How would this work in terms of HMRC/Company profit?

[firehawk]

I've never done anything like this before so curious to know where I stand in terms of my company profit.

I am not only selling my services to my end client, but also will be selling them servers.

servers is where I can make some profit for my company/me. I pay myself dividends (%age take home)

Now, I can make say, an example, £100 profit per server.
Now, when time comes to invoice them and them to make payments, would they pay directly into my company bank account for selling hosting/server solutions?

Would I have to "declare" anything to HMRC/Inland Revenue?

thanks!

[Clare@InTouch]

Hi

Yes, you would invoice your client for the item, including any markup, and the client would pay into your company bank account. You record the cost of the server as a cost. The net difference would be your profit, and this is decloared to HMRC on your company tax return, and you'll be taxed on it.

If it was done personally, you'd have to declare it on your personal tax return and pay any tax that way anyway.

[firehawk]

Thanks Clare.

Tax everywhere...grrr.

how much would HMRC tax on the profit? I wouldn't be making much profit per server - so say around £100 ?

[malvolio]

Thanks Clare.

Tax everywhere...grrr.

So perhaps you should learn how it works?

how much would HMRC tax on the profit? I wouldn't be making much profit per server - so say around £100 ?

21% (at the moment) of your total gross profits from any source. Just like every other small business.

[northernladuk]

Would I have to "declare" anything to HMRC/Inland Revenue?

thanks!

Comedy question of the day for me LOL. Least I stared a Monday morning with a smile on my face.

There is a certainly level of naivety to both the approach to the tax situation and also to the extra service you are talking about providing.

You don't just supply a server, invoice him and walk off with the profit. Depending on how you negotiate your services (which I would have a guess at you haven't) you will always keep some level of responsibility. You don't just buy a PC from a shop and they wash their hands of it when the door shuts behind you do you. The client is going to come to you for any issues with delivery, DOA, returns, warranty and so on. You can of course try and direct them to the manufacturer but this won't please the client at all. If you think all that hassle is worth £100 then fill your boots. Surely you would be better off finding a suppliers and negotiating a finders fee and then pocket some risk free cash.

[firehawk]

well obviously, ill be the one doing the maintainence and so and and so forth of the servers - but that would be part of my contract with the client until they decide not to renew it, but as for "supplying" them the servers, thats where I can make the tad bit of profit at my prices if that makes sense.

[SallyPlanIT]

Thanks Clare.

Tax everywhere...grrr.

how much would HMRC tax on the profit? I wouldn't be making much profit per server - so say around £100 ?

As Mal say's, corporation tax is currently 21%. The more you reduce your profit with allowable business expenses, the less corporation tax you pay. The payment is due 9 months after the annual year end. That's a year on at the end of the incorporation month. So for example, if your company was incorporaated 10th January 2010, your accounting year end date is 31st Janaury 2011 (unless you have requested a change of date) so the corporation tax is due in October 2011.

[firehawk]

Thanks Sally (just a sidenote: hopefully next year ill be moving to you folks for my accountancy stuff!)

I guess really, wont find out how much I can "take home" from that profit until after the end of year taxes have been paid. Well, I guess its something, even if it were a few quid worth of profit.

whilst I understand its 21% to be given to HMRC for this "profit" or selling of services/products, still think that there is something somewhere I am missing which will cause my "profit" to be next to nothing.

another question: would it be better to setup a seperate bank account for these selling of products rather than through my own company bank account? I wouldnt want to get into a situation where I keep paying for the rental of services to my server provider when say, my end client for whatever reason doesnt transfer the funds and my business bank balance goes 0 (my business bank account contain money for HMRC, PAYE etc... etc...)

all im getting at is, its the first time im doing this and dont want to mess anything up - thats all.

[northernladuk]

but as for "supplying" them the servers, thats where I can make the tad bit of profit at my prices if that makes sense.

It does make sense but as I say remember supplying them comes with responsibilities and risks that you have to consider before calculating how much this venture is worth to you. If these things never turn up or make the project late or something more serious YOU have to take the responsibility as you are making money on it. It would be highly unprofessional of you to just continue to blame your supplier and teflon shoulder the whole thing.

[firehawk]

Thanks. I am very well aware of that