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More than 9.5 million people have been put on furlough since the government's Job Retention Scheme started in April. While the scheme helps to safeguard jobs, it doesn't guarantee that all jobs will be saved when the scheme comes to an end in October.
If you're on furlough, or facing the threat of redundancy, you might be taking stock of your situation and considering a change of career path or even contemplating starting up your own business. In fact, according to research by GoDaddy, 20% of people were considering setting up a new business venture during lockdown, while Growth Intelligence reported that more than 85,000 online businesses were launched during the same period.
If you are planning to start your own business, we've outlined below some of the most important things you need to know to help get you started.
When you start a business, one of the first decisions you need to make is the choice of structure. Does it make sense to operate as a sole trader, or will becoming a limited company work better for you? It's an important choice for many business people, freelancers and self-employed workers, and has implications for finance, tax, legal obligations and a raft of other considerations. It's worth taking a look at which of the two will best suit your particular enterprise, and working out the pros and cons for each. You can find out more about whether to become a sole trader or limited company on our blog here.
Value Added Tax is a government tax on goods and services, and it's based on the increase in value of a product or service at each stage of production and distribution.
All businesses that provide taxable goods and services must register for VAT if their turnover is more than £85,000, although if they have a lower turnover they can still register.
Registered businesses must pay HMRC the VAT they have charged, but they may offset this with the VAT they have incurred on goods or services they have purchased.
HMRC's Flat Rate Scheme allows a VAT registered business with a turnover of less than £150,000 per annum to pay a fixed percentage of its turnover to HMRC every three months. The scheme is intended to help small businesses by reducing the paperwork and allowing new companies to keep some of the VAT they charge their customers. You can find out more about VAT on the government's website.
Auto-enrolment is a government initiative aiming to help more people save for their retirement through a workplace pension scheme. If you are planning to take on staff, it is now compulsory for all employers to automatically enrol any eligible personnel into a pension scheme, and contribute towards it. Employees must also contribute, although they are permitted to opt out of the scheme all together.
Companies that do not comply with the rules face being fined. You can find out more about auto-enrolment on our blog The latest on auto-enrolment compliance.
Making Tax Digital is a scheme by HMRC to improve the efficiency of the tax system. For VAT registered businesses with a taxable turnover above the VAT registration threshold (currently £85,000), you will be required to keep and send VAT returns using Making Tax Digital approved software.
The idea is that HMRC will receive information electronically and will be able to improve the time it takes to process the submission of VAT returns whilst reducing the risk of errors and misrepresentation of VAT liabilities.
Making Tax Digital affects all types of businesses, including sole traders, partnerships and limited companies that have a turnover above the current VAT threshold of £85,000. Of course, while you cannot know what your turnover will be in your first year of trading, it is a wise idea to prepare yourself for the eventuality by ensuring you operate software that's compatible with Making Tax Digital requirements. You can find out more about this on HMRC's website - find software that's compatible with Making Tax Digital.
In the early days of operating your business you might feel that investing in a bookkeeper is an unnecessary expense. However, if you are planning to employ staff, or you know that you won't have the time or the expertise to understand the complexities behind managing your own books, it is worthwhile consulting with a professional bookkeeper to discuss your options. Bookkeepers will be able to advise you on many aspects of the day to day running of your business including budgets, cash flow, payroll, credit control and specialist software.
Here at AMR we are experts at helping businesses of all sizes with their bookkeeping and payroll requirements. If you have any questions about the contents of this blog or you need professional bookkeeping advice, our friendly team will be happy to assist you. Get in touch and find out how we can help you and your business.