5 Top Tips for ensuring you are compliant when becoming self employed.
Becoming self employed is not only a very exciting time, but it can also be extremely daunting. Often, when starting out, people are not compliant simply due to a lack of understanding, at d2 Accounting, we have found that lots of new businesses tend to not be aware of their obligations when starting out.
It is important to remember and acknowledge that most business owners start out because they have an interest and / or expertise in a particular field, its important to accept your strengths and weaknesses and seek advice where you lack knowledge. If you are in any doubt at all about your obligations when becoming self employed, please speak to a professional sooner rather than later as they will be able to help and guide you, ensuring you avoid costly mistakes.
HMRC
1. As a self employed person, it is your responsibility to ensure you pay your tax and national insurance. Therefore, within three months of commencing your self employment, you must register with HMRC. This is relatively easy and you can either do it yourself online http://www.hmrc.gov.uk/selfemployed/iwtregister-as-self-employed.htm or ask your accountant for some help.
BANK ACCOUNTS
2. If you are setting up as a limited company, then you must have a separate bank account set up in the name of the business. If you are trading as a sole trader, there is no legal obligation to have a separate bank account, however, for ease of differentiating your finances it is recommended that you do open a separate bank account. This ensures that your personal and business finances are kept apart. Make sure you visit different banks to try and get the best deals, many people also suggest you do not keep your business bank account with the same finance house as your personal bank account, thus keeping the two entirely distanced.
RECORD KEEPING
3. From day one it is important to keep accurate records of all your business transactions. Whether you decide to use a computerised system or a manual one, keep it accurate and up to date. Basic information that you should keep are:
All bank statements
Cheque & Paying in Books
Copies of all Sales Invoices
Purchase invoices and receipts
Other things to consider are if you are employing subcontractors, you may need to register under the Construction Industry Scheme. Also, if employing staff, you would need to register as an employer with HMRC and ensure that any deductions are paid by the 19th of every month.
INSURANCE
4. Dependent upon your business sector you will need to ensure you are adequately insured to do the job / product you are selling.
If you are employing staff, you must take out employers liability insurance which will protect you and your employee(s) from any claims that may arise as a result of injury, illness or accident from their employment.
If you are a member of a professional body, you may also require professional indemnity insurance, if you are in doubt, contact your professional body for clarification.
Should you have members of the public visiting you or your premises, you must also have public liability insurance. A good insurance broker will be able to advise you on the level of cover you require.
VAT REGISTRATION
5. If your turnover has exceeded £70,000 (as at April 2010) in the last 12 months, or if you expect to turnover more than that in the next 30 days alone, then you must register with HMRC for VAT. You can either ask your accountant to do this on your behalf, or you can do it yourself by completing the form VAT1 from HMRC. If you become VAT Registered, you must ensure you keep accurate records in order to verify your input VAT (VAT spent on purchases) and your output VAT (VAT collected on Sales). Your sales invoices must also show your VAT registration number, be dated and be sequentially numbered.
If you want any help or advice with regards to ensuring you are compliant please feel free to contact us.
