Checklist for keeping on the right side of HMRC

A small business owner may have three fronts to cover to keep HMRC happy. Tax can be a minefield for the unwary. Here is a checklist to help you through. Where your knowledge and experience is not enough, don’t hesitate to get professional help.

Business tax

1 Register for tax on start-up. You’ll be penalised if you haven’t done this within three months.
2 Decide when to register for VAT. Once your turnover reaches the current threshold, you have no option but to register. Before that, does your business need to look well established to penetrate the desired markets? Or will it help you get customers if you can keep prices down by not charging VAT? Looking at your start-up costs, how much VAT you could reclaim if you were registered? Consider all factors before deciding.
3 Get familiar with VAT rules. Always submit your quarterly returns and payments on time.
4 Depending on what kind of organisation you have set up, you may have to pay corporation tax. This payment will be due before the deadline for submitting your tax return. To be safe, complete the return and submit it early at the same time as the payment.

Employment tax

5 If you have employees, once they earn a certain amount, you have to deduct tax and National Insurance Contributions from their pay, and pass them on, together with any employers’ contributions due. Find out how to do this and make sure you pay on time, so you avoid interest charges.
6 Make the regular form returns on time, including the annual ones due by May 19th each year.
7 Issue P60s to relevant employees by 1 June each year.
8 Find out your responsibilities in regard to, sickness, maternity and other special benefits.
9 Check the tax aspects of company cars

Personal Tax

10 Always file tax returns and pay on time to avoid penalties.
11 Plan for the payments by putting money away. A special account is a good idea.

General

12 Check your tax bill. Human error can creep in, even from HMRC.

Debt Recovery Guide for Small Businesses

In any small business, cash flow is crucial. It definitely pays you to stay on top of the cash you are owed. If any of your debtors are slow to pay, you need to do something about it.

First look at your payment terms and make sure they have been clearly set out and cannot be misunderstood. This can go a long way towards ensuring that you get paid on time. In the UK, you can also make it worth while for your customers to pay on time by imposing a small extra percentage fee for late payers.

You need to have a policy about credit so that you don’t take on any risky customers. Run a credit check before handing out any goods or services to new customers that do not pay up front. Your policy should also make sure you set realistic credit limits for each of your customers and review them regularly.

Run debt management reports from your system weekly, so you can see where any problems lie. If your payment terms are not met, act quickly. Don’t let the debts build up or go on too long without your intervention. Get on the phone and remind them about it straight away.

With good communication in place, you should be able to judge whether the customer can make staged payments, as this kind of agreement is better than not getting paid at all. You also need to decide whether to continue to supply such customers. Find out the true reason for the delay and these decisions will be easier to make.

Once a payment is over 60 days late, it is time to get really serious. You might consider calling in a debt recovery agency. You will certainly need to review the credit status you allow the customer.

How to Prepare an Invoice: Another Useful Bulletin from Office Assistants

Clients often ask us the correct way to go about setting out an invoice so we thought we’d put together this useful guide to help you get it right first time and ensure you include all the required information.

If you ever encounter issues with non-payment, you’ll find that including the right wording on your invoices will make it much easier for you to state your case.

What Information is required on an Invoice?

Company Details
Your company’s name and trading address, telephone number, email address, registered office address, company number and VAT registration number (if VAT registered) must all be stated clearly on your invoice.

Agency/Client Details
The full name and address of the agency/client that you are invoicing should be included on the invoice.

Fees
List details of the services or products provided, the gross amount payable, any VAT amount due (if you are VAT registered) and then the final amount due. If you charge an hourly rate for your services, state that rate.

Purchase Order Number or Contact Reference
If your client or agency uses Purchase Orders, clearly state this number on your invoice so as to speed up the payment process. If Purchase Orders are not used, state the name of the contact that ordered the products or services.

Invoice Number
Each invoice should have its own individual invoice number. The number can also include letters which may help you identify particular clients.

Dates
Include the date the invoice was produced and the payment due date. Usually the due date will be 30 days after the invoice was raised although terms do vary from between 7 and 60 days.

Payment Terms
Confirm how you would like to receive the payment, either by cheque or bank transfer and clearly state when your invoice should be paid.

With a cheque payment, clearly set out who the cheque should be made payable to and advise the client to write the invoice number on the back of the cheque to aid you in identifying the payment once received.

For bank transfers, state your bank account details: account name, sort code, account number and payment reference (usually the invoice number) to enable the agency/client to forward the money to the right account.

Late Payments
To help protect yourself from late payments you may quote the Commercial Debts Act which allows you to charge a late payment fee of £40 once your stated terms are exceeded. Include the following wording:

“We understand and will exercise our statutory right to claim interest and compensation for debt recovery costs under the late payment legislation if we are not paid according to agreed credit terms.”

Timesheets
If your client or agency requires a timesheet to back up the invoice then remember to include one. Don’t forget to take a copy before submitting it!

Sending your Invoice
You can send your invoice by email, fax or post and normally your client will advise you of their preferred method. If sending by email, always convert it into PDF format so that the document cannot be altered. PDF printers can be downloaded free of charge from PDF 995: http://www.pdf995.com/