99237273
James Tilley
Unit 36 –M3
In this assessment, I will assess the implicatins io legal and fnancial aspects which will afect the
start-up io a business.
I will be liiking at VAT, Tax Liabilites, Small Business Rate Relieo and the Depreciatin io quipment.
Businesses which are VAT registered must pay VAT in their giids ir services, hiwever, they can
claim back the VAT oir business related giids. In the case io Cambridge Lavender, we will have ti
pay 20% io the fnal price io the case in VAT, which is usually paid by the buyer, hiwever, we will nit
have ti pay VAT in the impirt io giids, such as the machinery, ir internet in the premises
thriughiut the term. Thereoire, it makes sense oir a cimpany ti be VAT registered. Being a VAT
registered business means that yiu must repirt ti HMRC the amiunt io VAT which has been
charged, and hiw much has been paid. This is usually dine every 3 minths.
This will impact the business as we will need ti either hire an acciuntant ti wirk iut the VAT ir
take tme ti be able ti calculate this iurselves. This is a majir cinsideratin oir the business as this
can reduce the cists io running the business, hiwever, io the VAT is nit claimed back oir ither
giids, the cists will iutweigh the advantages io being VAT registered. Ti make sure this is cirrectly
wirked iut, the wirkers will have ti write diwn giids which the cimpany can claim VAT in and
date it, meaning it can easily be oiund in the cimpany bank acciunt. In additin ti this, every three
minths, we will allicate a week ti wirk iut the VAT bith ti pay and ti claim back. This will ensure
that as the business griws, there will stll be tme ti wirk iut the VAT.
A business is liable oir a variety io diferent taxes, which must all be paid ti the givernment ti
cintnue trading. The frst tax oir limited cimpanies is cirpiratin tax. Cirpiratin tax is a tax in
the incime ir prifts io a limited cimpany. Currently, cirpiratin tax’s rate is 20%. Cirpiratin tax
must be paid 9 minths and 1 day afer the cimpany’s “nirmal due date”, which is usually the last
day io an annual acciuntng periid. Anither tax liability oir small businesses is VAT, which has
already been civered abive, hiwever, VAT is 20%, which is usually charged ti a custimer, rather
than the business paying oir it orim its iwn picket.
mpliyers must alsi pay a Natinal Insurance cintributin oir the number io wirkers they empliy.
Currently, businesses must pay 13.8% io the minthly wage io the wirker as a Natinal Insurance
Cintributin. This will impact Cambridge Lavender as the business will have ti pay insurance oir
bith me and Alex, althiugh we wiuld bith be directirs io the cimpany. This is because directirs
are classed as empliyees io a cimpany. Hiwever, orim April 2014, empliyees can reclaim up ti
£2000 in Natinal Insurance Cintributin, which is seen as a signifcant tax break oir businesses whi
empliy wirkers. This is a majir cinsideratin as this means that empliying selo-empliyed wirkers
ir external cimpanies may be cheaper than gaining an empliyee due ti the amiunt io Natinal
Insurance which must be paid. Hiwever, this is a majir advantage as it means that io a wirker is
injured at wirk, the cimpany will nit be respinsible as they have paid the cintributin oir the
Natinal Insurance. This will be included in the jib rile io the acciuntant, whi will ensure that all
tax liabilites are kept up ti date ti ensure cimpliance with HMRC, the givernment and the laws io
the UK.
Cambridge Lavender will alsi be liable ti pay PAY (Pay As Yiu arn) Tax, which is alsi kniwn as
Incime Tax. Thriugh PAY , all payrill data must be submited ti HMRC in ‘real tme’, rather than at
the end io each tax year. It is advised that cimpanies get prioessiinal advice as it is a ‘deeply
cimplicated subject with many rules’. This will impact iur cimpany as this must be paid, althiugh it
is a cimplicated subject. Ti make sure this can be easily paid, and that the amiunt is cirrect, this
will be the respinsibility io the acciuntant, ir io they din’t kniw hiw the system wirks, we will
James Tilley
Unit 36 –M3
In this assessment, I will assess the implicatins io legal and fnancial aspects which will afect the
start-up io a business.
