A quick list of start-up mistakes new businesses can easily avoid. If ignored, some of these will put the business owner in potentially significant financial pain later on:
- 5 : HMRC not notified that trading has started: The rules are clear - sole traders have 3 months from commencing trade to notify HMRC. One telephone call to HMRC quoting start date and NI number is all there is to it. Failure to notify in time means a £100 fine, and if tax returns are missed as a result, penalties too. Easy to fix this one!
- 4 : No business bank account: Mixing up personal and business transactions presents a couple of issues - firstly it means that there is a lot more bookkeeping work to be done and secondly it means in the event of tax enquiry, there will be a lot more explaining to do to the taxman. Our advice - get a business bank account, bookkeeping savings will outweigh any costs.
- 3 : VAT: we find some start-ups often ignore VAT completely, and some get registered without thinking about whether they should do so, and some submit returns late. Businesses making vatable supplies don't have to register until they do £70k + in sales in 12 months, BUT it can be beneficial to register beforehand, in many cases. Submitting VAT returns late is a quick way to problems with the VAT man, our advice is keep on top of VAT.
- 2 : Forming a limited company before seeking tax advice : Surprisingly common, and generally occurs because someone's mate told them it was best down the pub. It may well be the best vehicle for a new business, but far from always, other structures exist, and which can often have significant tax advantages in the early days. Advice is needed on this point.
and finally, the biggest mistake of them all........
- 1 : Not keeping records : The most common mistake we see remains not keeping a record of transactions in the business and no receipts. No receipts / records means higher tax bills - simples, as the Meerkats might say.
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