Help! Year End / Tax dates?


P

Phil Patrick

Hi, I'm a little confused coming up to the end of my first year of trading.
I registered with the IR as a sole trader from May 10th 2004 and
assumed that I HAD to file my first set of figures or self-assessment
forms on March 31st 2005 and pay my first tax bill in January 2006.

But having just had a conversation with a family friend who asked when
my year end was as that decision would impact my tax payments.
He advised to set my year end AFTER March 31st (in my case on May 9th)
which would give me extra time before I received my first tax bill.

Is he right? I was just gearing up to work out how and when I would file
my accounts so this is very important to me!
Thanks in advance, Phil
But my confusion arises because I assumed that any sole trader had to file
their accounts at the end of the financial year and there were strict
penalties
for any returns not completed at the right time.
 
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D

David Floyd

Hi, I'm a little confused coming up to the end of my first year of trading.
I registered with the IR as a sole trader from May 10th 2004 and
assumed that I HAD to file my first set of figures or self-assessment
forms on March 31st 2005 and pay my first tax bill in January 2006.

But having just had a conversation with a family friend who asked when
my year end was as that decision would impact my tax payments.
He advised to set my year end AFTER March 31st (in my case on May 9th)
which would give me extra time before I received my first tax bill.

Is he right? I was just gearing up to work out how and when I would file
my accounts so this is very important to me!
Thanks in advance, Phil
But my confusion arises because I assumed that any sole trader had to file
their accounts at the end of the financial year and there were strict
penalties
for any returns not completed at the right time.
You can have your year end at any time you like, to suit your pattern of
trading (wouldn't recommend mid month though). It does not have to be
31st March/5th April, but if it is some other date that this you will
probably need a tax accountant due to the complicated was overlap relief
is calculated and also what figures go on what returns when there isn't
an accounting period ending within the first Tax Return period.

As far as tax payments are concerned, if a trading year ends early in
the Tax Year then there is a much longer period before the tax is
payable relative to those profits, which can be a problem if you have a
poor year when tax becomes due for an earlier good year.

DF
 
R

Ronald Raygun

Phil said:
Hi, I'm a little confused coming up to the end of my first year of
trading. I registered with the IR as a sole trader from May 10th 2004 and
assumed that I HAD to file my first set of figures or self-assessment
forms on March 31st 2005 and pay my first tax bill in January 2006.
It is simplest to align your year end with that of the tax year.
That's 5th April. To use 31st March instead is acceptable if it makes
your bookkeeping easier, for example, if you subdivide your accounting
into monthly units aligned with the calendar.

Where you are mistaken is in thinking that you need to file your
accounts by your year end. This is a physical impossibility as it
would require you to process your accounts in zero time.

What you should be doing is make up your accounts to your trading
year-end of either 31st March or 5th April 2005. You should file
these as soon as you like thereafter, but preferably before the end
of September 2005 (if you want IR to calculate your tax for you), or
at the latest together with your payment by the end of January 2006.
But having just had a conversation with a family friend who asked when
my year end was as that decision would impact my tax payments.
He advised to set my year end AFTER March 31st (in my case on May 9th)
which would give me extra time before I received my first tax bill.

Is he right?
It used to be advantageous in the pre-SA days to do as your friend
suggests. If you set your accounting year end just after the
beginning of the tax year (30th April was a popular date), then it
meant you could defer tax by up to an additional whole year.
But my confusion arises because I assumed that any sole trader had to file
their accounts at the end of the financial year and there were strict
penalties for any returns not completed at the right time.
No, the penalties apply to failing to file before the end of January
*after* the end of the tax year to which the accounts relate.
 
P

Phil Patrick

David Floyd said:
You can have your year end at any time you like, to suit your pattern of
trading (wouldn't recommend mid month though). It does not have to be 31st
March/5th April, but if it is some other date that this you will probably
need a tax accountant due to the complicated was overlap relief is
calculated and also what figures go on what returns when there isn't an
accounting period ending within the first Tax Return period.

