Transferring your VAT Registration Number

transferring your VAT number

VAT can be complex and confusing at times. Under current guidelines, you need only register for VAT if your VAT taxable turnover exceeds £85,000. You can also register voluntarily, if you wish.

VAT – Value Added Tax is a consumption tax which applies to good and services. The current VAT rate (as of 2011) is 20% – this must be added to the price of good and services where VAT applies. Supposedly, VAT only applies to ‘non-essential, luxury items’, but there are some inconsistencies, so it’s worth checking.

With services, such as plumbing, decorating or building work, you only have to pay VAT if the company is VAT registered (i.e turning over in excess of £85,000).

There may be circumstances where a VAT registration number needs to be transferred to another business. Here, we answer some common questions about the process and how to navigate it with ease.

Why would you need to transfer your VAT registration number?

You may wish to transfer a VAT registration number if you have bought a company and wish to continue using it’s VAT registration number, or likewise, if you are selling a VAT registered business. You may set up a new business and wish to transfer your VAT registration to the new one, as the old business will no longer meet the threshold. Be aware the continually transferring a VAT registration number may arouse suspicions. If you are buying a company, but you are already VAT registered, you may use your current VAT registration number.

How to do it…

The first thing to remember about VAT registration transfers is that both parties must tell HMRC of the intention.

  1. Cancel any and all direct debits connected to the VAT registration number in question.
  2. Use your VAT online account to fill out a transfer form, OR send a VAT68 form by post.
  3. Within 3 weeks, you will receive confirmation from HMRC that the transfer has been successful.

Responsibilities…

Once the VAT registration number has been successfully transferred, there are a few final steps to complete to ensure VAT compliance.

  1. The original registration holder should cancel their VAT online account’s accountant access. (Unless the new registration holder intends to use the same accountant).
  2. Any and all records relating to the previous owner’s VAT registration number should be passed over to the new owner, to compile a complete VAT history.
  3. The new owner must set up new self-billing arrangements, in order to pay their VAT correctly – in order to do this, they must register for VAT from the day they take over the business.
  4. As the new business owner, you may only claim VAT on purchases for the business once you own it. These can be reclaimed on your first VAT return.

Once you are registered for VAT, you must pay your quarterly tax return online. There are some tax benefits to paying VAT, such as claiming VAT in director’s mileage.

If you’re confused or concerned about transferring a VAT registration, paying your VAT contributions or claiming back VAT, check out the HMRC website or get in touch today.

Responsibilities of a Company Director

Responsibilities of a Company Director

No matter the size of your business, as a company director, you take control of all the pivotal decisions. Whilst it might be daunting, it can also be extremely rewarding – as long as you know what you’ve signed up for.

We’ve put together a list of the major responsibilities you should know about before you say ‘count me in!’.

1.Upholding the company’s constitution

Think of your business as its own little country or state. Within that land mass, there are rules which must be followed by everyone which inhabits it, including the leaders. When you establish a company, you draw up these rules as ‘articles’. As you continue to operate the business, you must abide by these articles at all times. If you overstep the mark or exceed your powers, your decisions could be reversed.

For example, there be several stakeholders or directors. Under one of the company articles, it may state that a certain number of stakeholders or directors must vote of actions before they are taken. As the company director, you must stick to this rule too.

2. Promoting the company’s success

Under the Companies Act 2006, a director of a company “must act in the way he considers, in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole”. In this sense, ‘promoting’ doesn’t mean advertising – it means acting under the best interests of the company. This may include looking after relationships with clients, stakeholders, employees and suppliers. It also refers to sensible economical and environmental decisions which do not endanger the company, the employees or the environment.

3. Operating with reasonable care, skill and diligence

Similar to the above rule, directors are expected to have a level of skill with which to conduct the running of a company. If someone is not skilled, they may prefer to take on other director’s with specific specialisms – such as law or accountancy.

Under ‘reasonable care’, you may consider taking out various insurance policies to protect the business and it’s dependants. You must also uphold the company’s constitution, as stated above, in order to be directing in a diligent manner.

