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  • I have received notification of an enquiry. What should I do?

    A tax investigation or enquiry will start with a letter asking for information.

    The letter will tell you whether HMRC is investigating a particular aspect of your tax return or carrying out a full tax investigation. It may appear threatening or causal to try to encourage a quick response. As soon as you receive the letter, contact your accountant for advice.

    Whilst honesty is of course the best policy – lying or destroying evidence can lead to severe penalties – how you present the facts to HMRC can influence the outcome. You may find it best to deal with as much as possible in writing, through your accountant, rather than having telephone conversations or unaccompanied meetings with the tax inspector.

    Your accountant can also advise you if you should make payments on account towards any likely tax bill to reduce the amount of interest payable.

    Once a tax investigation has started, it can last several months or more. A tax investigation may also expand, for example, with a corporation tax investigation leading to enquiries into the directors’ personal tax affairs. Your accountant can advise you what to do if HMRC is asking for too much information, taking too long or otherwise behaving unreasonably.

    If WMT is your tax adviser, you can take advantage of our fee protection insurance. This means we can act promptly on your behalf if you receive notification of an enquiry and your fees will be taken care of by the insurer.

    Do you still have questions? Get in touch with our tax team to find out more about how they can help you.

  • How many years can a tax investigation go back?

    If they suspect that errors have crept in innocently, they can go back four years, and claim unpaid tax with interest plus penalties. If they think you have been careless with your returns, they can go back six years. But if they believe you have been deliberately false, they can go back 20 years.

    Do you still have questions? Get in touch with our tax team to find out more about how they can help you.

  • What triggers a tax investigation?

    Tax investigations and frequent tax audits are more likely if:

    • you file tax returns late, pay tax late or make errors that need correcting
    • there are inconsistencies or substantial variations between different returns, such as a large fall in income or increase in costs
    • your costs are abnormally high for a business in your industry
    • your tax returns are inconsistent with how busy your business actually is or your standard of living
    • you have offshore bank accounts
    • you have income from property
    • you have invested in schemes or funds which HMRC views as tax avoidance investment schemes
    • you operate in a high-risk industry, such as those that routinely take cash payments, or an industry that HMRC has decided to target
    • HMRC receives a tip-off

    HMRC also carry out a number of random investigations each year to target tax evaders that are difficult to detect. Anyone – private individual or business owner – can be receive notification of a random enquiry.

    Do you still have questions? Get in touch with our tax team to find out more about how they can help you.

  • What types of tax investigation are there?

    Tax investigations fall into three broad categories:

    • Aspect – where HMRC want to assess one or more areas of your tax information
    • Full – the whole of your tax return is reviewed (personal return or business return)
    • Random – spot-check full enquiries. These are usually aimed at higher risk tax areas or sectors. SMEs are a particular target.

    All types of enquiry or investigation from HMRC should be treated seriously. An aspect investigation may, for example, seem less threatening but it could easily broaden out into a full investigation if not properly managed.

    Sometimes businesses can be placed under a code 9 (COP9) investigation. These are only issued when the revenue suspects deliberate tax fraud is taking place. These are very serious indeed.

    Do you still have questions? Get in touch with our tax team to find out more about how they can help you.

  • How much is my business worth?

    Whatever your reasons for having your business valued, you will usually be looking for an open market value. This is an estimate of what someone would be willing to pay for it in the current market.

    Your valuation will take a number of factors into account such as:

    • Projected financial performance
    • Value of your assets – including tangible assets, financial assets and intangible assets such as IP
    • Level of debt in the business
    • Customer base and the certainty of future income streams
    • Experience and skills of the management team
    • Barriers to entry
    • Synergies with the buyer
    • Market position and/or the strength of your brand within it.

    The value that an interested party puts on your business could be vastly different. For example, a departing shareholder in a private limited company may think the business is worth more than its market rate.  In such situations, you will want an experience independent party to act as a buffer between you and the other party (or parties) negotiating the final figure on your behalf.

    Do you still have questions? Get in touch with our corporate finance team to find out more about how they can help you.

  • What sources of funding are available to my business?

    What sources of funding are available to my business?

    There are two main sources of long term financing – debt or equity.

    Debt finance is a loan to your business where you will have to pay back the amount borrowed plus interest. Equity finance involves giving shares in your business in exchange for an investment.

