Small Business Accounting Support

<h2><strong>PAYE</strong><br></h2><p>RTI late filing will incur a monthly penalty of £100, depending on the <a href="https://www.gov.uk/guidance/what-happens-if-you-dont-report-payroll-information-on-time#3" target="_blank">number of employees you have</a>.<br></p><h2><strong>Self Assessment</strong><br></h2><p>A late filing penalty of £100 is imposed if your tax return is up to three months late. The penalty increases if you're later than three months, or if you pay your tax bill late. Additionally, interest will be charged on late payments.<br></p><h2><strong>VAT</strong><br></h2><p>You may be required to pay a surcharge if you submit a late return. Surcharges for late payments or VAT return filings are indicated on the <a href="https://www.gov.uk/vat-returns/surcharges-and-penalties" target="_blank">HMRC website</a>. <br></p><h2><strong>Corporation Tax</strong><br></h2><p>HMRC's penalties are as follows:<br></p><ul><li>1 day late: £100</li><li>3 months late: An additional £100</li><li>6 months late: Your total corporation tax bill will be estimated, after which a penalty of 10% of unpaid tax will be imposed. </li><li>12 months late: An additional penalty of 10% of unpaid tax will be imposed.<br></li></ul><h2><strong>Company accounts</strong><br></h2><p>The following penalties for private limited companies will be imposed if you fail to file your accounts with Companies House on time:<br></p><ul><li>Up to 1 month late: £150</li><li>1 - 3 months late: £375</li><li>3 - 6 months late: £750</li><li>More than 6 months late: £1,500</li></ul><p><br></p>

<p>Here's a brief overview of the VAT changes occurring after Brexit:<br></p><h2>Exporting goods to the EU:<br></h2><ul><li><strong>EC Sales List</strong>: Previously, UK VAT-registered businesses that met specific conditions and were supplying goods to VAT-registered customers in the EU had to complete an EC Sales List. This is no longer required.</li><li><strong>Distance selling threshold</strong>: Starting from 1 January 2021, UK sellers can no longer take advantage of the distance selling thresholds.<br></li></ul><h2>Importing goods from the EU to the UK:</h2><ul><li><strong>Abolition of Low Value Consignment Relief (LVCR)</strong>: The LVCR, which relieves import VAT on goods valued at £15 or less will no longer apply to goods imported into the UK, or for goods supplied to Northern Ireland from outside the UK and EU. </li><li><strong>Postponed VAT accounting</strong>: Starting from 1 January 2021, UK VAT registered businesses importing goods from locations worldwide into the UK can use a new system known as <a href="https://www.gov.uk/guidance/check-when-you-can-account-for-import-vat-on-your-vat-return" target="_blank">postponed VAT accounting</a>.</li><li><strong>The £135 threshold</strong>: Starting 1 January 2021, the point at which VAT is collected on imported goods valued at up to £135 is moved from the point of importation to the point of sale. <strong>UK supply VAT</strong>-not import VAT-will be charged at the point of sale.<br></li></ul><h2>EU VAT Registration Number Validation service: </h2><ul><li>UK businesses will be able to continue to use the EU VAT number validation service to check the validity of EU businesses, but UK VAT registrations will cease to be included.<br></li></ul><h2>VAT flat rate scheme: </h2><ul><li>The scheme no longer applies to any sales a seller makes through an online marketplace, where the OMP is liable to account for VAT.<br></li></ul><h2>EU VAT refund system:</h2><ul><li>UK businesses can no longer reclaim VAT incurred in other EU countries using the electronic EU VAT refund system.<br></li></ul><p>Further details on the above mentioned changes can be found in our <a href="https://www.goforma.com/business-resources/vat-guide-ecommerce-businesses" target="_blank">VAT guide for ecommerce businesses</a>. <br></p><p>There are additional VAT changes implemented that do not apply to ecommerce merchants. These include: </p><ul><li>The VAT treatment of the supply of services to the EU</li><li>The abolition of the £8,818 annual threshold for cross borders sales of digital services to EU consumers </li><li>Businesses are no longer able to use the UK's MOSS scheme to report and pay VAT on sales of digital services to consumers in the EU. The new rules regarding the registration for the VAT MOSS non-union scheme in an EU member state will impact UK and non-UK businesses.</li></ul>

<p>Brexit has created a significant impact on imports, exports and shipping:</p><ul><li><a href="https://www.goforma.com/business-resources/vat-guide-ecommerce-businesses" target="_blank">Ecommerce businesses will be affected by post-Brexit VAT changes</a>, which includes the abolition of the distance selling threshold and Low Value Consignment Relief (LVCR), the introduction of the postponed VAT accounting system and more. </li><li>Businesses will have to abide by the new import and export rules, which may mean dealing with additional paperwork and customs checks. </li><li>The above mentioned changes will further impact other aspects of your business, such as your supply chain, fulfillment process and pricing. Additional checks may create shipping delays, while the new VAT changes will lead to a rise in costs.</li></ul>

<p>Here's a brief summary of the ways in which ecommerce businesses will be impacted:</p><ul><li>Businesses will have to abide by the new import and export rules. We've covered the VAT changes impacting ecommerce businesses in greater detail in our <a href="https://www.goforma.com/business-resources/vat-guide-ecommerce-businesses" target="_blank">guide</a>. </li><li>Businesses may face additional paperwork and customs checks. </li><li>These changes will impact other aspects of your business, such as your supply chain, fulfillment process and pricing. Additional checks may mean a delay in shipping, while the new VAT changes will lead to a rise in costs. As such, businesses may need to decide who will bear the burden of the increased costs, and to assess if revising their prices is necessary.</li><li>UK citizens and companies established solely in the UK will <a href="https://www.lexology.com/library/detail.aspx?g=a6a3258a-1857-410f-a307-fc177841bd5e" target="_blank">no longer be eligible to hold .eu domains</a>. This will likely result in additional costs incurred, as business purchase new domains or undertake the necessary measures to demonstrate compliance with the .eu regulatory framework.</li></ul>

