Often start-ups are cash poor and choose to wait to appoint an accountant. By the time they do, mistakes that could have been avoided with the help of an accountant have occurred. Five of the most common mistakes the Orange Genie accountants see are:
- Company structure
Many start-ups start trading as a sole trader, as it’s the simplest way to trade. However often they will be missing out on government grants they could have received if they worked through a limited company.
Not only do they risk missing out on funding they may also find it could have been more tax efficient for them to work through a limited company, as they are missing out on valuable tax planning options that they could not take advantage of while trading as a sole trader.
- VAT Registration
If you earn more than £83,000 for a consecutive 12 month period, you will legally have to register for VAT. Also, there are other scenarios such as if you receive goods from the EU worth more than £83,000 where you have to register for VAT.
An accountant would advise you on when you are nearing the limit and if there is another reason you might need to register for VAT. If you fail to register on time, you could incur a surcharge and a penalty of up to 100% of the tax owed.
Sometimes it is beneficial for you to register voluntarily for VAT, as some businesses can find themselves in a refund position with HMRC. Others choose to register for VAT as the clients they are working with are VAT registered and also it can open opportunities to companies that would prefer to work with only VAT registered companies.
- Important dates
Throughout the year you will need to make sure you keep up to date with your tax obligations with HMRC and Companies House. If you don’t keep on top of these certain dates and deadlines, you could end up with some rather hefty fines.
Not only will your accountant ensure you meet these deadlines, the paperwork is completed accurately, they will make sure you are tax planning as efficiently as possible. Your accountant can also advise you on any legislation changes and can work on a plan to ensure if there are additional costs you could incur, they are forecasted for.
Monitoring your expenses can be key to your company’s success, every penny counts really in the early days and missing out on any of them could be a costly expense. For example, some businesses could claim costs for working from home which is about £4 a week, or if you cycle you could claim 20p a mile.
Business expenses do not attract corporation tax, so if you are to pay for something that is wholly and exclusively for your business, you in around about way would be saving around 20% on the purchase.
Every business needs insurance. It is key that you have the correct insurances as you never know when something could go wrong. Often accountants will identify you have the wrong type of insurance, or you have no insurance at all.
It is always worth checking extra insurances you could take out too, such as business equipment and vehicles and goods in transit insurance. An accountant though can recommend which ones might be worth you taking out and the benefits of doing so. It is always worth sometimes remembering it is worth spending a few pounds now which could save you thousands of pounds in the long-term.
These are just some of the many mistakes a start-up could make if they do not appoint an accountant. It’s worth remembering an accountant will not only be there to do the cumbersome paperwork, but they will also be a financial advisor and will support you in helping your business succeed.
By Jessica Vella-Bone Digital Marketing Manager at Orange Genie
Orange Genie provides umbrella and accountancy products to contractors and freelancers.