Aspects to consider in your Business, whether discussing with an Accountant (or not).

Some helpful thoughts for you before and after discussing with your Accountant …

1. MY GUIDANCE AND CONVERSATIONS
   Be aware that my guidance tends to reflect real-world practical considerations (not necessarily financial-led), learned from my experience not as an accountant, but rather from several years employment within a ‘Business Consultancy’ firm, and also alongside over 20 years’ experience ‘Helping Business Owners’.
   
2. As I’m not a qualified accountant, this document serves purely as a practical framework to support a more informed discussion with your accountant.
   
3. IMPORTANT
   Only you can decide what is right for you and your business (practicalities vs. cost savings). My advice is:  Try to balance ‘Financial Efficiency’ with ‘Real-World Considerations’, such as ‘Personal Protection’, ‘Risk Exposure’, and ‘Peace of Mind’.

EXAMPLE REAL WORLD CONSIDERATIONS FOR
‘LTD’ INSTEAD OF ‘SOLE-TRADER’

An example of 3 Common issues where Ltd could be better for you rather than Sole-Trader.

1) ‘Trade Debts’ & ‘Supplier/Merchant Credit’ going wrong

Eg.Cashflow crunch → Can’t pay supplier accounts / trade credit / finance agreements / commercial contracts.

• Sole trader = unlimited liability (the debt is personally yours). GOV.UK+1
• Ltd Co = Debt is generally the company’s problem unless the Director gave a personal guarantee.

Why this matters for bathroom refits: Materials-heavy projects create big swings in working capital; one delayed payment can cascade into supplier arrears quickly.

Key caveat: Personal guarantees can erase much of the benefit. A notable SME survey found a sizeable share of owners became personal guarantors to access lending (survey-based, not government). purbeckinsurance.co.uk+1

2) A major ‘Customer Claim (damage, injury, defect) that exceeds insurance

Eg.Leak/Fire/Electrical issue/Property Damage/Injury Claim → Insurer disputes scope or limit → claim exceeds cover.

• If you’re a Sole trader: The Claimant can pursue your personal assets. GOV.UK+1
• As an Ltd Co: The Claimant typically pursues the company (again, subject to wrongdoing/piercing scenarios).

Why this matters for Trade People: High water-risk environments (eg.Plumber) + Multiple Trades (if contractors involved) + Expensive Finishes = Bigger downside when something goes wrong.

Key caveat: If the business owner is personally negligent in a way that creates direct liability (case-dependent), ‘Limited Liability’ is not guaranteed.

3) VAT/tax debt snowballing (where structure helps less than people assume)

Eg. VAT threshold crossed late, pricing not adjusted, VAT not ring-fenced → arrears build → enforcement.

• Sole trader: tax/VAT debts are personal by default. GOV.UK
• Ltd Co: tax debts are company debts — but HMRC can, in certain circumstances, pursue directors personally (joint & several liability notices / related powers). GOV.UK+1

Why this matters: materials going through his books can push turnover up fast (and therefore VAT exposure), even if margin is modest.

Key caveat: incorporation is not a substitute for VAT discipline; the real protection is pricing, ring-fencing VAT, and systems.

10 fundamental accountancy-related considerations,
that Business Owners (especially Sole-Traders)
‘Are not CLEAR on’ …

1. Business Structure: Sole Trader vs Limited Company

Decision criteria to review (with/without an accountant)

A. Professional Positioning

• Trading as a Limited Company materially improves credibility with:
  • Higher-Value clients (certainly £1,000+ projects)
  • Showroom Partners / Concessions
  • Trade Suppliers and Credit Accounts
    

B. Risk, Liability & Protection

• Level of ‘Personal Financial Exposure’ as a Sole Trader versus:
  • Limited liability protection under a Ltd Co
• Exposure to:
  • Customer disputes
  • Accidental damage
  • Sub-contractor issues
• Whether insurance alone is sufficient, or whether incorporation meaningfully reduces risk
  

C. Privacy & Security

• Sole Trader = home address publicly visible
• Ltd Co = ability to use registered office / accountant address
• Considerations around personal safety, debt visibility, and credit checks
  

2. Tax Efficiency: Sole Trader vs Limited Company

Clarify real-world differences (not assumptions)

A. Income Tax vs Corporation Tax

• Compare:
  • Income tax + Class 2 / Class 4 NIC (Sole Trader)
  • Corporation tax + dividends / PAYE mix (Ltd Co)
• Identify profit level where incorporation becomes tax-efficient
  