<p>Xero connects with most banks in the UK, including Barclays, HSBC, NatWest, RBS and more. You may view the full list of banks <a href="https://www.xero.com/uk/partner-programs/banking-partners/uk-banks/" target="_blank">here</a>.</p>

<p>Presently, FreeAgent supports over 40 feeds from banks worldwide. You may refer to their <a href="https://support.freeagent.com/hc/en-us/articles/115001222744-Which-Bank-Feeds-does-FreeAgent-support-" target="_blank">resource</a> to see which banks are listed, or search for your bank using the search tool in the Banking area of FreeAgent.</p>

<p>Yes, FreeAgent offers a <a href="https://www.freeagent.com/en/features/mobile/" target="_blank">mobile accounting app</a>.</p>

<p>You can do so using FreeAgent's <a href="https://www.freeagent.com/find-an-accountant/" target="_blank">‘Find an Accountant' resource</a>.</p>

<p>As a <a href="https://goforma.com/limited-company/what-is-a-limited-company" target="_blank">limited company</a> director, you may pay yourself through taking a salary and drawing <a href="https://www.goforma.com/tax/what-are-dividends" target="_blank">dividends</a>.<br></p><p>Salaries are typically paid out monthly. While dividends can be drawn at any frequency across the year-as long as there are sufficient distributable profits-payments are typically made on a monthly or quarterly basis.</p><p></p><p><br></p>

<p>As a <a href="https://goforma.com/limited-company/what-is-a-limited-company" target="_blank">limited company</a> director, you can pay yourself through:<br></p><h2><strong>1. Taking a salary</strong><br></h2><p>As the director of a limited company, you're also considered an employee. As such, any salary you draw will be paid through the PAYE scheme-similar to how other employees of the company will receive their pay.<br></p><p>You'll run a payroll, report to HMRC and receive your salary (after taxes have been deducted at source).<br></p><h2><strong>2. Dividends</strong><br></h2><p>A dividend is a payment of profit that a limited company distributes to its shareholders.<br></p><p>While dividends can be drawn at any frequency across the year-as long as there are sufficient distributable profits-payments are typically made on a monthly or quarterly basis. </p>

<p>You can use your <a href="https://www.access.service.gov.uk/login/signin/creds" target="_blank">VAT online account</a> to set up a Direct Debit payment.<br></p><p>Do note that Direct Debit payments take at least three working days to clear. As such, you should set up the Direct Debit at least three working days before submitting your online <a href="https://www.goforma.com/tax/what-is-vat-registration-threshold-schemes" target="_blank">VAT</a> return, or the payment won't be processed in time.</p>

<p>The term ‘debtor' refers to an individual or company that owes money, or is in debt to an individual or organisation. An example would be a customer that has purchased a product or service from your business. In the <a href="https://www.goforma.com/small-business-accounting/what-is-balance-sheet-profit-loss" target="_blank">balance sheet</a>, debtors are listed under the current assets section.</p>

<p>An invoice number is a unique number that is assigned to each invoice. This number is one of the most important elements of every invoice. Its role is to identify transactions, so it needs to be unique. Invoice number can contain only numbers or letters and numbers. It may contain date of issue, name of project or task.</p>

<p>Yes, you can claim the purchase of computers as a deductible expense.<br></p><p>For further information on allowable business expenses, refer to our expenses and allowances guides for <a href="https://www.goforma.com/tax/limited-company-director-expenses-tax-allowance" target="_blank">limited company directors</a> and the <a href="https://www.goforma.com/tax/self-employed-expenses-tax-allowances" target="_blank">self-employed</a>.<br></p>

<p>Tangible assets are physical assets or property owned by a company, such as equipment, buildings, and inventory.</p>

<p>An <a href="https://www.goforma.com/small-business-accounting/31-accounting-terms-concepts-you-need-to-know" target="_blank">asset</a> is any resource that is owned by a company. There are two main types of assets: current assets and non-current assets. Current assets are expected to be consumed within a year, while non-current assets are expected to be held for longer than a year.</p>

