Business admin

As you soon as you start your business you'll need to put processes in place to ensure that you get paid promptly and that you pay your own bills in a timely fashion. It's also vital to ensure that you have the administrative systems in place to remain compliant with the law. From filing tax returns and accounts through to health and safety legislation, there's a lot to think about and a lot to do.

In brief

• Sole traders and tax
• Partnerships and tax
• Limited companies and tax
• VAT
• Accounts
• Health and safety
• Environmental protection laws
• Data protection
• What to do next

If you go into business as a sole trader, your tax requirements will be relatively simple. You'll have to pay income tax, National Insurance and (if your sales warrant it) register for VAT.

From the perspective of Her Majesty's Customs and Revenue (HMRC) as soon as you start to earn money by selling goods or services (either on a full-time or part time basis) your income from that activity is potentially taxable. You must inform your tax office and they will send you a self-employment tax return form or give you the option of filing the figures online. Within that form, you will be required to state your income from self-employment along with any business expenses. The taxable amount will be based on profits (sales minus expenses) with any additional allowances factored in.

If you're also working as an employee and paying tax through PAYE, that's all you have to do. However, if you work for yourself full time, you will also have to register with the Contributions Agency, the body responsible for issuing quarterly National Insurance bills. You have a month to do this once you become full-time self-employed.

Key dates

• The tax year ends on 5 April
  All paper tax returns must be delivered to HMRC by 30 September
• Deadline for online returns and payment is 31 January the following year.

So if you're earning money on a self-employed basis for the first time and you supply figures for the tax year April 2009-April 2010, you won't have anything to pay until 30 January 2011. However, there's a possible sting in the tail. If your tax liability exceeds £1000 you will also have to make an advance payment for the 2010-2011 tax year. This will be based on half the previous year's bill with a second payment that will be due on 31 July.

For instance, if your tax bill for 2007/2008 comes to £4000 that will be payable on 31 January 2009, but you will also pay an additional £2000 on account for the 2008/2009 year. You will subsequently make two payments every year based on the previous year's earnings.

If you are planning on going into business with a partner you have three options: form a partnership, a Limited Liability Partnership, or establish a limited company with you and your partners as directors.

If you are a partner in either a partnership or limited partnership, you retain self-employment status and must fill in an annual tax return, just as though you were a sole trader. The deadlines remain the same.

However, if your partnership employs staff, you are responsible for administering their tax and National Insurance payments (as well as employers' tax and National Insurance through the Pay As You Earn (PAYE) system.

As such, you will have to deduct the correct amount of income tax every month, and make a payment to HMRC by the 19th of the same month or the 22nd if paying electronically.

If the average monthly totals come in below a certain threshold, currently £1500, you have the option of paying quarterly. Tax becomes due on the 5th of July, October, January and April.

Limited company directors are taxed on salary in the same way as staff. In other words, as a director you are employed rather than self-employed and your tax is paid through PAYE.

However, a limited company must also pay corporation tax on profits.

Key dates

• If your sales amount to less than £1.5million per annum, corporation tax is payable nine months and one day after the end of your company's accounting period. That period may coincide with the tax year or - as is often the case - it may run from January to December
• Corporation tax returns must be delivered within 12 months of the end of your accounting period
• If you establish a company and intend to trade, you must inform HMRC within three months.

Larger companies have to pay their corporation tax in four instalments, based on an estimated tax liability formulated from profits in previous years.

VAT is charged on a comprehensive range of business transactions. You must register to pay VAT if your turnover exceeds, or if you expect it to exceed, a certain threshold, currently £67,000. There are advantages in registering to pay VAT. While you must charge customers the appropriate VAT rate on any goods or services sold to them (output tax) and pass that charge on to HMRC, you can also claim back VAT charged to you (input tax) by suppliers. Therefore, good book-keeping is essential.

Products fall into three VAT categories: zero rate, reduced rate and full rate. You quantify which categories your products and services are in.

VAT returns are filed on a quarterly basis to HMRC.

If you run a partnership or limited company, you must file accounts at Companies House each year. Each set of annual accounts relates to a financial year. This varies from company to company. In the case of newly established businesses the financial year starts from the point at which the venture was incorporated or the partnership established. This can be changed at a later date.

Under normal circumstances, private limited companies must file their accounts 10 months after the end of their financial year. However, new companies have a 22-month window in which to file their first set of accounts. The rules are slightly different for public companies, those listed on stock exchanges, with the windows coming in at seven months (ongoing) and 19 months (new). All companies must provide a balance sheet and a profit and loss account.

All companies have a duty to protect the health and safety of staff, and that of visitors to the workplace. As an employer you must:

• Carry out risk assessments
• Draw up Health and Safety policies
• Consult with staff
• Have public liability insurance in place.

Companies also have a responsibility to minimise noise, emissions and other forms of harmful pollution that could effect employees or others living or working in the area. There is also a responsibility to safely dispose of waste. Waste rules:

• Waste must be stored securely and safely
• Different types of waste must be separated and disposed of legally either by you or by authorised contractors
• Steps should be taken to minimise the impact on the environment.

If you store and process information on customers, you must comply with data protection laws. The key principles are that data should be processed fairly, lawfully and accurately and that it should be relevant to the purposes of the business. It should be kept secure and not transferred outside of the European economic area without due safeguards.