• General

  • Self Assessment

  • Corporation Tax

  • IR35

  • VAT

  • PAYE

  • Export-Import

  • Compliance

  • Company

  • CIS

  • General

  • What is UTR (Unique Taxpayer Reference)?

    A UTR (Unique Taxpayer Reference) number is a 10 digit code that's unique to either you or your company. It facilitates HMRC to process tax returns in an efficient, effective and accurate manner. It helps identifying the person (i.e. whether it’s a company, partnership etc.) so that their records can be managed accordingly. It also helps in ensuring that everyone pays what they owe or receive amounts they might be entitled to correctly.

  • What are Tax Codes used for?

    Tax code is a alphanumeric code used to work out how much income tax needs to be collected from a person's income.These codes generally start with a number and end with an alphabet, for eg. 1250L. The number in a tax code denotes the amount of tax-free income the person gets in that particular year. The letter in the tax code refers to personal circumstances which may affect their Personal Allowance.

  • What are different types of errors that can occur while finalising a Trial balance?

    Various types of trial balance errors are as follows:

    Error of Principle:
    When a transaction is recorded in a manner that any of the generally accepted accounting principle is violated then it is called error of principle. There isn’t any effect on trial balance in such cases as the amount is correctly posted on debit-credit sides but the accounts are incorrect. Such errors can cause the financial statements to depict misleading picture of the affairs of the business.

    Omission Error:
    There can be two kinds of error of omission- complete and partial. Complete omission means that a transaction has been missed to be recorded in the journal. There isn’t any effect on trial balance in such cases. Partial omission means that a transaction has been recorded in the journal but omitted to be posted into the ledger accounts. Such kinds of omissions hamper the agreement of trial balance.

    Commission error:
    Such errors generally relate to arithmetic accuracy. These include recording wrong amount in subsidiary books, wrong totaling of subsidiary books, posting incorrect amount in ledger accounts, posting at the wrong side of ledger accounts, incorrect totaling of ledger balances etc. These may or may not cause trial balance to tally.

    Compensating errors:
    If two or more errors are committed in a manner that the effect of one error is compensated by the effect of other error, then such errors are called compensating errors. These errors leave agreement of trial balance unaffected.

  • What are the effects of over reporting and under reporting in accounts submitted to authorities?

    Over reporting- Once you file your accounts to Companies House and HMRC, they come into public domain. Over reporting in the accounts can cause your competitors to know your business strategy and they could easily take undue advantage of this.

    Under reporting- Under reporting to Companies House and HMRC can cause them to take action against you. You might end up paying heavy penalties.

  • Are there any benefits of early filing of accounts?

    Filing your accounts well before the due date comes with its own benefits. Some of them are:

    • You get ample time for amendment (if required).
    • You don’t have to worry about deadlines.
    • You don’t have to fear paying penalties for late filing.
    • Businesses who wish to engage with you get a timely updated information.
    • You don’t haste, hence less chances of being prone to mistakes.
  • What is the difference between accrual basis of accounting and cash basis of accounting?

    Cash basis of accounting deals with recognising revenues- when cash is actually received and expenses- when cash is actually paid. In this method there is no requirement of keeping a track of receivables and payables. The business income isn’t taxed until it’s received in cash or in bank account. It is easier to maintain. The disadvantage of this method is that it ends up giving biased view of the business as expense and its related revenue might get reported in different periods.

    Accrual basis of accounting deals with recognising revenues when they are earned and expenses when they are incurred, irrespective of the date of actual payment. irrespective of the fact that whether the money has been received/paid. This method works on matching principle which means expense is reported in the period when related revenues are earned. This method gives a true and significantly better view as compared to cash basis of accounting.

  • What is HMRC gateway account?

    The HMRC Gateway account is an account created to use online services provided by HMRC. To sign in the HMRC gateway one needs 12 digit Government Gateway user ID and password.

  • Where can I find my UTR (Unique Taxpayer Reference) number?

    UTR (Unique Taxpayer Reference) is automatically sent when you register for self-assessment or set up a limited company. It can be found on your:

  • What is benefit in kind?

    Benefit in kind refer to:

    • Asset or service provided by the employer to employee,
    • that is used by employee personally but is paid for by company
    • and isn’t “wholly, exclusively and necessary” for business purpose.

    It needs to be reported in form P11D. The benefits in kind are treated as cash equivalents and so are taxed as a part of employee’s salary.

  • What is meant by Trivial benefit?

    A trivial benefit is a benefit that:

    • costs the employer £50 or less
    • isn’t in form of cash or cash voucher
    • isn’t a reward for employee’s work or performance
    • isn’t mentioned in the terms of contract

    There isn’t any requirement to pay tax or National Insurance or report such an expense to HMRC. However, if employer provides trivial benefits as a part of salary sacrifice arrangement, then they won’t be exempt. There will then be a need to report HMRC in form P11D:

    • the salary given up or
    • how much you paid for the trivial benefits, whichever is higher

    The director of a ‘close company’ cannot receive trivial benefits worth more than £300 in a tax year.

  • What is minimum wage?

    The government has prescribed minimum wage rates i.e., the minimum amount per hour that any worker should be paid. Workers above the age of 25 are entitled to National Living Wage which is highest of the National Minimum Wage. The wages amount determined using these minimum wage rates is called minimum wage.

  • What are benchmark scale rates?

    Benchmark Scale rate payments are basically the maximum tax and NICs free amount that can be paid or reimbursed by the employers to their employees in respect of common business expenses incurred by the employee, without requiring any approval from HMRC.

  • What is Auto enrolment of pensions?

    As per the Pension regulators guidelines, the employer has to auto-enroll all its employees under a workplace pension scheme and also contribute prescribed percentage of the salary as an employer’s contribution. Any employers in the UK fulfilling the below conditions are bound by this legislation:

    1. if they employ atleast 1 person
    2. such person/persons earn more than £10,000 a year
    3. such person/persons is/are aged between 22 and State Pension Age
  • What is a financial year?

    The period falling between two accounting reference dates is called a financial year. It is also known as an accounting period.

  • What is an accounting year?

    The period falling between two accounting reference dates is called a financial year. It is also known as a financial year.

  • What is capital allowance?

    Capital allowance refer to deductions allowed from the profits with respect to certain assets purchased which have a useful life of more than one tax period. Click here to read about capital allowances in detail.

  • What is accounting reference date?

    When a company is formed, the first accounting reference date will be a year later, on the last day of the month in which company was incorporated. Accounting reference date will then be on this date every year. For example, if a company was incorporated on the 6th of July 2018, the first accounting reference date will be on the 31st July 2019. The period falling between two accounting reference dates is called the accounting period or a financial year.

  • What do you mean by Business mileage claim/allowance?

    Business mileage is basically a blanket term for the expenses reimbursed by an employer for travel expenses of the employee for purpose of business travel. For sole traders, it shall cover the cost of buying and maintaining vehicle for business purpose. Read more about business mileage allowance in our article. These can be claimed by sole tarder or reimbursed to employees, as the case may be, at actual cost or approved mileage rates.

    These can be claimed by sole tarder or reimbursed to employees, as the case may be, at actual cost or approved mileage rates.

  • What is Tax Code?

    Tax code is an alphanumeric code used to work out how much income tax needs to be collected from a person's income.These codes generally start with a number and end with an alphabet, for eg. 1250L. The number in a tax code is the amount of tax-free income the person gets in that particular year. The letter in the tax code refers to personal circumstances which may affect their Personal Allowance

  • Self Assessment

  • What is personal UTR (Unique Taxpayer Reference)?

    Personal UTR (Unique Taxpayer Reference) is a 10 digit code. It is completely unique to each and every UK taxpayer who is a natural person. Whether the taxpayer is sole trader or an individual earning any income or part of a partnership, a personal UTR number is needed to file a Self-Assessment tax return online or via post. HMRC uses it to identify you for everything relating to your taxes.

  • Who needs to file self-assessment tax return SA100?

