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    1. Plunky97 is offline

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      #1

      Looking for a layman’s guide to registration, taxes, VAT, etc…

      Cheerio everyone! I’m a little lost about the grey area surrounding registration, taxes, the VAT, etc…and would just like to find someone who can give a bit of a layman’s guide to all this technical stuff.

      Some of the questions I want to know are:

      • Can I get in with cash and carry/wholesalers if I’m not a business?
      • If I have to set up a business, what are my options?
      • Is it necessary to register for VAT?
      • What about record keeping?
      • What if I hire people?
      • What else do I need to think about?
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    2. lyndonb is offline

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      #2
      This is a good set of questions and they are actually all questions that come up a lot. Here are the answer’s you are looking for. Hope they help!

      1. (Can I get in with Cash and Carry/Wholesalers if I’m not a business?) To put it simply – no. You need to have proof that you are operating as a “business.” Does this mean you have to be a brick and mortar business? No…sole traders can get in easy – just have proof of it.

      2. (If I have to set up a business, what are my options?) You can do one of two things when setting up a business. You can:

      A.) Become a Sole Trader;
      B.) or, Become a Limited Company.

      Both of these options work. The first just means that you are self employed whereas the second option is for creating a “company.”

      3. (Is it necessary to register for VAT?) It depends on how much you make a year. If you make Ł70,000 in a 12-month time frame, then you have to register for VAT. If you don’t – then don’t worry about it. Keep in mind that if you are a registered VAT businessman (or woman) then you need to keep good records.

      4. (What about record keeping?) Record keeping is a must for all businesses – no matter how big or small they are. Sage is a great program for keeping business records regardless of the size of your business. However, if you don’t have a large business and feel that you can keep your records with a spreadsheet – then you are free to do that.

      It’s just important that you keep records – and you keep them for at least 7 years. Keeping records doesn’t just mean keeping track of your income and expense, it also means you keep all your invoices and receipts to validate what’s in your “books.”

      5. (What if I hire people?) If you hire people who don’t claim to be self-employed, you have to take out taxes and insurance for them in addition to paying them minimum wage, giving holiday time (28 days), sick pay, maternity pay, paternity pay, etc.

      This also means you need to give them payslips showing them what they made in a pay period, how much went to taxes, etc…you also have to give them an end-of-year summary too in addition to filing the proper HMRC forms for them. They are your employees after all!

      6. (What else do I need to think about?) Just remember that no matter what you classify your business as (sole trader or limited company) you have to pay taxes every year. You will need to account for income taxes and National Insurance for your profits every year.
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    3. Thank you for this post:

      Kyle (09 Aug 2011)

    4. Plunky97 is offline

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      #3
      Many thanks. If you don’t mind me asking a little more from you…how do you set up a Limited Company vs. a Sole Trader business? Also, do I have to wait to register with VAT until I make Ł70,000? And, how do I register for VAT?

    5. lyndonb is offline

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      #4
      Okay – here you go:

      1. Setting up Limited Company vs. Sole Trader: You can easily set up a limited company online – one of the most popular sites is: Company Formation - Online Company Formation - Limited Formation - Company Registration and it only costs Ł16.99. For a Limited Company you will need a Director and Shareholders and once all that is set up, you will get your Company Certificate and Number. Of course, you have to file taxes and register with the HMRC too.

      The only thing required as a Sole Trader is that you notify HMRC before you begin trading. Every year on January 31st, you will have to submit a Self Assessment Tax Return and it’s wise to set up a separate bank account and use a Trade name as well.

      2. When and How to Register with VAT: You can register for VAT before you reach the Ł70,000 mark…but you may find it more hassle than it’s worth. Of course, you’ll be able to begin getting VAT back when it applies, but there is a lot more accounting required from you when you are VAT registered.

      To register for VAT, simply go to this website: HM Revenue & Customs: Error page could not be found, but don’t be alarmed if it takes a while (3 weeks or so) to get your registration to go through – it isn’t immediate.

    6. Plunky97 is offline

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      #5
      Again, many thanks – very useful info!

    7. McJennings is offline

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      #6
      I agree – great post! One that everyone (newbies) should read!

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