A start-up often focuses on minimising costs, especially during the initial months when the cash flow may be limited. Starting a new business gives you the opportunity to maximise revenues from the very beginning by considering company status. Forming a limited company may be beneficial to you, depending on the level of income. For those who will be earning more than the threshold for a higher rate taxpayer, setting up a limited company may be beneficial. However, although there are many advantages to being incorporated, including the limited liability aspect, there are also disadvantages which have to be carefully considered.
Consider contacting HMRC to register for VAT. You don’t have to wait until your turnover reaches the threshold to register, as you can do this on a voluntary basis. Calculate the benefits of registering for VAT against the additional responsibility of keeping records, and the completion and submission of VAT returns on a regular basis.
Keep accurate business records from the very first day of business. This will provide an accurate portrayal of the company so that you are aware of the situation at any time. If bookkeeping isn’t your strong point and you think you may fall behind, consider outsourcing to a professional who will know which expenses and allowances you can claim to maximise revenues. Business records which are accurate and up to date can help to reduce your accounting bill at the year end.
Claiming expenses and allowances
Make sure that you are aware of all expenses and allowances which you are eligible to claim, as this can significantly reduce your tax bill at the end of the year. Business equipment and travel may all be claimed for, although there are strict criteria to abide by. All expenditure claimed must have been incurred solely for business use. If any personal use is involved, this must be deducted from the claim. If you work from home, you may be able to claim a small amount to cover additional costs, like the extra cost for heating and energy. This amount is claimed as a flat rate for each week, and you may be asked for evidence by HMRC.
You may also be able to claim costs of equipment and assets that you already owned but have introduced into the business when starting up. If you have registered for VAT you may also be able to claim back the amount paid on equipment used in the starting up of the business.
Take advice from an expert to ensure that you remain compliant with rules and regulations at all times.
Article by Karl Bilby from The Accountancy Partnership – www.theaccountancy.co.uk