are employed, self-employed or not working. The different ways Income Tax is collected include:
PAYE (Pay- as- you-earn).
Tax deducted ‘at source’. Whereby tax is deducted from your bank/building society interest before the interest is paid to you.
In some cases, a one off payment.
If you are an employee or you receive a company or private pension, your employer or pension provider will deduct tax throughout the year using the tax code HM Revenue & Customs (HMRC) provides them. This is known at the Pay As You Earn system (PAYE).
If you are self-employed, you will be responsible for filling in a Self-Assessment Tax Return which can be done either online or by filling out a paper form. You will probably pay your income tax in two instalments plus a third final ‘balancing payment
If you don’t pay your corporation tax on time, known as a late payment, or you do not pay enough (underpayment or non-payment), HMRC will charge your company interest. Late payment interest is charged from the day after the tax should have been paid (normally 9 months and one day after the end of the accounting period) until the date you pay it. Interest charges are automatic, however, interest is not charged on interest itself. Any late payment interest you pay to HMRC is deductible for tax purposes.
You must file your company tax return- which includes a company tax return form and other supporting documentation- within 12 months of the end of your companies corporation tax accounting period. Your company tax return filing deadline is known to HMRC as your ‘statutory filing date’. If you file your return late your company will be charged an automatic penalty, even if it does not owe any corporation tax.
HMRC will usually send your company letter telling you that you need to file a company tax return. HMRC calls this letter a ‘Notice to deliver a company tax return’. If HMRC has sent you this notice and you don’t file your return on time, your company will be charged a penalty. You will be charged a flat-rate penalty of £100. HMRC will charge a further £100 penalty, if you file your return more than three months late.
If your company tax return is late for three or more accounting periods in a row, the initial flat-rate penalty increases to £500 with a further £500 charged if you file your return more than 3 months late.
Additional penalties for very late company tax returns:
18 months from the end of your corporation tax accounting period.
Your filing deadline.
HMRC may charge your company, further penalties from that date. These penalties will be on top of the flat-rate penalty or penalties you’ve already been charged. These additional penalties are known as tax-related penalties because they are related to the amount of corporation tax your company owes. They are calculated as follows:
Where a tax return is filed between 18-24 months after the end of your company’s accounting period = 10% of any unpaid corporation tax.
Where a return is still not filed 24 months after the end of your accounting period = a further 10% of any unpaid corporation tax.
The amount of unpaid corporation tax is the amount due that you didn’t pay by the date your company first became liable to a tax related penalty.
Self- Assessment Tax Returns are designed to be relatively straight forward, although most people opt to use an accountant. The forms you need to fill in if you are self-employed are as follows:
HMRC will send you a tax return- or a letter telling you to file online, every year in April. This relates to the previous tax year; from the 6th April to the following 5th April. If you receive a tax return.
HMRC will always send you form SA100 and SA101. You may also have to file in some supplementary pages, depending on your circumstances.
If self-employed either pages SA103S, if your annual turnover was below £68,000 or SA103F is your turnover was over £77,000.
If self-employed in a business partnership you will also need to complete either SA104S (for partnerships that have only trading income) or SA104F (for all other types of partnership income). These forms detail your share of the partnerships profit and loss.
If you are submitting a paper return, it must reach HMRC by midnight on the 31st October. If you decide to send your tax return online, it isn’t sure until midnight on the 31st January.
You will be charged a penalty if your Tax return isn’t received on time. When you send HMRC a Self-Assessment tax return, you will receive a Self-Assessment statement showing what tax you owe and how to pay. If you have paid too much it will show how much you will be repaid. If you file your Tax Return online, you can view this before you even receive it in the post.
To file your return in this way, you’ll need to register online and request an ‘activation PIN’ from the HMRC website. To do this, you’ll need your Unique Taxpayer Reference (UTR), which you’ll find on form SA100 of your tax return, as well as your National Insurance Number or postcode. It can take up to a week to receive your account password and become fully registered, so don’t wait until the last minute! Once you have completed your form, just make sure you print a copy off or save one on your computer, so you can still refer back to it if necessary.
