The process of accounting and doing business in the UK.
Oleg Nedranets -- April 21, 2023 - 5 min read
To support the company's business and its development in the UK, directors need to take their obligations into the account.
Below is an example of what stages the company will go through in the early stages of its development and in the future.
1. Newco – Newly opened company – bank account
The company is registered, the directors are appointed, and the next standard step is to open a bank account.
For a company with one director, opening an account is as follows:
Required:
Choosing the bank
Contact business banking representative
Describe the activities and provide information about the founders and authorized persons of the company
Sign the documents in person at the bank branch
After opening a bank account, a company can start paying bills and receiving money for its services.
Opening a bank account is the responsibility of the director, as personal presence a bank branch is required.
2. Payroll –Payroll System Design and Support
The next stage is registration for the payment of salaries to both directors and employees of the company. Registration for payroll is may be desirable not only for businesses that plan to hire employees in the near future, but also for those whose directors optimize the taxes of both the company and their personal ones.
Registration and monthly submission of payslip (payroll) processes that take up time from directors, and many choose to outsource this aspect of the business since the price directly depends on the number of employees.
3. VAT – VAT registration and declarations
For a new company whose turnover does not exceed £85,000 in the last 12 months or the company does not expect turnover to be above £85,000 in the next 30 days, registration is not mandatory. However, registration in the VAT system can bring great benefits.
Those companies that are registered for VAT have the opportunity to return 20% of the cost of paid services and goods (sold by those companies / individuals who are registered for VAT) every quarter. If the company is at the beginning of its development, it is likely that its costs exceed the income which leads to a refund of the inverse VAT to the company's account.
The company is also obliged to add VAT to the cost of its services and return it to the state. For legal entities operating in segment B2B, VAT registration will add credibility to the company, as this means that the company has crossed the turnover threshold. In segment B2C, companies with a small number of individual customers will be forced to increase the final price for their services for the client (price per service + VAT) that.
In making a decision on registration , it is also worth considering the cost of accounting services for filling out the declaration. The cost of such directly depends on the turnover, the number of monthly transactions on the account and the jurisdictions with which the company works (if there are international transactions).
4. Management Accounts - Optimization and financial structuring
A fast-growing company can be absorbed in its success and not engage in planning and optimization. Such companies often face a gradual decrease in profitability since scaling turnover does not always lead to a similar effect on revenue.
In such cases, a focus is created on budgeting and cost optimization. Directors whose time is fully occupied by the business are often unwilling to spend it on budgeting, planning, optimization and choose financiers to compile and provide information for decision-making .
It is difficult to calculate the exact benefit that will be brought to the company, as it depends on many factors, but it is useful to prepare a financial analysis for any business with a turnover above £ 500,000.00 per year.
The cost of these services depends on the scope of work, turn over, number of employees, the availability of international contracts, internal accounting processes. Such reports are prepared according to the established requirements of the director(s), founders, investors and the recommendations of CIMA PAS 1919.
5. YE Accounts & Corporation Tax - Annual Tax Return and Corporate Tax Calculation
After 12 months of the company's existence, the state obliges to submit an annual report, a tax return and pay corporate tax. To fulfill these obligations, companies have 9months after the end of the fiscal year. The result of this work is designed not only to fulfill obligations to the state, but also to provide a complete understanding of business efficiency. At this stage, a detailed study of various aspects of tax optimization also takes place.
Declaration services depend on the company's turnover and the volume of transactions on its accounts.
6. Other services
Bookkeeping - Keeping ledger records of all business transactions on a monthly basis. It reflects the funds that are credited to or left your bank account in the form of payments to suppliers, company expenses, loan and borrowing payments, customer payments, and interest accrued by the bank on month-end account balances.
Tax planning – For individuals and legal entities, these services can help optimize taxation in the UK.
Online services – services such as Quickbooks, Xero, Freshbooks allow businesses to move away from preparing reports and bookkeeping in Excel andautomate many processes.
7. Commercial rates
The cost of services largely depends on the turnover and number of transactions, as well as on the structure, number of employees, number of investments and other factors. For a more detailed assessment, complete information is required.
