Frequently Asked Questions

If you want to start working as self-employed, you must register with HM Revenue & Customs, but first make sure you have a National Insurance Number. After the registration, you will receive your Unique Taxpayer Reference (UTR) and HMRC will set up the right tax and National Insurance contributions records. You should keep your UTR safe as you will need it when completing your Self Assessment tax return.
This depends upon what your contract says or what your working arrangements are. You can be employed and self-employed at the same time. When defining your employment status, you should refer to the following questions:
A self-employed person:
Runs own business and decides about the type and time of its work
Bears responsibility for the success or failure of the business
Have more than one customer at the same time
Can hire people
Takes care of the main equipment needed to perform business activities
An employed person:
Has to perform the tasks imposed on their own
Is told how, where and when to do your work
Works within fixed hours
Work for just one person at a time
is not in charge of the business nor takes responsibility for it, that is the employer’s task
is paid a regular wage or salary

You may need to register for VAT if you are doing business in the Canada as an individual, a partnership, a company, an association, a charity, a local authority or any other organisation or group of people acting together under a specific name.

You must register for VAT if:

Should you register for Canadian GST

Foreign businesses providing taxable goods or supplies may register for GST as a non-resident where:

There’s no threshold if neither you nor your business is based in the Canada. You must register as soon as you supply any goods and services to the Canada (or if you expect to in the next 30 days).

Note that you cannot register for VAT if you sell only goods or services that are exempt from VAT or you are not in business according to the HMRC’s definition.

If you are doing business in the UK but your turnover is below the threshold for registration, you may register for VAT voluntarily. Remember to regularly check if your turnover has exceeded the threshold and you need to register.
You may find it beneficial to be able to charge VAT on your sales and claim back VAT on your purchases in various ways. By way of example, if there is a zero VAT rate for the items you sell but you buy standard-rated items, HMRC will give you a VAT refund. Note that if you voluntarily register for VAT, you have the same rights but also responsibilities as in the case of compulsory registration.
If you are planning to close your business, there are a few things you should consider, such as notifying Canada Revenue Agency (CRA), filing a final tax return, paying any outstanding tax amounts, and financing your succession planning.

Here is a list of things you should do if you are planning to close a business:
Cancel your business registration for your sole proprietorship or partnership OR
Voluntarily dissolve your corporation
File a last tax return, if you have dissolved a corporation
Close your RST/PST/QST accounts with the appropriate provincial agency
Close your payroll accounts with the Canada Revenue Agency (CRA)
Close your GST/HST accounts with CRA

All resident corporations (except tax-exempt Crown corporations, Hutterite colonies and registered charities) have to file a corporation income tax (T2) return every tax year even if there is no tax payable. This includes:
non-profit organizations;
tax-exempt corporations; and
inactive corporations.
Most corporations can file their return electronically using the Internet. It is mandatory for certain corporations with annual gross revenues that exceed $1 million.
You might acquire a depreciable property such as a building, furniture, or equipment to use in your business or professional activities.
These properties wear out or become obsolete over time, you can deduct their cost over a period of several years. This yearly deduction is called a capital cost allowance (CCA).
You cannot deduct the full cost of depreciable property when you calculate your net business or professional income for the year in which you acquired the property.
Canada. Currently, only 50% of realized capital gains are taxable in Canada at an individual’s tax rate. Some exceptions apply, such as selling one’s primary residence which may be exempt from taxation. Capital gains made by investments in a Tax-Free Savings Account (TFSA) are not taxed.

For example, if you bought shares for $10,000 and sold them for $15,000, you have to declare a $5,000 capital gain in the year you sold the shares. As of 2016, the capital gains inclusion rate is 50 percent, so you would include $2,500 in your total taxable income.

In most cases you do not have to manage your finances on your own. You may authorise an accountant to act for you. In fact, some entrepreneurs find it too complicated or time-consuming to deal with financial matters by themselves. You can avoid many misunderstandings or mistakes if you authorise an accountant to do it for you.
Like any other business you have to consider your online setup as the same kind of entity. You will need a business plan, competitor research, geographical target zone and survey your service or product to ensure it is in demand.

If you are starting an online business from home then VAT registration is required in the Canada.

Online businesses have different laws to abide by. You should familiar yourself with the data protection legislation, and include a strong privacy policy (as well as making sure your website code/script abides by this).

Many potential start-up businesses are daunted by the prospect of writing a business plan. But it is not a difficult process – and a good business plan focuses the mind as well as helping to secure finance and support.

The business plan will clarify your business idea and define your long-term objectives. It provides a blueprint for running the business and a series of benchmarks to check your progress against. It is also vital for convincing your bank – and possibly key customers and suppliers – to support you.

Your business plan will help you flesh out your idea and get a better feeling of whether you are ready to go ahead. Taking time to complete a thorough business plan before you start your business will reduce the risk of you missing something.

A plan will also be required by your bank and other lenders before they offer you credit, business loans or overdraft facilities.

It is important to outline all of the main points to give you and others a clear snapshot of your business idea, or where your business is heading.

Completing the plan will help you think methodically and sharpen your ideas about your business concept. The plan will also enable a stranger to grasp your business idea without getting bogged down in unnecessary details.

Templates are available on various websites.

The following is not exhaustive but a thorough business plan will normally include the following:

Executive Summary

Business Overview comprising brief history of your business or why you have decided to start one, purpose of the business, products and services. Your current position, competitive advantages, strengths and weaknesses of your competitors, a brief overview of your plans to grow the business.

Business Strategy for the next year/3/5 years, your specific objectives and goals, tactics, steps you need to take, resources you will need. Outline strategic threats or opportunities in the short to medium term and outline the business core values.

Marketing – market research undertaken and marketing plans, how you will reach your customers, how you will use technology, how you will actually promote your business to clients, your marketing budget and how you will build credibility.

Team and management – structure and experience, external advisors, management systems.

Financial budgets and forecasts – Cash flow forecast, profit & loss forecast, balance sheet forecast, capital expenditure budget

If you wish to trade and do not use a limited company you will be personally liable for the debt of your business. If you have assets or savings they are vulnerable to a claim made against you.

By trading through a limited company you are literally placing a limit on your liability. That limit is the value of the company, including any money you may have invested in, loaned to or are owing to the company. The company has a separate legal identity from its owners and directors and unless they sign a personal guarantee for its debts they are not liable for these

There are a number of advantages in becoming a limited company, such as :-

  1. You can give a share of the business to others eg family.
  2. It may be easier to attract people to invest money in your business.
  3. Obtaining bank loans may be easier.
  4. There is no higher rate tax bands.
  5. In the event of a partner leaving or somebody dying it is easier to continue the business.
  6. It is easier to sell the business.
  7. You have better standing in the public eye.
  8. It can assist in the protection of a name.
  9. People have more confidence in your business as they can check up on your company on the public records at Companies House.
  10. Subcontractors and agency workers will find it easier to obtain work.

The main disadvantages of becoming a limited company are the extra costs of preparing of annual accounts and some loss of financial privacy.

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