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Answer:

I get asked this all the time. The answer is normally "No". Consider that you would have to submit a P11d to cover any private use. The business would have to pay 13.8% NI on the LIST PRICE of the car every year. You would have to suffer income tax (or reduce your salary) on the taxable benefit. And you can no longer claim 45p per business mile as a tax deduction. In cases where a very low emission car (electric or sub 50g Co2) is considered and low levels of business mileage it MAY be beneficial. Also consider contract hire as some of the VAT may be recoverable and first off consider the deals available as these can often outweigh the tax benefits of different financing options.

Answer:

Unless you are able to spend more than 2% of your sales on qualifying goods, you now have to pay 16.5% of your gross sales income in VAT. This is higher than your previous flat rate percentage. Many confuse this percentage with the 20% VAT standard rate and believe they still save 3.5%. But this is not the case. The 16.5% applies to the gross income which equates to 19.8% of the net income - pretty much the same. So in nearly all cases you are better off financially coming off the flat rate scheme if you do not meet the 2% criteria. In service organisations the difference can be marginal. In which case consider staying on the flat rate scheme - you will have easier VAT returns and no need to retain formal VAT receipts - and in the case of a VAT inspection the purchase invoices don't even need to be taken off the shelf.

Answer:

This depends of course. Now that dividends are taxed you may not want to consider a limited company until your profits exceed £30k. There are a lot of factors to consider and many are not tax related. Limited companies are generally more expensive to run but give a more professional image. Auto-enrolment can be more time consuming for sole traders. Sole traders usually get better tax relief for working from home. Limited companies generally are less likely to get a investigation than a sole trader. This is really a subject for discussion to consider all the options.

Answer:

The extra 7.5% dividend tax doesn’t tend to change the low salary high dividend tax efficient route for extracting money from your company. Paying a salary equal to the NI threshold (£719 pcm for 2019/20) is often the most tax advantageous way forward. However of course it depends on your circumstances. Think of more ways of extracting cash from your company. For instance make sure that all business entertainment goes through your company (or you claim it on expenses) - in the past it may not have mattered (as entertaining is not tax deductible) because your dividends may have been tax free.

Answer:

Normally basic rate taxpayers are marginally better off making company (employer) pension contributions rather than personal contributions. A business will achieve 19% corporation tax deduction for the contribution, a person 20% at source with the pension claiming it directly from HMRC.  But  you could pay more tax on your dividends to extract the funds in order to make a personal contribution.  This could be at the dividend tax rate of 7.5% or 32.5%. Personal contributions are also limited to 100% your earned income in a tax year (e.g. pension or investment income would not count) - where company contributions do not have such a limit. Always consult a financial advisor before making a pension contribution. We can provide details.

Answer:

HMRC can view this as artificial separation of trade.  Several factors are taken into account in deciding whether the two businesses should be considered together for VAT - or separately.  For instance the ownership.  Perhaps one business is a sole trader and the other a limited company with different ownership.  The customer base.  Perhaps one business supplies male haircuts and one female hairdressing.  Also the financing of the business is considered.  Most important is the trade.  How different are the trades from each other?  A plumber simply splitting his business into 2, one being for domestic clients, the other for business clients would not be able to VAT register one business and not the other.

Answer:

Generally the answer is no.  A car is seen by HMRC as an asset that would either likely have some private use or it would be AVAILABLE for private use.  Even if the car wasn't actually used privately, unless you can demonstrate that the car is also not available for private use, the input VAT would be blocked.  Writing to employees explaining that they must not use the vehicle for private use, locking the keys away at night, leaving the car at the business premises when not being used for business and not driving the car from home to the office are some measures you could take to demonstrate there is no availability for private use.  There are separate, less stringent rules for vans. Which can make them a more attractive option.

Answer:

We offer all clients the use of their own bookkeeping software. You can raise sales invoices, email them to customers and much more. Please get in touch if this is of interest. Be aware that although you may not immediately register for VAT, when you do register, it may be possible to recover VAT on expenditure prior to starting your trade.  Make sure you keep VAT receipts. Furthermore making a profit is not a prerequisite for being permitted to recover VAT on your purchases - as long as you were trading with a view to profit and it is not your hobby.  VAT incurred on abortive business costs can also be recovered - or if there is a long lead time (many many years in some cases) before revenue can be generated, the costs relating to that revenue may have VAT that can be recovered now.

Answer:

IR35 is the widely used name for the (significant) extra tax payable to HMRC where a limited companies offers the services of an individual to a customer in an "employee-like" role. We have many freelance contractor clients and have a lot of experience in this area. Come and talk to us about your particular circumstances. It isn't just about what is says in your contract but what happens on a daily basis as your company provides its services.  HMRC would look at the level of supervision, direction and control (SDC) you are under in your work.  The less the better.  A plumber who turns up at your front door to fix your taps will not expect anything more than a cup of tea.  He will be telling you what needs to be done.  He brings his tools and expertise to the job. He is self employed. If you are under a high level of SDC you may need to report your company earnings under IR35.  In recent changes government bodies are expected to decide if service providers fall under IR35 or not.  If they do they (or the nearest agency to the service provider) are expected to make the necessary tax and NI deductions. See also the BLOG entry on IR35 changes in April 2020.

Answer:

Everyone is different. Keeping your own books means you keep close to the numbers and when cashflow is very tight this can be crucial. Many people are not mathematically inclined and recognise where their strengths and weaknesses are - and get a bookkeeper to help very early on. However eventually most business owners get to the stage where they use a bookkeeper and use their time to run their business, increasing profitability and managing customers and new markets.   When looking for a bookkeeper it is important to make sure you check they are suitably qualified - preferably with relevant experience.  There are many aspect of VAT that may not be familiar to them.  For instance the flat rate scheme and the limited cost trader for VAT, or dealing with VAT on overseas transations or rental income. We have a wide range of experience in VAT and offer bookkeeping services as well as accounting/tax services. If this is of interest please get in touch.  

Answer:

In short yes. The upside is that a capital loss can be carried forward and offset against future capital gains for an indefinite period. For instance if you close your business in 20 years and claim entrepreneurs relief you can offset a capital loss that arises prior to that. Calculating the loss correctly is important - some things are deductable and others are not. For instance the replacement of single glazed windows with double glazing in your investment property would not be deductible from the capital gain and so could not be used to create a capital loss.  If you have generated a capital loss this can normally be used to offset capital gains in the same or future years - including gains arising from unrelated transactions.  It is important to retain these records so that if a gain is made in many years (or decades) you can still utilise this capital loss. This is a complex area so please get in touch if you need help.