Business: Understand The Laws of Taxation
Do you think as a new business you need to understand the laws of taxation?
Many people will say not, that's where your accountant will come in. However my feelings are the opposite: if you want to be in full control of your business it is vital you have a basic understanding of how you stay on the right side of the taxation laws, whilst using them to your full advantage.
24 years running my own businesses have taught me a great deal. The fact I cottoned on to the importance of understanding finance and tax at a very early stage I believe this has paid dividends, and can allow much more control over ones future. I fully agree with a taxation system that supports our nation and ensures that the less well off are supported and those in need are helped along the way. That does not mean I agree with a namby pamby approach to society, far from it.
If you can do your bit for society you should!
Help Your BusinessIt is within most people's nature to want to pay as little tax as is possible. The only true way of knowing you are achieving this goal is for you to have a reasonable understanding of how the system works. Many businesses both large and small get themselves into financial difficulties due to a lack of understanding their financial base. The taxman can take a real chunk year on year from your cash flow and it is well worth being involved so you can strategically plan and position your business to take the best advantage possible.
I do of course advocate using professionals. I would advise any start up businesses to get involved with a reputable firm of accountants early on in their business life. But, once you have engaged the services of an accountant don't abdicate all responsibility for how you plan your financials to that organisation.
At the end of the day it is your responsibility and yours alone.
Whilst you may have never really been exposed to the complexities of tax, cash flow, balance sheets and profit and loss, they are the key areas to running a successful business, and should therefore form part of your day to day duties.
Recent turmoil in our economy have seen a sea change in the way in which the HMRC (Her Majesty's Revenue and Customs) are dealing with late payers and defaults. This in a much firmer manner than previously, thus providing another reason why it is worth being personally involved.
The internet provides a great source of information on how to run your finances and how the taxation system in the UK operates; take a look at http://en.wikipedia.org/wiki/Taxation_in_the_United_Kingdom
Here you will find step by step introductions to the UK's tax laws and other relevant financial help.
A simple methodical reference is to:
- Understand Tax and Finance.
- Make a plan and try to execute that plan.
- Review the plan at the end of every month.
- Save towards your Tax on a monthly basis.
Keep abreast of taxation changes such as occur in the PBR or actual Budget.
I am sure like me when you first venture into how taxation can affect your financials you will probably find it a daunting task. Stick at it and learn about one section at a time. You don't need to become an expert that's your accountant's role, but a basic understanding will enable you to ask pertinent questions and help you better formulate your future business plans.
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