As far as tax payments are concerned, if a trading year ends early in the
Tax Year then there is a much longer period before the tax is payable
relative to those profits, which can be a problem if you have a poor year
when tax becomes due for an earlier good year.

DF
Thank you for your explanation
 
P

Phil Patrick

Ronald Raygun said:
It is simplest to align your year end with that of the tax year.
That's 5th April. To use 31st March instead is acceptable if it makes
your bookkeeping easier, for example, if you subdivide your accounting
into monthly units aligned with the calendar.
I don't so if 5th April is simplest then thats what I'll go for!
Where you are mistaken is in thinking that you need to file your
accounts by your year end. This is a physical impossibility as it
would require you to process your accounts in zero time.
True..

What you should be doing is make up your accounts to your trading
year-end of either 31st March or 5th April 2005. You should file
these as soon as you like thereafter, but preferably before the end
of September 2005 (if you want IR to calculate your tax for you), or
at the latest together with your payment by the end of January 2006.
That's what I'll do.
It used to be advantageous in the pre-SA days to do as your friend
suggests. If you set your accounting year end just after the
beginning of the tax year (30th April was a popular date), then it
meant you could defer tax by up to an additional whole year.


No, the penalties apply to failing to file before the end of January
*after* the end of the tax year to which the accounts relate.
Thanks RR, I'll be doing as you suggest and as I originally planned.

One more point if I may. My 1st year (or nearly first full year to Apr 5th)
will have produced a turnover of around 25k with probably no more than
£7k profit. On this basis as I am not earning much or liable for a
substantial
tax payment - should I "play safe" and get an accountant to file the
accounts for me or do it myself online?
Is it true that a new business/sole trader's accounts will be more readily
accepted when filed by an accountant? ie less chance of a more detailed
check into them than if filed by the trader themselves?

Finally, what kind of fee should I expect to pay for this service?
At present I keep computerised records on MS Money which basically
keeps an ongoing record of my business transactions and classifies them
into groups aligned to the relevant categories that the IR use.
As I have kept it very simple during Yr1 and not bothered with travel
expenses and capital purchases with complicated (to me!) tax and
depreciation implications, my accounts are rather simple.
As such, would I be able to get my accounts produced cheap and cheerfully
as I feel I should not expect to pay a premium for advice which may save
my money as my accounts are so simple.
Cheers!!
 
R

Ronald Raygun

Phil said:
That's what I'll do.
Which? September or January? :) If you miss the September
deadline, you will have to do the tax calculation yourself, if
you don't do it online.
One more point if I may. My 1st year (or nearly first full year to Apr
5th) will have produced a turnover of around 25k with probably no more
than £7k profit. On this basis as I am not earning much or liable for a
substantial
tax payment - should I "play safe" and get an accountant to file the
accounts for me or do it myself online?
You don't file the business's accounts as such. You file your personal
tax return, which will include a set of SA103 self-employment pages in
respect of your business. These will simply contain a summary of
your accounts.

Whether you splash out on an accountant is up to you, of course, as
there will be a betterchance of getting it right if you do.
Is it true that a new business/sole trader's accounts will be more readily
accepted when filed by an accountant? ie less chance of a more detailed
check into them than if filed by the trader themselves?
No, I don't think so, especially for one with such a relatively tiny
turnover.
Finally, what kind of fee should I expect to pay for this service?
You'll be lucky if you have any of your profit left over.

Where are those smelling salts? <Slap, slap; shake, shake> WAKE UP!
I was only kidding. A few hundred pounds should cover it, but what
exactly "a few" will turn out to be depends on how useful your
existing records are.
At present I keep computerised records on MS Money which basically
keeps an ongoing record of my business transactions and classifies them
into groups aligned to the relevant categories that the IR use.
If you're already using categories compatible with the ones on IR's
SA103 pages, and have read and understood the notes which accompany
SA103, then it should not involve a lot of work at all. But on the
other hand you might well be able to dispense with an accountant
altogether.
 
