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ANSWERS TO FREQUENTLY ASKED QUESTIONS   


Would it be a waste of money to find an accountant before I start my new business, when I don’t have any accounts to be checked?


Not at all. After having decided the format of your new business, whether you will operate as a sole trader, a partnership or a limited company, you will also need to know what records you are legally bound to keep. Each choice will have implications in respect of legal contracts; registering for VAT and the amount of credit your suppliers will allow your business.A chartered accountant will be able to advise and help you to set up your business correctly and effectively.  And having helped you right from the start, it will be much easier for your chartered accountant to prepare things like your year-end accounts, and cash flow projections when the time comes.


What does the reduction and increase in UK interest rate mean for my business?


The key thing is to be aware of the rate you are currently being charged and to register the amount your bank reduces that rate by when there is a change in the Bank of England Base Rate. Secondly, if you manage your business to minimise your investment in working capital changes in UK interest rates have a diminishing effect.  This means reducing any stocks or work in progress and keeping your debtors to a minimum by having an effective system of credit control. The Better Payment Practice Website provides guidance to businesses wanting to improve their credit control.


A chartered accountant will know, the banks offering good deals locally, can discuss the consequences of changing banks and can often advise on whether your credit management is effective.


Would I save time if I bought a PC and some accounting software and did my books on the computer?


It can pay off in the long run to computerise your records.  But there are some steps to take make the transition as smooth as possible.

Make sure everyone who will be working on the records is comfortable with the decision.  When thinking about the purchase of accounting software consider what you will want the system to do. There are a number of effective accounting software programmes to choose from.  Do not underestimate the training required.


I’m setting up a new business. I’m PC literate and have bought some accounting software to record my transactions. What more could an accountant do for me?


Any business owner should do as much of the record-keeping as possible in order to minimise the accountants bill.  However, an accountant is still absolutely necessary to:

Provide help with the record-keeping,  including difficulties with the record-keeping software Sort out the tax and VAT queries and returns including helping to deal wit inspections by HM Revenue & Customs Help deal with payroll / employment law issues such as annual returns, P11Ds, National Minimum Wages, etc Deal with returns to HM Revenue & Customs and ensure the correct  amounts are paid and are made on time thereby avoiding penalties and interest. Help the business owner understand what the financial records are telling them about their business performance

Assist with negotiations with finance providers.Be a source of general business advice and support and to be good listener


Who can give me some impartial advice and what are my options for raising some finance for the growth of my business?


For impartial advice speak to your chartered accountant. Consider raising equity finance, but be prepared to grant outside shareholders a stake in the business. You should ask the following questions while considering the alternative of seeking additional finance:


Do you have assets against which finance could be raised?

Could you manage the stocks and debtors better to free up cash?

Do you have any under-performing assets that will realise cash or reduce costs?

Can you improve the profitability of your products or services thereby generating more cash?

You can discuss your financing requirements and how best to meet them with your chartered accountant.

What are the basic tax differences between being a limited company and as a sole trader?


When the taxable profits exceed the rate at which income tax is levied at the highest rate (40%), the total tax and National Insurance (NI) cost borne by a small limited company is likely to be lower than a comparable unincorporated business. A further advantage is that company profits do not attract NI.So there may be good tax and NI reasons to incorporate your business.  There may be capital gains tax implications when transferring assets from an unincorporated business to limited company. However there are other factors to consider such as having to file accounts at the Registrar of Companies and an increase in paper work. A chartered accountant can advise you about whether incorporation is the right thing for your business.


When should a business first register for VAT and what happens after registration for VAT?


If at the end of any month, the taxable turnover of all business activities in the previous year has exceeded £79,000, it is then that businesses must first register for VAT. HM Revenue & Customs, formerly HM Customs and Excise, must be notified within 30 days.

After a form has been completed, a unique VAT registration number notification will be given.

As a general rule a VAT return must be completed quarterly by the end of the following month.

Businesses which have been VAT registered for at least a year and have taxable supplies of less than £1,350,000 can make one return a year with quarterly interim payments.


Small business can use the Flat Rate Scheme to calculate their VAT liability as a percentage of their total turnover, rather than having to calculate the liability based on individual sales and purchase invoices. There are severe penalties for late, incorrect or incomplete returns.  Customs officials will periodically visit your business premises and inspect your records to ensure you are correctly complying with the VAT regulations. Chartered accountants handle numerous VAT registered businesses and are an excellent source of friendly advice and guidance.


What are the advantages if Tax Returns are sent before 31th October?


If you have income which is not taxed at source and you want the HM Revenue & Customs to calculate your liability for you, then your Tax Return should be filed in by 30th September deadline.

Tax Return can still be filed in after 30th September, but you have to make the calculations yourself, or seek professional help.  The ultimate deadline for completing and filing the Tax Return is 31st January. After that date you will have to pay penalties for not having filed your Return.



How can I find out if I am paying too much tax?


Ask HM Revenue & Customs for a calculation at the end of each tax year. If you have a single source of income such as employment it is not too difficult. Queries should be directed to the tax office identified on your P60 provided by employers, your local tax office or the HM Revenue & Customs helpline. If you own a business or have a number of sources of income, the tax system soon becomes more complicated. Tax advice is available from accountants and by keeping good records it helps to keep the costs down.


What is the best way to go about selling a business?


It pays to use an intermediary as much as possible.  Your chartered accountant may recommend a specialist or be able to help directly with some tasks.

Some general guidance includes:

Start a minimum of 18/24 months beforehand to tidy up the business and to prepare the paperwork for potential buyers such as business plans and financial history Businesses usually sell for a multiple of profits or turnover Find out what similar businesses sell for and what deals have been done. Monitor trade publications Develop an expectation of the likely asking price

Will the management buy the business?


Decide where best to advertise

There are a number of websites such as Business Link to help


How do I get my money out of the business if I want to retire, without closing it down?


Financial planning for retirement and steps to extract value from business should be regularly discussed with a chartered accountant.

The best option, apart from an outright sale is to groom the management to carry on the business. It might be financially viable to employ a person to run the business, initially under your supervision, but increasingly under their own initiative, provided there are controls in place to ensure you are not robbed. Think carefully about the incentives that you need to offer to attract and keep the right person.