It is preferable to maintain regular basic accounts within the financial control bearing in mind that all obligations of the business are personal to the trader. By preparing monthly account’s cash flow can be maintained more effectively and an estimation of future taxes liability made. While a sole trader doesn’t have to keep formal basic accounts, financial records are required to enable the net taxable profit to be calculated with paperwork to support that calculation.
Documentary evidence includes paperwork obtained from third parties such as sales information and receipts, purchase invoices and receipts and if managed the business lender accounts. Sole trader accounting really is the easiest easy accounting as the formal reporting requirements will be the easiest. It isn’t essential to utilize an accountant to prepare the sole trader accounts and the taxes return. Employing an accountant has the advantages of saving time in preparing the basic accounts, tax return; expert advice on what expenditures can be claimed including calculating the capital allowances. The disadvantage is the cost and this is the choice of the sole trader.
Sole investors are evaluated for income tax and national insurance on an annual basis based upon the one-man shop tax come back everyone self-employed must complete and send to the tax authority. HMRC issue taxation statements in April every year, which need to be completed and posted by 31 October following the end of the financial 12 months. Tax returns submitted online can be posted with a financial submission date of 31 January, some 10 a few months after the end of the financial year.
Self utilized pay course 2 national insurance contributions that have been set at £2.30 for the financial calendar year 2008-09. Refunds, through the small exceptions rules, are possible if net taxable profits are very low. Following the financial season end on 5 April the tax and national insurance calculated by HMRC must be paid completely by the following 31 January.
In addition HMRC also assess the liability for the next financial season and 50 per cent is also payable on 31 January with the remaining 50 per cent payable by 31 July. Starting up as a sole trader will not involve compulsory registration for vat. If a business is unregistered for vat then the VAT charged on purchases is treated in the accounts as a cost and VAT is not added to the sales beliefs. Businesses are necessary to register for VAT when sales reach the VAT threshold in a 12-month period, the existing vat threshold as from April 2008 is £67,000.
If sales are mainly to the general public who cannot reclaim the vat billed then it is usually better to delay registration before threshold is reached. A business setup that registers for vat needs to maintain more than just basic accounts. Easy accounting can be adopted provided there is an audit trail to support the quarterly VAT return. A sole trader doesn’t need to open another business account.
If a specific business account is utilized then HMRC have the right to start to see the transactions during that business accounts as supporting proof to the accounts therefore bookkeeping information should be taken care of. HMRC may ask to visit a private account however they do not have a statutory right to do so.
Since all bank transactions will be the personal responsibility and liability of the sole trader if another business bank-account is opened up then it must condition the name of the only real trader. Typically the bank-account name would be Your Name trading as Business Name. The advantages of maintaining another business account are significant in keeping business and personal finances separate. The drawbacks are business loan company charges and being committed to declaring the details to HMRC as long as they ask. If the business is run truthfully then that should not be a problem.
- Which of the following is NOT a reason why financial analysts use ratio analysis
- No asylum claims unless pre-approved
- Amount of timely, constant feedback to students
- UCLA: Anderson
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