    The following persons need to file self-assessment tax return SA100:

    • A person self-employed as a ‘sole trader’ and earning more than £1,000
    • A partner in a business partnership
    • A person may file a self-assessment return to claim some income tax reliefs
    • A person may file a self-assessment return to prove he/she is self-employed, for example to claim Tax-Free Childcare or Maternity Allowance
    • A person who’s only income is from wages or pension but also has any other untaxed income, such as money from renting out a property, tips and commission, income from savings, investments and dividends, foreign income etc.
    • Most employees paying tax under the PAYE system are not required to file a tax return. However, some employees may have income that has not been taxed at source and needs to be declared to HMRC. Such a person shall do so by submitting a self-assessment tax return.

    To know more about self-assessment tax return filing due dates click here. You can also read our article on self assessment to know more about it.

  • Who needs to file a personal tax return SA100?

    The following persons need to file self-assessment tax return SA100:

    • A person self-employed as a ‘sole trader’ and earning more than £1,000
    • A partner in a business partnership
    • A person may file a self-assessment return to claim some income tax reliefs
    • A person may file a self-assessment return to prove he/she is self-employed, for example to claim Tax-Free Childcare or Maternity Allowance
    • A person who’s only income is from wages or pension but also has any other untaxed income, such as money from renting out a property, tips and commission, income from savings, investments and dividends, foreign income etc.
    • Most employees paying tax under the PAYE system are not required to file a tax return. However, some employees may have income that has not been taxed at source and needs to be declared to HMRC. Such a person shall do so by submitting a self-assessment tax return.

    To know more about self-assessment tax return filing due dates click here.You can also read our article on self assessment to know more about it.

  • What is tax year for a personal tax return?

    The tax year for personal tax return is 6 April current year to 5 April of next year.

    The deadlines for filing personal tax returns (for tax year 2018-19) are:

    Paper tax return Midnight 31 October 2019
    Online tax return Midnight 31 January 2020
    Pay the tax you owe Midnight 31 January 2020
  • What do you mean by Payments on Account?

    ‘Payments on account’ mean advance payments made for your Self-Assessment tax bill. HMRC assumes that you will continue to earn at the same rate as the previous year, therefore, you’ll pay approximately the same amount of tax in the following year. Each year two payments on account have to be made. Each payment is half the previous year’s tax bill. Each payment is due by midnight on 31 January and 31 July. To know more click here.

  • How long does a sole trader needs to keep tax records?

    The time period for which the tax records need to be kept depends on whether the tax return was filed before or after the deadline.

    If the tax return was filed before the deadline: 22 months after the end of the tax year the tax return is for.

    If the tax return was filed after the deadline: 15 months after you sent the tax return.

  • What are simplified expenses?

    Claiming expenses on actual basis requires the businesses to maintain records pertaining to those expenses. Simplified expenses relieve the businesses from the burden of maintaining records. The business expenses are calculated using flat rates and the resultant figure is claimed as business expense out of the net profits for the year. Once they have claimed simplified expenses you can no more claim actual expenses for the same.

  • Who can claim simplified expenses?

    Simplified expenses can be used by:

    • sole traders
    • business partnerships that have no companies as partners
  • What kind of expenses can be claimed as simplified expense?

    Flat rates for simplified expenses can be claimed for:

    • business costs for vehicles
    • working from home
    • using business premises for personal use

    All other expenses are claimed by working out the actual costs.

  • How should I register as a sole trader?

    If you’ve never registered for self-assessment with HMRC ever before, then you need to register for it online on gov.uk website. Once you register, HMRC will set up your self-assessment online service account and send you a letter with your UTR.

    You need to re-register online via form CWF1 if you’ve sent a self-assessment return online before. For this you’ll need your 10 digit UTR (Unique Taxpayer Reference). To know where you can find your UTR click here.

    Once you register, you will get a letter from HMRC within 10 business days (21 days if you’re abroad) that will have an activation code for your online account which you will need while signing in to your online account for the first time.

  • Can I amend my self-assessment tax return?

    Yes, you can make changes to your self-assessment return either online or by post within 12 months from filing deadline for the self-assessment return for the said period.

    Examples:

    1. For tax year 2017-18.
      The due date of filing the return will be 31st January 2019. If any amendments need to be made to it later, then they can be made upto 31St January 2020.
    2. For tax year 2018-19.
      The self-assessment tax return will have to be filed online by 31st January 2020. If any amendments need to be made to it later, then they can be made latest by 31st January 2021.
  • What are the Income Tax rates in UK?

    The income tax rates in UK for current tax year i.e. from 6 April 2019 to 5 April 2020 are as follows:

    Band Taxable income Tax rate
    Personal Allowance Up to £12,500 0%
    Basic rate £12,501 to £50,000 20%
    Higher rate £50,001 to £150,000 40%
    Additional rate over £150,000 45%
  • What is self-assessment tax return filing due date?

    The due date for filing self assessment tax returns are:

    Type of Tax Return For tax year 2018-19 For tax year 2019-20
    Paper tax return Midnight 31 October 2019 Midnight 31 October 2020
    Online tax return Midnight 31 January 2020 Midnight 31 January 2021
  • What is self assessment tax payment due date?

    The due date for paying self-assessment tax returns for tax year 2018-19 is Midnight 31 January 2020 and for tax year 2019-20 is Midnight 31 January 2021

  • How long do I need to keep accounting records as a sole trader?

    You must keep your accounting records for a period of at least 5 years after the 31 January submission deadline of the relevant tax year. For example for tax year 2018-19, the tax return will be filed upto 31 January 2020 and the accounting records need to be kept till atleast 31 January 2025.

  • Can changes be made to self-assessment tax return after it is filed?

    Yes, you can make changes to your self-assessment return either online or by post within 12 months from filing deadline for the self-assessment return for the said period.

    Examples:

    1. For tax year 2017-18.
      The due date of filing the return will be 31st January 2019. If any amendments need to be made to it later, then they can be made upto 31St January 2020.
    2. For tax year 2018-19.
      The self-assessment tax return will have to be filed online by 31st January 2020. If any amendments need to be made to it later, then they can be made latest by 31st January 2021.
  • What is SA100?

    SA100 is the form for carrying out self-assessment of an individual’s income and informing the same to HMRC. It is accompanied with several supplementary forms to detail out income from other sources like UK property, foreign income etc. SA 100 alongwith relevant supplementary forms is called self-assessment return. You can read our article on “SA 100-things every taxpayer should know’ here

  • What is the difference between advisory fuel rates (AFR) and approved mileage allowance (AMA)?

    Firstly, advisory fuel rates (AFR) are used when company’s car is used by employee whereas approved mileage allowance (AMR) is used when employee’s own car is used for business travel.

    Secondly and most importantly, AFR only covers for fuel expense since the employer is already paying for the car. On the other hand, AMA covers cost of insurance, repair, maintenance etc. AFR can be used to figure out how much of the annual business mileage are spent on fuel, regardless of the fact whether company’s or own vehicle is used.

  • What are emergency tax codes?

    1250L W1 and 1250L M1 codes or just 1250L X code are temporary codes. HMRC applies an emergency tax code if it doesn’t have enough details about the amount of tax the person needs to pay. M1 is used when the pay is monthly while W1 is used when the pay is weekly. 1250L X can apply to either of these. M1/W1 or X code indicates that the tax shall be non-cumulative. In other words, the tax will be calculated based on the only current period’s pay and not on the basis of year to date earnings.

    A “cumulative” code (like 1250L) calculates tax due by taking into consideration rebate on any overpaid tax or recovery on any underpaid tax automatically. Suppose, if a person is not paid in a particular pay period a cumulative code would automatically give him/her benefit of the tax allowances for the no income period on the next payment but a non-cumulative code would not. In cases where HMRC does not issue a cumulative tax code before the end of the tax year, any overpayment gets rebated when the year is reconciled or when the person completes his/her self-assessment return. One always starts a new tax year with a cumulative tax code.

  • What is property allowance?

