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Business Taxation Overview

Corporation Tax 

You must pay Corporation Tax (CT) on profits generated from doing business as:

  • a limited company

  • any foreign company with a UK branch or office

  • a club, co-operative or other unincorporated association, eg a community group or sports club

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You don’t get a bill for CT. There are specific things you must do to work out, pay & report your tax.

  1. Register for CT when you start doing business or restart a dormant business. Unincorporated associations must write to HMRC.

  2. Keep accounting records & prepare a CT Return to work out how much CT to pay.

  3. Pay CT or report if you have nothing to pay by your deadline - this is usually 9 months & 1 day after the end of your ‘accounting period’.

  4. File CT Return by your deadline - this is usually 12 months after the end of your accounting period.

Accounting period is normally the same 12 months as the financial year covered by the annual accounts.

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Taxable profits for CT Tax include the money your company or association makes from:

  • doing business (‘trading profits’)

  • investments

  • selling assets for more than they cost (‘chargeable gains’)

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If your company is based in the UK, it pays CT on all its profits from the UK & abroad. The CT rate for company profits is currently 19%.

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Allowances & Reliefs

You can deduct the costs of running your business from your profits before tax, when you prepare your company’s accounts. Anything you/your employees get personal use from must be treated as a benefit.

Some expenses are not allowed for CT, for example entertaining clients - add these back to your profits when you prepare your Company Tax Return.

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VAT Overview
You usually submit a VAT Return to HM Revenue and Customs (HMRC) every 3 months. This period of time is known as your ‘accounting period.’

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The VAT Return records things for the accounting period like:

  • your total sales and purchases

  • the amount of VAT you owe

  • the amount of VAT you can reclaim

  • what your VAT refund from HMRC is

​You must submit a VAT Return even if you have no VAT to pay or are looking to reclaim.

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If your taxable turnover goes over the VAT registration threshold, you must register for VAT. You need to keep digital VAT records & use software to submit VAT Returns. The current VAT registration threshold is £85,000. VAT taxable turnover is the total value of everything you sell that isn't exempt from or outside the scope of VAT.

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Accounting Schemes

The 3 most popular schemes are:

  • Flat Rate Scheme

  • Cash Accounting Scheme

  • Annual Accounting Scheme

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VAT Rates for Goods & Services

Standard rate             20% 

Reduced rate               5%

Zero rate                     0%

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