<p>To hire a new employee, you need to:<br></p><ul><li>Check if your business is <a href="https://www.gov.uk/get-ready-to-employ-someone?step-by-step-nav=47bcdf4c-9df9-48ff-b1ad-2381ca819464" target="_blank">ready to hire a new staff</a> </li><li>Kickstart your recruitment efforts. You can recruit employees on <a href="https://www.acas.org.uk/hiring-someone" target="_blank">your own</a>, or by using a <a href="https://www.gov.uk/using-a-recruitment-agency-to-find-staff?step-by-step-nav=47bcdf4c-9df9-48ff-b1ad-2381ca819464" target="_blank">recruitment agency</a>. </li><li>Check that the candidate has the <a href="https://www.gov.uk/check-job-applicant-right-to-work?step-by-step-nav=47bcdf4c-9df9-48ff-b1ad-2381ca819464" target="_blank">right to work in the UK</a></li><li>Find out if they require a <a href="https://www.gov.uk/dbs-check-applicant-criminal-record?step-by-step-nav=47bcdf4c-9df9-48ff-b1ad-2381ca819464" target="_blank">DBS check</a></li><li>Check if you need to enrol the employee into a workplace pension scheme. Here's a <a href="https://www.thepensionsregulator.gov.uk/en/employers/new-employers" target="_blank">guide for first-time employers</a>. If you've already hired employees previously, refer to this <a href="https://www.thepensionsregulator.gov.uk/en/employers/new-employers/im-an-employer-who-has-to-provide-a-pension/declare-your-compliance/ongoing-duties-for-employers-" target="_blank">resource</a> instead. </li><li>Before carrying out salary negotiations, you need to check the National Minimum Wage for different <a href="https://www.gov.uk/national-minimum-wage-rates?step-by-step-nav=47bcdf4c-9df9-48ff-b1ad-2381ca819464" target="_blank">ages</a> and <a href="https://www.gov.uk/minimum-wage-different-types-work?step-by-step-nav=47bcdf4c-9df9-48ff-b1ad-2381ca819464" target="_blank">types of jobs</a>. You'll also need to finalise the <a href="https://www.gov.uk/employment-contracts-and-conditions" target="_blank">employment contract</a>, and provide a <a href="https://www.gov.uk/employment-contracts-and-conditions/written-statement-of-employment-particulars?step-by-step-nav=47bcdf4c-9df9-48ff-b1ad-2381ca819464" target="_blank">written statement of employment particulars</a> within 2 months of the start of employment. </li><li><a href="https://www.gov.uk/new-employee?step-by-step-nav=47bcdf4c-9df9-48ff-b1ad-2381ca819464" target="_blank">Notify HMRC</a> that you've hired a new employee. Make sure you're aware of the <a href="https://www.gov.uk/running-payroll?step-by-step-nav=47bcdf4c-9df9-48ff-b1ad-2381ca819464" target="_blank">steps you need to take when you start paying your employee</a>.<br></li></ul><p>If you're hiring staff for the first time, refer to HMRC's guide on the <a href="https://www.gov.uk/employing-staff" target="_blank">steps you need to take</a>.</p>

<p>Statutory Sick Pay (SSP) is the amount of money mandated by law that every employee must be paid if they are too sick to work. Employees have to meet certain eligibility criteria to qualify for SSP.</p>

<p>If you're <a href="https://goforma.com/self-employed" target="_blank">self-employed</a>, HMRC will work out your loan repayment amount from your tax return. You make your repayment the same time you pay your tax.<br></p><p>If you're an employee and your salary is above the minimum amount, your loan repayments will be deducted from your salary by your employer.<br></p><p><a href="https://www.gov.uk/repaying-your-student-loan/make-extra-repayments" target="_blank">Additional repayments</a> can be made through your <a href="https://www.gov.uk/sign-in-to-manage-your-student-loan-balance" target="_blank">online repayment account</a> and by card, bank transfer or cheque.</p>

<p>A bank deposit involves placing money into an account with a banking institution. Depositing a cheque is one way to make a deposit. You can also deposit cash or make a funds transfer.</p>

<p>You can pay an independent <a href="https://goforma.com/contractors" target="_blank">contractor</a> by an hourly or daily rate, or by the project through the contractor's preferred payment method. You won't need to withhold taxes, as they are responsible for paying their own income and National Insurance contributions.</p>

<p>A trial balance is a report that lists the balances of all general ledger accounts of a company at a certain point in time.</p>

<p>You can submit the <a href="https://www.goforma.com/small-business-accounting/what-is-p11d-form" target="_blank">P11D form</a> via HMRC's <a href="https://www.gov.uk/paye-online" target="_blank">PAYE online service</a>, HMRC's <a href="https://www.gov.uk/guidance/report-end-of-year-expenses-and-benefits-online" target="_blank">Online End of Year Expenses and Benefits service</a> or through a <a href="https://www.gov.uk/payroll-software" target="_blank">commercial payroll software</a>. If you're unable to use the online methods above, you can also download the forms <a href="https://www.gov.uk/guidance/report-end-of-year-expenses-and-benefits-online" target="_blank">P11D and P11D(b)</a> and <a href="https://www.gov.uk/employer-reporting-expenses-benefits/reporting-and-paying#:~:text=At the end of the,or benefits through your payroll" target="_blank">send it to the P11D Support Team via post</a>.</p>

<p><a href="https://www.goforma.com/small-business-accounting/31-accounting-terms-concepts-you-need-to-know" target="_blank">Current liabilities</a>, otherwise known as short-term liabilities are due within a year.</p>

<p>It is the amount of money that must by law, be paid to an adoptive parent when he or she takes time off to adopt a child, or have a child through a surrogacy arrangement.</p>

<p>As a limited company director, you pay yourself through drawing a salary and receiving <a href="https://www.goforma.com/tax/what-are-dividends" target="_blank">dividends</a> from your company.<br></p><p>Drawing a salary from your company is fairly similar to how you'll be paid if you were employed elsewhere-you'll run payroll, submit the required information to HMRC each month and receive your salary (after income tax and NIC have been accounted for).</p>

<p><a href="https://www.goforma.com/small-business-accounting/31-accounting-terms-concepts-you-need-to-know" target="_blank">Depreciation</a> is the measurement of the decline in the worth of an asset. Common methods of depreciation include: <a href="https://www.accountingtools.com/articles/2017/5/15/straight-line-depreciation" target="_blank">straight line</a>, <a href="https://www.accountingtools.com/articles/2017/5/17/units-of-production-depreciation" target="_blank">units of production</a>, <a href="https://www.accountingtools.com/articles/2017/5/17/sum-of-the-years-digits-depreciation" target="_blank">sum-of-years-digits</a> and <a href="https://www.accountingtools.com/articles/2017/5/17/double-declining-balance-depreciation" target="_blank">double-declining balance</a>.</p>

