This information is targeted at small owner-managed companies. It is assumed that the owners do not have any children about to go to university, or already at university, for whom a student loan application is needed.
Let’s suppose that Business A has entered into a maintenance contract with Business B to keep the computers of Business B in working order. The contract was started on 1st November, Business B paid £1,200 cash up front, and both companies have a year end of 31st December.
Our business strategy is to be a product development strategy. We will use new technology so we can offer a service which is cheaper than anyone else. Once we have some clients, we will introduce more new technology (a spreadsheet for everything for example) so we can better meet the needs of our clients. Then we will stop undercutting (but protecting the position of clients who came in early) and concentrate on being good accountants.
The January 31st Self Assessment deadline is now over, and it’s a quiet time for accountants until after Easter. There is a prospect of sitting around with nothing to do, although we will be out promoting our services. We would like to take on some VAT work. This has to be done all year round, and in addition, our software allows us to start work on the preparation of the annual accounts without duplication of activity. This in turn takes the stress off the next busy period in December/January. Our innovative software has solved a major problem that accountants have. This is a pleasant discovery which wasn’t foreseen.
If you’re in business and you want to be paid for some goods or services you have supplied, you need to issue a document called an invoice. This will provide details of your business, what you have supplied, the amount, any other charges, and any Value Added Tax. The bottom line of this invoice will show what you are owed.
If you inherit a stamp collection and sell it on eBay as a one-off transaction, then no tax is likely to be payable. There might be a theoretical charge to Capital Gains Tax, but in practice this is a relatively lenient tax and often the charge turns out to be nothing. However, if you make a habit of buying stamps as and when you can and selling them online, then you are now engaged in a trade and your profits are chargeable to Income Tax.