    Property allowance is a tax exemption of up to £1,000 a year available only to individuals with income from land or property. This means that if the rental income is less than £1,000 then no tax is payable and also nothing needs to be informed to HMRC. But, if the rental income is more than £1000 then self-assessment tax return needs to be filed. One needs to choose between receiving the property allowance and deducting the actual expenses from rental income. Claiming actual expenses is advisable if this produces a rental loss, as no loss can be claimed if he/she elects to use the property allowance.

  • Who needs to make Payments on Account?

    HMRC introduced a system called “payments on account” for assesses who pay most of their tax through Self-Assessment. If the Self-Assessment bill of a person is more than £1,000, then his/her tax needs to be paid on account. But, if more than 80% of one’s income gets taxed through PAYE, then this system won’t apply on him/her.

  • What is personal allowance?

    The people who are self-employed need not pay tax from zero income. They are allowed personal allowance before they start paying tax. Personal allowance refers the amount earned in a tax year before you start paying tax. It is also known as “tax free allowance”. The personal allowance for year 2018/19 is £11,850 and for year 2019/20 is £12,500.

  • Can a person switch from claiming simplified expenses to claiming actual expenses?

    Once a business opts for claiming simplified expenses it needs to stick to it throughout the life of the business or the life of asset regarding which simplified expenses are claimed.

  • Corporation Tax

  • What is Company UTR (Unique Taxpayer Reference)?

    The company Unique Taxpayer Reference (UTR) is issued by HMRC when the company is set up and registered. It is a 10 digit code. HMRC will use the UTR to identify the company whenever it contacts them about tax. The company’s UTR is included in the first letter it receives from HMRC at its registered office.

    It is important to note that company’s Company Registration Number (CRN) is not the same as company Unique Taxpayer Reference (UTR). Click here to know the difference between both of them. You can see sample UTR letter here.

  • Is CRN (Company Registration Number) different from company UTR (Unique Taxpayer Reference)?

    A Company Registration Number (CRN) is not the same as company Unique Taxpayer Reference (UTR). While UTR is used when company contacts HMRC, the CRN is used when company contacts Companies House. Also, CRN is public information but UTR is known only to company and is required to be disclosed only in certain specific situations.

  • What is CT603?

    CT 603 is a notice HMRC issues to a company to request the filing of a company tax return for corporation tax, including supplementary pages. If HMRC has sent company a ‘Notice to deliver a Company Tax Return’ (form CT 603), then the company must, by law, deliver a Company Tax return (CT 600). The said Company Tax return shall be prepared for the company’s accounting period that is the same as or ends in the period specified in form CT603.

  • What is franked Investment Income?

    Income in form of dividends paid to a company from earnings on which corporation tax has already been paid by the originating company is called franked investment income.

  • What is restitution interest?

    It relates to companies who’ve made common law claims in relation to tax paid ‘under a mistake of law’. If a restitution award is made, whether as a result of judgment or an agreement, THE INTEREST element of the award will be chargeable to corporation tax at a special rate of 45% instead of normal rate (i.e. currently 19%). This interest is defined as restitution interest. It does not apply to any element of the award that represents the repayment of overpaid tax.

  • What is CT activation code?

    A CT activation code is a 12 digit code which is needed to activate the company’s corporation tax account. Once you successfully enroll for corporation tax online service, you receive a letter containing activation code within 7 days of enrollment. The activation code is valid for only 28 days from the date mentioned on the letter and you need to use it before that. If it expires then you’ll have to request a new activation code online. This can be done by signing in for HMRC online services and enrolling for the services again. But if the code is lost within aforementioned 28 days, then sign in for HMRC online services and ask for a new code.

  • What is meant by surrenderable loss while claiming R&D tax relief?

    As per section 1055 of Corporation Tax Act 2009 the company has a surrenderable loss if in an accounting period the company:

    • obtains an additional deduction under section 1044 of the Corporation Tax Act 2009 in calculating the profits of a trade and it makes a trading loss in that period in the trade, or
    • is treated as making a trading loss under section 1045 of the Corporation Tax Act 2009.

    For expenditure incurred on or after 1 April 2015 the amount of the surrenderable loss shall be calculated as the lesser of:

    • the amount of the unrelieved trading loss sustained in that period; and
    • 230% of the related qualifying R&D expenditure.

    Click here to read about R&D tax relief

  • What is meant by Unrelieved trading loss, while calculating surrenderable loss?

    As per section 1056 of Corporation Tax Act 2009 the amount of the unrelieved trading loss is the amount of the trading loss less the sum of following:

    • any relief that was, or could be obtained by making a claim to set the loss against profits of the same accounting period under section 393A(1)(a) of Income and Corporation Tax Act 1988,
    • any other relief obtained in respect of the loss,
    • any amount surrendered to group or consortium members.

    Knowing unrelieved trading loss is used to calculate amount of surrenderable loss

  • What is due date for filing corporation tax return?

    A Company Tax Return needs to be filed within 12 months from the end of accounting period to which it relates.

  • What is the due date for paying corporation tax?

    The corporation tax bill needs to be paid within 9 months and 1 day from the end of accounting period to which it relates.

  • What is meant by iXBRL tagging?

    The Extensible Business Reporting Language (XBRL) is a standard used for tagging business data for computers. It involves applications of computer readable tags to business data such that data is automatically processed by the software. This information is encoded to be machine readable only. iXBRL, or inline XBRL, is a newer version of the language which allows financial information to be presented in a format that is both human readable and machine readable. The data (e.g. Financial Statements) is presented in a normal document format but with XBRL “tags” embedded in the soft copy document. iXBRL thus handles both the presentation of accounts and the delivery of XBRL data in a single file.

  • What is CT600 form?

    CT600 is a form that the companies use to report all the information used to derive the corporation tax liability for the year.

  • What is company tax return?

    A company tax return contains all the details relating to the corporation tax payable to HMRC. It not only comprises of CT600 and supplementary pages but also Accounts for the period covered by the return and computations showing how entries on the return have been calculated from the figures in the accounts. It is also called corporation tax return.

  • Can corporation tax return be amended?

    Yes, you can make changes to the corporation tax return of your company upto 12 months after the tax return filing deadline. This can be done either online or by sending a paper return to HMRC. Suppose you need to make changes in the return for the year ending on 30th November 2017, then deadline for filing the return will be 30th November 2018. Thus amenedments, if any, need to be made upto 30th November 2019.

  • What is corporation tax rate?

    Currently, corporation tax rate is 19% which shall further reduce to 17% in April 2020.

  • Can changes be made to corporation tax return after it is filed?

    Yes, you can make changes to the corporation tax return of your company upto 12 months after the tax return filing deadline. This can be done either online or by sending a paper return to HMRC. Suppose you need to make changes in the return for the year ending on 30th November 2017, then deadline for filing the return will be 30th November 2018. Thus amenedments, if any, need to be made upto 30th November 2019.

  • What is Company Registration Number (CRN)?

    A company number is officially known as a Company Registration Number (CRN). It is issued by Companies House immediately upon incorporation of a company. It is unique to a company and is displayed on the certificate of incorporation. A company must provide this number whenever it contacts Companies House.

    It is important to note that company’s CRN (company registration number) is not the same as company Unique Taxpayer Reference (UTR). Click here to know the difference between both of them.

  • IR35

  • How can you tell if you are an off-payroll worker or not?

    A worker is involved in off-payroll working when they work for a client through their own intermediary, often a personal service company (PSC), but would be an employee if they were providing their services directly instead of involving the arrangement of providing service through a PSC. An intermediary will usually be the worker’s own personal service company. It could also be a partnership, a managed service company, or an individual.

  • What are the implications of being inside or outside IR 35 Rule?

    Inside IR 35: The entity inside IR 35 are required to pay tax & National Insurance Contributions on the entirety of their deemed salary, just like a permanent employee would have.

    Outside IR 35: The entities outside IR 35 are deemed to be legitimate companies and they continue to operate and pay tax accordingly (as any other limited company would have).