As a general rule of thumb, anyone setting up as a self employed person for the first time should expect to reserve around 30% of their total income to set aside for tax and national insurance payments. If you do this you should always have enough money available to pay those bills. Failing to reserve funds for tax bills could leave you in a situation where you do not have enough money to pay HMRC and this could result in the end of your business!
There is no absolute method of finding the market value of a business other than carrying out a marketing exercise and receiving offers. However, the following will provide some guidance:
See what prices have been paid for any of your competitors - such information maybe found in the Financial Times or from your trade press. From the back page of the Financial Times, take the average price earnings (P/E) ratio of companies in your sector. Discount this by around 30% and apply that number to your recurring (i.e. exclude unusual and one off costs or revenues) post-tax profits.
Although it is often quoted, it is true that the best time to sell is when you don't have to. A forced sale due to say financial difficulties is unlikely to allow the best terms and price to be obtained. Plan for the sale some 12 months ahead; try and time a sale with any upswing in either your own sector's economic cycle or that of the economy in general. Consider using public relations to enhance your company's image, which may encourage a buyer to make an unsolicited offer.
To maximise the chances of receiving full value for your business, you should undertake a through review of your business at least 12 months prior to a sale. This will cover at least those areas covered under grooming you business for a sale.
Generally, you should appoint advisers who are able to conduct a covert controlled auction process. This process is designed to deliver attractive offers from parties known to be interested in acquiring businesses such as yours. Only in exceptional circumstances will the unsolicited offer deliver a top price.
There are essentially two ways to buy a business: either by purchasing specified assets of the business or by purchasing the company which runs the business, the latter is achieved by buying the share capital of the company. There are many reasons why one route or another is preferred in a particular transaction and we can advise you on this. Of particular deliberation for a buyer is that under a share purchase the buyer would inherit all the potential liabilities of the company and in an asset transfer they would only inherit the liabilities they choose to take on.
Generally under the Transfer of Undertakings (Protection of Employment) Regulations (known as ‘TUPE’) if a business is sold to a new owner the employees follow the business and are transferred to the purchasing company. They are transferred on similar terms to their current employment and at the least under no worse terms. TUPE usually only applies on the sale of business and assets as upon a share sale the owner of the business (i.e. the company remains the same) however this is not always the case and we can advise you more specifically to the impact of TUPE on the transaction.
An "earn-out" is a mechanism by which a seller can achieve additional consideration for the sale of his business by reference to and as determined by the performance of the business over an agreed trading period following the sale.
A sale involving an earn-out will typically involve an initial payment on completion of the sale, followed by further deferred payments over a number of years. The earn out payments are normally calculated and paid as a percentage of annual turnover or profits.
Earn-outs are often used as a management incentive where owner-managed businesses are sold and the managers continue to work for the business following the sale. They are also commonly used where the business being bought is fairly new but has significant growth potential and in circumstances where the seller wishes to achieve the price the seller would sell for.
At A&U Corporate Finance we take the time to listen to your needs and tailor a facility accordingly. By shopping around the finance market we can source you the best deal, making you savings even after taking our fees into account. We have strong relationships with a wide range of lenders meaning we can access deals that may not be available directly. We also take most of the administration tasks off your hands, saving you time too.
Interest rates are subject to status, however thanks to our extensive range of potential funders, the volume of deals we facilitate and our position in the market place, we have access to some of lowest rates available.
Our charges will depend on the facility being arranged and you will receive complete transparency when it comes to the cost of our services. We always offer a completely free of charge appraisal of your proposal and you will be made fully aware of all costs involved in facilitating your funding requirements before signing any agreement with ourselves or the lender. Therefore you can be assured that you are always able to make a non-pressured, fully informed decision regarding the most appropriate and cost effective option to take.
Every quarter you will need to fill in a VAT form (online only) to HMRC.