    Some of the most common sources of funds are:

    • individuals – including friends and family, business owners and angel investors.  To make yourself attractive for investment you should consider the Enterprise Initiative Scheme or Seed Enterprise Initiative Scheme. These schemes offer tax benefits on investments in qualifying companies.
    • high street banks – often a business owner’s first thought when looking for funding. Not all banks are the same. They have different risk appetites and preferred areas of investment, so if your application is rejected by your usual bank, it might find favour with another. Professional guidance on preparing your proposal will improve your chances of getting it accepted first time.
    • asset backed lenders – provide funds that are secured against an asset. The assets are usually a combination of physical assets (stock, plant and machinery or equipment) and invoices (debtors).
    • private equity or venture capital – typically some of the funding will be in the form of equity investment in the business and some will be provided under the terms of a loan.
    • turnaround investment – buyers of failing enterprises or businesses that have been through difficult times may look for specialist turnaround financing. To reduce the funder’s risk management, a turnaround director will often work with the business to implement the changes needed to take the business back into profit.
    • company vendors – if you are buying a business, under certain circumstances the vendor may be prepared to provide some or all of the finance you need to buy the business from them. The vendor will ask for a certain amount of the sale price when you acquire the business and the remainder at an agreed later date.
    • crowd funding platforms – now used to fund start-ups and growth enterprises, crowd funding platforms have proved popular with all types of small businesses. Both debt and equity funding are available and it offers an effective way to attract a number of small investors rather than just looking for one or two larger investors.

    WMT can help you evaluate funding options and choose the one that best suits your business model, market conditions and future plans.

    We can also help you to prepare information for funders that will answer their key questions and help you secure funding.

    Do you still have questions? Get in touch with our corporate finance team to find out more about how they can help you.

  • What types of VAT schemes are available to me?

    In addition to the standard VAT accounting there are three VAT schemes designed to simplify the process for small businesses (including those that are partially exempt):

    Flat rate scheme

    Designed to encourage small businesses to register for VAT, with this scheme, you charge VAT at the appropriate rate but pay VAT to HMRC at a lower rate. Your business’s turnover must be less than £150,000 to qualify for the flat rate VAT scheme.

    The big advantage of this scheme is that you don’t have to keep a record of the VAT you charge on every sale or pay VAT on every purchase. Instead you can calculate your VAT payments as a percentage of your total VAT-inclusive turnover, which makes it easier and quicker to do your VAT return.

    You don’t have to work out how much VAT you spend either. Instead the percentage rate you apply –  typically between 9% and 14% depending on industry sector – is designed to take account of the VAT you have spent.

    From 1 April 2017, a new flat rate percentage was introduced for limited cost businesses. These are businesses whose expenditure on goods is less than either:

    • 2% of their turnover
    • £1,000 a year (if costs are more than 2%)

    For some businesses it may be unclear if they are a limited cost business, especially if goods are close to the 2% threshold. It is likely to affect you if your main costs are services, vehicle or fuels costs, or if you do not purchase many goods.

    To make this simpler HMRC has developed an online calculator to help businesses work out if they are eligible to pay the higher rate. The calculator can be used each time a VAT return is completed to clarify any uncertainty.

    This flat rate scheme can be used with the annual accounting scheme. As it contains its own cash based method of accounting, it cannot be used with the cash accounting scheme.

    Cash accounting scheme

    You can use cash accounting if you estimate that your turnover during the next tax year will be no more than £1.35 million.

    If you use standard VAT accounting, you have to pay HMRC the VAT you charge on your sales whether or not your customer has paid you. If you use cash accounting, you only pay VAT when your customer pays you. Similarly, you can only reclaim VAT once you’ve paid your suppliers.

    For many businesses, this scheme offers a cash flow advantage and relief from bad debts. If you are paid promptly at the point of sale, regularly reclaim VAT or your customers pay by direct debit, you are unlikely to benefit from cash accounting.

    You can use this scheme in combination with the annual accounting scheme but not the flat rate scheme.

    Annual accounting scheme

    You can reduce your VAT paperwork and make it easier to manage your cash flow by using the Annual Accounting Scheme.

    If you use this scheme, then you make nine monthly or three quarterly interim payments during the year. These can be smaller than a typical quarterly payment under standard VAT accounting, which can help with your cash flow.

    At the end of the year, you complete a single return and then either make a balancing payment or receive a balancing refund.

    You can use annual accounting if you estimate that your turnover during the next tax year will be no more than £1.35 million. You can also use this scheme in combination with the flat rate and cash accounting schemes. It can also be applied alongside certain sector specific VAT schemes.