  • IR 35 off-payroll working rules apply on which business entities?

    Following persons shall be covered under IR 35 off-payroll working rules 2020:

    1. Public sector entities
    2. Private sector companies that satisfy at least two of the following conditions:
      • Annual turnover of more than £10.2 million
      • Balance sheet total more than £5.1 million
      • More than 50 employees
    3. Any person other than company, LLP, unregistered company, overseas company with an annual turnover of more than £10.2 million.
    4. If the parent of a group is medium or large, their subsidiaries will also have to apply the off-payroll working rules.

  • Which parties are affected by IR35 off-payroll working rules?

    There are 5 parties involved in the labour supply chain:

    1. Worker
    2. Intermediary - Workers own personal service company (PSC)
    3. Fee payer (maybe)
    4. Agencies (maybe)
    5. Client - for whom work is being done

    ‘Clients’ covered under IR35 wef April 2020 are:

    1. Every public company
    2. Every private company which satisfies 2 or more of the following conditions:
      • Annual Turnover of more than £10.2 million
      • Balance sheet total of more than £5.1 million
      • 50 or more employees
    3. Every entity, other than company, limited liability partnership, unregistered company and overseas company with an annual turnover of more than £10.2 million.
    4. If the parent of a group is medium or large, their subsidiaries will also have to apply the off-payroll working rules.
  • What is IR35?

    IR35 or off payroll working rules refer to an anti-avoidance tax legislation designed to collect tax and National Insurance at a rate similar to employment, where the contractor is an employee in all but name.
    Click here to read about IR 35 in detail.

  • What is CEST?

    Check Employment Status for Tax service (CEST) is a tool that has been developed by HMRC to help the user in determining the employment status of a person, i.e., whether the said person is employed or self-employed for tax purpose. It is pertinent to note here that the tool assumes there is a contract in place between employer and employee to see whether the engagement can be classed as employment or self-employment. HMRC claims it to provide accurate results and that it shall stand by the result produced by the tool provided the information input is accurate and the tool is used in accordance with the guidance.

  • What is a Managed Service Company (MSC)?

    A Managed Service Company (MSC) has a separate set of owners and organisers managing a group of contractors. Management Service Company differs from Personal Service Company. MSC manages and controls the affairs of the business, not the contractor. Further, MSC are subject to different regulations by HMRC.

  • What is a Personal Service Company (PSC)?

    A Personal Service Company is a limited company set up to provide services of a single contractor. In other words it is generally an “intermediary” taking the form of a limited company. This company is generally owned 100% by the contractor, and he/she is usually the sole director too.

    Forming a PSC has many benefits. Firstly, the liability of the sole contractor becomes limited. Secondly, it provides a more formal and professional way to present services to their clients. Also, company form of business structure enables managing taxes efficiently.

  • VAT

  • Can I reclaim VAT paid on purchases made before registering into VAT?

    You can reclaim VAT on following purchases and services made before registering into VAT:

    • 4 years for goods you still have or that were used to make other goods you still have.
    • 6 months for service.

    It is worth noting that you can only reclaim VAT on supplies for the business which is now registered for VAT. Also, these supplies must be used for ‘business purpose’ only.

    Click here to read more about claiming back VAT.

  • What is VAT flat rate scheme?

    VAT flat rate scheme is meant for small businesses who do not keep proper bookkeeping. Under this scheme, the VAT payable to HMRC is calculated as a percentage of VAT-inclusive turnover. There are different VAT flat rates for different types of businesses. This scheme is available for businesses with taxable turnover of less than £150,000. Once a business joins the scheme it can remain in it even if turnover exceeds £150,000 up to 230,000 in a year.

  • What is VAT accounting period?

    A VAT return generally covers period of 3 months. These period of 3 months is called VAT accounting period. However, your VAT accounting period will comprise of 12 months in case you have opted for VAT Annual Accounting Scheme.

  • By when should I submit my VAT return?

    Generally, the due date for submitting the return online is 1 calendar month and 7 days after the end of an VAT accounting period. Accounting period varies from business to business. The deadline for businesses which opt for annual accounting scheme is different.

  • What is the due date for paying VAT bill?

    Generally, the due date for submitting the return online and paying HMRC are usually the same - 1 calendar month and 7 days after the end of a VAT accounting period. You need to allow time for the payment to reach HMRC’s account. The due date for businesses which opt for annual accounting scheme is different.

    If the due date falls on a weekend or bank holiday, your payment must clear HMRC’s bank account on the last working day before it, unless you pay by Faster Payments.

  • What is the due date for submitting VAT return for businesses covered under annual accounting scheme?

    If you opt for annual accounting scheme you need to file VAT return only once a year. Your VAT accounting period will comprise of 12 months. The VAT return shall be due in 2 months from the end of VAT accounting period.

  • What is the due date for paying VAT bill for businesses covered under annual accounting scheme?

    If you’re covered under the annual accounting scheme you need to make advance payments towards your VAT bill during a VAT accounting period and a final payment once you file your VAT return. HMRC will tell you in writing when your installments are due and how much they’ll be.

    PAYMENT PAYMENT DEADLINE IF ANNUAL ACCOUNTING SCHEME IS USED
    Monthly Due at the end of months 4, 5, 6, 7, 8, 9, 10, 11 and 12
    Quarterly Due at the end of months 4, 7 and 10
    Final payment Within 2 months from month 12

    If the due date falls on a weekend or bank holiday, your payment must clear HMRC’s bank account on the last working day before it, unless you pay by Faster Payments.

  • What is input VAT?

    The amount paid as VAT over and above the value of goods purchased or services availed is called input tax. If the said goods and services are used for business purpose, then input VAT so paid can be reclaimed.

  • What is output VAT?

    When a VAT registered business sells goods or provides services, then it needs to charge VAT over and above the value of invoice at VAT rate prescribed for said good or service. This extra amount so charged is called output VAT.

  • What is VAT?

    Value added tax as the name suggests is tax on value addition. It is a tax levied on value added at each stage of supply chain, from production to point of sale. Unlike income tax, which is levied on how much we add to the economy; VAT is a ‘consumption tax’ that is charged on purchase of goods and service i.e. how much we consume. VAT is an ‘indirect tax’ as it is collected by businesses on behalf of government and ultimately paid into government’s coffer.

  • Can I claim VAT credit if I sell zero rated supplies?

    When goods or services are zero rated they are still called VATable supplies. The VAT rate on such goods and services is zero. Hence, a supplier supplying goods at zero rate can reclaim credit on purchases.

  • All my sales are zero rated. Do I still need to register for VAT?

    When goods or services are zero rated they are still called VATable supplies. The VAT rate on such goods and services is zero. So if the taxable turnover goes above £85,000 the supplier needs to register under VAT.

  • How can partly exempt businesses claim input tax credit on capital goods?

    The partly exempt business can claim tax credit on capital goods through capital goods scheme. Under this scheme VAT recovery is adjusted based on the taxable use. As the taxable use increases, a further amount of input tax can be claimed and, as it decreases, equivalent input tax already claimed needs to be repaid. Click here to know more about capital goods scheme.

  • What are VAT rates are prescribed in UK?

    There are three VAT rates prescribed:

    1. Standard rate- It is the rate at which most of the goods are charged. The standard rate is 20%.
    2. Reduced rate- It is charged on domestic fuel or power, mobility aids for older people, children’s car seats etc. The reduced rate is fixed at 5%.
    3. Zero rate- The goods covered under this rate are VAT taxable and charged to customers at 0%. Though practically no VAT is collected but the businesses are still required to record such sales in their VAT account and report them in VAT return. Zero rate is applicable on books, newspapers, motor cycle helmets, children’s clothes and shoes etc.

    Exempt supplies- Some supplies are exempt from VAT. No VAT is charged on goods that are exempt.

  • What is VAT reverse charge?

    VAT is generally recorded, collected and paid by the seller. But, if a transaction is covered under reverse then the VAT will be recorded by the buyer instead of the seller. Thus in such situations, VAT is paid by the buyer directly to HMRC instead of the seller.

