1. Start-up legal and tax issues Pg 100-103

2. Starter activity Sole trader and partnerships worksheet
There are three sections –A, B and C
All of you must complete section A without looking at your textbook
Most of you should rely on your own knowledge to answer section 2 otherwise refer to the textbook
Some of will be able to attempt section C with very little help from the book
How well you did
0-6 marks try again as homework
7-15 Getting there but use your notes and textbook as a guide
16-24 Good work
25-30 Excellent

3. Keeping records
Page 101
All business are legally required to keep records. They are evidence of what has happened in the past.
Generally, non-financial company records (accident book) must be kept for 5 years;
All financial documents (bank statements, receipts) must be kept for 7 Years.

4. Mapping
Create a map to list all the records that you keep personally and make a list of the records that a business must have (4 of each)
A-C Grade-List and briefly explain
D-F Grade-List

5. Records that must be kept
Generally any financial records are legally required to be kept for 7 years
Cash receipts books
Vehicle log books
Cheque butts
Cash register Z Totals
Credit card receipts
Permits or licenses
Tax invoices
Wages and salary payslips
Purchase orders
Bank records
Workplace injury register
Timesheets

6. Employment question time
What are the reasons for getting a job? (MTG D-F)
What are the rewards for working? (MTG D-F)
What is the purpose of the minimum wage? (MTG A*-C)
Why is Health and Safety important? (MTG A*-C)

7. The list is not-exhaustive!
2. Employment
Every employer has a number of legal responsibilities. They must carefully consider laws relating to:
Health & Safety at work (mental & physical)
Minimum wage
Working Time directive
Discrimination
Pre-employment checks
The list is not-exhaustive!

8. Health and safety

9. Objectives
ALL
To be able to identify the rights of consumers once they purchase a product
To be able to list the reasons why taxes are paid by businesses
MOST
To be able to explain how consumers can react if they purchase a product and if something goes wrong
To be able to calculate VAT and TAX rates
SOME
To be able to differentiate the different types of taxes that businesses pay
To explain what taxes go towards

10. Starter activity MTG A*-B MTG C-D Answer £550
Write two questions that could have this as the answer
You have been asked to calculate the total revenue for the company;
Day one 55 products sold at £10.50 each
Day two 6 products sold at £15.60 each
Day three 17 products sold at £3.40 each
Day four 3 products sold at £1.30 each

11. 3. Consumer protection
Employers also have a responsibility towards consumers through laws such as:
The Sale of Goods Act – Insists that goods should be ‘fit for purpose’. If they do not, consumers are legally entitled to get their money back.
Key consumer protection agencies include:
The Office of Fair Trading (OFT)
Trading Standards (TS)
The Consumer Protection Agency (CPA)

12. What does the picture show?

13. 4. Environmental protection
Businesses also have a responsibility to the environment.
Example of Laws include:
Environmental Protection Act 1990
Hazardous Waste Regulations 2005
Noise and Statutory Nuisance Act 1993
Waste must be suitably disposed of in landfill or through recycling.

14. Fill in the blanks activity
You have been given a sheet to help you recall the people that have an interest in a business
Complete the sheet using the words provided
Help guide:
Use your own subject knowledge
Ask a friend (no more than two gaps)
Refer to your text book as a last resort

15. What does this picture say about TAX? - Justify your answer-

16. Her Majesty’s Revenue & Customs
Taxes are paid to the government agency HMR&C.
It expects ALL businesses to keep their own tax records & they inspect business records.
The taxes that businesses will have to pay depend on:
The amount of sales over a year
Whether or not the businesses has employees
If the business is a limited company or sole trader

17. Tax on Small Business Lets go DIRECT.gov!
There are a variety of taxes that small businesses may have to pay including:
VAT
Income Tax
National Insurance Tax
Corporation Tax
Lets go DIRECT.gov!

18. Each EU country has its own rates of VAT
In the UK, In the UK there are 3 rates:
Standard rate
You pay VAT on most goods and services in the UK at the standard rate, which is 20 per cent.
2. Reduced rate
In some cases, for example children's car seats and domestic fuel or power, you pay a reduced rate of 5 per cent.
Zero rate
There are some goods on which you don't pay any VAT, like: Food,
books, newspapers and magazines , young children's clothing and footwear, special exempt items - for example equipment for disabled people.

19. How VAT is worked out
When someone charges you VAT they multiply the original ('net') price of the item or service by the VAT rate to calculate the amount of VAT to charge.
They then add the VAT amount to the net price to give the gross price - the price you pay.

20. Paying VAT

21. Task Work out the VAT on these items BASED ON 20%:
Car exhaust costing £49
Car Hire costing £175
Carton of cigarettes at £32
Wooden floor costing £499
MTG A*-B calculate VAT amount and total price
MTG C-F Calculate the VAT amount only

22. Income Tax

23. Income Tax

24. Income Tax Businesses must pay INCOME TAX in two ways.
If it employs any workers, it must take the tax off their wages and pass it onto the HMR&C. This is called the Pay As You Earn system (PAYE).
Sole traders must pay income tax on their earnings – the difference between their sales revenue and the expenses of running a business.

25. Income Tax example Businesses must pay INCOME TAX in two ways.
If it employs any workers, it must take the tax off their wages and pass it onto the HMR&C. This is called the Pay As You Earn system (PAYE).
Sole traders must pay income tax on their earnings – the difference between their sales revenue and the expenses of running a business.

26. Tax rates – some examples
Country
Income Tax
VAT
(CORPORATE)
(PERSONAL)
Ireland
12.5%
20-41%
23% UK
28%
0-40% 20
Bulgaria
10%
20%
Sweden
26.3%
0-57%
25%
Denmark
38-59%
Qatar (Middle East) 0%

27. Salary Calculator
Would you like to know how much you would earn after tax and other deductions are made from your salary?

28. National Insurance Contributions (NICs)
Businesses have to pay different types of NICs. A company with employees is responsible for 2 types of NICs: 1. Firstly, they deducts NICs from employee salaries and pass them to HMR&C. 2. Secondly it must pay EMPLOYERS CONTRIBUTION (THIS IS CALCULATED AS A PORPORTION OF THE EMPLOYEES WAGES) Sole traders: Have to pay a FLAT RATE NIC plus a % of NET earnings

29. Corporation Tax

30. Corporation Tax
This is ONLY paid by LIMITED COMPANIES (Ltd’s and PLC’s).
It is a tax on the PROFITS of a company.
You DO NOT pay CORPORATION TAX if you are self-employed (Sole traders & partnership). Sole traders only pay INCOME TAX on their PROFITS.

31. Corporation Tax

32. To finish...
Income from taxes is used to fund various things such as:
Healthcare
Education
Defence (military)
International Aid
Environmental protection
Disaster relief
Ministers expenses & bonuses
Transport
Crime
TASK: In your groups, prioritise the use of Tax – you must be able to FULLY JUSTIFY your answer

33. How does this relate to the legal and tax issues faced by new businesses?