A major task for any new business is to ensure it is registered with the various government departments, this is one area I find a lot of new clients fail to do, mostly through a lack of knowledge, but sometimes through a fear of red tape and paperwork. The aim of this part of the start up guides is to help you get over this initial hurdle, and by doing so save you money, failure to register within given time limits carries a fine.
I will take each stage in turn starting with HM Revenue & Customs (formerly known before the merger as the Inland Revenue and HM Customs & Excise).
HM Revenue & Customs ‘HMRC’
If you are self employed as a sole trader or partnership you will need to inform HMRC of this fact, this is done by completing form CWF1. This form will provide HMRC with essential information, from personal details to when you started in business, what type of self-employed work you will do, your business address and much more.
This form will also deal with registering you as an employer if you have or are going to take on staff and you can also request a VAT registration form if you are going to be VAT registered.
If you are operating through a limited company the form you use is CT41G. This form much like the CWF1 for the self employed will inform HMRC that your company is in existence, it will give them details on your business address, what business you are in, accountant (if you have one) and it also tells them the date you started to trade.
Important to remember, failure to register with the first three months of commencing in business will result in a penalty of £100.
Class 2 NIC
As a self employed person you are liable to pay Class 2 NICs (this used to be referred to as paying ‘your stamp’), but you only have to pay this once your profits are above £4,465 (current year running to 5 April 2007). To make sure you register to pay your contributions you can complete a Direct Debit mandate, this way HMRC will take a monthly Direct Debit from your bank account. Currently the rate for Class 2 NICs is £2.10 per week. Without a Direct Debit you will receive a bill every 13 weeks.
If you employ staff you need to register as an employer, this can be done by phoning the New Employers Help Line and they will take the necessary information required to register you as a new employer. Once registered you need to seek professional advice on how to run a payroll scheme together with guidance on your responsibilities and obligations which are now quite onerous.
Registering for VAT
You need to consider if it is beneficial to be registered for VAT, if your turnover (sales) is less than £61,000 then you don’t need to be registered, but it may still be beneficial to be registered. Anyone will turnover exceeding £61,000 should be registered for VAT. To register you need to complete form VAT1. If you are in partnership you also need to complete form VAT2.
Please remember, these are only bite sized guides, there is a lot more to running your own business than can be put into such a guide, always take professional advice sooner rather than later.