<p>Fixed assets are property or equipment that a company owns, and uses in its day-to-day operations for income generating activities. These include machinery, equipment, buildings and land.</p>

<p>An annual return (AR01) is a document that all businesses are required to submit to Companies House each year. It details general information about a company, such as its ownership, capital position and management. The annual return has been replaced by the confirmation statement (CS01) since 30 June 2016.</p>

<p><a href="https://www.goforma.com/small-business-accounting/31-accounting-terms-concepts-you-need-to-know" target="_blank">Current assets</a> are assets that are convertible to cash in less than a year.</p>

<p>Retained profits, or retained earnings are profits that a firm has earned to date (after deducting dividends or other distributions paid out to investors) and are retained in the company's accounts. In a <a href="https://www.goforma.com/small-business-accounting/what-is-balance-sheet-profit-loss" target="_blank">balance sheet</a>, retained profits are included under the owner's equity section.</p>

<p>Retained profits, or retained earnings are profits that a firm has earned to date (after deducting dividends or other distributions paid out to investors) and are retained in the company's accounts. In a <a href="https://www.goforma.com/small-business-accounting/what-is-balance-sheet-profit-loss" target="_blank">balance sheet</a>, retained profits are included under the owner's equity section.</p>

<p>If you're the director of a <a href="https://goforma.com/limited-company" target="_blank">limited company</a>, you're also considered an employee. As such, you may pay yourself a salary through the PAYE scheme-which is similar to how other employees of the company receive their pay.<br></p><p>You'll need to register as an employer with HMRC (even if you're only employing yourself as the sole director of a limited company), <a href="https://www.gov.uk/paye-for-employers/setting-up-payroll" target="_blank">set up and run payroll</a>, report to HMRC and abide by HMRC's record keeping requirements.</p>

<p>The P45 is a tax form that provides your new employer with details of how much taxable salary you've paid over the course of the current tax year, along with how much has been deducted, and your tax code at the time of leaving your last job.<br></p><p>A P46 is a form that takes the place of a P45 if you don't have one from a previous employer. It ensures you pay the correct amount of income tax from your pay.</p>

<p>The common methods of depreciation are <a href="https://www.accountingtools.com/articles/2017/5/15/straight-line-depreciation" target="_blank">straight line</a>, <a href="https://www.accountingtools.com/articles/2017/5/17/units-of-production-depreciation" target="_blank">units of production</a>, <a href="https://www.accountingtools.com/articles/2017/5/17/sum-of-the-years-digits-depreciation" target="_blank">sum-of-years-digits</a> and <a href="https://www.accountingtools.com/articles/2017/5/17/double-declining-balance-depreciation" target="_blank">double-declining balance</a>.</p>

<p>In <a href="https://www.goforma.com/small-business-accounting/31-accounting-terms-concepts-you-need-to-know" target="_blank">business accounting</a>, amortisation is a method of calculating the value of a business asset over time. It is the process of spreading out the cost of an asset over its useful life.<br></p><p>In relation to loans, amortisation refers to the spreading out of loans into a series of fixed monthly installments.</p>

<p>Through the agent authorisation process, a client is able to authorise an agent to deal with HMRC on their behalf. Further information is available on the <a href="https://www.gov.uk/guidance/client-authorisation-an-overview" target="_blank">HMRC website</a>.</p>

<p>The portability of a laptop brings in a layer of complexity, as they tend to be purchased for both business and personal use. You can claim it as an expense, but you will need to apportion between business and personal use. <br></p><p>For further information on allowable business expenses, refer to our expenses and allowances guides for <a href="https://www.goforma.com/tax/limited-company-director-expenses-tax-allowance" target="_blank">limited company directors</a> and the <a href="https://www.goforma.com/tax/self-employed-expenses-tax-allowances" target="_blank">self-employed</a>.</p>

<p>Unallocated payments are where the client has given you more money than they owe.</p>

<p>Payment terms indicate when payments should be made and how. These terms are usually included in the invoices generated by companies and sent to customers.</p>

<p>If you're paying an employee for the first time, you'll need to set up payroll. You need to take the following steps:<br></p><ol><li><a href="https://www.gov.uk/register-employer" target="_blank">Register as an employer</a> with HM Revenue and Customs (HMRC) and get a login for <a href="https://www.gov.uk/paye-online" target="_blank">PAYE Online</a>.</li><li><a href="https://www.gov.uk/payroll-software" target="_blank">Choose payroll software</a> to record employee's details, calculate pay and deductions, and report to HMRC.</li><li><a href="https://www.gov.uk/paye-for-employers/keeping-records" target="_blank">Collect and keep records</a>.</li><li><a href="https://www.gov.uk/new-employee/" target="_blank">Tell HMRC about your employees</a>.</li><li><a href="https://www.gov.uk/running-payroll/" target="_blank">Record pay, make deductions and report to HMRC</a> on or before the first payday.</li><li><a href="https://www.gov.uk/running-payroll/paying-hmrc" target="_blank">Pay HMRC</a> the tax and National Insurance you owe.<br></li></ol>

<p>As a <a href="https://goforma.com/limited-company/what-is-a-limited-company" target="_blank">limited company</a> director, there are three ways in which you can withdraw money from your company:<br></p><ul><li>Drawing a salary</li><li>Issuing <a href="https://www.goforma.com/tax/what-are-dividends" target="_blank">dividends</a></li><li>Taking out a <a href="https://www.goforma.com/small-business-accounting/what-is-directors-loan-account" target="_blank">director's loan</a></li></ul>