    VAT reverse charge applies to intra-community EU transactions and with effect from 1st October 2020, this will also apply to construction industry services.

  • What is MTD for VAT?

    MTD refers to Making Tax Digital. With effect from1st April 2019, all the VAT registered businesses with an annual turnover of more than £85,000 were mandated to maintain their VAT records digitally and file the VAT returns through MTD-compatible software. Businesses with a taxable turnover less than the VAT threshold can voluntarily opt for it. Click here to read more about Making Tax Digital.

  • What is the difference between zero rated supplies and exempt supplies in VAT?

    Zero rated: The goods and services covered under this rate are VAT taxable and charged to customers at 0%. Though practically no VAT is collected but the businesses are still required to record such sales in their VAT account and report them in VAT return. Also, the best part is that a claim can be made for any INPUT VAT paid while producing/acquiring zero-rated goods. Zero rate is applicable on books, newspapers, motor cycle helmets, children’s clothes and shoes etc.

    Exempt supplies: No VAT is charged on goods that are exempt, and such turnover is neither required to be reported in a VAT return nor can you claim back the INPUT VAT charged on your inputs. Exempted supplies include sponsored charitable events, Admission charges by charities, Charitable fundraising events etc. If a business only supplies VAT exempt goods, then such business is neither required nor allowed to register for VAT.

  • What is a VAT group?

    A group of companies connected to each other may choose to file a single VAT return. Such group of companies are treated as single entity and so are called a VAT group.

    Making VAT group facilitates two or more eligible persons to account for VAT under a single registration number and allows any one of the eligible persons within the group acting as the representative member.

  • What is VAT return?

    VAT return is basically a form that depicts the amount of VAT owed to HMRC or the amount they owe to you. It shows total sales and purchases, amount of VAT owed, amount of VAT reclaim, VAT refund from HMRC for a particular VAT accounting period.

  • Can corrections be made in a VAT return?

    Yes, net errors made in previous 4 years can be corrected in later VAT returns if the amount of net error is either:

    • £10,000 or less, or
    • Between £10,000 to £50,000 but not exceeding 1% of total value of sales (before correction)

    The difference between the total errors in output VAT and the total errors in input VAT is called a net error.

  • What are VAT rates are prescribed in UK?

    There are three VAT rates prescribed:

    1. Standard rate- It is the rate at which most of the goods and services are charged. The standard rate is 20%.
    2. Reduced rate- It is charged on domestic fuel or power, mobility aids for older people, children’s car seats etc. The reduced rate is fixed at 5% on the value of goods and services.
    3. Zero rate- The goods and services covered under this rate are VAT taxable and charged to customers at 0%. Though practically no VAT is collected but the businesses are still required to record such sales in their VAT account and report them in VAT return. Zero rate is applicable on books, newspapers, motor cycle helmets, children’s clothes and shoes etc.

    Exempt supplies- Some goods and services are exempt from VAT. No VAT is charged on goods that are exempt.

  • What are the different VAT flat rates?

    The different VAT flat rate scheme are as follows:

    1. Limited Cost Business: A business that spends a small amount on goods is classed as a ‘limited cost business’ if goods cost less than either:
      • 2% of your turnover,
      • £1,000 a year (if your costs are more than 2%)
        If a business satisfies the condition of limited cost business then it has to pay a higher rate of 16.5%.
    2. Others: If the business isn’t a limited cost business, the VAT flat rate will depend on the type of business. Click here to know the flat rates applicable on different types of business.
  • PAYE

  • What are the various PAYE forms?

    There are 3 PAYE forms- P45, P60, P11D

    P45- It is given to an employee when he/she leaves a job. It provides summarised details and amount of tax and insurance paid by the employee from the start of that tax year until termination of employment. This form includes employee’s tax code that enables employer to calculate the amount of tax to be withheld from an employee’s salary.

    P60- It is given to ALL existing employees at the end of every year. It shows the tax they’ve paid on their salary in an year.

    P11D- If employee receives any ‘benefit in kind’ then employer needs to submit this form to HMRC. This form records how much each benefit is worth. Employer may provide employee with a copy of P11D.

  • How to find PAYE payment reference number?

    PAYE payment reference number helps HMRC to identify whom the payment is from and to which month and year the payment relates to.

    It is made up of 3 parts- account office reference number of the employer, the end of the current tax year and number of the tax month. If the tax year is 2018-19 then year-end will be 2019 and last two digits, i.e. 19 will become the year code. The month code means the month’s number from the beginning of the tax year, i.e. April-May is 01, May-June is 02 and so on.

    For e.g. Account reference number is 123XY45678910

    Tax year 2018-19

    Tax month is 6th May-5th June

    Then the PAYE payment reference number will be 123XY456789101902.

    That is [ref: 123XY45678910] [ year end 19] [month 02]

  • What is accounts office reference number for PAYE?

    It’s a 13-character reference number that helps HMRC to identify you when you send a payment to HMRC for your tax and national insurance on payroll. It is also called collection reference. This number can be found on

    • the letter HMRC sent you when you first registered as an employer
    • the front of your payment booklet or the letter from HMRC that replaced it
  • Can benefits in kind payrolled?

    Yes, benefits in kind can be payrolled if the employer has registered with HMRC for using the ‘payrolling employees taxable benefits and expenses service’. All the benefits can be payrolled except employer providing accommodation and interest free and low interest loans. These needs to be reported in P11D even if you’re payrolling other benefits for the same employees. Further, if company car benefits are payrolled then there is no need of P46.

    If the employer intends to payroll benefits and expenses then he/she needs to register for payroll before the start of tax year in which he/she wishes to begin running it.

  • Is P11D required even if the benefits are payrolled?

    There is no need for P11D if the benefits are payrolled. Two benefits, i.e. employer providing accommodation and interest free and low interest loans cannot be payrolled, hence these need to be reported in P11D.

  • What is P87 form?

    P87 is a form that can be used by employees to claim tax relief for allowable employment expenses. If the allowable expenses are less than £2,500, the employee can claim tax relief through P87 form, but if the allowable expenses are more than £2,500 then these can be claimed only by filing a self-assessment return.

  • If benefits in kind are payrolled, then is there any requirement to file P11D?

    accommodation and interest free and low interest loans

    If benefits in kind are payrolled then prima facie there is no requirement of submitting P11D form.

    However, all the benefits except employer providing accommodation, interest free and low interest loans can be payrolled. Hence, these need to be reported in P11D even if you’re payrolling other benefits for the same employees.

    Further, you need to complete and file form P11D(b) to report Class 1A National Insurance contributions on benefits in kind despite payrolling them.

  • What are record keeping requirements for PAYE?

    For the purpose of PAYE, the employer needs to keep the following records:

    • Amounts paid to employees and deductions made therein
    • Reports and payments made to HMRC
    • Employee leave and sickness absences
    • Tax code notices
    • Expenses and benefits that are taxable
    • Documents like agency contract, employee authorization forms etc.

    The records need to kept for 3 years from the end of the tax year they relate to. HMRC may check records to make sure that the employer is paying the right amount of tax. Click here to read more about PAYE and payroll.

  • What is Employer Payment Summary (EPS)?

    EPS refers to Employer Payment Summary. It is basically used to claim refunds/recoverable amounts from HMRC or making declarations to HMRC. Few situations in which EPS needs to be filed are:

    1. For recovering statutory payments
    2. For reporting Apprenticeship levy
    3. For recovering Construction Industry Scheme (CIS) deductions suffered
    4. For informing HMRC that you have ceased using PAYE scheme, etc.
    5. For making an election to claim the employment allowance.
  • What is EPS?

    EPS refers to Employer Payment Summary. It is basically used to claim refunds/recoverable amounts from HMRC or making declarations to HMRC. Few situations in which EPS needs to be filed are:

    1. For recovering statutory payments
    2. For reporting Apprenticeship levy
    3. For recovering Construction Industry Scheme (CIS) deductions suffered
    4. For informing HMRC that you have ceased using PAYE scheme, etc.
    5. For making an election to claim the employment allowance.
  • What is Full Payment Sumission?