P

Phil Patrick

Ronald Raygun said:
Which? September or January? :) If you miss the September
deadline, you will have to do the tax calculation yourself, if
you don't do it online.
I realise that. My aim is to file it online quite soon after Apr 5th
and hope that the IR accept the figures and that my first payment
In jan 06 is as expected!
You don't file the business's accounts as such. You file your personal
tax return, which will include a set of SA103 self-employment pages in
respect of your business. These will simply contain a summary of
your accounts.
This is where I get very confused and worried.
AFAIC my personal accounts have nothing to do with the IR - eg how much I
spend on food or magazines or if I won a bit online betting or if Mum gives
me a few quid to keep me going. My income is dependant on my business
and as such are kept solely to my business account as those are the figures
that matter, the records that are diligently, accurately and honestly kept
and
and that I will be filing my accounts from.

I am always concerned that due to the small turnover/profit the IR will
wonder
how I'm surviving and expect me to show this by including every bank
account or credit card I own! I don't see why as my fiancée supports our
household with a well paid job and pays most if not all of the bills and my
mum does help me out on a personal basis. My "earnings" are my income
into the business account less the expenses and costs in gaining those
earnings.
I would not even conceive of thinking to include how much I spent on
breakfast cereals in one year against how much my fiancée gave me to
do this shopping.

Am I getting my knickers in a twist and reading your "personal tax return"
wrongly? My aim is to keep this as simple as possible. I actually want to
pay the correct tax based on my business accounts. Yes, as a sole trader
I AM the business but I have a business account in the business name and
that to me is my business, full stop.
 
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D

Doug Ramage

Ronald Raygun said:
Which? September or January? :) If you miss the September
deadline, you will have to do the tax calculation yourself, if
you don't do it online.


You don't file the business's accounts as such. You file your personal
tax return, which will include a set of SA103 self-employment pages in
respect of your business. These will simply contain a summary of
your accounts.

Whether you splash out on an accountant is up to you, of course, as
there will be a betterchance of getting it right if you do.


No, I don't think so, especially for one with such a relatively tiny
turnover.


You'll be lucky if you have any of your profit left over.

Where are those smelling salts? <Slap, slap; shake, shake> WAKE UP!
I was only kidding. A few hundred pounds should cover it, but what
exactly "a few" will turn out to be depends on how useful your
existing records are.


If you're already using categories compatible with the ones on IR's
SA103 pages, and have read and understood the notes which accompany
SA103, then it should not involve a lot of work at all. But on the
other hand you might well be able to dispense with an accountant
altogether.
As the turnover is over £15,000. A full P&L is required, and a Balance
Sheet - although you might get away without the latter. However, a person
who omitted the Balance Sheet is now the subject of a full IR Enquiry.
Possible coincidence?
 
R

Ronald Raygun

Phil said:
This is where I get very confused and worried.
AFAIC my personal accounts have nothing to do with the IR - eg how much I
spend on food or magazines or if I won a bit online betting or if Mum
gives me a few quid to keep me going.

Am I getting my knickers in a twist and reading your "personal tax return"
wrongly?
Yes.

Your personal expenditure is irrelevant. Remember that in general
your business income is just one of several potential sources of
personally taxable income. You might have part-time employment income
in addition to income from your business, you might have several
businesses, you might have rental income, or bank interest on that
fortune you inherited from a long-forgotten maiden aunt. You might
have dividend income from shares, you might be in partnership. You
might have capital gains. All these are brought together under the
umbrella of your personal income, and information on all of which is
conveyed in your personal tax return.