<p>To pay a<a href="https://www.goforma.com/tax/what-are-dividends" target="_blank"> dividend</a>, you need to:<br></p><ul><li>Hold a directors' meeting to ‘declare' the dividend.</li><li>Keep minutes of the meeting, even if you're the only director. For smaller companies, this may often be just a case of getting the paperwork completed.</li><li>Issue dividend vouchers.<br></li></ul>

<p>The <a href="https://www.goforma.com/small-business-accounting/what-is-balance-sheet-profit-loss" target="_blank">profit and loss account</a> (P&L) is a financial report that shows the revenue, expenses and profit or loss of your company over a specific accounting period.<br></p><p>This period can be a month, a quarter or a year. A P&L is also commonly referred to by other terms, such as the income statement, statement of operations, financial results statement and earnings statement.</p>

<p>The cost of sales is the accumulated total of all costs used to create a product or service, which has been sold. The cost of sales is a key part of the performance metrics of a company, since it measures the ability of an entity to design, source, and manufacture goods at a reasonable cost.</p>

<p>To pay a <a href="https://www.goforma.com/tax/what-are-dividends" target="_blank">dividend</a>, you need to:<br></p><ul><li>Hold a directors' meeting to ‘declare' the dividend.</li><li>Keep minutes of the meeting, even if you're the only director. For smaller companies, this may often be just a case of getting the paperwork completed.</li><li>Issue dividend vouchers</li></ul><p><br></p>

<p>1. HMRC - Companies must register with HMRC to file online and obtain a user ID and password.<br></p><p>2. Companies House ‚- To file online companies must obtain an authentication code from Companies House<br></p><p>Alternatively, the accounts can be posted to Companies House.</p>

<p>The first accounting year end date for a new company is the last day of the month in which the first anniversary falls on. For example, if your company was incorporated on 15 January 2021, the first accounting year end date will be 31 January 2022.</p>

<p>Here are a few strategies to <a href="https://www.goforma.com/small-business-accounting/improve-business-cashflow" target="_blank">better cash flow management</a>:<br></p><p><strong>Be rigorous about updating your cash flow</strong>: It can be helpful to update your cash flow whenever there is new information-such as when you've made a payment, or when a client informs you that a payment is coming in late. You'll need to have a system for managing your cash flow, whether that's a spreadsheet or cash flow management tool.<br></p><p><strong>Carry out an in-depth analysis on a regular basis</strong>: Carve out a block of time each quarter to carry out an in-depth review of your cash flow. You'll want to assess your overall financial position, and look ahead at your cash flow projection for the next quarter.<br></p><p><strong>Implement milestone payments for extended projects</strong>: If you're working on an extended project, consider structuring your payments by milestones-rather than receiving a single payment at the end of the project.</p>

<p>A taxable supply is any supply made in the UK which is not exempt from VAT.</p>

<p>A <a href="https://www.goforma.com/small-business-accounting/what-is-balance-sheet-profit-loss" target="_blank">balance sheet</a> is a financial statement that provides a snapshot of the financial condition of a company, showing how much it owns (assets), owes (liabilities) and the amount that is left over for its owners (owners' equity) at a specific point in time. It is typically completed at the end of a month or a financial year.</p>

<p>There are various ways to pay your suppliers. Common payment methods include bank transfers, credit card payments and Letters of Credit.</p>

<p>A supplier reference (or trade reference) refers to a report detailing the payment history between a business customer and its supplier or vendor. It enables a supplier to check your creditworthiness and find out if you're a reliable customer before they offer you credit.</p>

<p>The P35 is an annual tax return completed by employers. The form indicates the total tax and National Insurance contributions for each employee during the previous financial year.<br></p><p>With the introduction of the Real Time Information reporting (RTI), the P35 is no longer required.</p>

<p>Written-down value, otherwise known as the book value or net book value is the value of an asset after accounting for depreciation or amortisation. It represents the present worth of an asset from an accounting perspective.</p>

<p>Statutory Paternity Pay is the amount of money that must by law be paid to the father of a new baby while he is away from his job.</p>

<p>Accruals refer to revenue that have been earned, or expenses that have been incurred but aren't yet recorded in a company's accounts.<br></p><p>Examples of accrued expenses include wages payable, bonuses, interest on loan and goods received.<br></p><p>One example of accrued revenue is accrued interest.<br></p><p>On the <a href="https://www.goforma.com/small-business-accounting/what-is-balance-sheet-profit-loss" target="_blank">balance sheet</a>, accrued expenses are recorded under the current liabilities section, while accrued revenue are recorded under the current assets section.</p>

<p>There are different forms associated with PAYE. These are:<br></p><p><strong>P45</strong>: A P45 form is issued to an employee when he or she stops working for you. It shows how much the employee has paid in tax and NICs throughout the tax year.<br></p><p><strong>P60</strong>: A <a href="https://www.goforma.com/tax/what-is-p60-form" target="_blank">P60 form</a> is an official form issued to employees at the end of the tax year. The form indicates how much the employee has earned over the tax year, as well as the amount they've paid in PAYE income tax and NICs. You need to issue the P60 to your employees by 31st May each year.<br></p><p>If you're a limited company director, you're considered both an employer and employee. As such, you'll have to issue yourself a P60 form.<br></p><p><strong>P11D</strong>: The <a href="https://www.goforma.com/small-business-accounting/what-is-p11d-form" target="_blank">P11D</a> is a tax form that records employment benefits that the employees and directors of a company have received across the year.<br></p><p>A copy of the P11D is to be issued to employees who've received certain benefits by 6 July each year. You should also submit the form online by the same date. If you're paying tax on all their benefits through your payroll, submitting a P11D isn't required. </p><p><br></p><p> </p><p><br></p><p><br></p>