B. Expenses & Allowances

• Vehicle mileage vs actual vehicle costs
• Tools, phone, PPE, software
• Use of home as office
• Pension contributions (often more efficient via Ltd Co)

3. VAT Exposure & Threshold Management

Critical – current assumptions need tightening …

A. VAT Threshold Reality

• Current VAT threshold: £90,000 turnover (rolling 12 months)
• Not calendar-year based
• Registration required once the rolling total exceeds £90k, not “at year end”
  

B. When VAT Becomes Payable

• VAT is chargeable from the effective date of registration, not retrospectively
• Failure to register on time can trigger:
  • Back-dated VAT bills
  • Penalties and interest
    

C. Materials vs Labour Model (Major Point)

Discuss whether turnover is being artificially inflated by materials handling:

Current model:

• Client pays £5.5k–£8k
• 50–60% materials
• VAT threshold reached faster due to pass-through costs

Alternatives to explore:

• Customer pays suppliers directly (tiles, suites, furniture)
• Labour-only or labour-plus-management fee model
• Transparent materials handling with clear margin disclosure

Key questions for accountant:

• How much VAT exposure is driven by cash-flow, not real profit?
• Does restructuring billing materially delay or reduce VAT registration?

4. Tax & VAT Provisioning (Cash Discipline)

High-risk gap identified

A. Tax Provisioning

• Agree a realistic percentage to set aside monthly
  • Not a guess (20% may be insufficient or excessive depending on structure)
• Separate account for tax/VAT only

B. VAT Provisioning

• VAT is 20%, not 17.5%
• Accountant to confirm:
  
  • Flat Rate Scheme suitability (likely poor for materials-heavy trades)
  • Cash Accounting Scheme eligibility (often useful for trades)
    

5. Real-Time Financial Visibility

“I don’t know my numbers” is the core problem

A. Turnover Tracking

• How to monitor? …
  • Rolling 12-month turnover (for VAT)
  • Weekly / monthly net profit
• Across mixed payments:
  • Cash
  • Card
  • BACS
  • Online invoicing

B. Systems to Discuss

• Simple cloud accounting (Xero / QuickBooks / FreeAgent)
• Daily or weekly “money dashboard”
• Separation of:
  • Gross receipts
  • Materials
  • Labour
  • Sub-contractor costs
    

6. Vehicle & Personal Loan Strategy

Current approach may be distorting cash reality

A. Vehicle Structuring

• Options to review:
  • Personal vehicle + mileage
  • Business-owned vehicle
  • Lease vs purchase
• VAT recovery implications (if VAT-registered)
  

B. Repaying Family Loan

• Current £750pcm repayment may be unsustainable
• Recommended order:
  • Establish true monthly tax/VAT liability
  • Maintain working capital buffer
  • Then agree a sensible, flexible repayment to family
    
• Accountant to confirm:
  • Whether repayments should be documented formally
  • Whether interest should (or should not) be charged

7. Expansion Ambitions (Premature Without Numbers)

High risk without financial clarity …

A. ‘Physical Presence’ Options

• £50/day shopping centre booth
• £1,600pcm showroom concession

Questions to answer first …

• What is current true net monthly profit?
• How many additional jobs must this generate to break even?
• Can the business survive 3–6 months if it underperforms?
  

8. Profitability Reality Check

Headline figures need validation

Client (Danny’s) assumption:

• Assumed £5k to £8k weekly sales
• Assumed 35–45% “ Gross Profit” (likely lower).

Accountant to validate:

• Is this:
  • Gross margin?
  • Net profit before tax?
  • Net take-home after everything?
    
• ‘What remains?’ after …
  • Tax
  • VAT (if applicable)
  • Tool Replacement
  • Vehicle
  • Downtime / holidays
    

9. Labour, Apprentices & Sub-Contractors

Compliance & efficiency review …

A. Sub-Contractors

• Occasional Tiler / Electrician:
  • CIS applicability?
  • Labour-only vs supply-and-fit risk
• Are contracts and payment ‘Records’ compliant?
  

B. Apprentice

• £50/day, 3 days per week:
  • Employment status check
  • Minimum wage compliance
  • Insurance implications
    

10. Additional Considerations to Raise

Often missed

• Business savings / Contingency Buffer.
• Personal Drawings vs Salary Discipline.
• Pricing Strategy aligned to VAT reality.
• Exit planning (if scaling or selling later).
• Stress & Sustainability — not just Turnover.

I trust for now this helps form discussions.

If you’ve any other questions please feel free to ask – Simply Get in Touch.