Every new business should have a business plan. It is the key to success. If you need finance, no bank manager will lend money without a considered plan.
It is one of the most important aspects of starting a new business. Your plan should provide a thorough examination of the way in which the business will commence and develop. It should describe the business, product or service, market, mode of operation, capital requirements and projected financial results.
Why does a business need a plan?
Preparing a business plan will help you to set clear objectives for your business and clarify your thinking. It will also help to set targets for future performance and monitor finances and profitability. It should help to provide early warning for when you might need to reconsider the plan.
Always bear in mind that anyone reading the plan will need to understand the essentials of your business quickly and easily.
The business plan should cover the following areas.
An overview of your plans for the business and how you propose to put them into action. This is the section most likely to be read by people unfamiliar with your business so try to avoid technical jargon.
A description of the business, your objectives for it and how you plan to achieve them. Include details of the background to your business for example how long you have been developing the business idea and the work you have carried out to date.
Details of the key personnel including you and any external consultants. You should highlight the skills and expertise that these people have and outline how you intend to deal with any weaknesses.
Details of your product or service and your Unique Selling Point. This is exactly what its name suggests, something that the competition does not offer. You should also outline your pricing policy.
Details of your target markets and your marketing plan. This may form the basis for a separate, more detailed, plan. You should also include an overview of your competitors and your likely market share together with details of the potential for growth. This is usually a very important part of the plan as it gives a good indication of the likely chance of success.
You will need to include information on your proposed operating practices and production methods as well as premises and equipment requirements.
The plan should cover your projected financial performance and the assumptions made in your projections. This part of the plan converts what you have already said about the business into numbers. It will include a cash flow forecast which shows how much money you expect to flow in and out of the business as well as profit and loss predictions and a balance sheet. Detailed financial forecasts will normally be included as an appendix to the plan. As financial advisers we are particularly well placed to help with this part of the plan.
The cash flow forecast referred to above will show how much finance your business needs. The plan should state how much finance you want and in what form. You should also say what the finance will be used for and show that you will have the resources to make the necessary repayments. You may also give details of any security you can offer.
Putting together a business plan is often seen as a one-off exercise undertaken when a new business is starting up. However the plan should be updated on a regular basis. It can then be used as a tool against which performance can be monitored and measured as part of the corporate planning process. There is much merit in this as used properly it keeps the business focused on objectives and inspires a discipline to achieve them.
How we can help
We can help you put together a detailed and accurate plan demonstrating your businesses growth plan for the future.
VAT registered businesses act as unpaid tax collectors and are required to account both promptly and accurately for all the tax revenue collected by them.
The VAT system is policed by HMRC with heavy penalties for breaches of the legislation. Ignorance is not an acceptable excuse for not complying with the rules.
We highlight below some of the areas that you need to consider. It is however important for you to seek specific professional advice appropriate to your circumstances.
What is VAT?
A transaction is within the scope of VAT if:
• there is a supply of goods or services • made in the UK • by a taxable person • in the course or furtherance of business.
Inputs and outputs
Businesses charge VAT on their sales. This is known as output VAT and the sales are referred to as outputs. Similarly VAT is charged on most goods and services purchased by the business. This is known as input VAT.
The output VAT is being collected from the customer by the business on behalf of HMRC and must be regularly paid over to them.
However the input VAT suffered on the goods and services purchased can be deducted from the amount of output tax owed. Please note that certain categories of input tax can never be reclaimed, such as that in respect of third party UK business entertainment and for most business cars.
Points to consider
Taxable supplies are mainly either standard rated (20%) or zero rated (0%). The standard rate was 17.5% prior to 4 January 2011.
There is in addition a reduced rate of 5% which applies to a small number of certain specific taxable supplies.
There are certain supplies that are not taxable and these are known as exempt supplies.
There is an important distinction between exempt and zero rated supplies.
• If your business is making only exempt supplies you cannot register for VAT and therefore cannot recover any input tax. • If your business is making zero rated supplies you should register for VAT as your supplies are taxable (but at 0%) and recovery of input tax is allowed.
Registration - is it necessary?
You are required to register for VAT if the value of your taxable supplies exceeds a set annual figure (£82,000 from 1 April 2015). If you are making taxable supplies below the limit you can apply for voluntary registration. This would allow you to reclaim input VAT, which could result in a repayment of VAT if your business was principally making zero rated supplies. If you have not yet started to make taxable supplies but intend to do so, you can apply for registration. In this way input tax on start up expenses can be recovered.
A taxable person is anyone who makes or intends to make taxable supplies and is required to be registered. For the purpose of VAT registration a person includes:
If any individual carries on two or more businesses all the supplies made in those businesses will be added together in determining whether or not the individual is required to register for VAT.
Once registered you must make a quarterly return to HMRC showing amounts of output tax to be accounted for and of deductible input tax together with other statistical information. All businesses have to file their returns online. Returns must be completed within one month of the end of the period it covers, although generally an extra seven calendar days are allowed for online forms.
Electronic payment is also compulsory for all businesses.
Businesses who make zero rated supplies and who receive repayments of VAT may find it beneficial to submit monthly returns.
Businesses with expected annual taxable supplies not exceeding £1,350,000 may apply to join the annual accounting scheme whereby they will make monthly or quarterly payments of VAT but will only have to complete one VAT return at the end of the year.
It is important that a VAT registered business maintains complete and up to date records. This includes details of all supplies, purchases and expenses.
In addition a VAT account should be maintained. This is a summary of output tax payable and input tax recoverable by the business. These records should be kept for six years.
Inspection of records
The maintenance of records and calculation of the liability is the responsibility of the registered person but HMRC will need to be able to check that the correct amount of VAT is being paid over. From time to time therefore a VAT officer may come and inspect the business records. This is known as a control visit.
The VAT officer will want to ensure that VAT is applied correctly and that the returns and other VAT records are properly written up.
However, you should not assume that in the absence of any errors being discovered, your business has been given a clean bill of health.
Offences and penalties
HMRC have wide powers to penalise businesses who ignore or incorrectly apply the VAT regulations. Penalties can be levied in respect of the following:
• late returns/payments • late registration • errors in returns.
Cash accounting scheme
If your annual turnover does not exceed £1,350,000 you can account for VAT on the basis of the cash you pay and receive rather than on the basis of invoice dates.
There are special schemes for retailers as it is impractical for most retailers to maintain all the records required of a registered trader.
Flat Rate scheme
This is a scheme allowing smaller businesses to pay VAT as a percentage of their total business income. Therefore no specific claims to recover input tax need to be made. The aim of the scheme is to simplify the way small businesses account for VAT, but for some businesses it can also result in a reduction in the amount of VAT that is payable.
How we can help
Ensuring that you comply with all the VAT regulations is essential. We can assist you in a number of ways including the following:
• tailoring your systems to bring together the VAT information accurately and quickly • ensuring that your business is VAT efficient and that adequate finance is available to meet your VAT liability on time • providing assistance with the completion of VAT returns • negotiating with HMRC if disagreements arise and in reaching settlement • advising as to whether any of the available schemes may be appropriate for you.