advice and FAQ's

Over our many years in the accountancy profession, we have been asked a number of questions or advice sought on great number of issues. Here, we try to help out but please bear in mind that the answers are not definitive and may not necessarily apply to your business. If you're unsure, please get in touch with us.

Q. Is it better to work as a sole trader or as limited company?

This is a question that comes up very often. In short, it depends on a number of factors; not only business related but also in your personal life to. As the answer to this is quite long, I have developed a guide which can be accessed here. You need Adobe Acrobat Reader to view it.

Q. Is it worth employing my wife as a director of my company?

This depends. Is your wife currently employed and what are her earnings? Everyone has a personal allowance set by the Government each year which can be viewed on HMRC's web site. For the tax year 2011/12, you are allowed to earn £7,475 before paying any tax. If her earnings are below this, then yes, add her as a director, put through your accounts directors remuneration for how much you want to pay her and this will also lower your Corporation Tax liability. Obviously, she should do some work for the company, you cannot simply pay her for doing nothing and a contract of employment would also help.

Q. I am a carpenter and suffer CIS deductions. Is it better to be Gross Status?

A good one here. Gross status (which means you do not have deductions made from your services at source) can help with cash flow, especially if you have sub-contractors working for you. On the other hand, it also means you will have a tax liability at the end of the year. Having deductions made at source will always mean your tax is paid and you will evidently be subject to a tax refund as the deduction is based on turnover and does not include expenditure relating to your business. If you are good with money and always put some away each month for tax, then yes, it is a good idea to apply for. Your turnover needs to be at least £30,000 (not including materials) and you need to have a good status with HMRC (i.e. always submitting your returns on time).

Q. Should I always take dividends?

Dividends can only be taken on post-tax profits and are only beneficial on your personal tax situation. For example, if you made a £10,000 pre-tax profit, you will need to pay corporation tax (£2,000) before you can take a dividend. The balance, £8,000, is added to any retained profits or deducted from prior year losses to produce a retained income. You can then take dividends from this amount.


We will add more this page over the coming weeks but if you have a question, please and we will do our best to answer it for you.