I can start your business: Everything you need to know to run your limited company or self employment – for locums, contractors, freelancers and small business by Russell Smith

Author:Russell Smith [Smith, Russell]
Language: eng
Format: azw3
Publisher: Russell Smith Chartered Accountants
Published: 2015-11-19T00:00:00+00:00

Pre business expenses

It is often the case that you will have some costs associated with the business before you’ve actually set up your limited company or set up your self-employment.

You should definitely keep all your receipts and paperwork since this can be brought into your accounts at day 1 of the business starting.

The only slight complication for a limited company is that effectively the director has paid for them on the company’s behalf so needs to be reimbursed.

Charging your client or customer expenses

This is an interesting area which many clients get wrong.

Let’s suppose you are a service business and you do some work for a client which you will charge £1,000 for. However, to do the work, you have to go to the client’s premises and therefore incur travel expenses.

You agree with the client that you will charge 45p per mile and it is a round trip of 20 miles - £9. You also have to stay in a hotel which costs you £50, which again, the client agrees to pay.

Your invoice looks like this:

Service£1,000

Travel £9

Hotel £50

Total£1,059

So far so good.

However, make sure that you also include the travel cost in your expenses as well as your sales invoice.

The profit on this job should be £1,000 i.e. you’ve charged your client £59 but incurred £59 of cost which nets off.

If you forget to include the £9 in your costs, you will effectively be paying tax on the £1,059.

If you are VAT registered, there is something else to know which catches out even more people.

If you are a VAT registered, your invoice should look like this:

Service£1,000

Travel £9

Hotel £50

Net£1,059

VAT @ 20% £211.80

Gross£1,270.80

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