Yes, some businesses feel that having a VAT number adds a certain credibility and prestige to their company, so they voluntarily register for VAT.
You begin charging VAT on all sales and invoices from the day you register for VAT.
So, for example, if you register for VAT in April, but do not receive your VAT registration number until May, you would still start charging VAT on goods and services provided from April.
It can take up to 30 days before you receive your VAT registration number and certificate, so within these 30 you will still need to charge standard 20% VAT (2013) onto all invoices raised. Once your VAT number is received you will then need to include your VAT number onto invoices raised within this time.
Once you are at the required threshold amount or if you have voluntarily registered for VAT (more on this later) you will need to fill in the VAT registrations forms on the HMRC website. You will then receive a VAT registration number, which you will need to add to any raised invoices and a confirmation certificate.
If in the previous 12 months your turnover has reached the VAT threshold amount of £79,000 (As of April 2013) or you expect your turnover to reach £79,000 in the next 30 days then it is mandatory that you must register for VAT.
If you are under the VAT threshold amount of £79,000 then you do not have to charge VAT on your goods and services. The threshold amount can change so make sure to check the HMRC website each year to ensure you are not over or under this amount.
VAT stands for Value Added Tax. If you are VAT registered you need to add 20% (2013) on top of whatever you sell. To make things a little more complicated there are certain things that are zero rated like: food, books, newspapers and magazines, young children's clothing and footwear but I wouldn't worry about these for now.
You can offset any trading losses you have made from self-employment against deductions you’ve already made via PAYE by registering with HMRC for tax self-assessment.
On your annual tax return, if you declare a loss on your self-employment activities you will be able to claim a tax refund from the amount you’ve paid over the year on your salary via PAYE. In order to claim a refund, you will need to have spent at least ten hours per week on self-employment, and you must be genuinely intending to trade for profit.
For future PAYE deductions, you can request HMRC to alter your tax code to change the amount of tax deducted at source.
Yes, but their terms of employment should make this clear.
When a new employee starts, they will enter into a contract of employment with you. Within the first two months of this contract, you’re legally required to issue them with a written statement of employment particulars. Along with things like their job title, hours of work and location, this statement must include details of when and how much they will be paid.
If an employee qualifies for sales commission, the statement of employment particulars should include reference to this, and state when that commission will be paid. It’s not unusual for commission to be included as part of the regularly scheduled monthly payroll.
No. If you’re registered for VAT (sales tax), you must include VAT in the prices you charge to customers, but you can claim back the VAT you pay for any legitimate business expenses, including the purchase of repair parts.
Alternatively, if you aren’t registered for VAT, you can’t claim back the VAT you paid on the parts but you should charge your customers any VAT.
In either scenario, the VAT is paid only once. If your annual turnover is more than £81,000 you must register for VAT, otherwise it’s optional. Once you register, you can submit a backdated VAT claim for VAT goods (including repair parts) bought during the past four years, if they’re still in your possession.
Typically as a limited company you will pay yourself from your own company by way of a salary, plus if you make a profit you will also pay yourself by dividend. If you are paid as salary from your own company normal PAYE rules apply. Income tax and employees National Insurance is taken out of your gross salary to give you a net salary and you as the employer pay employers NI.
In regards to salary it can be weekly, fortnightly or monthly- it can be paid whenever you choose.With income tax and NI this has to be paid either monthly or on a quarterly basis. Your payroll can be done quarterly if the monthly due figure is not more that £1,500. If it is over £1,500 it has to be done monthly.
The money you need to pay to HMRC is always due on the 19th of the following month. For example if you have just had the June payroll, the money due will be by July 19th.
For a quarterly payroll, it always runs per tax year (from 6th April 2010 to 5th April 2011) and there are four set quarters in each tax year, always as follows:
1st quarter – April, May, and June – pay PAYE & NI by 19th July.
2nd quarter – July, August, and September – pay PAYE & NI by 19th October.
