Corporation Tax is paid on any taxable profits that your company has. You’ll need to pay Corporation Tax if you’re set up as a limited company, charity, association or society. Think of it as the equivalent to income tax.

So what is taxable profit?

Taxable profit can include your trading profits (also known as gross profit) and investment profits. Also included are capital gains, which is the profit made on the sale of a property or investment.

Who needs to pay Corporation Tax?

All UK-based companies will need to pay Corporation Tax on all taxable profit, even if the profit only comes from sales to people in other countries.

If the company is based outside of the UK but still has a UK office, then Corporation Tax will still need to be paid, but only on the taxable profits arising from the UK sales and activities.

Corporation Tax rates

For the current financial year (2018/19) the Corporation Tax rate is 19%. It is set to remain at this level until 2020/21 where it’s set to drop to 17% (as set out in the 2016 Budget)¹.

Claiming Corporation Tax relief

If your company has made a loss while trading – then you could claim a relief from Corporation Tax.

You can claim a relief by offsetting your loss against other business profits from the same period. This can then be carried back or forward into other accounting periods.

Other reliefs are available and can be found on the Gov.uk website.

Who is responsible for filing Corporation Tax returns?

If you have an accountant, it will be one of their key jobs for you. However, the ultimate decision and responsibility for what gets submitted are up to you as a director. So make sure that:

• Your company’s Corporation Tax liability is accurate
• Your Corporation Tax return is filed on time; and
• You’ve paid all outstanding Corporation Tax to HMRC

Corporation Tax self-assessment

You’ll need to file a Corporation Tax return (form CT600) every year. You will need to include the following when filling it out:

• Your company name and registration number
• Your registered office
• Your tax reference number
• Details about your turnover and profit for the year
• Your tax calculation
• Details for allowances and reliefs.

When do I need to file by?

You can submit your Corporation Tax return any time between your company’s year-end date and your statutory filing date. There are two things to remember though:

1. If your CT600 is filed late, or is inaccurate, you will be charged a penalty. You will have to pay this even if you file through an accountant.
2. You need to pay your liability electronically. If you pay late, you will be charged interest.

Record keeping

Note: you legally have to keep all company records for at least six financial years. This includes invoices, receipts, workings and tax-related paperwork. It is acceptable to store them electronically (such as scans), provided they are easy to read.

La entrada What is Corporation Tax? se publicó primero en Companies UK.

There is no legal obligation for a limited company to have its own bank account, but it is better to have one.

Business finances must be accurate and transparent, so a separate account will make it easier to keep track of your income, expenditure and available profits. This will be of great help when you are preparing annual accounts and tax returns each year.

UK residency is not a legal requirement

There are no legal restrictions that prohibit non-UK residents from opening a business account. However, most banks will not accept applications from overseas due to fraud concerns and the additional administration costs.

You do not have to open a UK bank account

There is no legal requirement for a UK company to have a business bank account in the UK. You can open one in your country of residence. To do so, you must get your company documents apostilled (legalised). Please scroll down for further information on document legalisation.

Business account options for non-UK residents

Companies UK has partnered with TransferWise to provide non-UK residents with a UK business banking solution. TransferWise will provide you with a UK business bank account number and sort code, as well as simultaneously providing you with US, Australian and Eurozone bank details at the same time. You will be able to receive money for free and hold over 40 currencies in your account at any one time. Our Non-Residents Package, which is specifically tailored to suit the needs of non-UK residents, includes a free TransferWise business account.

Opening a business bank account in your country of residence

A useful alternative to opening a UK account for your limited company is to open one in your country of residence. To do so, your company documents must be legalised. This process is called ‘apostilling’. You must obtain Apostille Certificates for these documents to confirm their authenticity.

Apostilled documents are accepted in all countries that are party to the 1961 Hague Convention, There are 105 in total. We are unable to offer advice to non-member countries regarding the acceptance of apostilled documents.

Companies UK in-house Notary Public is available to sign company documents and organise Apostille Certificates with The Foreign and Commonwealth Office. In general terms, two Apostille Certificates are required: one for the certificate of incorporation and another for the memorandum and articles of association.

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Once you’re done registering a company and have begun trading in earnest, you’ll have to complete a number of vital, annual documents — particularly Companies UK annual accounts. Here we outline everything you need to know about a company’s annual accounts, including the ways in which you can process your own company’s accounts.

What Are Annual Accounts?

Annual accounts are usually described as “financial accounts”, “company accounts” or “statutory accounts”.

Annual accounts provide a comprehensive report of a company’s financial activity over the last financial year. The information in the accounts will be used to prepare a Company Tax Return for HMRC and estimate the amount of corporation tax owed by a company.

What Is a Financial Year?

A financial year (commonly referred to as “fiscal year” in the U.S) is usually a 12-month period for which annual accounts are prepared. Companies UK financial year begins on the day after the last financial year ended, or on the day of incorporation for those who have just set up a company.

Note, financial years are determined by reference to the period that ends on a specified date known as the Accounting Reference Date (ARD) (see below). You can choose to set up your accounts to the ARD, or to a date up to 7 days either side of the ARD.

What Is Included in Full Statutory Annual Accounts?

With the exception of dormant and small companies, every company needs to provide comprehensive, statutory annual accounts for Companies House. Company directors have the legal responsibility for ensuring annual accounts are processed in a timely manner by the statutory filing deadline. Shareholders must also be given a copy of the annual accounts.

The following must be included in a company’s full statutory annual accounts:

• A balance sheet outlining the value of everything owned by your company.
• A profit and loss account outlining the company sales and running costs, as well as the loss or profit it made for the period of its latest fiscal year.
• Notes regarding the annual accounts.
• Report from a director.
• The name and signature of director on the balance sheet.
• Report from an auditor unless the company is exempt.

