A person starting to trade is faced with a number of requirements; for example, they must register their business with HMRC. Penalties may be charged where the person fails to meet, or is late in meeting those obligations. In addition, the person must make a number of important decisions; for example, choosing the date to which they will prepare their accounts. In some cases, a tax and/or cashflow advantage could be obtained.
Choosing a name for the business
Although not a tax issue, this is an important consideration for a new business and getting it right can save problems later on.
Key points to bear in mind are:
- the individual can trade in their own name; they don’t need a separate name for the business;
- there is no requirement to register the name but once chosen, it must be used on paperwork (eg invoices);
- the name should not include ‘limited’, ‘ltd.’, ‘plc’ and so on;
- the name should not include offensive words or sensitive words; and
- it can’t be the same as an existing trade mark (you can search for existing trade marks here).
If the name chosen for the business infringes an existing trade mark, the individual may be liable for damages or may need to change their business name.
In some circumstances, it may be advisable for the individual to apply for a trade mark to protect their business name. This can be done here.
Registering as a sole trader with HMRC
The individual should register for Self Assessment as soon as they begin to trade. The deadline for doing this is 5 October in the second tax year of trading; ie 5 October 2021 for someone who begins to trade in 2020/21.
If the person has registered for Self Assessment before, they need to register for self-employment using this online form. It is possible to view the complete form on screen so it is clear, before completing the form, what information is required. A key piece of information is the person’s 10-digit tax reference number.
If the person is new to Self Assessment, they can register here.
Remember to register with HMRC as the person’s agent.
Registering a partnership with HMRC
The partners should register for Self Assessment as soon as the partnership begins to trade. In addition, the nominated partner (being the partner the partners have agreed is responsible for the partnership’s tax return) should register the partnership for Self Assessment as soon as it begins to trade.
The deadline for registering with HMRC is 5 October in the second tax year of trading; ie 5 October 2021 for someone who begins to trade in 2020/21.
A different procedure applies where the partnership is a limited partnership or a limited liability partnership (LLP); for example, you will need to register the partnership with Companies House.
We can help with all of your business and personal tax and financial planning needs. For a strategic review of your finances, please contact us.
Disclaimer: We don’t take any responsibility for actions taken based on above information. Please speak to our consultants if you need more information. This guide was written specifically for Smart Accounting clients. Some of the information contained in this guide might not be applicable if you do not have a business managed by Smart Accounting. By necessity, this briefing can only provide a short overview and it is essential to seek professional advice before applying the contents of this article. No responsibility can be taken for any loss arising from action taken or refrained from on the basis of this publication. Details are correct at time of writing.