18th June 2019
We know how many hats small business owners have to wear on a daily basis. Before you get down to doing what you know best, there are a number of financial responsibilities that must be in place as your business grows. Accounting tech has made many of these tasks easier to handle, however an experienced accountant could save you a lot of time and stress. Here are the main obligations you must have in hand as you scale up:
Employing staff - PAYE & Pensions
So you’ve set up your company and things are really starting to get going – sales are coming in and you’ve hired your first members of staff. Now you are officially an employer, you also have some new financial obligations to put into place. Employers must register with for Pay As You Earn, or PAYE, in order to pay HMRC any income tax and national insurance (NI) deducted from staff wages. You must ensure that this is paid in a timely manner by the third week of the following month. Workplace pension contributions are also now mandatory. As of April 2019, all employers must contribute a minimum of 3% of their employee’s salary into a workplace pension scheme such as NEST.
Expanding revenue? Then you should be Making Tax Digital
Most business owners will have registered with HMRC at the start and ensured their various insurance obligations are in place. The next step is Value Added Tax. If your expected revenue is likely to exceed £85,000 in the next 12 months then you’re required to register for VAT. It is the company directors’ responsibility to report this and there are penalties if you wait until after you reach the £85,000 threshold. Unless you’re really hot on your numbers, this is where your accountant is essential – they will be able to provide support when it’s time for you to get VAT registered
As of April 1st 2019, HMRC’s Making Tax Digital means all VAT registered companies must keep all relevant records online, spelling the end of paper accounting. If you’re already using cloud-based accounting software such as Xero, FreeAgent or QuickBooks Online then you can submit your quarterly VAT return to HMRC at the push of a button. Good news for those already embracing digital accounting and motivation for those who aren’t.
Expect more complex statements & tax returns
Every business owner must submit financial statements to Companies House within 9 months after year end. At 12 months after year end you must also submit your CT600 corporation tax return to HMRC. As your business grows, the disclosure requirements on your financial statement increase – based on your profitability and assets, your statements will become lengthier and increasingly complicated as you will have more to disclose.
Who is responsible and why comply?
All these obligations come down the company directors, and all of them are legal requirements. Pay particular attention to reporting and return deadlines. Timely submission is important as delayed or late returns will be flagged on HMRC systems, bringing attention to your company and increasing the likelihood of investigations.
Where can business owners turn for cash injections as their business takes off?
The three most common sources of investment are family and friends, banks or institutional investors (seed investors or venture capitalists). Family money can come with less pressure for repayment, but more pressure to succeed and perhaps with less industry insight. Banks can be more flexible than VCs and money comes with less scrutiny, but VCs will have more interest in your success, providing valuable insight, regular meetings and positive input.
Industry specific funders and investors can provide alternative finance, plus there are hundreds of government grants out there - just remember to plan early, long before you incur the costs you are looking to fund. Crowdfunding has also become a popular form of business finance, and with it comes additional shareholder complexity that can require the expertise of startup-savvy accountants.
Do things differ for other types of startups?
Fin-Tech or T-Tech SMEs who have created a ‘unique’ piece of technology can get up to 30% of their investment back from HMRC, by submitting an R&D claim at the same time as your CT600.
If you’re trading in any other EU countries, you must file an European Commission Sales List (ECSL). This contains information on your sales and transfers of goods/services to VAT registered companies in the EU. The ECSL usually requires monthly or quarterly filing and your accountant will be able to advise you on the information that needs to be provided.
How can accounting tech make things easier?
Cloud accounting packages are designed with the business owner in mind, with user friendly language and intuitive interfaces. Seamless integrations with apps like Receipt Bank allow you to send photos of your expense receipts directly to your accountant, who can then reconcile them against the bank transactions in your accounting package. There are a wealth of apps to support with cash flow and forecasting, which provide access to financial and business insights that are easy to digest, so that you can focus on running your business.
Find out how you can link data from your cloud accounting package to the Deloitte Propel business insights dashboard
What can business owners or staff do themselves and what should be carried out by an expert accountant
Sam Hewitt, Senior Finance Expert at Deloitte says, ‘Whilst directors may feel like they can do basic bookkeeping, accountants bring a depth of knowledge and expertise which can help in a number of areas. Accountants have more specialist knowledge when it comes to more complex statements and tax returns, and as your business grows you might find you need to turn to an accountant when everything gets that little bit more complicated. By using appropriate tax planning, you might also find that an accountant can minimise the corporation tax you have to pay, and let you know when you’re ready to make tax digital.’
Finding a fast growth business accountant will undeniably free up your precious time so you can focus on driving your business. They can help you scale your company, whilst avoiding the penalties and stress of getting compliance wrong. Contact Deloitte Propel to find out more.