Frequently asked questions

Below you will find the questions that we get asked most frequently by both businesses and individuals, whether existing or new clients or other business contacts.

How do I know whether I am employed or self employed?

This is usually a question of fact and is dependent on many factors, not just, for example whether or not you have more than one client/employer. The answer depends on your working relationship with the business with whom you are working and your contractual position with them. It is never a choice. You are either one or the other! If you are in any doubt about this do contact us as mistakes here can be very expensive.

Do I have to be VAT registered?

You are required to be registered by law if your “Taxable turnover” (broadly speaking the amount that you sell to customers) exceeds the annual registration limit, currently £85,000, You can register voluntarily before you reach the turnover limit if it is beneficial for you to do so.

What do I do if I think that I owe tax?

If you are an individual or a company who owes tax then you are required by law to complete a self-assessment tax return and pay over any tax due. HMRC will not necessarily tell you to do so but, not withstanding this, you could be liable to penalties and interest on outstanding tax if you do not declare such tax or do not complete a tax return within the statutory time limits.

What do I do if I want to employ someone?

You must register immediately with HMRC as an employer. You will need to deduct PAYE and National Insurance from your employee’s salary at prescribed rates. If you do not do so, or make incorrect submissions to HMRC then you can be liable to heavy penalties and interest on tax and NIC that you do not pay over. You will also need to disclose and pay NIC on employee benefits that you provide to your employee.

Does my company need an audit?

You are only required to have a statutory audit if you are not a small company as defined by The Companies Act and your annual turnover passes certain limits. There are exceptions to this, for example if you are a company registered with the FSA. You will also be required to have an audit if more than 10% of your members require you to do so. You may also wish to have an audit for other reasons, for example if you are a members body that has to submit accounts to many members or if you are an organisation of public interest.

Should I be a sole trader, partnership, limited company or LLP?

Like most things, it depends on a number of factors: the type of business that you are in and in particular, your size and profitability. All of these may determine whether there are tax advantages to being set up in a particular way. There are also other legal and statutory issues that may make you more in need of one structure than another.

I have money or assets overseas. What are my responsibilities here?

If you are resident and domiciled in the UK then this is easy. You must account to HMRC for everything. If you are not domiciled here then things get a little more complicated. The definitions of residence and domicile are long and complex and have to some extent been decided by case law. If you are not sure then you will need to take advice.

I think that I have paid too much tax. What should I do?

If you know why you have paid too much tax and that it is due to an error by you or the tax authorities, you should contact them by phone or in writing explaining the error and they can then normally adjust it. If however you just feel that you are paying too much tax then perhaps you should realise that we all feel like that, but take advice if you feel thing are not correct!

How do I pay myself?

If you are a director/shareholder of a limited company then you can pay yourself by means of a salary or by declaring a dividend which is paid to shareholders out of its profits. Advice needs to be taken about the best way to do this.

Is what I am planning to do "Tax avoidance" or "Tax evasion"?

Tax avoidance is where you use legitimate and legal means to use the tax system to your best advantage. Tax evasion is where you go outside the law to gain an advantage. In general terms if you are doing something that you do not wish to be disclosed to the tax authorities or that you hope they will not find out then you are treading on thin ice and should think carefully about what you are doing. If you have any doubt then you should urgently seek advice.

How do I form a company?

This is quite straightforward assuming that you have in front of you the personal details of each director and shareholder and a few other basic pieces of information (such as the Company’s proposed name!). Collards operates an online system which can have a company up and running in 24 hours.