Some of the most commonly asked questions about Corporation Tax. Find your answers here or let contact us for more information.
What is an Accounting Period? Accounting periods are normally 12 months’ long, and they generally correspond with the financial year. An accounting period can be shorter than 12 months, but it cannot exceed 12 months. Your Corporation tax liability is determined by the amount in profits your company has over an accounting period.
When your corporation tax return due? This needs to reach HMRC to HMRC within 12 months after the end of each accounting period
What if you didn’t make a corporate profit? You still need to submit your accounts and tax return confirming this information within these deadlines.
What needs to be submitted? You need to prepare and submit Statutory Accounts and a Corporation Tax return (on form CT600) along with supporting calculations to show how the figures in your tax return were reached.
How to File a Corporation Tax Return?
A Corporation Tax return can be filed online via HMRC website on a form CT600. You need to be registered for Corporation Tax in order to be able to submit your Tax Return.
How to register for Corporation Tax?
When you register/form your company with Companies House, HMRC is automatically alerted of the formation of your company. They will send you a Welcome letter which will include what is known as a UTR number. This number is very important and you should keep it safely as it will be needed at every tax-related event in the future.
You need to register on HMRC website for Corporation Tax Online Services.
Get professional help with your Corporation Tax registration – included free in all our Fixed Fee Packages. View Packages
Auto Enrolment requires employers to enrol eligible workers into a workplace pension scheme. Every employer is affected even if you only employ 1 person. The new regulations will be enforced by the Pensions Regulator.
When the UK government found too few workers were putting money into a pension, they introduced a new law – called automatic enrolment or ‘auto enrolment’ – to help fix the problem.
This means every employer must automatically enrol workers into a workplace pension scheme if they are aged between 22 and the state pension age, earn more than £10,000 a year and work in the UK. This automatic enrolment is automatic from the employee perspective only – as an employer there are things which you need to do.
When is your Deadline/Staging Date?
Employers have been given various staging dates. These are dates on which they must start enrolling employees into workplace pension schemes. Staging started in 2012 and will continue until 2018 by which time companies of all sizes must be compliant.
You can find out your exact staging date on the Pensions Regulator Website.
You simply need to enter your PAYE reference number.
The PAYE Reference can be found on letters you have received from The Pensions Regulator about automatic enrolment. Alternatively, it can be found on the letter HMRC sent you when you first registered as an employer, or from your payroll software package.
As an employer, you must auto enrol your qualifying employees into a qualifying pension scheme. They can choose to voluntarily opt out of the scheme, however, this should not be due to any persuasion from you as their employer.
An employee’s eligibility is based on an employee’s age and earnings.
Automatic Enrolment applies to:
Those aged between 22 and 66 years
who earn at least £192 per week or £833 per month gross
Those younger than 22 or older than 66 have a right to opt-in to an eligible pension scheme but it is not automatic. Anyone earning less than £192 per week or £833 per month gross, cannot be enrolled in the scheme.
This table summarise Employee Eligibility
|DO YOUR EMPLOYEES QUALIFY FOR AUTO ENROLMENT|
|AUTOMATIC ENROLLMENT||MANUAL ENROLLMENT||NOT ELIGIBLE|
|SALARY: > £10000 gross per year||SALARY: > £10000 gross per year||SALARY <£10000 gross per year|
|AGE: 22 to 66||AGE: <22 years
AGE: >66 years
You need to automatically enrol eligible jobholders into a qualifying pension scheme, and
make employer contributions on their behalf into that pension scheme.
You must keep records to show that you have complied with Auto Enrolment. The law requires employers to retain documents relating to auto-enrolment for a period no less than six years.
You are required to write to each of your employees after your staging date to inform them of the changes:
You need to let the Pensions Regulator know that you have complete your the enrolment process.
You can do this by visiting the following link.
You will need your government gateway ID and employer reference number, PAYE scheme reference(s) for all PAYE schemes the employer use, details of the Pension Scheme you have chosen and more.
|Income tax rates||2017/18||2016/17|
|Starting rate limit (savings income)||£5,000||£5,000|
|Basic rate band – income up to||£33,500||£32,000|
|Dividend ordinary rate||7.5%||7.5%|
|Higher rate – income over||£33,500||£32,000|
|Dividend upper rate||32.5%||32.5%|
|Additional rate – income over||£150,000||£150,000|
|Dividend additional rate||38.1%||38.1%|
|Personal allowance (PA)|
|Blind person’s allowance||£2,320||£2,290|
|Married couple’s allowance (MCA)|
|Either partner born before 6 April 1935 (relief restricted to 10%)||2||£8,445||£8,355|
|Transferable tax allowance (‘Marriage Allowance’)|
|For certain married couples and civil partners born after 5 April 1935 (relief 20%)||3||£1,150||£1,100|
|Venture Capital Trust (VCT) up to||£200,000||£200,000|
|Enterprise Investment Scheme (EIS) up to||£1,000,000||£1,000,000|
|Seed Enterprise Investment Scheme up to||£100,000||£100,000|
|Social Investment Tax Relief||£1,000,000||£1,000,000|
Not many Company owners are aware that as a Limited Company you may be eligible for Tax Reliefs on Charitable donations that you make. And that doesn’t mean just making monetary donations – there are tax reliefs available for your company on a variety of charitable actions from Equipment to Your Employees Time!