<p>Rechargeable expenses are expenses that are incurred during the performance of your work that you can recharge or recover from your client or agency.</p>

<p>A credit note is a document that a business issues to its customers. It is used whenever an <a href="https://www.goforma.com/business-resources/how-to-make-send-invoice" target="_blank">invoice</a> needs to be changed and re-issued, such as when a customer changes or cancels an order, or is charged an incorrect amount.<br></p>

<p>A creditor is an individual, company or entity that has provided goods or services to a business and is owed money. In the <a href="https://www.goforma.com/small-business-accounting/what-is-balance-sheet-profit-loss" target="_blank">balance sheet</a>, a creditor may be listed under the current liabilities or long-term liabilities section.<br></p>

<p>Statutory Paternity Pay is the amount of money that must by law be paid to the mother of a new baby while she is away from her job.</p>

<p>If you're operating as a <a href="https://goforma.com/limited-company/what-is-a-sole-trader" target="_blank">sole trader</a>, you can contribute to a personal pension scheme.<br></p><p>If you're a <a href="https://www.goforma.com/limited-company/what-is-a-limited-company" target="_blank">limited company</a> director, you can make pension contributions as an individual (as an employee), as well as through your company (as an employer). For the latter option, your pension contributions are paid directly from your <a href="https://www.goforma.com/limited-company#best-business-bank-account" target="_blank">business bank account</a>.</p>

<p>The <a href="https://www.gov.uk/government/publications/self-assessment-partnership-statement-full-sa800ps" target="_blank">Partnership Statement (SA800(PS))</a> is used to record details of your earnings from sources other than trading and professional income indicated on your SA800 Partnership Tax Return.</p>

<p>To pay an overseas supplier, you need to:<br></p><ul><li>Decide on a payment currency</li><li>Select a payment method: There are various payment methods and payment service providers available, including bank transfers, credit card payments, PayPal and TransferWise. When you're choosing a payment method or provider, you need to think about the currencies available, fees, exchange rates, speed of international transfers and payment reconciliation capabilities. </li><li>Obtain the information you need to process the payment: You may need to obtain different types of information from your supplier, depending on the payment method you agree on. These may include their full name and address, bank account number, routing number and branch number and address.</li></ul>

<p>An aged debtors report shows a list of customers (debtors) who owe your business money, as well as the amount owed at any given time.</p>

<p>Interim accounts are accounts prepared during the tax year to show the current financial position of a company.</p>

<p>An aged creditors report shows who your business owes money to, as well as the amount owed at any given time.</p>

<p>There may be times when you have no option but to use your personal funds to cover company costs such as paying by cash or if you forget to bring your company card. It's important to keep a copy of the receipt of all expenses but this is especially important when paying for costs and expenses personally. This way, a record of the cost can be kept, logged in your company accounts and then your company can reimburse you for this.</p>

<p>A year end refers to the end of a company's financial year. As such, the <a href="https://www.goforma.com/small-business-accounting/company-year-end-accounts" target="_blank">year-end accounts</a> are a summary of a company's performance across the financial year, and will typically include a directors' report, balance sheet, profit and loss statement and explanatory notes. These financial statements and reports, along with the company tax return (CT600) must be filed with HMRC.</p>

<p>The optimum salary for a contractor to pay themselves in the current tax year is dependent on their overall income throughout the period.</p><p>In the instance there is no other income to be considered, it is generally recommended that salary is paid in line with the Secondary National Insurance threshold which is currently <strong>£732 per month</strong> (20/21).</p>

<p>In today's times, you can find an accountant pretty much anywhere you go whether that's walking down the high street or browsing the internet. Take a look at our guide on choosing an accountant to get some tips on what to look out for when choosing an accountant.</p>

<p>As a <a href="https://www.goforma.com/limited-company/what-is-a-limited-company" target="_blank">limited company</a> director, you can make pension contributions as an individual (as an employee), as well as through your company (as an employer).<br></p><p>Most directors make pension contributions from their company. This is a tax efficient approach, as employer pension contributions are an allowable business expense, which means that your company doesn't need to pay corporation tax on pension contributions made.<br></p><p>You won't need to pay tax on your contributions, as long as it falls below your <a href="https://www.gov.uk/tax-on-your-private-pension/annual-allowance" target="_blank">annual allowance</a> (capped at £40,000 for 2020/21), and your pension benefits doesn't exceed the <a href="https://www.gov.uk/tax-on-your-private-pension/lifetime-allowance" target="_blank">lifetime allowance</a> (£1,073,100 for 2020/21).</p>

<p>How you close down your <a href="https://goforma.com/limited-company/what-is-a-limited-company" target="_blank">limited company</a> will differ depending on whether your company is solvent or insolvent.<br></p><h2><strong>1. Closing down a solvent company</strong><br></h2><p>You may apply to <a href="https://www.gov.uk/strike-off-your-company-from-companies-register" target="_blank">strike off your company from the Companies Register</a> or start a <a href="https://www.gov.uk/liquidate-your-company/members-voluntary-liquidation" target="_blank">Members' Voluntary Liquidation</a>.<br></p><h2><strong>2. Closing down an insolvent company</strong><br></h2><p>You must arrange the <a href="https://www.gov.uk/liquidate-your-company/creditors-voluntary-liquidation" target="_blank">liquidation of your company</a>. In certain circumstances, you may be able to avoid liquidation by applying for a <a href="https://www.gov.uk/company-voluntary-arrangements" target="_blank">Company Voluntary Arrangement</a>. </p><p>Further information is available on our resource on the <a href="http://contractoraccountinghelp.goforma.com/en/articles/4408696-company-closure-process" target="_blank">company closure process</a>.</p>