    FPS refers to Full Payment Submission. FPS is sent to HMRC to inform HMRC about the payments made to employees and the deductions made. It contains information like starter and leaver information, employee details, employee payment and deduction information etc.

  • What is FPS?

    FPS refers to Full Payment Submission. FPS is sent to HMRC to inform HMRC about the payments made to employees and the deductions made. It contains information like starter and leaver information, employee details, employee payment and deduction information etc.

  • When to send EPS?

    Employer Summary Scheme (EPS) needs to be sent to HMRC by the 19th of the following tax month to apply any reduction (for example statutory pay) on what you’ll owe from your FPS.

  • When to send FPS?

    Full Payment Submission (FPS) needs to be sent to HMRC on or before each payday even if taxes and National Insurance are paid to HMRC quarterly or monthly.

  • What is payroll?

    Payroll refers to the process of evaluating employee’s pay, deducting income tax and national insurance contributions and reporting the same to HMRC.

  • What is PAYE?

    PAYE refers to the system of Pay As you Earn. It is a system used by HMRC to collect Income tax and NI contributions from employee’s pay as they earn it.

  • Export-Import

  • What are Transitional Simplified Procedures(TSP)?

    In order to simplify the procedural requirements for movement of goods between the EU and the UK post Brexit, TSP have been introduced. TSP aim to make import of goods easier for an initial period of one year to give businesses time to prepare for usual customs procedures while importing from the EU. The businesses registered for TSP will be able to postpone payment of import duty until one month after imports. Further, they’ll be required to give reduced information in the import declaration when the goods are crossing the border and give full declaration only after the goods have crossed the border.

  • What is meant by Common Transit Convention(CTC)?

    Common Transit Convention (CTC) allows quicker movement of goods across the borders of common transit countries. The common transit countries are EU member states, Iceland, Norway, Liechtenstein, Switzerland, Turkey, North Macedonia, Serbia. The customs declaration and payment of customs duty needs to be paid only when the goods reach final destination. This facilitates cash flow benefits and reduces administrative burdens.

  • Compliance

  • Is it mandatory to report Person with Significant Control (PSC) to Companies House?

    Yes, the companies need to mandatorily report Person with Significant Control (PSC) changes to Companies House as and when they happen. Beside reporting changes to Companies House, companies are also required to maintain a Register of People with Significant Control. If you fail to comply with these requirements you could be committing a criminal offence.

  • What are the compliance obligations of a dormant company?

    1. Filing of dormant accounts to Companies house- Dormant accounts should include a balance sheet and any relevant notes for the past financial year. The accounts will have to be filed with Companies House every year, no later than 9 months after the end of the company’s financial year.
    2. Filing of confirmation statement to Companies House- You are also required to provide an annual confirmation statement for a dormant company every 12 months. The due date for filing a confirmation statement for the dormant company is 12 months from the date the company was incorporated and then needs to be filed every 12 months. It must be filed within 14 days from this date. It is to be filed even if there is no change to the relevant details.

    Note: As long as the company is inactive throughout the financial year there won’t be any tax liabilities and it won’t have to file a tax return. However, in cases when company was previously trading you need to call HMRC on 0300 200 3410 or write a letter addressed at Corporation Tax Services, HM Revenue and Customs, BX9 1AX,United Kingdom to tell them that the company is dormant and that you shall thereby not submit any tax return.

    Click here to know more about compliances required by a dormant company.

  • What are the filing requirements for a dormant company?

    1. Filing of dormant accounts to Companies house- Dormant accounts should include a balance sheet and any relevant notes for the past financial year. The accounts will have to be filed with Companies House every year, no later than 9 months after the end of the company’s financial year.
    2. Filing of confirmation statement to Companies House- You are also required to provide an annual confirmation statement for a dormant company every 12 months. The due date for filing a confirmation statement for the dormant company is 12 months from the date the company was incorporated and then needs to be filed every 12 months. It must be filed within 14 days from this date. It is to be filed even if there is no change to the relevant details.

    Note: As long as the company is inactive throughout the financial year there won’t be any tax liabilities and it won’t have to file a tax return. However, in cases when company was previously trading you need to call HMRC on 0300 200 3410 or write a letter addressed at Corporation Tax Services, HM Revenue and Customs, BX9 1AX,United Kingdom to tell them that the company is dormant and that you shall thereby not submit any tax return.

    Click here to know more about compliances required by a dormant company.

  • How to inform HMRC about dormancy?

    To inform HMRC about the dormant status call on 0300 200 3410 or write a letter addressed at Corporation Tax Services, HM Revenue and Customs, BX9 1AX, United Kingdom.

  • Company

  • What are the duties of a Company Director?

    A company does not have its own physical existence. The Board of Directors is basically the soul and body of the company. As a result anything required to be done by the company under the Companies Act, 2006 is to be carried out by the Directors unless otherwise provided (e.g. Passing resolutions required to be passed at a general meeting etc.). Most important obligations as required to be complied by a Company Director:

    • Ensure that the company has filed accounts with Companies House and HMRC on or before due date.
    • Make sure that the corporation tax returns are filed with HMRC on time.
    • Filing confirmation statement to Companies House.
    • Maintain various statutory registers like- register of charges, register of members, register of directors etc.).
  • What are the compliance obligations of a Company Director?

    A company does not have its own physical existence. The Board of Directors is basically the soul and body of the company. As a result anything required to be done by the company under the Companies Act, 2006 is to be carried out by the Directors unless otherwise provided (e.g. Passing resolutions required to be passed at a general meeting etc.). Most important obligations as required to be complied by a Company Director:

    • Ensure that the company has filed accounts with Companies House and HMRC on or before due date.
    • Make sure that the corporation tax returns are filed with HMRC on time.
    • Filing confirmation statement to Companies House.
    • Maintain various statutory registers like- register of charges, register of members, register of directors etc.).
  • What is Person with Significant Control (PSC)?

    A Person with Significant Control (PSC) is an individual who meets any one or more of the following conditions in relation to a company:

    1. directly or indirectly holding more than 25% of the shares
    2. Directly or indirectly holding more than 25% of the voting rights
    3. Directly or indirectly holding the right to appoint or remove the majority of directors
    4. he/she has the right to exercise, or actually exercising, significant influence or control
    5. he/she has the right to exercise, or actually exercising, significant influence or control over the activities of a trust or firm which is not a legal entity, but would itself satisfy any of the first four conditions if it were an individual.

    These need to be reported to various authorities. Click here to know more.

  • What is confirmation statement?

    The confirmation statement is used to confirm that the information held by Companies House about the company is up to date. It requires information like changes in the name and registered address of the company, directors’ details, the location of statutory records, shareholder or guarantor details, register of people with significant control, and information about share capital. It is to be filed even if there is no change to the relevant details.

    Click here to know due date for filing a confirmation statement.

    Every company, whether dormant or non-trading, must file a confirmation statement. It is to be filed to Companies House at least once a year, but a company may choose to file it more often.

  • Do I need to file confirmation statement for a dormant company?

    Yes, you need to file confirmation statement for a dormant company too. This statement provides important company information such as the name and registered address of the company, directors’ details, the location of statutory records, shareholder or guarantor details, register of people with significant control, and information about share capital.

    The due date for filing a confirmation statement is 12 months from the date the company was incorporated or the date you filed your last confirmation statement. It must be filed within 14 days from this date. It is to be filed even if there is no change to the relevant details.

    Click here to know more about compliances required for a dormant company.

  • How can a dormant company be made active?

    To make a previously dormant company active, inform HMRC within 3 months from the date company starts trading. It can be done by signing in to company’s HMRC gateway account and registering the company as active.

  • What is umbrella company?

