Sometimes it’s easy to forget that at any given time, there are always a few people who are new to this industry in fact, new to being in their own business at all. Of course, there’s some ’churn’ in petrol retailing, as in every other walk of life.
People get old and retire, a few lucky ones get rich and retire younger; and while network owners and managers have always bemoaned the lack of suitable replacements, not every vacancy for site operators results in the site being handed to another existing operator. And it’s around this time of year that the newcomers sometimes feel as if they’re suddenly being assaulted by letters from officialdom in the shape of various departments within HMRC.
So if you started running your own business within the last 12 or 13 months, the end of the (2013-14) tax year on April 5 means that you’ll soon start receiving a lot of requests for information about your financial activities during that period.
It can seem rather intimidating as if they’ve only just discovered that you exist, and now they’ve got their eyes on you. Occasionally we find that to be almost literally true: sole traders frequently start their business from tiny beginnings and forget to tell HMRC that they are now self employed. Quite often they also forget to tell another part of HMRC that they’re now employing staff of their own. And while we’re on that subject: if you’re running your own business as a sole trader (or in a partnership with someone else) then you are not an employee and you don’t appear on the payroll of that business!
As a sole trader you’re self-employed; you are expected to pay Class 2 National Insurance (NI) contributions in order to maintain your entitlement to certain basic state benefits such as the state pension and maternity allowance. The usual way of doing this is to register with HMRC and they will take out money via direct debit monthly or six-monthly at the rate of £2.75 per week. That is, of course, just the start. Eventually you’ll have to pay Class 4 NI contributions based on your business’ taxable profits for the year. The rate for profits between £8,000 and £41,000 is currently 9% and then 2% for profits over £41,000. The exact amount won’t be known until you’ve worked out your profits for the tax year and then it forms part of the self assessment tax return where you declare the profit to the Revenue and work out how much income tax you owe. In practice, you’ve got between now and the end of January 2015 to do that, but we don’t recommend leaving it right up to the deadline. It’s worth stressing that the tax and NI are not based on what you took out of the business (drawings) they’re based on the profits that the business made in the year which is why most businesses, however small, produce year-end accounts; how else would you know what profit you need to declare?
registering for VAT
Then there’s the small matter of registering for VAT. With (very) few exceptions, almost everything sold through a petrol retail business is VAT-able; quite a lot of it these days may be zero rated but that still requires the retailer to account for it. The current threshold of turnover (ie sales) above which you must register is £81,000 per year or put another way just £6,750 a month. Putting it simply, every petrol retail business ends up registered for VAT and, apart from any other consideration, it’s in your interest to be registered as soon as possible. You’ll want to reclaim all of the VAT that your suppliers are charging you.
Registration isn’t particularly onerous, but you do need to have a lot of information about yourself and your business at hand. In some cases you may have to estimate various types of sales that you expect to make in future but that information should already have been part of your business plan before you even started to operate.
Of course, you can do these official registrations yourself. All it takes is internet access, a certain level of familiarity with ’official-ese English’ and a lot of time. But, if you’ve just taken over your first site at short notice, time is the one commodity that you might find you don’t possess. You’ll have your staffing to sort out; business funding from the bank and supplier agreements to negotiate and sign; maybe a crash course in how to operate the on-site technology, basic Health & Safety compliance, right down to ’responsible person’ training for overseeing deliveries. You’re too busy and it’s easy to forget some of the paperwork after all there’s always next weekend in which to do it.
let your accountant do it
It doesn’t have to be this way. This is where you should allow your accountant to take the strain and do the work. They can make sure that you’re registered with all of the appropriate departments of ’officialdom’. All you’ll need to do is sign a few no, let’s be honest, a lot of forms that they’ll have prepared for you. And there’s one in particular that you’ll hear about quite a few times: the ’64-8’. Basically this is the form through which you give permission for HMRC to talk directly to your accountant. You might need to sign several of these, since HMRC aren’t very good at passing them on between different departments, but in some ways this is perhaps the most important form of all. It’s the one that allows your accountant to sort things out on your behalf with HMRC without either of them having to bother you if there’s ever any kind of problem.
Starting your own business is always going to involve some stress; there’s a lot at stake and you’re expected to hit the ground running. That’s why you need professional help right from the beginning don’t wait until the official letters start quoting deadlines and default fines so contact your accountant as soon as you know you’re about to become your own boss.