    Which of the VAT schemes is right for you?

    Each of these VAT schemes can help to simplify the VAT process for a smaller business. If you’re unsure which would be the right scheme (or combination of schemes) for you, it’s best to seek professional advice before making a choice.

    Do you still have questions? Get in touch with our tax team to find out more about how they can help you.

  • What do I have to do once registered for VAT?

    Once you’ve registered your business for VAT you must:

    • Charge VAT on the goods or services you sell (whether you sell to individual customers or to other businesses,
    • Include your VAT number on your invoices,
    • Pay VAT on the goods and services you buy for your businesses, and
    • Prepare and file a VAT return to HMRC each quarter to show how much VAT you have charged (known as output tax) and how much VAT you have paid (known as input tax).

    If your output tax exceeds your input tax, you must pay the difference to HMRC. On the other hand, if your input tax exceeds your output tax, you can claim a refund on the difference.

    There are three different rates of VAT that can be charged – standard rate, reduced rate and zero rate. Some goods and services are exempt from VAT. You need to make sure you are charging the right amount of VAT to avoid unexpected demands from HMRC for unpaid tax.

    If you are VAT registered and your turnover falls below the threshold, it might be to your advantage to de-register for VAT.

    Do you still have questions? Get in touch with our team to find out more about how they can help you.

  • When should I register for VAT?

    All businesses must register for VAT if they have an annual turnover of more than the current VAT threshold, or if they think they will soon go over this limit.

    Once you’ve registered your business for VAT you must:

    • Charge VAT on the goods or services you sell (whether you sell to individual customers or to other businesses,
    • Include your VAT number on your invoices,
    • Pay VAT on the goods and services you buy for your businesses, and
    • Prepare and file a VAT return to HMRC each quarter to show how much VAT you have charged (known as output tax) and how much VAT you have paid (known as input tax).

    If your output tax exceeds your input tax, you must pay the difference to HMRC. On the other hand, if your input tax exceeds your output tax, you can claim a refund on the difference.

    There are three different rates of VAT that can be charged – standard rate, reduced rate and zero rate. Some goods and services are exempt or partially exempt from VAT. There are also specific VAT rules that apply to certain trades and industries. You need to make sure you are charging the right amount of VAT to avoid unexpected demands from HMRC for unpaid tax.

    If you are VAT registered and your turnover falls below the threshold, it might be to your advantage to de-register for VAT. Your accountant should keep an eye on this for you and advise you on your best course of action.

    Do you still have questions? Get in touch with our team to find out more about how they can help you.

  • What is the ‘revenue model’ and how will it help me?

    The revenue model establishes the bridge between financial performance and the non-financial inputs of a business.

    It highlights the best ways to grow and develop your business by breaking down the turnover into 2 elements:

    • Volume – the number of customers, the frequency of transactions;
    • Value – average transaction value.

    Building a revenue model for each element of your business enables you to obtain meaningful information and avoid erroneous conclusions.

    The effectiveness of the revenue model lies not in producing ‘the numbers’, but in how the information is interpreted and what decisions are made. When used as an ongoing method of assessing business performance, it allows you to identify important trends, and see if the action taken makes matters better or worse.

    Do you still have questions? Get in touch with our business consulting team to find out more about how they can help you.

  • Why do I need a business plan?

    A business plan sets the direction of travel for your business, maps out goals and gives an indication of who will help you achieve them. Many businesses have a three or five year ‘master plan’ which they supplement with annual plans.

    Without the helicopter view that a plan provides, it is easy to see how the business can get lost in the ‘doing’ and fail to reach its full potential by investing more time in ‘thinking’ – often conceptualised as too busy working in the business to work on the business.

    We can help you write a traditional detailed business plan or a one-page-strategic summary, backing up your plan with financial forecasts including:

    • Cash flow forecast;
    • Profit and loss forecast;
    • Balance sheet forecast;
    • Breakeven and sensitivity analysis.

    Do you still have questions? Get in touch with our business consulting team to find out more about how they can help you.

  • How long will my financial model be useful to my business?

    Your financial model will be designed to incorporate multiple variables that, together, help you predict outcomes for your business. As your business develops, your marketplace changes, and you gather new information, your model can be adapted to improve its predictive ability.

    With regular updating a periodic review of its underlying assumptions, your financial model can support your decision making throughout the business’s lifecycle.

    Do you still have questions? Get in touch with our business consulting team to find out more about how they can help you.

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