Ok,
I'm sure like many people here since the change in legislation in April a lot of people must be wanting to 'do things themselves', rather than risk using a service either in part or full.
For this I thought it would be useful to create a thread (maybe a moderator can 'sticky' the thread?) which would explain the basics of a) setting up the company, and b) the basics of the daily/weekly/monthly/etc tasks involved if you plan to do your own books.
Obviously everyone's situation will be slightly different but at least it can perhaps be used as a check guide to make sure you have covered the basics and got a basic understanding of how to operate your company.
Having started my own company on April 3rd 2007, here is what I understand so far, I will use my own circumstances in the description as an example. Please feel free to add or correct anything I have detailed here:-
Company setup
---------------
1. Setup company and obtain company number, registered office, directors, company secretary, split the shares as desired (in my case 500 myself, 500 my partner as we both work within the company on separate projects. Take advice on this and read up on S660 if you are splitting it between yourself and your husband/wife etc).
2. Register the company for corporation tax (in my case I was sent a form from my tax office requesting this soon after I setup the company).
3. Register for PAYE, obtain a PAYE pack which details various codes to be used such as payroll tax codes, etc, and explains how to pay your employees within the company.
4. Register for VAT (optional if under a certain threshhold of turnover), but in my case I chose to do it as I plan on registering for the flat rate VAT scheme, thus I can charge clients 17.5% VAT, but only pay back 13% to the tax man (12% in year 1)! making a few quid in the process!
5. Purchase software to do the book keeping and payroll (optional), you can do it all on a spreadsheet or with the PAYE pack (for payroll) from HMRC, but in my case I chose to purchase Sage Instant Accounts, and Sage Instant Payroll as I've heard it's good (yet to find out as only just setup!). Set a company financial accounting period (e.g. from when the company intends to run its finances from and to for the year).
6. Get a business bank account setup (in my case I went with Barclays as thats who I have my current accounts with, they gave me a business bank account, and an additional account which gives a higher interest rate which I assume I transfer my VAT, PAYE, payments pending into in order to make some money off it before it gets sent to HMRC).
Operating the finances of the company
-------------------------------------
1. Invoice clients following the rules required for invoicing. If VAT is to be added then do so, if you are waiting for your VAT number then charge without VAT but state on the invoice 'VAT pending'. Once you have a VAT number invoice for all the VAT not yet paid. (Can someone please confirm this is correct? It is how I currently understand it).
2. Purchase legitimate business expense items using the company bank card or cheque book. This in essence means they are paid for using company profits and are tax free. If expenses are paid for from your own personal funds then they need to be recorded on a P11D and cross referenced on self assessment after you have reimbursed these costs from the company account back to your own account. It may be the case that business account purchases go on the P11D too, i'm not sure because this is an area I've not yet touched on!, only read the basics... (Can someone please confirm this is correct? It is how I currently understand it).
3. From your company profits, deduct VAT owed at the correct rate, then deduct any outstanding business expenses owed. Once this is done pay the company employees using PAYE (as a Director you are not bound by the national minimum wage, so you can pay yourself a very small fee, I've heard that it's an idea to pay £100 a week as this still means you pay a NI/tax contribution, but I've also read arguments against this suggesting that the tax man might not look very favourably on this, and to pay at least national minimum wage?, all other employees must be paid at least national minimum wage. The reason for doing this is that it leaves profits in the company bank account which can be taken later as a dividend).
The figure left is then the overall company profit to which can be paid to all shareholders in the form of a dividend by holding a shareholders meeting, recording the minutes of the meeting, and issuing a dividend certificate. The company pays the corporation tax element of this so must be deducted from the dividend and the NET amount sent to the shareholder. (I did have a web link with templates explaining how to do this yourself and how to record the minutes / certificate issue, etc but this is no longer available - anyone got an alternative? Can someone please confirm this is correct? It is how I currently understand it).
4. At the tax year end, pay a qualified accountant to do your company returns to companies house, corporation tax must be also be paid annually. VAT and PAYE is paid quarterly to HMRC?
5. Finally get clued up about IR35 and do your best to stay OUTSIDE of it.
Like I said, I've only been in this properly since April 3rd 2007, so please go easy on me, i'm not a tax expert, and I'm hoping for the new people here we can get our heads together on this to make sure we are doing it the right way! There will no doubt be people who say 'just pay a bloody accountant', but for personal reasons I'd rather do my own work on all this, primarily because I want to understand FULLY how to run a business, I don't mind the additional work involved in administering my own affairs (plus it saves a few quid doing it yourself).