    An umbrella company is a standard UK limited company. It acts as an ‘employer’ on behalf of its contractor employees. The recruitment agency shall enter into a contract with umbrella company, on behalf of the contractor who will be carrying out the work for the end client. Another contract, i.e. employment contract is to be signed between umbrella company and the contractor employee. Once the work is completed, the contractor employee shall submit a timesheet to both his recruitment agency, and umbrella, showing the number of hours he/she worked. The umbrella company will raise an invoice to the recruitment agency, which will subsequently bill the end-client. As soon as the umbrella company receives payment from the agency, they can prepare employee’s payroll and pay him/her a salary, allowing deductions for employment taxes, the pre-agreed umbrella fee/margin, personal taxes, and pension contributions (if applicable). They will also reimburse for certain allowable expenses he/she might have claimed – such as mileage.

    The umbrella company is created as a special purpose entity to lessen the compliance burden. Instead of working as a contractor to the company yourself and getting stuck in hassles of compliances required to be done by a contractor, one could simply enter into employment contract with an umbrella company and work for the client. In this case the umbrella company shall carry out all the administrative activities like running your payroll, paying taxes and dealing with HMRC etc. Also, you could be able to claim work related expenses, holiday pays, workplace pension scheme etc. All you need to do is submit your time sheet and expenses and wait to get paid; the umbrella company will do all the paper work for you.

    From the client’s point of view, it needs not run payroll, provide any employment benefits etc. All these need to carried out by umbrella company only.

  • What is a Personal Service Company (PSC)?

    A Personal Service Company is a limited company set up to provide services of a single contractor. In other words it is generally an “intermediary” taking the form of a limited company. This company is generally owned 100% by the contractor, and he/she is usually the sole director too.

    Forming a PSC has many benefits. Firstly, the liability of the sole contractor becomes limited. Secondly, it provides a more formal and professional way to present services to their clients. Also, company form of business structure enables managing taxes efficiently.

  • What is a Managed Service Company (MSC)?

    A Managed Service Company (MSC) has a separate set of owners and organisers managing a group of contractors. Management Service Company differs from Personal Service Company. MSC manages and controls the affairs of the business, not the contractor. Further, MSC are subject to different regulations by HMRC.

  • For how long does a company needs to keep its accounting records?

    Company’s accounting records need to be kept for 6 years from the end of the financial year they relate to, or longer if:

    • they show a transaction that covers more than one of the company’s accounting periods
    • the company has bought something that it expects to last more than 6 years, like equipment or machinery
    • Company Tax Return was sent late
    • HMRC has started a compliance check into your Company Tax Return
  • What are small companies?

    Small company is a company which fulfills any two of the following:

    • Has a turnover of £10.2 million or less,
    • Balance sheet total is £5.1 million or less,
    • Has 50 employees or fewer.

    To know how to do bookkeeping for these companies click here.

  • What are micro companies?

    Micro company is a company which fulfills any two of the following conditions:

    • Has a turnover of £632,000 million or less,
    • Balance sheet total is £316,000 million or less,
    • Has 10 employees or fewer.

    To know how to do bookkeeping for these companies click here.

  • Can a company change its accounting period?

    Yes, you can extend or shorten the current accounting period by changing the current or the immediately previous accounting reference date. You need to inform Companies House for change of accounting reference date in form AA01. The submission should be done before the due date for filing the accounts of period that you wish to change. This change can be done using Companies House’s software filing or online filing services or by sending the relevant paper forms.

  • Can extra time be requested for filing company’s accounts?

    You can request Companies House for extra time for filing your company accounts only in special circumstances. The application for extension must contain reasons for extension and the length of extension requested. It needs to be submitted to Companies House before normal filing deadline. This can be done by dropping a mail at Company House’s enquiries section or writing to:

    For companies incorporated in England and Wales Companies House
    Crown Way
    Cardiff
    CF14 3UZ
    DX 33050 Cardiff 1
    For companies incorporated in Scotland, Companies House
    Fourth Floor
    Edinburgh Quay 2
    139 Fountainbridge
    Edinburgh
    Scotland
    EH3 9FF
    DX ED235 Edinburgh1 or LP-4 Edinburgh 2
    For companies incorporated in Northern Ireland Companies House
    Second Floor,
    The Linenhall
    32-38 Linenhall Street
    Belfast
    Northern Ireland
    BT2 8BG
    DX 481 N.R. Belfast 1
  • What is company authentication code?

    The company authentication code is a 6-digit alphanumeric code which is received at the time of incorporation of the company. This code is required to authenticate any document you submit online or making changes to company’s details. It acts like electronic signature for officers of the company. You will generally receive the authentication code via post within 5 days of incorporation.

    In case later, if you lose onto your authentication code, then you can simply request for a new one, we can help you with the same free of charge. Click here to view sample letter containing authentication code.

  • What is a ‘close company’?

    A close company is a company:

    1. which is under control of-
      • five or fewer participators or
      • any number of participators if those participators are directors,
    2. more than half the assets of which would be distributed to five or fewer participators, or to participators who are directors, in the event of the winding up of the company.
  • What is the due date for filing company accounts?

    If you are filing your company’s first accounts and those accounts cover a period of more than 12 months, you must deliver them to Companies House:

    • within 21 months from the date of incorporation in case of private companies
    • within 18 months from the date of incorporation in case of public companies
    • 3 months from the accounting reference date whichever is longer

    The time allowed for filing company’s first accounts for the subsequent years, to Companies House is:

    When a company shortens its accounting period, the new filing due date will be the longer of the following two options;

    • 9 months for a private company (or 6 months for a public company) from the new accounting reference date
    • 3 months from the date of receipt of the notice (change of accounting reference date).
  • What is the due date for filing confirmation statement?

    An annual confirmation statement for a company needs to be filed every 12 months. The due date for filing a confirmation statement is 12 months from the date the company was incorporated or the date you filed your last confirmation statement. It must be filed within 14 days from this date. It is to be filed even if there is no change to the relevant details.

  • How to close a company?

    1. If the company is solvent then it can be closed by:
    2. If the company is insolvent then it can be closed by: entering an arrangement for liquidation with creditors
  • What is the difference between dormant and a non-trading company?

    A company which has not commenced trading since incorporation is called a dormant company. While a company which was previously trading but isn't active and trading anymore is termed as a non-trading company.

    A non-trading company may be receiving other incomes like rent, interest and/or maybe paying expense like rent, bank charges etc. However, to maintain a dormant status, the company shall not be have any significant accounting transaction.

  • What is the difference between advisory fuel rates (AFR) and approved mileage allowance (AMA)?

    Firstly, advisory fuel rates (AFR) are used when company’s car is used by employee whereas approved mileage allowance (AMR) is used when employee’s own car is used for business travel.

    Secondly and most importantly, AFR only covers for fuel expense since the employer is already paying for the car. On the other hand, AMA covers cost of insurance, repair, maintenance etc. AFR can be used to figure out how much of the annual business mileage are spent on fuel, regardless of the fact whether company’s or own vehicle is used.

  • What is advisory fuel rate?

    Advisory Fuel Rates (AFRs) are the rates prescribed by government for:

    1. Calculating how much employees need to reimburse their employer for use of the company vehicle for personal travel
    2. Calculating how much employers need to reimburse an employee for fuel expenses that they are responsible for a company car on business travel.

    Where the fuel cost is reimbursed at AFR instead of actual cost, for the particular engine size and fuel type, then HMRC will accept that there’s no taxable profit and no Class 1A national insurance to pay. Click here to read more about Advisory Fuel Rates.

    Current advisory fuel rates (AFR) per mile are:

    Engine Size Petrol amount per mile LPG amount per mile
    1400cc or less 12p 8p
    1401cc to 2000cc 14p 9p
    Over 2000cc 21p 14p
    Engine Size Diesel
    1600cc or less 9p
    1601cc to 2000cc 11p
    Over 2000cc 14p

    Hybrid vehicles: HMRC treats hybrid cars the same as either petrol or diesel cars for this purpose.
    Electric vehicles: If the car is fully electric, the Advisory Electricity Rate (AER) of 4p per mile shall be applied.