3rd quarter – October, November, and December – pay PAYE & NI by 19th January.
4th quarter – January, February, and March – pay PAYE & NI by 19th April.
The easiest way to set up payroll is to ask your accountant to help you, failing this you can go on to the HMRC website and fill in the forms, which includes basic information about your company, directors or proprietor’s details and registered address.
They will get back to you with a reference number for PAYE and an accounts office reference number- you need to use this number when you make payments of the PAYE and National Insurance. The PAYE number is used when the yearend payroll is completed; it will also indicate which PAYE office you belong to. Once you have these details you can start running payroll.
You take the gross amount, plus the employers National Insurance. This is 12.8% of the gross annual wage less the National Insurance threshold of £5,715.
For example: If you were doing payments on a monthly basis and the gross monthly wage was £1,000 to your employee you would deduct £475 (this is calculated over a 12 month period) which gives you £525. 12.8% of £525 is £67.20. This is how much you as an employer would pay in National Insurance. As long as the salary is the same every month and is paid for the whole tax year.
The only information you need to set up a new employee on the payroll would be:
Date of birth
Job titleAnnual salary or Hourly rate of pay
You get a P45 when you leave employment and you complete a P46 when you start employment should you not have a P45 from a recent previous employer.
Your P45 will show various pieces of information including your PAYE reference code and how much you earned and paid in tax during the tax year. Your P45 will be in 3 parts. When you find another job you should give parts 2 and 3 to your new employer. This will allow them to see how much tax you have paid and put you on the correct tax code. Often people lose their P45 or forget to give it to their employer. When this happens the employer is forced to put you on an emergency tax code which often means that you end up overpaying tax until you claim a tax refund at the end of the tax year.
If you do not want to show your employer your P45 because you want to keep your previous wage confidential then you can get around giving them your P45 by sending parts 2 and 3 to your tax office telling them where you are working. You should make sure that you do this as soon as possible otherwise you could be put on the wrong tax code.
If you lose your P45 or were not given one by your employer, because they say, went bankrupt. You can give your new employer a P46 instead. You need to complete the P46, and once you have, give it to your new employer so that they can put you on the right tax code.
A P35 is a yearend return completed by all employers. The P35 is a summary of the deductions made from the employees’ salaries reconciled to the payments made to HMRC during the tax year. Any difference in the reconciliation between the PAYE payments due and actually paid can then be identified. The P35 is completed for each individual tax year and is submitted to HMRC together with the employees P14 (The P14 is similar forms to that of the more well known P60).
The P35 must be submitted to HMRC no later than 19th May after the previous tax year. The P35 can be submitted using the HMRC website, direct from the payroll software or by paper if allowed.
Hopefully the above information has helped give some clarity on some of the most common questions asked about payroll. For more information or a general chat about your business plans please call us on 0158 296 6690 / 0750 843 0006 / 0796 158 7596 or email email@example.com.
No. Your company can remain dormant (non-trading) for as long as you wish.
These rights, standard with our companies, are the rights of existing shareholders to be offered new shares by the company prior to the shares being offered for sale elsewhere.
If a shareholder refuses to pay money due on a share, the company may use forfeiture proceedings if permitted by its articles. A forfeited share may be sold, re-allotted or otherwise disposed of at the discretion of the directors. Companies House need not be notified of the forfeiture or re-allotment except in the list of members on the company's next annual return. A company cannot use forfeited shares for the purposes of voting.
You cannot issue bearer shares.
A company may have as many different types of shares as it wishes, all with different conditions attached to them. The most common are ORDINARY , with no special rights or restrictions (by far the most common). PREFERENCE, normally carry a right that any annual dividends available will be paid preferentially on these shares before other classes, CUMULATIVE PREFERENCE, carry a right that, if the dividend cannot be paid in one year, it will be carried forward to successive years , REDEEMABLE , issued with an agreement that the company will buy them back at the option of the company or the shareholder after a certain period, or on a fixed date. A company cannot have redeemable shares only.
