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Limited Cost Trader

Mr Darren owns a vet practice in London. The veterinary business produced an income of a certain amount.

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Business Use of Your Home

Mrs Katie works from home. She runs a content creation business for a large pharmaceutical company. She works in one room where her desk and computer and documents are placed. She works for 5 hours per day during a week.

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Contracts are obligated to pay to HMRC all amounts that are liable to be deducted. Payments are done monthly, by the 19th of each month or by the 22nd of each month if the payments are done electronically.
In case a contractor has both subcontractors and employees, a single payment must be made in relation to CIS deductions and the amount of PAYE and NIC due.
Quarterly payments are allowed in case the sum of all ;
• Average monthly payment of PAYE
• National Insurance contributions,
• Construction industry and
• Student loans
All amount to less than £1500 limit.


A contractor must keep records showing payments and deductions made to subcontractors. In the case of HMRC investigation, it has the power to inspect these records.
A penalty charge of £3000 can be levied if contractors failed to produce to records upon investigation.


The subcontractors are also obligated to keep records of calculations of payments and deductions made to them for contracts under which they were a subcontractor.

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Capital Allowances

As a general rule, expenditure incurred in carrying out the compulsory business is not allowed to be used a deduction in the calculation of the adjusted profits of a business. Similarly, any depreciation given in the accounts must be added back for calculating taxes. However, capital allowances are offered as a financial relaxation to the businesses that purchase capital assets in the due course of carrying out business transactions.
Capital Allowance rules apply to companies, sole traders and partnerships equally. So if you work as a sole trader or partner and have an income of £150,000 or less a year, you should be able to use a simpler method called cash basis instead.

Capital Allowances can be claimed on
• Plant and machinery
• Business vehicles

The value of your capital allowance is calculated at different rates for different types of expenditure. In some special cases, the initial allowance in the first year is given at a higher rate, as a relief to the business to encourage investment.
Generally, the value of your assets is the same as you paid for it. However, you can claim, the allowance on items if
• the item personal belongs to you.
• Or it was gifted to you.
Capital allowance on expenditure cannot qualify for more than one category. There are different rules to apply for expenditure occurring under a different heading.

There are other expenses for running the business which is called business expenses or overheads. These could be
• Interest or other professional fees for buying assets
• Items bought for trading
• Running cost of your every day running of the business
Claim these expenses have a different procedure to follow.

There are many rules that apply to different types of assets to claim for capital allowances.
• The timing and the nature of the item would constitute to qualify for capital expenditure.
• The basis of allowance relief depends on the method and reason for calculating the expenditure.

All capital allowances must be claimed on the tax return. An accountant should be able to assist you with the details of the company tax return and income tax return.

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Your Business VAT

Value added tax (VAT) is an indirect tax on the supply of goods and services. The charge to A does not arise only on the sale of goods and services to end users but is also charged on the “value added” to the supply during each stage of the supply chain.

Businesses can submit their VAT online.
Letting your accounting software, Sage, Xero or QuickBooks complete your Vat return is the easiest option.

UK VAT is chargeable on the following:
1. Taxable supplies made in the UK by taxable persons in the course of business.
2. Acquiring goods from goods from other EU member states
3. Import of goods into the UK from outside the EU.
4. Receipt of services from outside the UK
For VAT purposes the UK includes the Isle of Man but not the Channel Islands or Gibraltar. The VAT is a European tax and supplies made elsewhere in the EU may be liable to VAT in another member state.

All businesses are not straightforward for VAT purposes. Some businesses have their own unique rules. The below outlines the exceptions to the rule:
• Second-Hand Dealers
• Tour Operators
• Building developers

For VAT rules on the above exceptions, consult our accounts experts to guide you on the right solution for your business.

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