This chapter deals with the areas most companies and businesses have problems with. They are mainly things over which you have little control because you are dependent on others, but you must try to overcome them because they can be critical in your success. Points covered include:

Paying Your Taxman

How often have you heard the cries ‘I hate paying tax’ or ‘Why do I pay so much tax?’ Well, the fact remains that all businesses have to pay tax and it is only when it is paid that differs. The main problem most businesses suffer, however, is having the money available to pay the tax when it is due.

Income Tax

To recap, tax is, in theory, paid both by the company and its employees. Remember that directors are employees so the tax on all salaries and wages is payable under the PAYE (pay as you earn) system which is collected by you. The PAYE system gives you a code number which reflects the tax allowances to which you as an employee are entitled. Tables are provided by the Inland Revenue to convert the code into tax payable or repayable if you have paid too much.

The income tax year starts on 5 April and both income tax and national insurance must be paid over to the Inland Revenue once a month. This tax is due to be paid by the 19th of the month and should include all deductions made during the previous month. The last date for sending payments for the year that ended on 5 April is 19 April and interest is chargeable on any payments made after this date.

When the tax year is over a return has to be sent to the Inland Revenue by 19 May showing the total amount deducted, the total amount paid and an explanation of any differences. This is called a P35. You are also required to send a form P14 for each employee showing his individual position. Finally by 6 June forms P9D and P11D must be submitted showing details of expenses and benefits.

You will see from the above that the taxman has a very foolproof method of collecting the taxes due from your company and if you are thinking about taking on employees you must be sure to have the wages and salaries system working properly. It sounds onerous but it is fairly simple and the starter pack issued by the Inland Revenue and the Department of Social Security explains exactly how to do it.

Corporation Tax

Once you have ensured that your taxes in respect of employees are dealt with properly you have to deal with the tax bill on the company profits which is corporation tax. This was mentioned in Chapter 4.

The first thing to say here is that the Inspector of Taxes cannot know how to charge you corporation tax if it is not known what your profit is. The Inspector does, however, have a very effective way of ensuring that you pay it. In the past a letter was sent containing the assessment of your profit, either based on evidence of your profits in the form of your accounts or estimated. Since June 1999 it has been up to you to assess your own profits.

Don’t panic. You must, however, deal with this promptly. It will be as well to learn how the system works. You will probably have appointed an accountant to deal with these matters, but that does not stop the taxman writing to you because you are responsible. Let your accountant deal with the taxman and don’t get into the position where both you and the accountant do some of it. You can imagine the mess that will ensue if you both do something without the other knowing. Wires get crossed and the taxman has as much difficulty sorting it out as you do.

The important thing is to get your accounts done on time as the Revenue are imposing more and more penalties for late accounts.