by Steve Wiltshire

Starting your own business can be an exciting – but daunting – time. One of the first and most important decisions to make is how are you going to structure your business? The reason this decision is so important is that it has a variety of consequences – not only related to tax, but also from a legal and administrative perspective, and how your business will be perceived.

The main options to consider are whether to set up as a sole trader, a limited company, or a partnership. Each has benefits and drawbacks.  As a sole trader, there is significantly less of an administrative burden than setting up as a company.  However, as a sole trader you are taxed on profits as they arise through income tax (at 20%, 40% and 45% depending on your level of earnings).  You also have a class 2 and 4 National Insurance burden.

On the other hand, setting up as a company gives more flexibility over your personal taxation position, as you are personally liable to income tax on income from the company when it is extracted from the company, rather than as profits are earned by the company. There also tends to be more flexibility, and therefore potential available tax planning opportunities, when structured as a company, although these have been mitigated with the recent changes to dividend taxation rules.  The company will be liable to corporation tax as soon as profit is earned, but this is at a lower rate of 19% (and this is set to fall to 17% in 2020).

Legally, owning a company offers more protection over personal assets than setting up as a sole trader, as the company is a separate legal entity from the shareholder.

However, there is additional administrative cost and procedures to follow as a company, and any tax saving may not be sufficient to compensate for this additional burden. Also, changes to taxation over dividends from April 2016 reduces the taxation efficiencies of setting up as a company, which makes this a less attractive proposition than previously.

In addition, anti-avoidance legislation (IR35) means that under certain circumstances, profits made through a company will be targeted as ‘earned income’, which means any tax saving will potentially be lost. This is a particularly important area to assess thoroughly before deciding on the right structure for your business.

A third alternative is to set up as a partnership. More and more businesses are setting up as a Limited Liability Partnerships.  With this structure, profits earned are subject to income tax as they arise, but the liability of the individual partners is limited to the capital which they have put into the business (rather than their personal assets), in much the same way as for a company.

When choosing which type of business structure to use, another consideration might be the availability of loss relief. If it is anticipated that the business might be loss making in its early years, this could impact the selection decision.

Capital gains arising on any sale of the business in the future may also be taxed, depending on which structure is chosen.

Overall, this decision is complex, and each individual’s preferences, priorities and circumstances will impact the final outcome. Here at Frost Wiltshire, we can set out the options available to you and give you the information and advice which you need to make an informed decision on what suits you and your business best.

by Mel Hackney.

As per our recent blog post, the deadline for filing self-assessment is 31 January 2019. Once this is completed for the year and out of the way, it is a natural time to reflect on the service you have received from your current accountant.  Many potential clients we speak to are keen to change accountants for various reasons, but fear that it will involve too much hassle.  However, be assured that there is very little administration for you at all.

In fact, we have recently overhauled our ‘new client onboarding’ process so that all you have to do is fill out a short online form, which can even be done using your smart phone.

We then contact your previous accountant directly for the records and other information we’ll need, so you are totally removed from this process.

We pride ourselves on delivering value for money, and as part of our compliance service we always consider tax planning savings for you at each step.

In addition, what sets us apart from many other small firms is the level of our team’s experience , and the associated breadth of our service offerings, particularly for small businesses.

If you are tempted to change and would like to arrange to meet us or have an initial phone call to hear more about the services which we offer, please contact Steve Wiltshire or Mel Hackney.

by Mel Hackney.

The prospect of Making Tax Digital (MTD) for businesses can be a scary one. There is much in the news about the administrative burden that this could become on sole traders, companies and landlords alike.

So what exactly is MTD for businesses, and where are we with progress?

To put it simply, MTD for businesses is a project which HMRC are undertaking to ensure that (eventually) all businesses keep digital records rather than paper.

At this stage of the process HMRC are focusing on VAT registered business.  From April 2019 all VAT registered businesses with turnover above the VAT threshold will be required to maintain digital accounting records. Maintaining paper records will no longer meet the legal requirements in tax legislation

Businesses and organisations will be required to use a functional compatible software product to submit their returns to HMRC. The software will use HMRC’s API (Application Program Interfaces) platform to submit information to HMRC. The current HMRC online tax return services will be withdrawn for those within the scope of the MTD rules.

Here at Frost Wiltshire we have ensured that those of our clients to whom this is relevant are keeping records which will comply with this new legislation. This has been done largely ‘behind the scenes’, so for the vast majority of our clients the only impact that they have seen has been to receive an email from us letting them know everything is in hand.

If you know you aren’t yet compliant and would like some help, or are concerned about the changes and would just like more information, please get in touch.

by Emma Hooper.

Now that the Christmas and New Year celebrations have drawn to a close, it’s time to start thinking about less exciting things – like tax.

The 2017/18 Self-Assessment Tax Return deadline is 31 January 2019.  Appreciating that taxes are probably the last thing you want to be thinking about during this cold and dark January, why not offload the task onto us?  We will make sure your return is submitted on time and that you only pay what is necessary, with tax saving advice available where applicable.

If you’ve been super organised and already have submitted your return, congratulations!  However, we might still be able to reduce the amount you need to pay on account for the coming tax year.

And don’t forget that any outstanding liabilities shown on your 2017/18 return, plus any payment on account due towards your 2018/19 tax liability, will need to be paid by 31 January 2019, so make sure this is done in time to avoid any interest charges on late payments.

Any questions? Please get in touch! We will be more than happy to help.