Module 8

1
Module 8
Start a Business Programme

• Bookkeeping, Tax, NIC and VAT

2
Module 8 - Contents

• Bookkeeping
• Tax
• National Insurance Contributions (NIC)
• VAT
• PAYE
• Sources of support and advice

3
Importance of bookkeeping

• Legal requirement of HM Revenue and Customs
• Preparing your tax return
• Monitoring financial performance
• Budgeting
• Cost control
• Credit control
• Financial monitoring and control
• Obtaining finance in the future
• Provision of historical financial information

4
Factors to consider
Setting up a bookkeeping system

• Type of business
• Type of transactions
• Compatibility with accountants system
• Easy to use
• Cost
• VAT, if you are VAT registered

5
Keeping records what you need

• Records of sales/income
• e.g. till rolls, invoices
• Records of purchases/expenses
• e.g. receipts, petty cash receipts
• Bank transactions
• e.g. bank statements, lodgement slips/deposit
  book, cheque stubs

6
Filing and storing financial records

• Filing records
• Date order - cash or accrual basis
• Numerical order
• Alphabetical
• Storing records
• Filing cabinet
• Box file
• Document wallet
• Ring binder

Note all records must be kept for at least 6
years
7
Bookkeeping systems

• Analysed cash books
• Patent systems e.g.
• Collins Complete Traders Accounts Book
• Simplex D
• Twinlock
• Kalamazoo
• The Best Small Business Bookkeeping System
• Computerised accounts e.g.
• MYOB
• Quick Books
• Quicken
• Sage
• Spreadsheets

8
Registering for Income Tax

• Complete tax/self assessment registration form
• (can be downloaded in PDF format)
• or
• Telephone the Newly Self-Employed Helpline
• Must register within 3 months
• Fines/penalties for late registration

9
Forming a limited company

• Complete the appropriate forms etc. yourself
• Use one of the following
• - Accountant
• - Solicitor
• - Company formation agent

10
Important tax form return dates
Tax forms

• On or before 30th Sept if you want the Tax
  Office to help calculate the tax and class 4 NIC
  due
• On or before 31st Jan if you, or your
  accountant will calculate the tax and class 4 NIC
  due

Late tax return - penalties

• Fine/penalty for late tax return
• Further fine/penalty if not received within the
  next 6 months
• Daily fines and surcharges may be applicable
  thereafter

11
Sole Trader Income tax is payable on the profits
of a business before drawings and NICs
are deducted Partnership Each partner is taxed
on their share of the profits before drawings
and NICs are deducted Limited
Company Corporation tax is payable on the
profits of the business. A directors
wages is treated under the PAYE system
What is a business taxed on?
12
Allowable expenses

• Examples of allowable expenses
• Cost of goods of sold/direct costs
• Fixed costs (overheads)
• Bad debts

13
Capital allowances

• Plant and machinery
• Vehicles
• Equipment
• Industrial buildings
• Research and development

14
Calculating tax payments

• Net profit/income
• Less tax allowances
• Taxable net profit/taxable income

Tax is calculated using the current tax bands and
rates
15
Important tax payment dates

• 31st January
• - 1st payment on account
• 31st July
• 2nd payment on account
• 31st January of the next year
• - Final balancing payment

16
Class 2 NICs

• Register using the self-employment registration
  form or by telephoning HM Revenue and Customs
  Helpline for the Newly Self-employed
• Flat weekly rate paid monthly by direct debit
  or quarterly
• Must register within three months
• Fine/penalty for late registration

17
Class 4 NICs

• Based on the business profits
• Assessed using the tax return
• Payable to the HM Revenue and Customs

18
Registering for VAT

• Legal requirement to register
• If turnover exceeds specified threshold
• If you expect to reach the threshold within 30
  days
• How to register
• You can register by completing the online
  application or
• by completing a VAT registration form
• Contact Customs and Excise National Advice Unit
  0845 0109 000

19
Bookkeeping and VAT

• Maintain VAT accounts
• Keep all VAT receipts (output tax)
• Keep all VAT invoices/records of sales
• (input tax)
• Ensure your invoices etc. meet the requirements
  of HM Revenue and Customs

20
VAT returns and payments

• VAT returns are usually made on a quarterly basis
  (monthly and annual returns can be requested)
• Vat returns are used to declare VAT due on sales
  and VAT reclaimable on purchases
• Penalties and levies are applicable for late
  returns/payments

21
PAYE - Pay As You Earn
PAYE

• The system used by HM Revenue and Customs to
  deduct the appropriate income TAX and NIC from
  employees gross wages

22
Sources of help and support

• Accountant
• HM Revenue and Customs Business Support Team
• Various help lines provided by HM Revenue and
  Customs
• HM Revenue and Customs website
• Companies Registry NI
• Various small business support websites
• Tax planning software