4. Exercising independent judgement

As stated above, there is a presumed level of skill when you become a company director. It is not the role of the director to simply implement the thoughts and suggestions of stakeholders. As a company director you must take a very active role in the decision making process and have a clear and concise vision for the company’s future. If you do not know, yourself, where the business is going, it will be very difficult to direct others in how to operate it.

5. Disclosing conflicts of interest

There are several different types of conflict of interest. This might include relationships with friends or family, in conjunction with your business. As a director, you may not accept benefits from a third party – as this could be considered a conflict of interest. If you feel there may be a potential conflict of interest, you are supposed to be fully transparent with other directors and stakeholders, allowing them to have a say in how the situation should be handled. Failure to make these conflicts known could result in a director being struck off.

6. Keeping up to date records

In order to prove your compliance with your responsibilities as a director and the constitution of the company, you must become very organised with keeping records. For every action or decision that is taken in the business, you should keep a note of it. If you have multiple directors or stakeholders, take minutes at meetings and make them accessible to all pivotal parties involved. This protects the company and yourself – for example, in the event that someone questions a decision that was made, you can display evidence that the issue was debated and deliberated appropriately.

If you’re ever concerned about your responsibilities as a director, it’s best to seek legal counsel, look up specific legislation or check with HMRC. When it comes to making financial decisions, of course, we would recommend that you seek out a suitably qualified accountant

25 Principles of excellent financial management – For business owners – Part 2

principles of financial management 2

25 Principles of excellent financial management – For business owners – Part 2

Following on from our post at the beginning of the month, we’re covering the next 10 steps to great financial management for your small business.

From tools of the trade, to tips and tricks we’ve studied – you need these practices in your business today!

11. Look after your credit score

It might seem like a no brainer, but your credit score is important. As a business owner, you may want to borrow money or lease equipment. Alongside your business plan and proof of earnings, a good credit score can help to support you when go looking for help. You can check on your credit score easily using tools like Experian.

12. Set ambitious but realistic goals

There’s nothing wrong with setting your sights on a six-figure business or million pound turnover. However, it’s best to keep your goals regular, consistent and realistic. You don’t want to be feeling disheartened when you see how far away you are from your target number.

13. Review expenses regularly

Do you know how much you’re spending? Signed up to subscriptions you no longer use? Paying for a service that isn’t bringing in a good ROI? Get to grips with your expenses and know exactly how much it’s costing you to run your business. If you fall on hard times, you’ll know where you can cut back.

14. Pay all bills on time

You want your figures to be as up to date as possible. Try to pay bills as soon as possible to ensure that the figure in your business bank account is accurate. Leaving bills unpaid could lead to interest or a huge list of expenses to settle at once.

15. Assess different payment types

Depending on how your customers pay you, it might be worth shopping around when it comes to payment providers. For overseas clients, portals such as Stripe and PayPal may be a safer option. However, most third party payment portals charge a fee or offer poor exchange rates. Be sure to investigate the most cost-effective option for you.

16. Check in with your business plan

Are you on track? It’s hard to know how you’re doing if you’re not touching base with your business plan every now and then. Make time, at least quarterly, to sit down with your business plan and see how you’re doing.

17. Think about your pension

Another thing to speak to your accountant about is how to manage your pension. If you are self-employed or running a small business, this is your responsibility. There are many different ways, means and schemes for collecting a pension – but ask a financial expert for customised advice.

18. Know your day to day costs

Managing your finances comes down to the nitty-gritty. Ever heard the saying ‘look after the pennies and the pounds will look after themselves’? – that applies in business too. Fans of The Lean Start Up recognise the importance of keeping your day to day costs down, knowing the benefits will accumulate later.

19. Get the right funding

Depending on the type of business you’re in, and how long you’ve been operating, there are various options when it comes to getting funding. For innovative new products, there’s Kickstarter and other crowd-funding options. For businesses who want to scale, there’s AngelList. For many, it starts with borrowing from friends and family. Ensure that you’re aware of the interest rate and pay-back terms with any investment. If you’re concerned, run it by your accountant first.