<p>A <a href="https://www.goforma.com/small-business-accounting/what-is-directors-loan-account" target="_blank"><strong>director's loan</strong></a> is defined as money taken from your company that isn't either of the following:</p><ul><li>A salary, dividend or expense treatment</li><li>Money that you've previously paid into or loaned the company<br></li></ul><p>A <strong>Director's Loan Account</strong> (DLA) is a record of all transactions between the company and its directors. It records not just the money owed by the directors, but also the money owed to them.<br></p><p><strong>Director's loans can be used</strong>:</p><ul><li>when you need to access money in your company-apart from what you take out as a salary, dividend or expense treatment-for personal reasons.</li><li>for a variety of purposes, such as covering the costs of a home repair bill, travel plans or any unforeseen personal expenses that may arise. </li></ul>

<p>The 24-month rule, also referred to as the two-year rule, enables contractors to claim travel expenses from their home to a client's office, as long as it is classed as a "temporary workplace". <br></p><p>The following conditions must apply for a work location to be classed as a "temporary workplace"</p><ul><li>The period of engagement is less than 24 months</li><li>The contractor should spend less than 40 percent of their time at the workplace<br></li></ul><p>Essentially, if you work at the client's office for more than 24 months, or spend more than 40 percent of your time at the location, it is considered a permanent workplace-and as such, you won't be able to claim travel or subsistence expenses. <br></p><p>Bear in mind that this is subject to the SDC legislation introduced in April 2016. Further elaboration on SDC can be found in our guide to <a href="https://goforma.com/contractors/claiming-umbrella-company-expenses" target="_blank">claiming expenses as an umbrella company contractor</a>.</p>

<p>You will obtain a login for HMRC online services when you register for tax online.<br></p><p>You register when you notify HMRC that:<br></p><ul><li>You need to send a Self Assessment tax return</li><li>You want to set up a <a href="https://www.gov.uk/personal-tax-account" target="_blank">personal tax account</a></li><li>You have set up a limited company or <a href="https://www.gov.uk/corporation-tax" target="_blank">other organisation</a> that needs to pay Corporation Tax</li><li>Your business needs to register for PAYE</li><li>Your business needs to register for VAT</li></ul>

<p>You must keep your records for at least 5 years after the 31 January submission deadline of the relevant tax year.</p>

<p>You can file your confirmation statement online. You may view Companies House's <a href="https://www.youtube.com/watch?v=itm8nwVYxzI&t=9s&ab_channel=CompaniesHouse" target="_blank">video</a> for instructions on how to file your confirmation statement.</p>

<p>As a <a href="https://goforma.com/contractors" target="_blank">contractor</a>, freelancer or small business owner, it's important that you make the most of what you can claim-especially as the trips you make can add up over time. Here's an example: if you make a 25-mile round trip twice a week, it adds up to 2,400 miles a year. That's £1,080 that you can as deduction against your business revenue.<br></p><p>To learn more, read our guide on <a href="https://www.goforma.com/tax/claim-business-mileage" target="_blank">how to claim business mileage</a>.</p>

<p>Yes. You can claim pre-trading expenses of up to seven years before the incorporation date of your <a href="https://goforma.com/limited-company/what-is-a-limited-company" target="_blank">limited company</a>, as long as these expenses have been paid for with your own money and were incurred ‘wholly, exclusively and necessarily' for setting up your business.<br></p><p>Examples of pre-trading expenses you can claim for include: </p><ul><li>Internet and domain name fees</li><li>Purchase of computer equipment and software</li><li>Accountancy and other professional fees</li><li>Travel costs</li><li>Insurance</li><li>Stationery<br></li></ul><p>To learn more about allowable business expenses, read our <a href="https://www.goforma.com/tax/limited-company-director-expenses-tax-allowance" target="_blank">expenses and tax allowances guide for limited company directors</a>.</p>

<p>You do not need to pay tax on allowable business expenses. These are essential business costs that are incurred "wholly and exclusively" for the purposes of running the business. They can be deducted against your income, thereby reducing the amount of tax that you need to pay.<br></p><p>For further information on the types of expenses you can claim, refer to our guides for <a href="https://www.goforma.com/tax/self-employed-expenses-tax-allowances" target="_blank">sole traders</a> and <a href="https://www.goforma.com/tax/limited-company-director-expenses-tax-allowance" target="_blank">limited company directors</a>. </p>

<p>Expenses are important as you can claim them against your revenue, which helps to reduce the amount of tax you need to pay.<br></p><p>For further information on the types of expenses you can claim, refer to our guides for <a href="https://www.goforma.com/tax/self-employed-expenses-tax-allowances" target="_blank">sole traders</a> and <a href="https://www.goforma.com/tax/limited-company-director-expenses-tax-allowance" target="_blank">limited company directors</a>.</p>

<p>You need to keep your receipts for expenses for at least five years after the 31 January submission deadline for the relevant tax year. <br></p><p>It helps to minimise paperwork wherever possible, so we recommend taking a picture of your receipts and storing these images away digitally. You can use cloud storage platforms like <a href="https://www.dropbox.com/features/cloud-storage" target="_blank">Dropbox</a> or an expenses app like<a href="https://www.expensify.com/" target="_blank"> Expensify</a>.</p>

