Professional Contractors GroupLeeds

26th March 2013

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Freelance Tax and Accountancy

Update

Paul Silver-Myer8 Durweston Street, London W1H 1EW Tel: 020 7486 0541 Mob: 07855 632 871

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General compliance and preventative advice

Best practice for your contractor business

The do’s and don’ts of record keeping

How to build a mutually beneficial relationship with your accountant

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But before we start …..

is the glass half full or half empty?

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Or rather, are you fearful or are you greedy?

General compliance and preventative action

Comply or Die• file your accounts on time

• pay your tax on time

• meet all your statutory

obligations

You are the director and so charged, and privileged, with the responsibility of running your company properly and legally

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Which cases do HMRC pick to investigate?

• flashing red security light• large steering wheel lock• keys left in the ignition

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Another way of putting it, is with the total number of possible cases available for investigation by HMRC, will you raise your head above

the parapet and allow yourself to become a sacrificial lamb?

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Best practice for your contractor business is therefore to be homogenised ... like Homepride Fred

FRED

Or would you rather stand out from the crowd?

Formation set-up

• No £1 Companies • No minor shareholders• >>> minimum wage• An innocuous name• Capitalise your assets• Have a company secretary• Be professional by respecting formation – amateurs leave a messy trail

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• Letterhead• Sales invoices• Business cards• Pay a salary to your Secretary• Use the PCG logo

Bee in Business

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• Do you have the right to substitute?• Do you have the right to control how you do your work?• Do you have the right to turn work down?

Know where you stand – have a contract review

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CONTRACT FOR SERVICES [self-employment]

CONTRACT OF SERVICE [employment]]

• The do’s and don’ts of record keeping

DO keep all your records for your four main tax returns

- Corporation Tax [CT600]

- VAT [1/4 returns]

- PAYE [P35 – RTI]

- Self Assessment [tax return]

[beware - don’t spend the Revenue’s money before the due date!]

DO make sure your records are

- accurate

- up to date

- complete

[and available for immediate inspection!]

DO you need to record your financial transactions

- assets

- liabilities

- income

- expenditure

[just like we all do with our household accounts!]

DO all these transactions are available from analysing your

- bank statements

- [petty] cash receipts

- credit card statements

[otherwise how would you know if you have become the victim of identity fraud?]

DO and personally you need to evidence your income for your tax return

employment [P60 / P45 / P11D]dividend [vouchers]

bank interest [tax deduction certificates]rental propertyforeign income

capital gainssocial security benefits

pension

[and don’t forget to keep the documentation for claiming tax relief on pension premiums and charity donations]

DO also, if appropriate keep, or self-create, documentation following receipt of an

exceptional item

inheritancewindfall

giftlottery or betting win

DO keep accounting records in a legible format for

- six years [at least]

but also keep all your original source documentation

- dividend vouchers

- bank interest certificates

WHAT IF ?

Your records are lost, stolen or destroyed?

- recreate them as best as you can

- and tell HMRC via ticking the ‘estimated’ box

What about a lack of… ?

Sales invoices – think business

expense receipts – think personal

WHAT IF I DON’T ? Business Records Checks

HMRC assumption: inadequate records = inadequate tax return

HMRC assumption: inadequate tax return = inaccurate tax paid

penalties = up to £3,000

Are you easy pickings for HMRC – low hanging fruit?

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Before we end …..

So is, for you, the glass half full or half empty?

Fear and Greed

the art is to hold the tension between

- inaction and action- others and yourself

- paralysis and over confidence