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incka
01-14-2005, 10:12 AM
Hello

It's not long before my company is a year old, and after that I have 9 months to send accounts in. One thing puzzles me though - How do I include US Funds, such as those in my paypal or those in cheques, into GBP? Do I do it on current exchange rate or the exchange rate at the time, and do I do it at tourest rate, bank of england rate or what? And if it's the rate at the time, how do I find the rates from each day in the last year?

MarkB
01-14-2005, 10:19 AM
Ask your accountant ;)

Blue Cat Buxton
01-14-2005, 10:23 AM
Then let us know :) :)

chromate
01-14-2005, 10:24 AM
You're probably gonna have a nightmare getting all this info together. You probably should have recorded this as you went along. Have you been putting money aside for corporation tax?

I base my accounts on the actual GBP I receive after cashing the cheques, as that is my income. Though, being a limited company, your accounts will be more complex. I just fill in a self assessment tax return online.

incka
01-14-2005, 02:34 PM
Corporation tax? My company isn't going to make much profit you know - It's gonna break even, but it's still gonna be within the Gordon Brown 10k tax free profit thingie. I invest everything I earn in my business.

r2d2
01-14-2005, 03:59 PM
I dont think reinvesting it means you havent made any profit. Cash != profit. Dont know for sure, but just having roughly the same amount of cash doesnt mean you wont pay tax.

incka
01-15-2005, 01:58 AM
No, investing means I've spent the money = expenses.

aj8
01-15-2005, 05:34 PM
If you've made no profit, then you will not pay any corporation tax. However, your first 10k isn't necessarily tax free. I formed my company in Y2000.

My first year was BEFORE the first 10K freeby band and I paid a little bit of tax on my profit.

The second year was also BEFORE the 10k freeby band, I paid quite a chunk of tax on my profit.

Third year was AFTER the 10K freeby band and I ended up paying a fair bit less than Y2! (hooray!).

They changed the rules. For small firms, first 10K band %age is now calculated on a sliding scale, based on profit and dividends declared. If you declared no divis, it'll probably still be tax free. If you did declare dividends, it won't be. FYI in year four I made LESS pre-tax profit, but because of the dividends I took, I paid a lot MORE tax than the year before..

Essentially it's my belief the chancellor either :-

Made a mistake, didn't realise the 10K tax free thing would encourage loads of people to incorporate...

OR

Knew this would happen and executed a classic 'bait and switch' con trick on the entrepreneurial population :<

Either way ask your accountant.... :)

A.

incka
01-16-2005, 11:15 PM
Accountants are a waste of money IMHO.

I'm not giving dividends...

Blue Cat Buxton
01-17-2005, 01:52 AM
Incka

If your aim is to really grow your business and diversify - youve mentioned property before, I think - then you really need to find a good accountant. They can save you far more than they cost.

As the business grows and the tax man comes along and has a look around, an accountant will help then as well.

chromate
01-17-2005, 03:04 AM
Exactly. At the moment as your business is so small, you will probably be fine doing your own accounts. But when you start paying employees, VAT etc then I think you should get an accountant, even if you use one to just check over the accounts that you've produced. They will likely be able to save you a lot of money in tax that you didn't think possible.

If you misunderstand something and make a mistake, without an accountant to point it out, then you could end up with a huge tax bill that your business may not be able to support. Then, goodbye business.

AndyH
01-17-2005, 05:27 AM
Accountants are a waste of money IMHO.

I'm not giving dividends...
:eek:



... :confused:

MarkB
01-17-2005, 06:08 AM
If you run a business, a good accountant is a must. An excellent accountant is a godsend.

moonshield
01-17-2005, 08:49 AM
Really? In the United States taxes are not THAT high... If one keeps decent records an accountant is not necessary, the Internet really helps, online banking is indeed very useful.

And then you just use a program like Tax-Cut and it computes your taxes with deductions and everything.

If you are paying 50% of your income... well, um move somewhere else.

Question: Is the tax code complicated where you live? Or are taxes just really high? or what?

incka
01-17-2005, 09:14 AM
Exactly. At the moment as your business is so small, you will probably be fine doing your own accounts. But when you start paying employees, VAT etc then I think you should get an accountant, even if you use one to just check over the accounts that you've produced. They will likely be able to save you a lot of money in tax that you didn't think possible.

