HMRC is likely to become more vigilant when it comes to scrutinising the tax affairs of umbrella company contractors, freelancers and entrepreneurs.
Richard Mannion from accountants Smith and Williamson said that it was vital to keep up-to-date, accurate records of tax payments. There is an enormous amount of pressure on the public purse at the moment and the Revenue will be seeking to recoup underpaid taxes as soon as possible.
Business VAT is one area that is high on the taxman’s agenda. Current estimates are that about 15 billion pounds of VAT has been underpaid.
Another area where people can get tied in knots with the Revenue concerns the input of private finances into a company. Mannion advises owners of micro-businesses to keep clear and precise records so that they can show exactly what has happened.
The UK’s tax laws are too complex for the majority of small business owners. The FSB recently conducted a poll that found that three quarters of UK enterprises want to see our tax system simplified. The government recently set up the Office of Tax Simplification to look into the best way of doing just that.
In the mean time, certain measures have been introduced to encourage people to start up their own small business. The National Insurance Contributions Holiday, for example allows eligible businesses to take a ‘holiday’ from paying employers NICs for the first ten people they hire during their first year in business.
Corporation tax for larger enterprises is being reduced by 1% per year for the next four years and the rate for SMEs will be cut to 20% from the current 21%. However, these benefits may be offset by the increase in VAT that is due at the start of next year.
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