<p><a href="https://www.goforma.com/tax/claim-business-mileage" target="_blank">Mileage claims</a> are designed to help cover your fuel costs, as well as the running costs of having a vehicle. As such, you can't make separate claims for individual expenses such as fuel, electricity or vehicle repairs.</p>

<p>A dividend is money that's paid out by limited liability companies to investors, usually on a quarterly or annual basis. These payouts are based on the quarterly profits of your company as well as the amount of stock you own.<br></p><p><a href="https://www.goforma.com/tax/taxes-on-dividends-allowances" target="_blank">Dividend tax</a> therefore refers to the rates by which those dividends are taxed according to HMRC. Each year, these tax rates may differ.</p>

<p>You can locate your Accounts Office Reference number (AORN) on the confirmation letter you receive from HMRC when you first register as an employer. The AORN contains 13 characters, and follows the format 123PA12345678.</p>

<p>As a <a href="https://goforma.com/limited-company/what-is-a-limited-company" target="_blank">limited company</a> director, you're classed as an office holder. You aren't automatically an employee at your company<strong>-</strong>even if you're the sole director and only person working in the business.<br></p><p>It's isn't mandatory to be set up as an employee at your new company. However, there are benefits to doing so if you aren't employed elsewhere, as you'll be able to take advantage of your tax free allowances.</p>

<p>To pay a <a href="https://www.goforma.com/tax/what-are-dividends" target="_blank">dividend</a>, you need to:<br></p><ul><li>Hold a directors' meeting to ‘declare' the dividend.</li><li>Keep minutes of the meeting, even if you're the only director. For smaller companies, this may often be just a case of getting the paperwork completed.</li><li>Issue dividend vouchers.<br></li></ul>

<p>PAYE-or Pay As You Earn-is a system of income tax withholding by employers.<br></p><p>Tax and National Insurance contributions from your wages or occupational pension and sent to HMRC, before your employer pays you your wage or pension. Student loan repayments may also be deducted in this manner.</p>

<p>A <a href="https://www.goforma.com/tax/what-is-p60-form" target="_blank">P60</a> is an official form you obtain at the end of the tax year. It indicates how much you've earned over the tax year (this starts on 6th April, and ends on 5th April of the following year), as well as the amount you've paid in PAYE income tax and National Insurance contributions.<br></p><p><br></p>

<p>If your tax code is incorrect, you can use HMRC's <a href="https://www.gov.uk/check-income-tax-current-year" target="_blank">check your Income Tax service</a> to notify them. If you're not able to use the online service, you may get in touch with HMRC <a href="https://www.gov.uk/government/organisations/hm-revenue-customs/contact/income-tax-enquiries-for-individuals-pensioners-and-employees" target="_blank">through other contact methods</a>.</p>

<p>For employers, the deadline for paying National Insurance will vary depending on the amount payable.<br></p><p>If the amount payable <strong>exceeds £1,500</strong>, the deadline will fall on the 22nd of the month (or the 19th if payment is made by post).<br></p><p>If the amount payable <strong>falls below £1,500</strong>, you can make quarterly payments instead of monthly ones. The quarters end on 5 July, 5 October, 5 January and 5 April, and payments are due on the 22nd of the month (or 19th is payment is made by post). For example, for the quarter ending 5 July, the payment must be made by 22 July.</p><p>-</p>

<p>A P45 is a form that is issued to an employee when he or she stops working for you. It shows how much the employee has paid in tax and NICs throughout the tax year.</p>

<p>A <a href="https://www.goforma.com/tax/what-are-dividends" target="_blank">dividend</a> is a payment of profit that a limited company distributes to its shareholders. This is the money remaining after all business expenses and liabilities, as well as outstanding taxes (including VAT and Corporation Tax) have been paid off.<br></p><p>Dividends are important as they are a tax-efficient way to pay yourself from your limited company. Other than drawing dividends as income, you may also consider paying dividends into a pension fund, ISA or to family members.<br></p>

<p>If you're paying salaries to employees or directors, you need to register for PAYE and pay your PAYE bill to HMRC. <br></p><ul><li>Monthly payments: Your PAYE bill is due on the 22nd of the next tax month.</li><li>Quarterly payments: Your PAYE bill is due on the 22nd after the end of the quarter.<br></li></ul><p>There are various ways to make your payment.<br></p><ul><li>Same or next day payments: online or telephone banking, CHAPS</li><li>Payments processed in 3 working days: card payments (online), Bacs, cash or cheque payments at your bank or building society, Direct Debit, by cheque through the post</li><li>Payments processed in 5 working days: Direct Debit (if it's the first time you're setting up a Direct Debit payment)</li></ul><p>-</p>

<p>Employment Allowance enables eligible employers to reduce their National Insurance bill by up to £4,000 each year. <br></p><p>HMRC's resource provides further details on checking if you're <a href="https://www.gov.uk/claim-employment-allowance/eligibility" target="_blank">eligible</a>, <a href="https://www.gov.uk/claim-employment-allowance/how-to-claim" target="_blank">how</a> and <a href="https://www.gov.uk/claim-employment-allowance/when-to-claim" target="_blank">when</a> to make a claim and what to do <a href="https://www.gov.uk/claim-employment-allowance/after-youve-made-a-claim" target="_blank">after you've made a claim</a>. </p>

<p>You can set up a Direct Debit through your HMRC <a href="https://www.access.service.gov.uk/login/signin/creds" target="_blank">online account</a> (you'll need to use your <a href="https://www.goforma.com/tax/utr-numbers-what-how-where" target="_blank">UTR number</a>). If you're setting up a Direct Debit for the first time, you'll need to allow five working days for the Direct Debit to be set up.</p>