MW TAX

UNDERSTANDING CORPORATE TAXES:             

1. Company Incorporations: Setting Your Business Up the Right Way

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When starting a new business, the first step is to incorporate your company. This means legally registering your business with Companies House, giving it a formal structure.

Whether you're setting up a limited company, limited liability partnership (LLP), or another structure, we can help you through the process.

Tax Compliance Obligations for Companies:

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Every business, whether large or small, has certain tax compliance obligations that must be met to ensure it operates within the law.

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Failing to comply with these obligations can lead to penalties, interest charges, and other legal issues. As part of our corporate tax services, we make sure that your business is fully compliant with all tax regulations, so you can avoid any unnecessary risks and focus on growing your business.

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Here’s a breakdown of the key tax compliance obligations for UK companies:

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2. Corporation Tax

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Every limited company in the UK is required to pay corporation tax on its profits. This is a tax on the income and capital gains that your company earns. Companies must calculate their taxable profits and file a Corporation Tax Return (CT600) with HMRC.

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• When is it due?: Corporation tax is generally due 9 months and 1 day after the end of your accounting period. For example, if your company’s financial year ends on 31st December, the corporation tax payment will be due by 1st October of the following year.

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• What happens if it's late?: If your company fails to submit its Corporation Tax Return or pay the tax on time, HMRC may impose penalties, which increase the longer the delay. In addition to financial penalties, interest will also be charged on any late payments.

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3. VAT (Value Added Tax)

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If your business' taxable turnover exceeds the VAT registration threshold (£90,000 as of 2024/25), you are required to register for VAT. Once registered, your company must submit VAT returns to HMRC, typically on a quarterly or annual basis.

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• What does this include?: The VAT return reports the VAT you have charged on your sales (output VAT) and the VAT you have paid on business-related purchases (input VAT). The difference between the two amounts determines whether you owe VAT to HMRC or are entitled to a refund.

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• Late submissions: Missing the VAT return deadline can result in penalties and additional interest charges. HMRC has become particularly strict on VAT compliance, and late returns can lead to hefty fines.

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3. Annual Confirmation Statements

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Every company must file an Annual Confirmation Statement with Companies House. This document confirms that the information held about your company is accurate and up to date. The statement includes company details like directors, shareholders, and the company's registered office address.

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• When is it due?: The confirmation statement must be filed every year, usually on the anniversary of your company’s incorporation.

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• Late filing consequences: If you fail to file the confirmation statement on time, Companies House may impose a penalty, and your company could be struck off the register if it remains non-compliant for a long period.

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4. PAYE (Pay As You Earn) & National Insurance

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If your company employs staff, you must operate the PAYE system to collect income tax and National Insurance (NI) contributions from your employees’ salaries. This involves calculating the appropriate tax and NI contributions based on employee earnings and submitting these deductions to HMRC.

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• Employer's responsibilities: As an employer, you are responsible for deducting the correct amount of income tax and NI from your employees' wages. You must also contribute employer’s National Insurance for each employee.

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• When is it due?: PAYE payments are typically made on a monthly or quarterly basis, depending on the size of your payroll.

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• Late payments: Failure to comply with PAYE obligations can result in penalties and interest charges.

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5. Self-Assessment for Directors

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As a company director, you may also have individual tax responsibilities. Directors are often required to complete a Self-Assessment tax return if they receive income from the company beyond their salary, such as dividends, or have other sources of income.

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• What needs to be reported?: Directors must report income, capital gains, and any tax owed from other sources such as investments, property rental income, or freelance work.

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• When is it due?: The Self-Assessment tax return is due by 31 January each year.

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• Penalties: Failing to file your Self-Assessment return on time may result in financial penalties.

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6. Keeping Accurate Financial Records

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Maintaining accurate financial records is essential for meeting your tax obligations. HMRC requires companies to keep records of income, expenses, and other financial transactions for a minimum of 6 years.

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• Record-Keeping: These records are needed to complete accurate tax filings, including corporation tax returns, VAT returns, and payroll submissions.

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• Audit Requirements: Some businesses are subject to audits based on their size and turnover, and having proper financial records helps in the event of an audit.