A few businesses are exempt from setting up complete constitutional annual accounts for Companies House.

“Small” businesses and micro-entities are allowed to prepare shortened accounts consisting of a balance sheet and notes, however they must still prepare constitutional accounts for their members.

Small Businesses and Annual Accounts

A company can be assigned a “small business” status if it meets any two of the following caveats:

• a turnover less than £10.2m
• balance sheet total less than £5.1m
• staff of 50 employees or fewer

Should your business be small, you can choose to apply for audit exclusion and decide whether to forward a copy of the director’s report to Companies House.

Micro-entities and Annual Accounts

A micro-entity is a very small business that fulfils a minimum of two of the following criteria:

• Has annual turnover of £632,000 or less
• Has £316,000 or less on its balance sheet
• Has 10 employers or less

Micro-entities are allowed to put together even simpler accounts compared to small companies, while profiting from the same exclusions that are accessible to small companies.

Dormant Companies and Annual Accounts

If you have a dormant company, you only need to put together inactive accounts for Companies House, and there won’t be any need for an audit. Dormant (inactive) accounts consist of notes and a balance sheet.

Limited Liability Partnerships and Annual Accounts

Limited liability partnership (LLP) accounts must be arranged at the end of each financial year to report the collective business activities of all LLP members. The accounts’ duplicate should be given to every LLP and debenture holder, including Companies House.

Similar to limited companies, micro-entities and small companies, LLPs can arrange abbreviated accounts for Companies House, while inactive LLPs only need to arrange dormant (inactive) accounts. LLPs and limited companies share the same qualifying criteria.

The first accounts of an LLP span over the period started on the incorporation date, and not the first day of trading. The accounts end on the accounting reference date, or about seven days either side of that date. Every future account starts on the day after the earlier accounts ended, on the accounting reference date, or about seven days on both sides of the ARD.

Should you be filing your LLP’s first accounts and they span over an excess period of 12 months, you must forward them to Companies House within 21 months of the incorporation date, or within three months from the ARD — whichever is longer. Accounts covering 12 months or less must be delivered to Companies House inside nine months of the ARD.

LLP accounts should be approved by every member and signed on their behalf by a chosen member.

A Company’s ARD Explained

Upon registration at Companies House, companies are given an ARD (accounting reference date) that reflects the end of the company’s financial year (typically a 12-month period).

A company’s first ARD will be the anniversary of the last day of the month in which the company was incorporated. For example:

• You register a company on 1st July 2019 – your first ARD will be July 31st 2020.
• Annual accounts have to be set to this accounting reference date and must be filed at Companies House no later than 9 months after the ARD.

Can an Accounting Reference Date Be Changed?

A company’s ARD can be changed at any time prior to the submission deadline. However, it cannot be changed if a company has overdue accounts (unless the company is in administration).

You can shorten your 12-month financial year by any desired number of months, as often as required. However, a financial year can only be lengthened once every five years and up to 18 months from your incorporation date or the previous year’s ARD.

In order to change Companies UK ARD, the company director has to complete Form AA01.  It’s a simple process and should only take you a couple of minutes. Unless you choose to make other changes to your financial year, the new ARD will be the date to which all subsequent annual accounts will be made.

Notify HMRC if You Change Companies UK ARD

HMRC must be notified immediately when ARD changes are made as it will impact your corporation tax accounting dates.

Accounting periods can be 12 months or under, but unlike the financial year, the accounting period cannot go over 12 months.

If your financial year exceeds 12 months, two Company Tax Returns must be filed — one for the first 12 months and another for the surplus period.

When to File Your Annual Accounts

As outlined, the annual accounts generally span over a period of 12 months. The final date for delivering annual accounts to Companies House is nine months following the ARD. This reflects the end of the financial year and typically falls on the last day of the month of the incorporation anniversary.

Additionally, if Companies UK first fiscal year exceeds 12 months (which is fairly common), you have to file your first annual accounts with Companies House within 21 months of incorporation (instead of 9 months). Subsequent annual accounts will be due in 9 months of the ARD.

Can You Complete Your Own Annual Accounts?

Sole traders may find it easier to complete their annual accounts compared to limited companies since the latter will inevitably have more complex accounting requirements. Limited company annual accounts have to adhere to stringent accounting regulations set by the Financial Reporting Council (FRC).

Company directors are responsible for the upkeep of accurate annual accounts records and the timely filing of relevant documents at Companies House and HMRC. If you do not deem yourself capable of competent bookkeeping or you don’t have the required accounting knowledge, then you should aim to hire an accountant as the risk of incorrect filing could be detrimental.

Additionally, professional accountants can help you minimise your tax bills with insider knowledge on how to handle your finances.

If you hire an accountant for your annual accounts, you must provide the following information:

• Receipts and invoices for all purchased/sold goods and services.
• Utility bills.
• Bank account statements.
• Credit card statements.
• Loan agreements.
• Cheque book stubs.
• Cash books and petty cash books.
• Payroll documentation.
• Dividend vouchers.
• Details of any finances owed to the company, or owed by the company.
• General expenses.
• Investment details.
• VAT records.
• Stock records held by the company at the end of the financial year.

When Are Limited Company Annual Accounts Audited?

Most small to medium-sized companies will not require an audit, unless the articles of association explicitly state that an audit must be carried out and shareholders make a request who own at least 10% of issued shares.

Audits are costly and can take up a lot of time since they involve a complete stock take and thorough analyses and reviews of all accounting documentation, including bank accounts. Audits must also be carried out by independent accountants who are authorised to act as auditors.

Conversely, audits can be highly advantageous as they allow you to review your financial status and further reassure lenders and investors of Companies UK viability and potential profitability.

La entrada Annual Accounts se publicó primero en Companies UK.