I'm sure like many people here since the change in legislation in April a lot of people must be wanting to 'do things themselves', rather than risk using a service either in part or full.
For this I thought it would be useful to create a thread (maybe a moderator can 'sticky' the thread?) which would explain the basics of a) setting up the company, and b) the basics of the daily/weekly/monthly/etc tasks involved if you plan to do your own books.
Obviously everyone's situation will be slightly different but at least it can perhaps be used as a check guide to make sure you have covered the basics and got a basic understanding of how to operate your company.
Having started my own company on April 3rd 2007, here is what I understand so far, I will use my own circumstances in the description as an example. Please feel free to add or correct anything I have detailed here:-
Company setup
---------------
1. Setup company and obtain company number, registered office, directors, company secretary, split the shares as desired (in my case 500 myself, 500 my partner as we both work within the company on separate projects. Take advice on this and read up on S660 if you are splitting it between yourself and your husband/wife etc).
2. Register the company for corporation tax (in my case I was sent a form from my tax office requesting this soon after I setup the company).
3. Register for PAYE, obtain a PAYE pack which details various codes to be used such as payroll tax codes, etc, and explains how to pay your employees within the company.
4. Register for VAT (optional if under a certain threshhold of turnover), but in my case I chose to do it as I plan on registering for the flat rate VAT scheme, thus I can charge clients 17.5% VAT, but only pay back 13% to the tax man (12% in year 1)! making a few quid in the process!
5. Purchase software to do the book keeping and payroll (optional), you can do it all on a spreadsheet or with the PAYE pack (for payroll) from HMRC, but in my case I chose to purchase Sage Instant Accounts, and Sage Instant Payroll as I've heard it's good (yet to find out as only just setup!). Set a company financial accounting period (e.g. from when the company intends to run its finances from and to for the year).
6. Get a business bank account setup (in my case I went with Barclays as thats who I have my current accounts with, they gave me a business bank account, and an additional account which gives a higher interest rate which I assume I transfer my VAT, PAYE, payments pending into in order to make some money off it before it gets sent to HMRC).
Operating the finances of the company
-------------------------------------
1. Invoice clients following the rules required for invoicing. If VAT is to be added then do so, if you are waiting for your VAT number then charge without VAT but state on the invoice 'VAT pending'. Once you have a VAT number invoice for all the VAT not yet paid. (Can someone please confirm this is correct? It is how I currently understand it).
2. Purchase legitimate business expense items using the company bank card or cheque book. This in essence means they are paid for using company profits and are tax free. If expenses are paid for from your own personal funds then they need to be recorded on a P11D and cross referenced on self assessment after you have reimbursed these costs from the company account back to your own account. It may be the case that business account purchases go on the P11D too, i'm not sure because this is an area I've not yet touched on!, only read the basics... (Can someone please confirm this is correct? It is how I currently understand it).
3. From your company profits, deduct VAT owed at the correct rate, then deduct any outstanding business expenses owed. Once this is done pay the company employees using PAYE (as a Director you are not bound by the national minimum wage, so you can pay yourself a very small fee, I've heard that it's an idea to pay £100 a week as this still means you pay a NI/tax contribution, but I've also read arguments against this suggesting that the tax man might not look very favourably on this, and to pay at least national minimum wage?, all other employees must be paid at least national minimum wage. The reason for doing this is that it leaves profits in the company bank account which can be taken later as a dividend).
The figure left is then the overall company profit to which can be paid to all shareholders in the form of a dividend by holding a shareholders meeting, recording the minutes of the meeting, and issuing a dividend certificate. The company pays the corporation tax element of this so must be deducted from the dividend and the NET amount sent to the shareholder. (I did have a web link with templates explaining how to do this yourself and how to record the minutes / certificate issue, etc but this is no longer available - anyone got an alternative? Can someone please confirm this is correct? It is how I currently understand it).
4. At the tax year end, pay a qualified accountant to do your company returns to companies house, corporation tax must be also be paid annually. VAT and PAYE is paid quarterly to HMRC?
5. Finally get clued up about IR35 and do your best to stay OUTSIDE of it.
Like I said, I've only been in this properly since April 3rd 2007, so please go easy on me, i'm not a tax expert, and I'm hoping for the new people here we can get our heads together on this to make sure we are doing it the right way! There will no doubt be people who say 'just pay a bloody accountant', but for personal reasons I'd rather do my own work on all this, primarily because I want to understand FULLY how to run a business, I don't mind the additional work involved in administering my own affairs (plus it saves a few quid doing it yourself).
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