Startup Tax Questions

D&T · Oct 26, 2006

Hi I have recently started up as self-employed (sole trader) and have a few questions I hope people won't mind answering.

1. When do I put down my start date as self-employed as it's a bit vague.
e.g.
- Registered website domain March 2006.
- Started creating website April 2006.
- Website up and running June 2006.
- First sale July 2006

2. I bought my computer for business use in 2005 but didn't use it for such until 2006. Can I still claim it as a business expense?

3. Most invoices will be electronic. Do I need to keep a printed copy too?

4. Should I get an accountant? I know most say yes but for a tiny business is it worth it and will it really save me more than it costs in the long run for a straight forward tax return?

5. How much (roughly) would a good accountant cost per year for someone in my situation?

Thanks for any help & advise.

bwglaw · Oct 27, 2006

I will answer what I can:

1. July 2006 (unless you have opened a business bank account and started to accrue interest. You need to register with HMRC now to avoid any penalties)

2. Ask Accountant

3. Ideal to keep printed copy for back-up

4. Yes, if you do not know what you are doing

5. Rough guess up to £500 for a sole-trader depending on how well you keep your books etc

Jonathan

Arcadian · Oct 27, 2006

I'd say 1. Depends what you were doing. If you'd started to seek out business, do research, find customers etc (and incur business expenses) then you would have started well before your first sale. Some people are trading for months before they ever make a sale.

2. The computer can come into the business at whatever date you decide you started at its value at that date. Computers lose their value so quickly this might not be much. It doesn't go in as a business expense but goes into your capital allowances pool (assuming you don't need balance sheet accounts and a simple income and expenditure set up will do)

3. I agree

4. See 2 above - do you know what capital allowances are? Spend your time on the business and let an accountant get on with the accounts. I make more money putting right the affairs of those who did it themselves and messed it up that I would doing it in the first place. I always suggest a local accountant or one who specialises in your business (hopefully both!)

5. Jonathan please send all the £500 clients to me ...

JOHNAF · Oct 27, 2006

£500 is a bit excessive as most accountancy firms will only charge up to £ 250 maximum for a self employed tax return

bwglaw · Oct 27, 2006

I did say "up to"... and I am not just referring to a tax return but to produce the entire accounts etc. It will depend how the accounts are presented

dcaccounting · Oct 27, 2006

D&T said:
Hi I have recently started up as self-employed (sole trader) and have a few questions I hope people won't mind answering.

1. When do I put down my start date as self-employed as it's a bit vague.
e.g.
- Registered website domain March 2006.
- Started creating website April 2006.
- Website up and running June 2006.
- First sale July 2006

You would put down the date you actively started your self employment.

D&T said:
2. I bought my computer for business use in 2005 but didn't use it for such until 2006. Can I still claim it as a business expense?

You will be able to introduce this into the business at it's current market value.

D&T said:
3. Most invoices will be electronic. Do I need to keep a printed copy too?

I'll have to disagree with the rest here. (only as I run a paperless office) Just have a good back up system. ;-)

D&T said:
4. Should I get an accountant? I know most say yes but for a tiny business is it worth it and will it really save me more than it costs in the long run for a straight forward tax return?

Yes

D&T said:
5. How much (roughly) would a good accountant cost per year for someone in my situation?

How long is a piece of string?.....

How well will you keep your business records?
How well will you keep your personal records?
What are the rest of your personal circumstaces?
Do you have investment income?
Land & Property?
Do you pay pension premiums?

(please do not reply to this, but as you can see there are a few areas that need to be looked at before any sort of price can be fixed)

D&T said:
Thanks for any help & advise.

Your welcome

Regards

Dean

D&T · Oct 27, 2006

Thanks for the advise so far.

So if I registered a domain on 1st April this would be a business cost would I then have to say i started on the 1st of April. If this is the case would i need to do a tax return for year 05/06 for those few days before 6th April?

Also what should I expect from an accountant, and do they charge an annual fee that just covers your tax return or will it generally include other issues /advise?

dcaccounting · Oct 27, 2006

D&T said:
Thanks for the advise so far.

So if I registered a domain on 1st April this would be a business cost would I then have to say i started on the 1st of April. If this is the case would i need to do a tax return for year 05/06 for those few days before 6th April?

Strictly speaking the answer is yes.

D&T said:
Also what should I expect from an accountant, and do they charge an annual fee that just covers your tax return or will it generally include other issues /advise?

Once your full circumstaces have been assertained, you should be able to get a fixed fee. As for other issues and advice it really depends on the complexity of it. If its the odd phone call here and there most won't charge. I know I don't. Prehaps that's why my WIP ledger looks poor at the moment or is it becuase it's the end of the month

Regards

Dean

dcaccounting · Oct 27, 2006

Have you completed and returned this form:-

http://www.hmrc.gov.uk/forms/cwf1.pdf

If this is the form you are trying to complete you are outside of the three months deadline and can be liable to penalties!

Regards

Dean

Arcadian · Oct 27, 2006

Yes, strictly speaking, if you started on 1 April 2006 HMRC would want a 2005/06 return for the few days but in practice they treat the year ended 31 March the same as the year ended 5 April otherwise it would waste an awful lot of HMRC time and resources. I hate inheriting accounts that end on 5 April. It always looks untidy and amateurish to me and shows the person didn't have an accountant when they started but that's just my personal foible. I like everything tidy and ending the year on 31 March makes my clients remember their accountant's birthday

sjbeale · Oct 31, 2006

You are classed as self-employed from the date you register with the Inland Revenue. You can claim for business expenses/purchases for the previous three months prior to you starting trading.

You can learn how to keep your accounts yourself (ingoings and outgoings) from library books or free advice from Business Link.

I use a book-keeper to submit my accounts online as they know where to fill in the right boxes and act on your behalf if there are any queries. You then get a letter telling you how much tax you owe and when to pay it. Book-keepers are much cheaper than an accountant.

Arcadian · Nov 1, 2006

Not so. You are self employed from the date you begin trading (and that has a myriad of definitions). You have three months to register with HMRC ie the two dates could be 90 days apart!

Kent Accountant · Nov 2, 2006

sjbeale said:
Book-keepers are much cheaper than an accountant.

... and of course in general much less experienced and lacking in the training that qualified accountants have undertaken and continue to undertake

Kent Accountant · Nov 2, 2006

sjbeale said:
You are classed as self-employed from the date you register with the Inland Revenue. You can claim for business expenses/purchases for the previous three months prior to you starting trading.

You can learn how to keep your accounts yourself (ingoings and outgoings) from library books or free advice from Business Link.

I use a book-keeper to submit my accounts online as they know where to fill in the right boxes and act on your behalf if there are any queries. You then get a letter telling you how much tax you owe and when to pay it. Book-keepers are much cheaper than an accountant.

Or of course you can take incorrect advice from an HR consultant about your tax affairs.

If you take on an employee you can learn how to draw up employment contracts and deal with employment issues from library books or free advice from Business Link.

You can use ACAS or the DTI website to draw up your employment agreements as they show you how to fill in the right boxes and they are much cheaper than an HR consultant

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Startup Tax Questions

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