Not only are you helping people, animals, the environment – whatever you choice of charity maybe – but you can reduce your tax bill too.
How it Works
In a nutshell, the amount you donate is deducted from your Company profit pre-tax, therefore reducing the amount of tax your company will pay.
What Types of Charitable Company Donations qualify for Tax Relief
If you allow your employees to spend some of their usual paid working hours performing charitable acts – you can deduct any costs as normal business expenses.
Continue to pay the employee and run PAYE on the salary as usual. You can deduct the costs (including wages and business expenses) from your taxable profits as if they are working for you as normal.
2. Donations for Trading Stock
If your company donates trading stock to a Charity, you can deduct the full cost of the stock from your pre-tax profits.
3. Donations of Equipment
If you donate company equipment to a Charity, full capital allowances can be claimed on the cost of the equipment you donate.
4. Donating Money
While donating money is potentially the most common way in which Company may choose to Donate to charity, it also has more rules you need to adhere to, to make a valid and acceptable Company Charitable Donation.
The money you donate cannot be a loan or in other words, you should not be expecting any kind of repayment in either in money or in services or any other restrictive conditions.
You also cannot make the donation from Dividends or Company Profits.
HOW TO CLAIM YOUR COMPANY TAX RELIEF ON CHARITABLE DONATIONS
Company Tax Reliefs on Charitable donations are claimed through the Annual Company Tax Return in 3 different ways, depending on the type of donation your company has made.
As an Expense
If your charitable donation was
As a Relief on Pre-Tax Profit
If your charitable donation was a donation of
As a 100% Capital Allowance
If your donation was Company Equipment
It’s worth noting that although it is not an all together complicated process to claim your tax relief, you need to record charity donations and payments correctly in order to successfully your obtain tax relief. For example, the type of payment or donation governs where and how you record the transaction in your accounts – which could become a bit complex depending on the type of donation you have made.
Get in touch with our team of experienced accountants and we can help you ensure your Tax Return is completed correctly to show that your Charitable Donations are eligible for Tax Reliefs.
Research and Development Tax Credits (R&D Tax Credits)
Although the R&D Tax Credits Scheme has been in place since 2000 many businesses are not aware that they are eligible for these tax credits. Currently, £2 billion in tax credits are being claimed every year.
R&D tax credits are a key part of the government’s strategy to support innovation in the UK.
The R&D Tax Credits incentive scheme is essentially designed to encourage innovation and increase business spending on R&D activities for companies operating in the United Kingdom. It’s one of the government’s most rewarding incentives for encouraging investment in research and development and allows up to 33.35% of a company’s R&D spend to be recovered as a cash repayment..
So one might wonder, what is the catch?
Well, there are restrictions which apply to what can be considered ‘Eligible R&D Expenditure’
Firstly, your business needs to be spending a minimum of £20000 on R&D.
Secondly, your business needs to be actively trading and a going concern.
Lastly, your business should not have paid for the R&D expenses using any other government funding.
What are costs can you claim on?
How Much R&D Tax Relief are you eligible for?
This depends on whether your business is in loss or profit.
If your business in profit, you are eligible for 26%
If your business is in loss, you are eligible for the higher tax credits rate of 33.35%
What is the claims process like?
HMRC processes R&D tax credits. The processing time is only 4 to 6 weeks. The claim can be made via your Company Tax Return (CT600). It is advisable to include an R&D Tax Credits Claim Report to justify the expenses that you are claiming. In either case, you may be contacted by an HMRC agent to verify information in your report or be asked to submit further evidence to support your claims. In some cases, an HMRC agent may need to visit your site to perform further verification checks related to your claim.
How can In2Accounting Help ?
We can assist you with the analysis of your expenditure and calculation of your potential R&D tax credits. We can also submit your Tax Return and R&D Claim. While it is not required, but highly recommended for a successful claim – we will also write your R&D Claim Report detailing your expenditures and their attributes which make them eligible for tax credits.
Learn more about R&D Tax Credits on HMRC Website.
Registering for Corporation Tax is a simple online procedure, but it is vital that it is performed in time and with accurate information. All our Limited Company Packages include registering for Corporation Tax on your behalf as your tax agent with HMRC.
You need to register your company within 3 months of starting your business. Starting your business means buying, selling, employing staff, advertising your products/services or renting for business purposes etc
Your UTR number will automatically be sent to, usually within 2 weeks of forming your limited company. HMRC is automatically informed of your companies registration and will send your UTR number by post to your registered company office address.
Your accounting period is a time period that you choose to run your accounts to and is usually 12 months or a year (it cannot be more than 12 months for Corporation Tax purposes – so if your Accounts did span a period over 12 months, you may need to submit 2 tax returns, with the second tax return covering the period in excess of 12 months)