Best time to setup a company?

[rashm2k]

In the process of leaving my permie job and doing something on my own/contracting. Eventually I will need to setup a company but when is a good time to do this?

Would it be easier/better to set it up on the 6th of april so my tax year aligns with the UK tax year? Does it make anything such as tax returns (or anything else I haven't thought of) any easier/convenient/simpler?

[northernladuk]

Engaging an accountant and asking all these questions is the best idea.

[jamesbrown]

There's no best time as such, other than when you need it. There may be considerations related to personal taxation to discuss with your accountant (e.g. if you're not a higher rate taxpayer in one year, but expect to be in the next year), but these issues are secondary to why you want to (and feel you are able to) start a business. Not to irritate my accountant if she's reading , but your focus shouldn't be on the simplicity of your accounts anyway - you pay someone to do that for you - it should be on the bigger picture.

[BlueSharp]

In the process of leaving my permie job and doing something on my own/contracting. Eventually I will need to setup a company but when is a good time to do this?

Would it be easier/better to set it up on the 6th of april so my tax year aligns with the UK tax year? Does it make anything such as tax returns (or anything else I haven't thought of) any easier/convenient/simpler?

When and if you register for VAT it will determine how the quarterly payments fall and the ease of finalizing an accounting year , but its no biggie to ask Hector to align the payment dates to your end of year date.

[Contreras]

In the process of leaving my permie job and doing something on my own/contracting. Eventually I will need to setup a company but when is a good time to do this?

Would it be easier/better to set it up on the 6th of april so my tax year aligns with the UK tax year? Does it make anything such as tax returns (or anything else I haven't thought of) any easier/convenient/simpler?

Set it up as soon as you ready. It won't make any practical difference.

The Annual Reference Date (company year end) can be adjusted by extending/shortening the current year, so it's really not a factor in deciding when to form the company. The ARD is always the last day of a month so it won't ever match the tax year exactly anyway.

There is some mileage to aligning your VAT periods with the company year end, for ease of bookkeeping, which you can do after VAT registration.

I personally think that aligning the company year with the tax year is a bad idea as there is less opportunity for tax planning. To be pedantic you could avoid having the year end coincide with busy periods for accountants, those probably being end of Jan and March. Similarly December would be a poor choice if you are typically already stressing at that time of year!

Oh, and speak to an accountant (or three). You don't actually need one to form the company but any decent accountant will be happy for a free initial chat and even if you don't engage somebody immediately it should set you on the right track.

[Martin at NixonWilliams]

Would it be easier/better to set it up on the 6th of april so my tax year aligns with the UK tax year? Does it make anything such as tax returns (or anything else I haven't thought of) any easier/convenient/simpler?

If you set up the company any day in April the yearend will automatically default to 30th April however this can be adjusted to whatever you like as Contreras has pointed out. If you do things properly and your affairs are kept in good order the yearend is not important really.

One other thing is that HMRC's guidance says that you must do a tax return if you are a director in the tax year. If you do not need to do a tax return currently you could set up on 6th April or shortly after to avoid doing a return for 2013/14.

I hope this helps.

Martin

[Clare@InTouch]

Contreras has covered pretty much everything, but just to add that HMRC will expect a tax return if you're the director of a company, so setting up after the start of the new tax year may keep things slightly easier if you don't need the company right away.

If you have already set the company up (or when you do) then you'll just need to inform HMRC that you're a director on form SA1, or by calling them. If you explain you have no other income that needs to declared in the 2013/14 tax year then they may well tell you not to bother submitting a return, but at least they'll have a note on record for future reference.

[rashm2k]

Thanks folks, I think that clears things up a little bit, I don't need to do a tax return for this year so makes sense to start it after 6th April.

I think I may set it up start of may as that will give me a few weeks to setup a business account and register for VAT and be ready end of may.

[TheFaQQer]

Thanks folks, I think that clears things up a little bit, I don't need to do a tax return for this year so makes sense to start it after 6th April.

I think I may set it up start of may as that will give me a few weeks to setup a business account and register for VAT and be ready end of may.

If you're considering going the the flat rate scheme, then you don't want to register for VAT until you have to.

[rashm2k]

If you're considering going the the flat rate scheme, then you don't want to register for VAT until you have to.

From what I've read about the flat rate vat, it depends on your expenses whether it's worth it.

I may have expenses (driving to/from client, hotels, subsistence etc), so not 100% sure whether I should register for flat vat rate, but it might make things a little easier.

next step is to chat to an accountant!