  • What is approved mileage allowance?

    If the business wishes to claim the cost of buying and running the vehicles, then it will have to keep records of buying, repairs, maintenance, road tax etc. separately. Instead one can opt to claim such cost of buying and running the vehicles at flat rates. These flat rates are called approved mileage claim or approved mileage allowance. Click here to read more about it.

    Vehicle Approved mileage rate per mile

    Vehicle Approved mileage rate per mile For employees For sole traders
    Cars and vans for first 10,000 miles 45p 45p
    Cars and vans after first 10,000 miles 25p 25p
    Motorcycles 24p 24p
    Bikes/bicycles 20p NIL

    Note 1: Sole traders have a choice to claim for actual expenses instead of claiming vehicle expense as simplified expense.

    Note 2: The amount so calculated is the total allowable expense for the whole year irrespective of how many vehicles have been used.

  • CIS

  • What is Construction Industry Scheme (CIS)?

    Construction Industry Scheme is a scheme under which contractors deduct money from a sub-contractor's payment and pass it to HMRC. This is a type of reverse charge, whereby the amount so deducted and paid to HMRC are actually advance payments towards sub-contractor's tax and Class 4 National insurance liability.

  • What is the purpose of construction industry scheme?

    The Construction industry scheme was introduced in order to prevent the loss of revenue to HMRC which arose as a result of payments between contractors not being properly accounted for tax purposes.

  • How does Construction Industry Scheme (CIS) work?

    Construction Industry Scheme mandates the contractors to deduct CIS deductions , from the payments to be made to sub-contractors, at either 30% (if the sub-contractor is not registered with HMRC) or 20% (if sub-contractor is registered). The amount so deducted is paid to HMRC and this stands to the credit of sub-contractor's account.

  • What is the reason behind higher deduction for non-registered sub-contractor in Construction Industry Scheme (CIS)?

    If sub-contractors are not registered, then HMRC does not have any way to verify them since they have no records relating to such sub-contractor. So the higher rate of deduction is meant to encourage sub-contractors to register with HMRC to enjoy the benefit of lower deduction. This would as a result make it easier for HMRC to keep a hold on them.

  • What are return filing requirements in Construction Industry Scheme (CIS)?

    After deducting the money in Construction Industry Scheme, contractors need to send HMRC a monthly return of all payments made to all subcontractors within the scheme in the preceding tax month. The return needs to be filed irrespective of the fact whether the subcontractors were paid-gross, net of the standard deduction or net of the higher deduction. It should be filed within 14 days from the end of the tax month the deductions relate to.

  • In Construction Industry Scheme, is the Contractor basically acting on behalf of the HMRC?

    Yes, exactly. The contractors are merely fulfilling the statutory duty assigned to them by the HMRC. They are actually acting on behalf of HMRC, thereby lowering the latter's burden and ensuring proper accounting of taxes and their payment into government coffers.

  • In Construction Industry Scheme (CIS) what happens to the money deducted by contractor?

    The money deducted by contractor out of payments due to sub-contractor is ultimately paid to HMRC as an advance payment towards sub-contractor's tax and Class 4 National insurance liability. So such an amount stands as a credit in the respective sub-contractor's account upon being paid to HMRC.

  • Can the sub-contractor claim back the money deducted from its payment by the contractor in Construction Industry Scheme (CIS)?

    Yes, the sub-contractor can claim back the money deducted from its payment by the contractor. The way it can be claimed back is different for a self-employed and company.

    If the sub-contractor is self-employed then they need to file self-assessment return as usual, recording the full amounts on invoices as income and showing any deductions the contractors have made in the ‘CIS deductions’ field.

    If the sub-contractor still owes tax after this, he/she will need to pay it by 31 January following the end of the tax year. If a tax refund is due, then HMRC will pay the money back. Click here to know more.

    In case sub-contractor is a company, then they need to claim back CIS deductions through monthly payroll scheme. They cannot claim it in corporation tax return as in case of sole trader. If they do say, they might be penalised. Click here to know more.

  • How can a limited company being a sub-contractor claim back CIS?

    In case sub-contractor is company then they need to claim back CIS deductions through monthly payroll scheme. They cannot claim it in corporation tax return as in case of sole trader. If they do say, they might be penalised. To claim the CIS deductions, companies need to:

    1. Send their monthly Full Payment Submission (FPS) as usual to HMRC.
    2. Enter the total CIS deductions for the year to date while sending Employer Payment Summary (EPS).
    3. HMRC will take the CIS deductions off what the sub-contractor owes in PAYE tax and National Insurance. The sub-contractor needs to pay the balance by the usual date.

    If sub-contractor company's PAYE bill for the period is reduced to zero and there are still some CIS deductions that could not be claimed back, then these need to be carried these forward to the next month or quarter (in the same tax year). Also, they need to inform HMRC in the EPS that they have nothing to pay.

  • How can a self-employed (individual) sub-contractor claim back CIS?

    If the sub-contractor is self-employed then they need to file self-assessment return to claim back CIS deductions . They need to record the full amounts on invoices as income and show any deductions the contractors have made in the ‘CIS deductions’ field.

    They need to record the full amounts on invoices as income and show any deductions the contractors have made in the ‘CIS deductions’ field. If the sub-contractor still owes tax after this, he/she will need to pay it by 31 January following the end of the tax year. If a tax refund is due, then HMRC will pay the money back.

  • Do I get the whole Construction Industry Scheme (CIS) deduction amount back?

    No, for a SOLE TRADER the CIS deductions is available to be adjusted against the overall personal tax liability computed at the end of the year. As you know the taxes are payable on profits (income after deducting expenses), you are right in thinking that there should be a refund (at least partial one) every year. But the only exception here is when you fall under the higher income slab and pay taxes at 40% in your annual personal tax return.

    For a LIMITED COMPANY, the CIS suffered needs to be submitted through the payroll and can only be adjusted against the overall PAYE liability for the year, and therefore it is very rare to not have a refund. The only essential here is registering for PAYE and then running regular payroll to claim it back.

  • What do you mean by a contractor for the purpose of Construction Industry Scheme (CIS)?

    There are two types of contractors:

    1. Mainstream contractors
      If you are into construction business and you pay sub-contractors for this construction work, then you will be called a mainstream contractor. Mainstream contractor includes builder, labour agency, gang master, property developer.
    2. Deemed contractor
      If you are not indulged into construction work but you spend more than £1 million a year on an average on construction in any 3-year period, then you shall be a deemed contractor. Deemed contractor includes housing association or arm’s length management organisations (ALMOs), local authorities, government departments.
  • Who is required to be registered for Construction Industry Scheme?

    Contractors are required to be registered under Construction Industry Scheme (CIS) if:

    • They pay to subcontractor for construction work
    • If though they are not into construction business but still spend more than £1 million a year on construction work in any 3-year period.

    Subcontractors should register under the CIS if:

    • They are self-employed, owner of a limited company, a partner in a partnership firm and
    • They work for any contractor
  • What is meant by a sub-contractor for the purpose of Construction Industry Scheme?

    A person who performs construction work on behalf of a contractor is called subcontractor.

  • What is the due date for paying the deductions made under Construction Industry Scheme to HMRC?

    Contractors need to pay deductions due to be made in each tax month to HMRC within 14 days from the end of the relevant month or within 17 days where payment is made electronically. The payment of CIS deductions need to be made irrespective of the fact whether or not these deductions have actually been made.

  • What are the deduction rates in Construction Industry Scheme (CIS) ?

    The deduction rates prescribed under Construction Industry Scheme are as follows:

    1. 20% for registered subcontractors
    2. 30% for unregistered subcontractors
    3. 0% if the subcontractor has gross payment status
  • What is meant by gross payment status in Construction Industry Scheme?

    If the subcontractors opt for gross payment status, then they are entitled to receive payment from their contractor in full, without any deductions. The subcontractor in such case shall pay the tax and national insurance contributions at the end of the tax year.

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