Business tax

Doglover

Hi, can someone give me a brief run through of tax in business ownership please?

We have a small business as a sideline to our paye jobs.

Wgat is corporation tax? Is that always payable? We haven't set the business up as a company so just running as a partnership ATM although we'll be meeting our accountant soon so wondered what info he'll want and what we need to think about asking etc

Dal_Whinnie

The best place to look initially is on HMRC website, they have a section for self employed. Corporation tax only applies to companies so your profits will be liable to income tax and NI based on your marginal rates.

When you say you are meeting your accountant soon I am not sure whether this is your first meeting or whether you have a long standing arrangement with them to handle your other tax affairs. I will assume it is your first meeting. If so, then he is likely to want following information:

1. Date of when business started
2. Nature of business
3. legal documentation for business (you refer to being a partnership so is there a partnership deed or agreement?
4. Details of income and expenditure to date
5. Copy of business plan or at least detailed projections as to how you expect the business to develop (you can look on websites such as Business Link to get advice around this area)
6. Details of your and your business partners other income and tax positions (this may affect how you run your business going forward)

Questions to ask would include

1. Should we set up a company?
2. What insurances do we need?
3. How does the tax work?
4. How does NI work?
5. When should we take our accounts to?
6. What sort of records should we keep?
7. Could it impact our employed roles (conflict of interest, inability to carry out job efficiently, etc)?
8. What would be position if we took on any employees?
9. If we are set up as a partnership do we need to operate PAYE if we don't have any employees?
10. If we are set up as a partnership how should we split profits?
11. Anything else you want to know about running the business

antrobus

Dal_Whinnie wrote: »

..... If so, then he is likely to want following information....

Details of income and expenditure to date...

The accountant will only want that information when they are at the point when the accounts need to be prepared.

Dal_Whinnie wrote: »

...Copy of business plan or at least detailed projections as to how you expect the business to develop (you can look on websites such as Business Link to get advice around this area)..

Well I'm sure if the OP has got one, the accountant will be interested in looking at it. But they'll only stick it in the file, they don't need one for any particular reason.

Dal_Whinnie wrote: »

...Details of your and your business partners other income and tax positions (this may affect how you run your business going forward)...

If the OP and the other party are going to get the accountant to complete their personal tax returns, or their are expecting some general advice about their personal tax position.

Dal_Whinnie wrote: »

..What insurances do we need?...

I'm sure most accountants will happily give their opinion on such a question if asked, but that's not really their area of expertise.

Dal_Whinnie wrote: »

..Could it impact our employed roles (conflict of interest, inability to carry out job efficiently, etc)?

The accountant will tell them to go and speak to a solicitor if they have any concerns in that regard.

Dal_Whinnie wrote: »

...If we are set up as a partnership do we need to operate PAYE if we don't have any employees?...

That's an easy one. You only need to operate PAYE if you have employees.

Dal_Whinnie

I note your comments Antrobus but since the OP did not say what the purpose of their meeting with their Accountant was then I assumed that it was to get general advice around running their business. I may be wrong but also assumed that this was their first meeting and that the business was relatively new or if it had been going for some time then it had recently grown, I don't know the detail because the OP didn't say.

My suggestions were therefore aimed at enabling the OP to provide the Accountant as much background as possible to enable them to advise accordingly. I accept that full details of income and expenditure, for example, are not required until accounts are prepared but an overall summary will give a feel for the size of business. Likewise, understanding the OP's overall financial position, may influence how the business should be structured.

I agree that the OP would need to go to specialists for advice on insurance, employment law, etc but if the accountant is used to dealing with small businesses then they should be able to give some general advice in these areas but again, whether this is relevant does depend on the purpose of the OP's meeting with the accountant.

One area which I didn't include in my original list was that of VAT and as to whether the OP is registered or potentially needs to so suggest that is added to list of questions if OP hasn't already reviewed that area themselves.

zygurat789

antrobus wrote: »

The accountant will only want that information when they are at the point when the accounts need to be prepared.

I would have thought the relevant detail was the date of the first receipt



Well I'm sure if the OP has got one, the accountant will be interested in looking at it. But they'll only stick it in the file, they don't need one for any particular reason.

But it does improve the clients credibility with the accountant



If the OP and the other party are going to get the accountant to complete their personal tax returns, or their are expecting some general advice about their personal tax position.

This is a very important part of the accountants role and the most asked question is probably "How can I reduce my tax?"

That's an easy one. You only need to operate PAYE if you have employees.

And partners are not employees. This one puzzles lots of people. With PAYE the taxable income is quantified, with a partnership the income or profit is only quantified when the accounts have been prepared.