If in fact your business represents your only source of income then
it merely simplifies your tax return. Most of the boxes in the main
part (SA100) will be left blank and you simply add the SA103 pages.
My income is dependant on my
business and as such are kept solely to my business account as those are
the figures that matter, the records that are diligently, accurately and
honestly kept and and that I will be filing my accounts from.
You don't actually "file" your accounts as such at all (unless your
business is a limited company, in which case you file accounts and
reports at Comapnies House, and which would make your tax position
rather more tricky). You merely transfer the relevant figures from
your accounts to the SA103.
I am always concerned that due to the small turnover/profit the IR will
wonder how I'm surviving and expect me to show this by including every
bank account or credit card I own!
No need to worry. You are not unique. I think the IR will have come
across examples of two-person households, mainly supported by one
of them, with the other running a Mickey-Mouse business, once or twice
before, even if the woman is the principal bread-winner. Emancipation
is well out of its infancy, don't you know. They even let women play
in the Berlin Philharmonic these days.

If they suspect that you have earnings which you aren't telling them
about, rest assured they'll be asking you to provide details toot sweet.
You have nothing to worry about provided you're being honest and aren't
hiding anything.
 
P

Phil Patrick

Ronald Raygun said:
Yes.

Your personal expenditure is irrelevant. Remember that in general
your business income is just one of several potential sources of
personally taxable income. You might have part-time employment income
in addition to income from your business, you might have several
businesses, you might have rental income, or bank interest on that
fortune you inherited from a long-forgotten maiden aunt. You might
have dividend income from shares, you might be in partnership. You
might have capital gains. All these are brought together under the
umbrella of your personal income, and information on all of which is
conveyed in your personal tax return.

If in fact your business represents your only source of income then
it merely simplifies your tax return. Most of the boxes in the main
part (SA100) will be left blank and you simply add the SA103 pages.


You don't actually "file" your accounts as such at all (unless your
business is a limited company, in which case you file accounts and
reports at Comapnies House, and which would make your tax position
rather more tricky). You merely transfer the relevant figures from
your accounts to the SA103.


No need to worry. You are not unique. I think the IR will have come
across examples of two-person households, mainly supported by one
of them, with the other running a Mickey-Mouse business, once or twice
before, even if the woman is the principal bread-winner. Emancipation
is well out of its infancy, don't you know. They even let women play
in the Berlin Philharmonic these days.

If they suspect that you have earnings which you aren't telling them
about, rest assured they'll be asking you to provide details toot sweet.
You have nothing to worry about provided you're being honest and aren't
hiding anything.
Cool. Thanks again RR.
btw, a "Mickey Mouse" business is not how I would describe mine.
It's 10 months old, is already making profit and will hopefully grow
and grow..
 
M

Matthew Church

Phil Patrick said:
Cool. Thanks again RR.
btw, a "Mickey Mouse" business is not how I would describe mine.
It's 10 months old, is already making profit and will hopefully grow
and grow..
Phil further up the thread you said:

"As I have kept it very simple during Yr1 and not bothered with travel
expenses and capital purchases with complicated (to me!) tax and
depreciation implications, my accounts are rather simple."

Those travel expenses and capital allowances are going to save you tax. You
don't seem to be too confident with what you are doing so why not get a
qualified accountant to help you with these first accounts and set you off
on the right course. Yes it will cost you some money but it might save you
more in the long run.
 
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P

Phil Patrick

Matthew Church said:
Phil further up the thread you said:

"As I have kept it very simple during Yr1 and not bothered with travel
expenses and capital purchases with complicated (to me!) tax and
depreciation implications, my accounts are rather simple."

Those travel expenses and capital allowances are going to save you tax.
You
don't seem to be too confident with what you are doing so why not get a
qualified accountant to help you with these first accounts and set you off
on the right course. Yes it will cost you some money but it might save you
more in the long run.
They will save me a very small amount at present and to keep it simple, not
claiming for them will be more helpful than claiming. We're talking a very
small mileage amount and low value pc equipment not paid for out of the
business. I understand your point but until I know I will be saving money
I would rather keep my account as simple as possible.
 

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