Q I have recently started to expand my small business and, as part of that, I have employed a person for the first time. I am not sure how I should be paying them. Can you give me some advice on what issues I should be considering and how I should go about this?

A The most important thing you need to determine is whether the person you have employed is considered as an employee or as self-employed. If your new employee does not give you a P45 when they start employment, it may be because they consider themselves as self-employed or they have misplaced it. If they have misplaced the P45, you will need to complete a P46 to notify the Inland Revenue. If you need help with completing these forms, you can contact the New Employers Helpline on 0845 60 70 143 or download the New Employers Guide P49 from http://www.hmrc.gov.uk/forms/p49.pdf

It is also important that your new employee has a National Insurance number. The Inland Revenue will no longer accept temporary NI numbers, eg TN220157M for a male born on January 22, 1957. This applies no matter which method you use to submit your forms and returns (eg, paper, online) so in all cases you should try to obtain the correct National Insurance number. To find out what your employee's National Insurance number is, you will need to contact the Inland Revenue and complete form CA6855. A copy of the form can be downloaded from the following link http://www.hmrc.gov.uk/ forms/ca6855.pdf

Once you have correctly identified your employee's National Insurance number, you have to consider how you wish to pay them. The Pay As You Earn (PAYE) scheme is the best one to consider. To use the PAYE scheme you must read The New Employers Guide P49. This booklet tells you everything you need to know about keeping records and completing the required forms for the Inland Revenue. You can also find more information and online help from Business Link, online at http://www.businesslink.gov.uk/bdotg/action/layer?topicId=1073859224&tc=000KW021193277

Q I set up a limited company last year and now I have been told that I must start paying corporation tax. Being very new to business, I'm not quite sure what it is or how it works. Can you help me understand this?

A Corporation tax is paid by limited companies on their profits, it is not payable by the self-employed, but does apply to the following organisations, even if they are not limited companies: Members' clubs, societies and associations, trade associations, housing associations, groups of individuals carrying on a business but not as a partnership (eg, co-operatives)

To calculate your liability for corporation tax, you are legally obliged to keep "sufficient" records of your outgoings and income to make a complete and correct company tax return.

Sufficient records include: details of all receipts and expenses incurred in the course of your company's activities, details of all sales and purchases made in the course of trade, if your company has a trade that involves dealing in goods, all other supporting documents

An organisation is not liable for corporation tax if the profit earned in the accounting period is less than £10,000. Dividends taken by directors are also classed as profit and will be subject to corporation tax. You can download a list of corporation tax rates from the HMRC website at http://www.hmrc.gov.uk/rates/ corp.htm. For help understanding how corporation tax works, or calculating your tax liability, you can download form CTSA BK3 A Modern System for Corporation Tax Payments from http://www. hmrc.gov.uk/pdfs/ ctsabk3.pdf

Q I've just been appointed as a director of a company but I'm not sure what I'm legally responsible for. What are my liabilities and what should I be aware of?

A Directors have many business responsibilities. for ensuring the success of their company, in areas such as health and safety, employment law and tax. You run the risk of serious penalties if you don't ensure that:

Key information is sent to Companies House. The company produces accounts. The board of directors approves the annual accounts. The report and accounts are presented at a general meeting of the company's shareholders. Apart from the responsibilities to Companies House, directors are responsible for other aspects of a business, including employment law, health and safety, tax and National Insurance.

You could be personally liable for issues such as unfair dismissal or sexual and racial discrimination in the workplace.

Failure to fulfill your responsibilities with regard to ensuring proper health and safety within the workplace could lead to a criminal conviction.

You can find more information on directors' responsibilities at the Companies House website, http://www.companieshouse.gov.uk/about/gbhtml/gba1.shtml#two or the Health and Safety Executive http://www.hse. gov.ukresearch/rrpdf/rr135.pdf

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