A UK limited company is a legal creation which is established in law and governed by the Companies Act, passed by Parliament. The process of setting up a limited company is known as company formation, setting up a limited company, registering a limited company or incorporating a limited company. Limited companies are registered at Companies House and given a certificate of incorporation and a number to record the fact. Limited companies are kept on a live database at Companies House. The limited company is a distinct and separate entity form the people who own it and run it, with its own status for taxation, financial and general legal obligations. A limited company is like another person, whereas a sole trader describes a situation where a person runs their own business in their own name or under a trading name, without registering at Companies House, and maintaining liability and responsibility for their affairs in a personal capacity.
The company is run by the directors and the shareholders (members) own it. Directors are answerable to shareholders and are legally bound to act in their best interests. You only require one member and one director, who can be the same person.
No. Unless you sign a personal guarantee or trade fraudulently. A limited company is "limited" in the sense that its owners are not liable for its debts. Some people see a limited company as an insurance policy, especially for a new or high-risk business. Many people lose their savings and other assets because they started out without "being limited". You need to assess the risk of your situation.
The preparation of annual accounts may cost more than if you were to trade as a sole trader. The public can check up on certain aspects of your business that you may prefer to keep private.
Companies House charges a small fee that has to be paid when the company's annual return is submitted. Annual accounts will need to be prepared in the appropriate format which will incur accountancy fees. The late delivery of documents to Companies House will be penalised.
Shares are a person's stake in the company. It is a way of describing ownership of their part of the company.
This is the shares and their value in monetary terms that the company can have at a particular point in time. In simple terms it is the money that has been invested in the business, either at the outset or at a later stage, and is intended to be used to protect the creditors in the event of a failure.
Normally the shares can be paid for at a date after they are issued. If they are not paid for when the request for funds is forthcoming the may be taken away by the company . If a company fails and money is owing for shares that have been allotted by the company the shareholder is liable to pay the outstanding money to the creditors.
Any currency may be used for a private company.
The people who own the shares are the owners of the company. So you can let whoever you want become a shareholder but ultimately they are in charge of everything and can sack or appoint directors as they wish. Any money made by the company will belong to them. It is essential that you take professional advice prior to allowing third parties to become shareholders. Once somebody has acquired a share it cannot simply be taken away from them.
If you are starting your own business, running it as a sole trader is the quickest and easiest way to do it. However, you will have unlimited liability which means you are personally responsible for business debts.
Unlike permanent employment, being self employed means you will be paid the whole invoice amount without any tax removed, so don’t be tempted to take all the money out and spend it, you’ll need to put some aside to cover your taxes.
As a general rule, we recommend you put 30% of everything you earn to one side, and this should cover your tax and National Insurance, but you will be able to adjust this over time as you get a better feel for your tax liabilities.
Your take home pay is your profit - i.e. income less expenses, tax and National Insurance. See below for a rough illustration, these figures are based on estimated expenses of 10% of your turnover.
Annual income Annual take home pay Monthly take home pay
£20,000 £15,666 £1,280
£40,000 £28,146 £2,345
£60,000 £39,295 £3,275
£80,000 £49,735 £4,145
As your tax is based on your profit after allowable expenses, you need to be sure that you are claiming everything you are entitled to and ensure that your tax bill isn’t larger than it needs to be – your accountant can advise you on this. However, as a rough guide, anything which is a business cost is tax deductible.
Yes. If you are self employed you are responsible for making sure you pay your own tax and National Insurance contributions.
The norm is to pay Class 2 National Insurance (NI) Contributions, which are paid at a flat weekly rate of £2.70 (2013/2014), although if your annual profit is over £7,755 you fall into the Class 4 National Insurance Contributions category as well. See below for more details on this.
Your National Insurance contributions go towards certain benefits, such as maternity leave and state pension, however they don’t count towards additional state pension, statutory sick pay or job seekers allowance. Therefore it is advisable to make your own arrangements for your income protection insurance and a personal pension.