20. Find a great accountant with a track record

By far the most useful tool when it comes to financial management, is a trustworthy accountant. Getting to know you on a personal level allows your accountant to recommend the best possible products and avenues, based on your individual needs. When choosing an accountant, see if you can find out what other businesses they look after. Do they have a long, positive track record? Do they have good client testimonials and a professional looking online presence? Be selective and don’t be afraid to ask lots of questions.

Thank you for checking out our top 20 tips for great financial management. Didn’t see the first 10? Check out that post, here.

Got any questions? Find us on Facebook, Twitter and LinkedIn. We’d love to hear from you!

20 Principles of excellent financial management – For business owners – Part 1

principles of financial management

20 Principles of excellent financial management – For business owners – Part 1

As a small business owner, there can be a lot to remember when it comes to finances. For some, this is second nature. For others, learning good financial management practises is a totally new ball-game.

Whether you are being supported by an accountant or not, it is very important to have at least a basic understanding of managing your money. Split into two parts, here are our first top ten tips for keeping your finances in tip-top condition.

1. Keep your business and personal transactions separate

Known by accountants as ‘economic entity assumption’, this process makes your accounting far simpler. By having separate bank accounts for yourself and your business, it’s easier to calculate expenses, earnings and just about everything else, without spending hours trawling through your bank statements. Treat your business as a separate ‘entity’, not an extension of your personal finances.

2. Date everything & run reports with similar timeframes

Every piece of financial collateral should be dated. Whether it’s statements, invoices, reports or receipts – put the full date on everything. If money was to ever go awry, or your accounts weren’t tallying up, a full timeline of your income and outgoings will help to alleviate concerns quickly.

3. Don’t confuse cost and value

Known to accountants as ‘cost principle’, this term refers to how items are recorded in financial reporting. Say your business bought a building and the value of the property sky-rocketed, your financial reports would only take into account the price you paid for the property. Value is reflected in the gain or loss when selling an asset.

4. Full disclosure with your accountant

Otherwise known as the ‘full disclosure principle’, this refers to the relationship between yourself and your accountant. You should disclose all financial information to ensure that your reporting and account management is always correct, up to date and meticulously accurate.

5. Always prepare for tax

No one wants to think about tax before it’s due, but it’s a great habit to get into. To protect your cashflow, many accountants will recommend that you syphon off a percentage of your revenue into a separate account. When your tax bill comes around, the money will be ready and waiting – preventing any surprise costs.

6. Pay yourself weekly/monthly

When you first start in business, this may not be feasible. Later down the line, the amount you pay yourself may still fluctuate. However, if you pay yourself on the same day of the week or month, it’s much easier to track your earnings and calculate your living costs. The amount may vary, dependant on turnover, but the date can remain the same.

7. Have a billing strategy and payment terms

In your billing strategy, you should invoice on a particular day of the week, offer inflexible payment terms (14 days, 30 days etc.) and impose financial sanctions for late payments. For example, you could explain that you charge a 10% surcharge on all invoices over a week late. It might seem harsh, but poor cashflow management is the number one reason that small businesses fail.

8. Check in on your books

In order to operate good financial management practises, you need to know what’s going on in your bank account. Using an online accounting system (such as Xero or Quickbooks) allows you to touch base your finances, whenever you want! Make it a habit to get friendly with your accounting once or twice a week.

9. Understanding your cash flow

In any business, there will be peaks and troughs throughout the year. If you are paying attention to your finances and keeping track of your income, you’ll know exactly when your peaks and troughs are. If you are quieter over the winter, you could start putting money aside in the busy summer months. Understanding your cashflow, when it’s flowing and where it’s flowing from, is incredibly important.

10. Understand your reporting

Speak to your accountant about the difference between your balance sheet, income statement, cash flow statement and revenue forecast. Once you’ve got a grip on how all these reports work together, you’ll find it easier to get the information you’re looking for.

Stay tuned at the end of this month for ten more expert tips from the GHawk team. Got any questions? Find us on Facebook, Twitter and LinkedIn. We’d love to hear from you!