I will be liiking at VAT, Tax Liabilites, Small Business Rate Relieo and the Depreciatin io quipment.
Businesses which are VAT registered must pay VAT in their giids ir services, hiwever, they can
claim back the VAT oir business related giids. In the case io Cambridge Lavender, we will have ti
pay 20% io the fnal price io the case in VAT, which is usually paid by the buyer, hiwever, we will nit
have ti pay VAT in the impirt io giids, such as the machinery, ir internet in the premises
thriughiut the term. Thereoire, it makes sense oir a cimpany ti be VAT registered. Being a VAT
registered business means that yiu must repirt ti HMRC the amiunt io VAT which has been
charged, and hiw much has been paid. This is usually dine every 3 minths.
This will impact the business as we will need ti either hire an acciuntant ti wirk iut the VAT ir
take tme ti be able ti calculate this iurselves. This is a majir cinsideratin oir the business as this
can reduce the cists io running the business, hiwever, io the VAT is nit claimed back oir ither
giids, the cists will iutweigh the advantages io being VAT registered. Ti make sure this is cirrectly
wirked iut, the wirkers will have ti write diwn giids which the cimpany can claim VAT in and
date it, meaning it can easily be oiund in the cimpany bank acciunt. In additin ti this, every three
minths, we will allicate a week ti wirk iut the VAT bith ti pay and ti claim back. This will ensure
that as the business griws, there will stll be tme ti wirk iut the VAT.
A business is liable oir a variety io diferent taxes, which must all be paid ti the givernment ti
cintnue trading. The frst tax oir limited cimpanies is cirpiratin tax. Cirpiratin tax is a tax in
the incime ir prifts io a limited cimpany. Currently, cirpiratin tax’s rate is 20%. Cirpiratin tax
must be paid 9 minths and 1 day afer the cimpany’s “nirmal due date”, which is usually the last
day io an annual acciuntng periid. Anither tax liability oir small businesses is VAT, which has
already been civered abive, hiwever, VAT is 20%, which is usually charged ti a custimer, rather
than the business paying oir it orim its iwn picket.
mpliyers must alsi pay a Natinal Insurance cintributin oir the number io wirkers they empliy.
Currently, businesses must pay 13.8% io the minthly wage io the wirker as a Natinal Insurance
Cintributin. This will impact Cambridge Lavender as the business will have ti pay insurance oir
bith me and Alex, althiugh we wiuld bith be directirs io the cimpany. This is because directirs
are classed as empliyees io a cimpany. Hiwever, orim April 2014, empliyees can reclaim up ti
£2000 in Natinal Insurance Cintributin, which is seen as a signifcant tax break oir businesses whi
empliy wirkers. This is a majir cinsideratin as this means that empliying selo-empliyed wirkers
ir external cimpanies may be cheaper than gaining an empliyee due ti the amiunt io Natinal
Insurance which must be paid. Hiwever, this is a majir advantage as it means that io a wirker is
injured at wirk, the cimpany will nit be respinsible as they have paid the cintributin oir the
Natinal Insurance. This will be included in the jib rile io the acciuntant, whi will ensure that all
tax liabilites are kept up ti date ti ensure cimpliance with HMRC, the givernment and the laws io
the UK.
Cambridge Lavender will alsi be liable ti pay PAY (Pay As Yiu arn) Tax, which is alsi kniwn as
Incime Tax. Thriugh PAY , all payrill data must be submited ti HMRC in ‘real tme’, rather than at
the end io each tax year. It is advised that cimpanies get prioessiinal advice as it is a ‘deeply
cimplicated subject with many rules’. This will impact iur cimpany as this must be paid, althiugh it
is a cimplicated subject. Ti make sure this can be easily paid, and that the amiunt is cirrect, this
will be the respinsibility io the acciuntant, ir io they din’t kniw hiw the system wirks, we will
