How To Know What Industry A Company Is In - The Criteria
This article will give you some criteria for determining what industry your business is in, helping you to get the best legal and tax advice.
Most young start-ups may not even know what kind of business they have, but the business they're in is the most significant financial commitment they'll ever make.
Learning about the kind of business you have is important. If you're involved in a specialized industry, you'll need to have evidence.
Ask yourself these questions to find out what kind of company you're in:
Are you just a sole trader?
A sole trader is the basic form of a business, where the sole proprietor is in full control of the company's assets.
Sole traders don't pay corporation tax as they pay no salary or business costs and you're only liable to income tax on their share of the profit.
You should make a formal application to the HMRC to register as a sole trader, but you can do this manually in about 10 minutes if you have a book that lists all the companies you are part of.
If you're an employee, you may be required to file a tax return. You'll need to show any wages or wages income you've received.
If you work in a business or as a freelancer, you'll also need to pay Corporation Tax, as well as the tax on any self-employed profits.
Are you a limited company?
Limited companies are the legal form of business. They can have up to five shareholders who are liable to pay tax on the company's profits.
Limited companies don't have to pay corporation tax, but if their profits are above £80,000 a year (under US rules) then the company must pay income tax on those profits.
The person who owns the company will pay tax on the profits. However, if they put money in the company, they may also be liable for income tax.
A limited company can receive donations from other companies, as long as they don't have a director's liability, which means that if someone else takes control of the company, you're unlikely to be liable for income tax on your donations.
Are you a partnership or a limited company?
As long as you're a member of one of the following categories, your company will be treated as one of these:
A partnership is an independent company that can have one partner.
Partners are liable to tax on any profit they make and, unlike a sole trader, they can pay staff or carry on carrying out their normal business.
A limited company is a company where the major shares are owned by one person or several people.
It can have more than one director, but the person who owns the majority of the shares (usually more than 50%) has the power to appoint the other directors.
A limited company can be either a partnership or a limited company.
A limited company can also have members, but there are strict rules on who can become a member.
If you want to join a limited company, you must be an 'innocent holder' of shares in the company and not hold the shares on behalf of another person, your company's director, or another company.
You can also become a member of a limited company by having other businesses as members.
You need to make sure you are the dominant member (the majority shareholder) so that you have the power to appoint directors.
How do I report a mistake to HMRC?
It's important to report any mistake you make in your tax returns, even if you think it's not your fault. If you don't or can't report your mistake, it could become a chargeable expense.
Make sure you get some independent financial advice before you do anything.
Find out more about how to get financial advice to help you decide which tax return best suits you, in our guide to tax return preparation and preparation software.
Do I need to claim tax relief on my childcare expenses?
If you are a full-time parent, you can likely claim up to 20% of the cost of childcare, including the nursery costs, from the government.
However, there are rules that you must follow.
Childcare is one of the essentials you have to claim to pay tax relief on.
However, a tax relief claim can't be made if you're claiming for your own personal allowance, if you can't claim Child Benefit, or if your childcare costs are higher than the personal allowance, or if you're claiming Child Tax Credit.
How do I pay your tax bill?
There are five ways you can pay your tax bill:
- Self-assessment - you can make a personal return and pay your tax to HMRC online using a debit or credit card
- Credit card - you can pay via your credit card, or you can download a form that you fill in and send to HMRC
- Debit card - you can pay your tax through a debit or credit card, or you can download a form that you fill in and send to HMRC
- Direct debit - you can set up a direct debit to pay your tax bill. You should pay your tax by the end of the tax year.
- Personal taxpayer and tax credit online accounts - you can pay tax from your personal tax account online by a debit or credit card, or a direct debit
Trying to get a copy of your tax return?
If you are trying to get a copy of your tax return to use to claim back tax relief, then it might take a bit of time to process the request.
HMRC's telephone lines are open from 9 am to 9 pm, Monday to Friday, and from 8 am to 5 pm on Saturdays.