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Tax calculations and returns

 

tax helpPersonal tax, corporation tax and VAT calculations and returns

 

Personal tax

personal tax returnAt present, personal tax is through the "Pay as you earn" (PAYE) scheme, with self assessment tax returns (SATR) made annually.  PAYE is part of our payroll and pensions bureau; here we'll concentrate on the SATR.

The term 'self assessment' is proving to be one of the great misnomers of all time.   Each year there are new rules to consider, and in the future it may even be abolished as part of the UK Government's "Making Tax Digital" initiative.

Today, though, many taxpayers struggle to understand the complex tax returns and complete them correctly. In the first year of the regime alone, 775,000 taxpayers received £100 penalties for failing to submit their returns on time, and some 400,000 incurred further penalties because their returns were still outstanding six months later! 

The constant stream of changes to tax legislation means not only that the returns are becoming even more difficult to understand but also that taxpayers risk incurring more penalties through failing to complete their returns on time or correctly.

We can act as your agent for SATR, drafting the return and ensuring you're happy with it, before filing it on your behalf with HMRC.  We can also discuss the figures on your behalf, and if necessary ask HMRC for a payment plan, in the event this becomes necessary.  Finally, we can help with understanding what you're being asked for by HMRC in the way of payments on account.  Payments on account are part of the self assessment process and therefore relevant to UK tax payers where less than 80% of your income has tax deducted at source (that means tax deducted from your income before you receive it, such as where an employer pays an employee under the PAYE system). 

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corporation tax

Corporation tax

Corporation tax - the tax paid by limited Companies in the UK represents a substantial part of trading costs. Moreover, the increased reporting obligations, robust investigation policies on the part of the tax authorities, and harsher penalties for non-compliance mean that an undue amount of your time and resources can be taken up collecting revenue for the Government.

You must pay Corporation Tax on profits from doing business as:

  1. a limited company
  2. any foreign company with a UK branch or office
  3. a club, co-operative or other unincorporated association, eg a community group or sports club

However, you don’t get a bill for Corporation Tax. You have to work out, pay and report your Corporation Tax, or we can do this for you.

We can also;

  • Register your company or club for Corporation Tax when you start doing business or restart a dormant business.
  • Keep the required accounting records for the Company, and prepare a Company Tax Return to work out how much Corporation Tax the Company needs to pay.
  • Advise you on putting aside money from profits, so you don't get caught out by a big unexpected Corporation Tax bill. You'll need to pay Corporation Tax or report if you have nothing to pay by your deadline, which is usually 9 months and 1 day after the end of your ‘accounting period’.
  • File your Company Tax Return and associated accounts by your deadline - this is usually 12 months after the end of your accounting period.

Value Added Tax

value added taxValue Added Tax (VAT) is charged on the sale of goods or services by UK businesses. Small businesse may not need to register for VAT - contact us if you're not sure whether to register or not.

VAT is collected on behalf of HMRC by Companies and sole traders. There are a number of options which can be used, and may benefit certain types of business.

Standard VAT schemes

The Company collects VAT on sales, and then pays the collected VAT to HMRC by calculating the amount of VAT charged to customers minus any VAT they have paid on their own purchases. The calculation can be made on a cash or accruals basis; there are potential benefits to both of these options. Please get in touch if you need help in understanding the differences between cash and accrual VAT accounting.

Flat rate VAT scheme

For smaller businesses, there is an option to collect VAT on sales, and then pay the collected VAT as a percentage of the collected amount (i.e. a "flat rate"). The flat rate varies according to the type of industry, and from April 2017, an additional test needs to be applied before the flat rate is decided. However, the flat rate VAT scheme may have benefits both in terms of simplicity and potentially in financial termsunder some circumstances. Since the rules can be complex and change from time to time, it's worth getting help with this decision.

Industry-specific schemes

Finally, there are specialist VAT schemes such as the Travel Operators Margin Scheme (TOMS) which can be used for specific sectors. Please get in touch if you want to use TOMS or another specialist scheme, and we can advise you.

puzzled by all the optionsFor all schemes, VAT is charged on sales of goods and services when the Company or trader is VAQT registered. However, it's worth noting that goods and services may be either VAT-rated or VAT-exempt. VAT-exempt items may include things like rent, private education, health services, postal services, finance and insurance, and gambling.

For goods and services which are VAT-rated, there are different levels of VAT to charge. The current standard rate of 20% applies to most items, but a Reduced Rate can be applied to many items such as mobility aids for the elderly, smoking cessation products (nicotine patches and gum), electricity and gas for domestic and residential use, children's car seats, booster seats and booster cushions. In some cases the Reduced Rate may be zero (so-called "Zero Rate". This applies to itemssuch as Cycle helmets (CE marked), Protective boots and helmets for industrial use, children's clothes and footwear, baby wear, printing of brochures, leaflets and pamphlets and building services for disabled people.

We can help with all aspects of VAT, from completing the registration process on yoour behalf to submitting VAT returns to HMRC and ensuring these are consistent with current legislation. Just get in touch.