If you misunderstand something and make a mistake, without an accountant to point it out, then you could end up with a huge tax bill that your business may not be able to support. Then, goodbye business.


That's my plan. I meant for a business in my position an accountant is a waste of money when Companies House sent a cd-rom that tells you how to do all the accounts and such...

incka
01-17-2005, 09:17 AM
If you are paying 50% of your income... well, um move somewhere else.


This is for business advice - Keep non-business politics out of it here because I am quite often tempted to argue with you and I don't want to argue with you...

chromate
01-17-2005, 10:04 AM
Question: Is the tax code complicated where you live? Or are taxes just really high? or what?

For a small business it's not complicated. However, as the company gets larger a good accountant will be able to save you more tax than any software can, I would think.

If you're interested, you can see the UK income tax, and links to other tax, thresholds here: http://www.inlandrevenue.gov.uk/rates/it.htm

moonshield
01-17-2005, 02:52 PM
thank you very much. very interesting.

And no I was not trying to stir political debate. I apologize if that was seen as insulting or something. But to myself anything around half is utterly ridiculous.

Question: If you have a corporation in the UK are you taxed twice? On your Corporation and then on your income?

chromate
01-17-2005, 03:14 PM
I haven't formed a company as there isn't any advantage for me to do so at the moment. So I'm no expert. But as far as I understand it, yes. The corporation is treated as a seperate entity and gets taxed on its profits. It also has to pay Employer's National Insurance contributions on behalf of its employees. The employees have to pay National Insurance too and also income tax.

r2d2
01-17-2005, 04:05 PM
Well, kind of. Any income you had would come out of profit, so you would have less profit to pay tax on. E.g. keep the $10k as profit and pay 50% tax, or pay it out as wages and pay income tax on that, but then pay no tax on profit since there was none. I think. This is probably where an accountant would be useful. We need to get a friendly accountant on here :)

paul
01-17-2005, 08:32 PM
An accountant is not necessarily the same as a bookkeeper. An accountant should be someone you can talk to, in advance, about what you are thinking of doing and get advice about how best to structure it to minimize your taxes.

For example, if you are thinking of buying/renting office space, in the USA there are advantages to buying the property with a limited partnership and then leasing it to your company.

Paul

aj8
01-18-2005, 07:07 AM
I haven't formed a company as there isn't any advantage for me to do so at the moment. So I'm no expert. But as far as I understand it, yes. The corporation is treated as a seperate entity and gets taxed on its profits. It also has to pay Employer's National Insurance contributions on behalf of its employees. The employees have to pay National Insurance too and also income tax.

You are right, you do have to pay NIC BUT the thing you can do when you have a company is pay yourself a miniscule wage (a few hundred a month), then extract the rest in the form of dividend. Yes the company will have paid tax on its profits, but this in many circumstances; certainly mine; still works out less.

A.

Edit; I should have said, because you pay miniscule wage, you pay miniscule tax and NIC. I pay myself 500 a month as wages, of which only about 25 comes off in NI and tax! Once the company has paid its corporation tax bill, the dividends I take I don't pay any tax on.

chromate
01-18-2005, 07:51 AM
Hmm Interesting. I wonder if it would be more cost effective for me to set up a company then and just take dividends. Being self-employed I have to pay a set 2 a week class 2 and then 8% NI on all profits. With my student loan repayments and all the tax stuff it adds up to about 40% of my income at the moment. :(

aj8
01-18-2005, 09:05 AM
I am fairly sure your student loans only need to be paid after you start earning 12K or something. Now I'm FAIRLY sure (although you would need to ask an accountant) that if you set your PAYE'ed salary to 6k a year; i.e. 500 a month, and stick with it, your dividends do not count as part of your pay.

Obviously you don't want to 'not pay' your student loan, as it'll be racking up interest, but if you wanted to save for something specific etc etc ... it does give you loads of options ...

IANAA but i'm fairly sure this is right.