It is possible to take no money out of a partnership business and yet pay a lot of tax, conversely it is possible to take large sums out of such a business and pay no tax. In the first case the profit would be in assets maybe bank balance or stock/debtors and in the latter there would be a large amount of debt.

antrobus

zygurat789 wrote: »

I would have thought the relevant detail was the date of the first receipt

AKA the date of when business started

zygurat789 wrote: »

But it does improve the clients credibility with the accountant

I can assure you that the only credibility that matters to the accountant is the credibility that the client will actually pay their fee.:)

zygurat789 wrote: »

..This is a very important part of the accountants role and the most asked question is probably "How can I reduce my tax?"

Undoubtedly. But the OP will need to be clear in their discussion with their accountant as to the distinction between (a) the personal tax affairs of the individual partners and the (b) the partnership tax return. It is not unknown for an accountant to act for a partnership but not act for one or more of the individual partners.

zygurat789

antrobus wrote: »

AKA the date of when business started



I can assure you that the only credibility that matters to the accountant is the credibility that the client will actually pay their fee.:)
I can only disagree with you on this matter



Undoubtedly. But the OP will need to be clear in their discussion with their accountant as to the distinction between (a) the personal tax affairs of the individual partners and the (b) the partnership tax return. It is not unknown for an accountant to act for a partnership but not act for one or more of the individual partners.

Reading the op I deduce that the couple concerned have had little experience of business and even less of accountants. It is the more usual option, although as you correctly point out "not unknown" for an accountant to act for a partnership but not one of the partners, that the accountant acts for the partnership and, in this case, both the partners.
Given this arrangement an accountant would then be best placed to arrange for the income to be organised and allocated so as to attract the least amount of tax.

zygurat789

Doglover wrote: »

Hi, can someone give me a brief run through of tax in business ownership please?

We have a small business as a sideline to our paye jobs.

Wgat is corporation tax? Is that always payable? We haven't set the business up as a company so just running as a partnership ATM although we'll be meeting our accountant soon so wondered what info he'll want and what we need to think about asking etc

Don't be too concerned about what you may have read above.
Just too say your accountant will discuss with you how to allocate the business profits which, in the future may involve forming a limited company. Just remember that this sort of scenario is fairly common and a good, experienced accountant will have dealt with it many times before and should know all the accounting tricks.

Pennywise

Dal_Whinnie wrote: »

The best place to look initially is on HMRC website, they have a section for self employed. Corporation tax only applies to companies so your profits will be liable to income tax and NI based on your marginal rates.

When you say you are meeting your accountant soon I am not sure whether this is your first meeting or whether you have a long standing arrangement with them to handle your other tax affairs. I will assume it is your first meeting. If so, then he is likely to want following information:

1. Date of when business started
2. Nature of business
3. legal documentation for business (you refer to being a partnership so is there a partnership deed or agreement?
4. Details of income and expenditure to date
5. Copy of business plan or at least detailed projections as to how you expect the business to develop (you can look on websites such as Business Link to get advice around this area)
6. Details of your and your business partners other income and tax positions (this may affect how you run your business going forward)

Questions to ask would include

1. Should we set up a company?
2. What insurances do we need?
3. How does the tax work?
4. How does NI work?
5. When should we take our accounts to?
6. What sort of records should we keep?
7. Could it impact our employed roles (conflict of interest, inability to carry out job efficiently, etc)?
8. What would be position if we took on any employees?
9. If we are set up as a partnership do we need to operate PAYE if we don't have any employees?
10. If we are set up as a partnership how should we split profits?
11. Anything else you want to know about running the business

An excellent post. I'm an accountant and would be really impressed if a potential client came prepared like that. It would make our opening meeting a lot more useful for us both and enable us to get right into the detail from the start.

Savvy_Sue

I'm just going to add that in my experience, the first thing an accountant will want to see is photographic ID and evidence of address for each individual in the room, regardless of whether they will be acting for all such individuals.

I went to see an accountant and took DH along to take notes. The business in hand had nothing to do with DH, but we both had to show ID.

Dal_Whinnie

Pennywise wrote: »

An excellent post. I'm an accountant and would be really impressed if a potential client came prepared like that. It would make our opening meeting a lot more useful for us both and enable us to get right into the detail from the start.

Yes, it's the same as any meeting you go to, prepare for it (which is what OP is doing by asking the question). It doesn't mean doing a lot of work but being able to present the whole picture. It also means knowing what you want to get out of it, your question may seem obvious to others but if you don't know the answer and you want to, then ask.

Savvy_Sue wrote: »

I'm just going to add that in my experience, the first thing an accountant will want to see is photographic ID and evidence of address for each individual in the room, regardless of whether they will be acting for all such individuals.

I think this is generally required in respect of money laundering so I wouldn't necessarily expect an accountant to require this for an initial discussion (which I have assumed this is) but if they do they should make it clear before the meeting. Very interesting that they also required it for your 'note taker', that really seems OTT.