Congratulations, you are working for yourself, or perhaps considering self-employment. Most of our sole-trader clients wouldn’t dream of going back to full-time employment. They prefer the independence, flexibility and opportunity. However, many of our clients find complying with the legislation  daunting, especially when they’d prefer to be out selling or working.

We know the problems and the solutions. Our clients include most of the building trades: architects, structural engineers,  builders,  and plumbers.  Other clients are often consultants, providing training/advice in, for instance,  mobile phone technology, health and safety, and sales.  So, let us explain:

When you start working for yourself as a self-employed person, you should “register” your business with HMRC within 13 weeks of starting, and certainly no later than 13 weeks after you receive any money for your work.  If you don’t register,  you could be fined “£100″.  However, registering with HMRC seems designed to put you off the whole self-employment  idea. The form is particularly confusing if you just want to work for yourself, as it also covers setting up large businesses.

Sole Trader, Partnership, or Limited Company?

Another issue is what type of organisation should you create. The simplest type of business organisation is the “sole-trader”.  A partership is where a number of people jointly operate a business.  Or perhaps you should form a limited company.

The type of organisation you create has tax implications.  In 1997, the taxation of small companies changed, particularly National Insurance contributions paid by employees, the self employed, and partners in a partnership. National Insurance contributions increased again in April 2011. Consequently, there may be significant annual savings if you operate through a limited company.  However,  a limited company is more complex.   However in general,  if you and your partners  are each going to make over £25,000 profit a year, then forming a company might save tax and National Insurance contributions.  It’s not simple, as you might lose out on the new Working Tax Credit. Of course, there are other reasons for setting up a limited company.  Perhaps in future your business will seek outside investment. Or limited liability might provide some protection.

If you wish, we can sort out the paperwork with Companies House to create your company. More importantly, we can deal with all the company secretarial and other legal matters concerning your company’s operations. Alternatively, we can show you what you need to do, as in some cases it is not complicated.

But, What About an Audit?

There is no need to fear the costs of an annual audit, unless your annual turnover exceeds £6.5 million. Note, we are one of the relatively few small accounting practices in the Cambridge area that is registered and licenced to audit your business. Even if your turnover doesn’t yet exceed £6.5 million,  after a while you may find there are good business reasons for an audit.

Is IR35 a Problem?

A new piece of legislation, usually called IR35, could reduce the tax and national insurance savings associated with working through your company.  Often we can help you keep these tax savings by planning in advance. We can put appropriate contracts in place with your customers, that describe how you both interact, which might avoid your “IR35″ problem.  Lots of our clients face potential “IR35″ problems. If  you talk to us before selling and signing each contract,  we can usually provide appropriate strategies to minimise “IR35″‘s effect.

Income from Dividends

You’ve probably heard about proposed legislation about the split of  dividend income where a husband and wife jointly own a company. Traditionally, paying dividends has been one way of reducing your tax bill.  The last government was thinking of introducing new legislation in April 2008.  However, they postponed it.  So far, the new coalition government have not suggested changing the legislation.  Nevertheless we beleive that if we reviewed your, your family’s and your company’s tax position, then we could find substantial tax savings.

Dealing with the Banks

Perhaps you need to borrow money to start your business. In which case you’ll need a feasible business plan.  Perhaps you also want to set yourself targets, or assess whether or not your business is viable.  Using information you supply, we can prepare, or help you prepare, a comprehensive set of business forecasts, and a professional business plan that investors would appreciate.

Accounts & VAT

Once you’ve created your business, in whatever form is most appropriate, we could free you to focus on delivering an outstanding service to your customers.