A.

incka
01-18-2005, 09:13 AM
Here's a tip: You are allowed up to 100 (I think) on meals per employee (including the owner) per year tax free.

chromate
01-18-2005, 09:13 AM
Yeah, the threshold for student loan repayment is 10k (I'm already well over that) and then 15k as of April this year (I think). But as you say, I should really pay it off ASAP. :)

I wish I had got into web publishing before my degree. Then I wouldn't have even needed the loan. Or I could have used it to make a profit.

aj8
01-18-2005, 09:42 AM
You write off everything to do with your business, thus reducing your corporation tax liability. My computer at home, my mobile phone, my business mileage, etc etc... all paid for from the company, reducing it's taxable profit.

All office equipment, furniture, computer gear etc is depreciated annually which gives another write-off, again reducing corp tax.

A.

aj8
01-21-2005, 03:46 PM
Going back to the original topic of this thread....(!)

My main business banks with the Bank of Scotland (now owned by Halifax). This is not the same bank that bought Natwest - it's the small friendly one. They've always been pretty good BUT you bank postally, online and by phone NOT at a branch.

Anyway... regarding receiving dollar cheques I put in a call to them about arrangements. They have told me that they can setup an account in US$ quite easily, alongside one for UK. Apparently here in the UK a dollar cheque drawn on an American bank will take five to six weeks to clear, and not be drawable until cleared.

Once funds clear, a exchange and transfer can be requested from US$ to GB, and this will be at the current exchange rate for selling. It doesn't *sound* like any paying in fees are applicable however (although I may get more information on this in due course).

A.

chromate
01-21-2005, 03:54 PM
Apparently here in the UK a dollar cheque drawn on an American bank will take five to six weeks to clear, and not be drawable until cleared.

This seems to be true in pretty much all cases apart from HSBC which will make the funds available next working day. Barclays (who I'm with) seem to take 4 weeks.

Blue Cat Buxton
01-22-2005, 12:25 AM
How much do Halifax / Bank of Scotland Charge?

Nat West charge about 5 / $10 per item (and for a 3-4 week delay) then a % of value over the certain minimum

I also enquired at Woolwich and they send cheques off to American Express so a similar delay and slightly more expensive

For small cheques $10 represents a high % of the value of the actual payment received.

incka
01-22-2005, 02:17 AM
Barclays takes about a week for me.

MarkB
01-22-2005, 02:45 AM
Natwest usually clear my Google cheques within a week or so (although longer for some others... but it hasn't been 3-4 weeks for some time).

chromate
01-22-2005, 04:02 AM
Barclays takes about a week for me.

Maybe because you have a business account? Mine are always consistently 4 weeks. Weird. I'm not bothered though. I don't care when I get the money, as long as it doesn't take like 4 months or something :)

incka
01-22-2005, 06:00 AM
I think my account could be a personal one... When I print a ministatement it's always on within 1 & 1/2 weeks...

aj8
01-23-2005, 01:42 PM
If you're a Limited Company IIRC you should have a Limited Company specific account really, otherwise the taxman could deem you to be a soletrader :)

chromate
01-23-2005, 04:10 PM
Could they do that? I would have thought that the decision as to what sort of an account would be entirely up to the director. I wouldn't wanna run a ltd company out of my personal bank account anyway. :)

aj8
01-23-2005, 04:51 PM
No. Limited Company being a separate legal entity a personal account is not an asset of that company. Supposing liquidators were to walk in, and take a look at the situation. How would they decide what was company cash and what was personal cash?

A Limited Company is a separate legal entity to the director. If possibly not specifically illegal (I have not checked the companies act about that point) it is *certainly* HIGHLY irregular and could cause you a LOT of problems to mix and match personal with Company.

I reckon it might be illegal though, perhaps not by statute but by case-law.

A.

topcat
02-13-2005, 07:58 AM
....regarding the tax thing and companies,

I had a friend who owned a large company and then got bored with it. To get out the tax, he made himself redundant, (tax free upto a certain amount 30,000, i think) and then closed the companty, capital gains at 10%.

....not that anyones looking at closing their companies, but interesting anyway.

It takes a clever accountant to find loop holes like this! But nothing is impossible! :)

aj8
02-24-2005, 09:37 AM
Interesting strategy.

I've been asked before whether as an employer with employers liability insurance, I could fire myself then sue my own company for unfair dismissal.

I think the phrase taking the p.... might apply here though :)