If your profits (not your turnover - many people get confused about this) are over £7,755, then you’ll also be responsible for class 4 NI contributions. If your profits are between £7,755 and £41,450 (2013/2014) this is an additional 9%, and any profit over £41,450 there is an additional 2% to pay as well.
Your National Insurance contributions are calculated alongside your tax return and you pay them with your income tax. You will need to pay your Class 2 National Insurance contributions either monthly or bi-annually by Direct Debit to Her Majesty's Revenue and Customs (HMRC).
Yes, you can. HRMC states it is possible to claim back expenses for a room in your home, for the hours you use it for business purposes.
Essentially this means you can claim for electricity, heating and water, council tax and mortgage interest for the use of your home as an office space. You will need to take into account how many hours a week you are using the space and then calculate the cost of the room per hour. These amounts would normally be charged in your accounts to 'use of home as office'.
To be honest the ‘use of home’ allowance is a little complicated, and changes yet again if you become a Limited company and continue to work from home, so it is probably best to speak with an accountant to get the most accurate and up to date information.
First and foremost you will need to register with HMRC. This should be a top priority for any newly self employed person as failure to register within three months will result in a fine. The quickest and easiest way to do this is by registering online.
If you have an accountant or agent who will be completing the form for you, you will need to ensure that you have signed a 64-8 form: Authorisation for your agent. This is a formal agreement which allows your accountant to act on your behalf, and to contact HMRC.
Alternatively you can call the newly self employed helpline on 0300 200 3504
Yes. You can claim for your car, rail travel and any other business related travel costs you incur. Although you should make sure that you keep hold of any receipts, to prove that the expense was incurred.
If you do not operate as a Limited company, claiming for usage of your car is very straightforward. If your car costs you £10,000 to run in a year, and you use it 50% of the time for business, you can claim back £5,000.
For any business expense, you need proof of purchase, usually in the form of a receipt. These receipts are then added up at the end of the year and the value put on your self-assessment tax form. HMRC recommends that you keep your receipts for six years, so make sure you invest in some box files!
You will not need to charge VAT on any of your goods or services until you have reached the VAT threshold amount of £79,000 (as of 1st April 2013). If at any point you expect it to reach this figure in the following 30 days, then you must register for VAT immediately.
Once over the threshold amount, it is mandatory that you register for VAT and start charging VAT on your goods and services, from the day you have registered. For more information on VAT.
Self Assessment involves completing an online or paper tax return. You tell HMRC about your income and your expenses, which ultimately gives them details of your profit figure, and this is what you will be taxed on. At the same time you can also advise HMRC about any other tax allowances or reliefs.
The advantages of being self employed are:
You are your own boss - something which can be very satisfying.
You will naturally work in different roles and for many different companies - this will help you to build a unique range of skills and experience.
You have the freedom to work when and where you choose, and for however long you like.
There is a direct link between work effort and reward, which sometimes doesn't exist as an employee.
You have more flexibility over the payment terms that you can negotiate.
You can work for multiple clients at the same time, on many different projects, which can also increase your pay.
Depending on your individual skills and the state of the industry in which you work (or the market in general) you can command very high rates of pay.
However you also need to consider the following:
You do everything yourself and are responsible for the day-to-day running of the business.
You will rarely have the resources at your disposal that are available to an established business owner, and this may mean doing tasks that you dislike.
Large salaries or income are rare in the early days - but you could be lucky!
It is not unusual for newly self-employed people to have a second job to help provide a guaranteed source of income for day-to-day living costs. Or you could even start working for yourself when you are still in full time employment, providing your employer is OK with it.
You need to offer a product or service for which there is demand. This may depend on projecting a certain image, perfecting a technique or making a product unique.
Expanding too rapidly, or conversely not being quick enough to seize a chance, may be detrimental to your business.
Working from home is the most effective when you have the space and facilities to do so. If you work from other premises, you will need to pay rent and other overheads.