The FreeAgent Blog

Creativity can be a very important skill to nurture when you’re running a business - but it’s also one that can easily go astray and leave you struggling for ideas. So here’s a few tips for re-stimulating your creative self when you’re feeling uninspired.

How do you boost your creativity at work? Leave a comment or hit us up on twitter and let us know. Have a great weekend!

As the days are getting longer and warmer, it’s a great time to get out of the office and stretch your legs with a quick power walk. But walking doesn’t just provide you with physical exercise; it could also have a big impact on the way you work:

As walking could make you healthier, more productive and more creative, why not try to incorporate a regular walk into other areas of your working life? Perhaps installing a treadmill desk will help you stay focussed on those fiddly bits of work that you have to do, or maybe you could follow in the footsteps of Aristotle and Steve Jobs and hold walking meetings instead of boardroom chats? And rather than attending traditional networking events, could you join a netwalking group instead? Remember, walking doesn’t necessarily have to be all about exercising!

Do you take regular walks during the day? How does this affect the way you work? Hit us up on Twitter or leave a comment and let us know.

In 2012, HMRC re-launched their Business Record Check programme, designed to ensure that small business owners are keeping their records up to date. The Business Record Check is just one part of HMRC’s compliance checks, designed to ensure that business owners pay the right amount of tax at the right time.

Compliance checks can be a stressful reality for any business, but there are ways that you can stay on the right side of the tax man and make the process as painless as possible.

Don’t put off the paperwork - keep your books up to date

The most important thing you can do is to make sure that your business books are updated regularly. This isn’t just because HMRC require you to, but it’s also essential to know where you are in your business. When your records are up to date, not only can you pick up on crucial information quickly (such as whether customers haven’t paid you on time), you can also easily respond to any HMRC enquiries without the stress of searching for scraps of paper!

To make sure your books are up to date, ensure that:

For more bookkeeping best practice tips, check out this live Q&A recording where I answer questions on this topic.

Avoid accounting errors that trigger an automated check

It’s always essential to make sure your records are as accurate as possible, but there’s an extra incentive for tackling any confusing parts of your books: unusual activity in your tax records or accounts could flag you up for HMRC review.

While some HMRC checks are entirely random, most are triggered by HMRC’s Central Risk team, who use sophisticated data mining tools to spot unusual activity on accounts, or trends in particular industries. For example, HMRC detects companies with activity that falls outside the normal parameters in their industry (see appendix C in HMRC's document), and flags them for potential review.

To keep HMRC’s systems happy, it’s important to make sure that your records are not only up to date, but as error-free as possible. If you’ve had a problem lurking in your books that you’ve been vainly hoping would just go away, now’s the time to ask your accountant for guidance or contact HMRC to sort it out. And to help keep the errors at bay and save time, try automating some of your day-to-day bookkeeping work with FreeAgent.

File your tax and VAT returns on time

HMRC are also more likely to review your tax filings when they are made late, so making sure you’re staying on top of your tax obligations can help you stay on the right side of HMRC. Luckily, FreeAgent makes this really easy to do: it automatically fills out your VAT return for you and files it directly to HMRC, and for many sole traders, FreeAgent can help fill and file your Self Assessment return for you too!

When HMRC is happy, you’re happy too!

One of the best parts about staying in HMRC’s good graces is that your business will benefit from tidy, up-to-date records. You’ll not only be ready if HMRC has\ an enquiry, but you’ll also know how your business is doing on a day-to-day basis, instead of waiting until the end of the month, quarter, or even tax year to find out about any problems or potential opportunities.

VAT can be very frightening for anyone who runs their own small business, especially if you’re already struggling with paperwork and wondering what you should be telling the taxman. So what is VAT, does it affect you, and - if so - how do you register for it?

A quick introduction

VAT is short for Value Added Tax - or as I like to call it, Very Awkward Tax - and it’s a tax that’s charged on most sales of goods and services in the UK.

When your business makes sales, you don’t charge VAT to your customers unless you’re registered with HMRC to do so. Sales on which VAT would normally be charged are called “taxable sales”. Sales that are exempt from VAT, or outside the scope of UK VAT, are not taxable sales.

At present you only have to register your business if its annual taxable sales are over the limit set by HMRC which, as of April 1st 2014, is £81,000.

When your business makes sales, you don’t charge VAT to your customers unless you’re registered with HMRC to do so. Sales on which VAT would normally be charged are called “taxable sales”. Sales that are exempt from VAT, or outside the scope of UK VAT, are not taxable sales.

At present you only have to register your business if its annual taxable sales are over the limit set by HMRC which, as of April 1st 2014, is £81,000.

Do I need to register for VAT?

If your annual taxable sales are above £81,000 per year, or they will pass that limit in the next 30 days, then you must register for VAT (this is called compulsory registration).

In some cases you may also wish to register earlier - which is called voluntary registration. Registering before you have to do so can help your cashflow, because being registered for VAT allows your business to claim back input VAT on its costs (we’ll explain more about this later).

However if your customers are members of the general public or small businesses who aren’t registered for VAT themselves, it may not a good idea to register voluntarily, as you would have to charge them VAT which they wouldn't be able to claim back. This could mean that your customers might feel your prices are higher.

You can register for VAT either by filling in a paper form or registering online. If HMRC accept your application for registration, they will send you a certificate confirming this, which will also show your business’s unique VAT reference number.

OK, I’m registered - what next?

Once your business is registered for VAT, then it has to charge VAT on all the taxable sales it makes to its customers. The VAT you charge to your customers is called “output VAT”.

Your business will also be able to reclaim some of the VAT that its suppliers charge. (I say “some” advisedly, because there are some supplies on which VAT can’t be reclaimed, such as entertaining anyone other than staff). VAT that can be reclaimed is called “input VAT”.

VAT-registered businesses must file a regular report called a VAT return to HMRC. Your VAT return shows your business’s output VAT, less its input VAT - and the difference is what you must pay to HMRC.

If your input VAT is greater than your output VAT, lucky you – you’ll get a refund from HMRC!

Managing the transition period

You apply to be registered for VAT as from a certain date. There will usually be an interim period between that date and the arrival of your certificate and VAT registration number.

You’ll have to charge output VAT on any sales after your registration date – but until your VAT registration number arrives, you can’t issue official VAT invoices.

Reached an impasse? What you’ll need to do is add the relevant rate of VAT - usually 20% - to the total value of all your invoices as from the date you’ve applied to be registered from, so that you don’t have to go back and ask your customers for more money.

Once your VAT registration number comes through, you’ll then need to re-issue any invoices you’ve issued in the interim period to your customers. This is so that your customers have official VAT invoices and can reclaim input VAT on the goods or services they’ve bought from you, because HMRC say that you can’t reclaim VAT unless it’s shown on a proper VAT invoice.

Remember that VAT can be exceptionally confusing, so if you have any queries about VAT and how it affects your business in general, you should check with HMRC or speak to your accountant for more advice.

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