MELOT ACCOUNTING LIMITED – FAQs

 

Below are a few of the questions which I am more frequently asked. I will keep adding to this as new things come up…

Q:I already have a FreeAgent account which I paid for upfront. If I transfer my licence will I be effectively charged twice?

No. When you transfer your licence to Melot Accounting the FreeAgent team will have a look at what you have already paid and how you have paid. Any existing Direct Debit will be stopped, and any money overpaid at the time of transfer will be refunded.

Q:I have an existing Accountant – is it easy to change?

Yes. You should advise your existing Accountant as soon as possible that you will be transferring your business to Melot Accounting. I will then be able to contact them to obtain relevant documents and details regarding your business.

Q:My FreeAgent account is currently licensed with another company/Accountant. Can it be moved?

Yes. Your FreeAgent account is yours and you can choose who you wish to licence it with. Obviously you will need to honour any notice period or contractual obligation you have with the company you are currently using.

Q:Should be a Sole Trader or set up a Limited Company?

There is no right or wrong answer to this. It totally depends on you, your individual business, your future plans…. There are pros and cons to either set up, and your decision should be made having given these adequate consideration.

I am happy to meet and talk these things through if you are just starting out and not sure which way to go. Contact me to arrange a consultation.

Q:I am below the VAT threshold but unsure if I should register for VAT anyway…

Depending on who you are working for and what you are doing it can be beneficial to register for VAT even when you are under the VAT threshold.

Freelancers do find that some bigger company clients prefer (require even) VAT registered companies/sole traders as they appear bigger and more professional. This is quite common in the IT industry which leads many IT freelancers (web developers and the like) to register for VAT at start up, or not long after simply to ensure that they are giving the best possible image to prospective clients.

Another reason to register early or at start up is if you expect that you will need to in the not-too-distant future. It is arguably easier to have been VAT registered from the start if you are using a lot of repeat clients. That way they will always have know you to be a VAT registered business.

This will be most important to non-VAT registered clients who will otherwise have become used to paying you at a certain rate, for example £100 for a service. When you then VAT register they will need to pay you 20% more, but will not be able to recoup the additional 20%.

Having said that, if you have a large client base of non-VAT registered clients and you are unlikely to need to VAT register in the near future, it may be better to wait. You will most likely be cheaper than your VAT registered competitors which may allow you to build up business and reputation before you need to register.

The answers above just touch on the sort of things to consider. Each business is unique and will have various considerations which lead to the best decision. If you are unsure and want to talk it through feel free to contact me.

Q:I am going to register for VAT, should I opt for standard VAT or the Flat Rate scheme?

Normally for freelance business who qualify for the Flat Rate VAT scheme I would suggest that option as it is far simpler to administer than the standard VAT process.

However, for some business who have a large number of VAT inclusive purchases the standard VAT rules may be beneficial.

If you are unsure whether the Flat Rate Scheme is for you can read a bit more about in on HMRC website or contact me if you want to discuss options.

Q:Can I be employed and self employed at the same time? How do I deal with this with HMRC? It’s not clear from their website…

Yes you can. It is very common for people to have some kind of contracted employment whilst running a sole trader business or engaging in self employed activities.

In terms of HMRC, you will need to register as self employed – either as a business or as an individual depending on the nature of your self employed work. You may also need to pay Class 2 National Insurance Contributions monthly depending on the likely profits from your self employed work.

When you come to do a tax return at the end of the tax year (5th April each year) you will need to complete a form for each employed job and self employed business you worked for during the year. You choose how many of each you need and what these are for.

If you need help or advice regarding setting up as a self employed individual /a sole trader, Class 2 National Insurance liability, or tax returns please contact me.

Q:I am a Sole Trader, do I need a business bank account?

I would always advise having separate personal and business banking. Having said that there is no requirement for a Sole Trader to have a business bank account as there is no distinction between the individual and the business – you are your business.

Apart from anything else it will mean using an online bookkeeping system such as FreeAgent much easier as only the business transactions will be uploaded via the bank feed. So you won’t need to keep working through which transactions are business and which are personal.

Q:I’m a Freelancer – do I need to worry about IR35?

Worry, no. But be aware of it yes definitely.

IR35 Legislation potentially affects all contractors working for their own Partnerships or Limited Companies. It kicks in when a contract you have worked on could have been classed as ’employment’ had it not been for the Partnership or Limited Company you were working through.

HMRC will basically then look to charge Income Tax and National Insurance on the total turnover, less direct expenses, for that particular contract, as if it had been employed work.

It means that Freelancers need to be aware of which contracts fall under IR35 and make sure they track the sales and costs for those contracts separately to their non-IR35 work.

FreeAgent projects module has an IR35 tracking function – sales and costs can be linked to IR35 contracts and the relevant tax owed will be calculated for you so you can keep track of it all.

More advice about IR35 can be found on HMRC’s website. Or contact me if you are unsure and want to talk things through.

Q:What is the AAT Qualification you hold? Are you a Chartered Accountant?

The Association of Accounting Technicians (AAT) Qualification is recognised by the International Federation of Accountants (IFAC) but is not a body of Chartered Accountants.

As a full Member of the AAT I have the letters ‘MAAT’ after my name, and as a Licensed and Regulated Member In Practice I am allowed to engage in public practice carrying out the services listed on my About page.

In order to obtain my Practicing Licence I had to evidence my ability and work experience in each service I wished to practice. Each year I have to reapply to the AAT for my licence and in doing so show I have worked to keep my skills fresh and up to date.

The restriction imposed on my as a non-Chartered Accountant is that I cannot audit accounts. Which only becomes relevant for larger companies with annual turnover of over £6.5 million who must have their annual financial statements audited before submission. I am still able to prepare the accounts for these companies, but I cannot audit them.

However, as I am offering services to small limited companies and sole traders only this is not of concern.

If you have any questions regarding my qualifications or licence please do not hesitate to ask me.