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Top Tips for UK Corporate Tax

The world of accounts and tax can appear to be a complicated one. Below, Richard Lane, Associate Director for LB Group in London, provides 8 top tips to help you avoid the majority of pitfalls that affect small owner-managed businesses in the UK.

1. Ensure that you do not fall foul of the VAT MAN!

Remember that VAT registration is compulsory if your previous 12-month income is over £81,000 or is expected to be over £81,000 for the next 12 months. Remember this isn’t per financial year but is measured at any one point.

2. Mileage

If you use your own vehicle remember you can claim 45p mile for the first 10,000 miles and 25p thereafter for those important business trips.

3. Remember the corporation tax

Don’t look to draw all your profits out of a company immediately. Ensure that you retain around 20-25% of the cash surplus in a deposit account to cover your corporation tax bill.

4. Year-end dates

Make sure that the year-end date works best for you and your purposes. For a company where the owner is expected to file personal taxes in the United States, a 31st December year-end is strongly recommended.

5. Keep records

Record keeping is the corner stone of every business. The clearer the records the more opportunity it allows for your accountant to work with you in a tax and business efficient manner.

6. Filing, filing, filing

We always recommend for our clients to put reminders in their calendars for every conceivable filing deadline. This ensures you do not miss one and get lumbered with a nasty penalty.

7. Insurances

As the business grows you want to ensure that you are covered for any eventuality. It is recommended you look at a number of insurances such as Professional Indemnity, Keyman insurance, and shareholder insurance as a way of protecting your income.

8. Drawings vs Dividends

Remember, you are taxed personally on your dividends, which should cover your cash drawings from the business. Try to avoid a situation where the drawings are not covered by dividends as there are a number of nasty tax implications (from both a UK and US perspective).

UK Company filing deadlines

Compliance in the financial and tax world can be a scary proposition for the new and even the experienced business owner.

You want to be concentrating on expanding the business and making it profitable for you. You do not want to be constantly worrying about filing deadlines.

Let us assume that your year end is 31 December, as this is a requirement under US law.  This means that we do not need to apportion your income and costs for the US tax return.

Filing deadlines normally fall within Companies House, and HM Revenue and Customs. Failure to comply with these can lead to a number of unwanted penalties and surcharges. For example, filing your accounts late by even 1 day will result in a £150 fine that only increases with delay.

Companies House

Year-end accounts – these are to be submitted by the 30th September
Annual Return – to be submitted yearly after the day of your incorporation, and is required in order for Companies House to be made up to date with any changes in the business that are not otherwise disclosed.
(For US owners of a UK business, the period of accounts should not be greater than 12 months.)

HM Revenue & Customs

Corporate tax

Tax return – this needs to be submitted with your accounts by the 31 December, 1 year after the year end.
Tax return payment – this needs to be paid by 1 October, 9 months and 1 day after the year end
VAT returns – if paying by direct debit you have until the 7th of the month after to submit, e.g. a December return would need to be submitted by 7 February. If you pay by conventional means then you must pay by the end of the month, therefore 31 January. VAT returns are normally prepared on a quarterly basis.

Personal tax

Tax return – this is to be submitted online by 31 January after the tax year which ends on 5 April. Hence the 2013/2014 tax return needs to be submitted by 31 January 2015. You can still submit by paper but this must be done is by the 31 October 2014.

Compliance is something that, if carefully planned and organised, can be easily managed and become part of your business routines.

If you require any help on this or other UK Corporate tax issues do not hesitate to contact Richard Lane at LB Group.  If you require assistance with US reporting relating to ownership of UK company, please contact us.

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