Company Tax - Presentation

How to setup a company You can set up a company through companies house or agents or accountants The name should be unique The company must have minimum one director, one shareholder and a registered address Setup process normally doesn’t take longer than two working days Useful link: https://www.gov.uk/limited-company- formation/register-your-company

Checking & requesting company information Once registered, you can check the details of the company and its directors. You can also check other companies information through Gov.uk website. Basic information are free to see, however, if you want to see detailed accounts you may need to pay small fee. Useful link: https://www.gov.uk/get-information- about-a-company

Statutory requiremnets Once the company is setup the company has to send statutory accounts to company house yearly Every year the company has to make Confirmation Statement to companies house, previously called Annual Return.

Annual Return/ConfirmationStatement Once a year the director(s) of the company must submit the confirmation statement (previously known as Annual Return) In the Confirmation Statement the company must provide information on people/entities who have significant control over the company The company also need to update the company house about change of shareholding, change of business activities, change of addresses etc. The submission can be done online through the Companies House account.

Year End Processes There are two parts to perform the year-end procedures: Firstly, prepare the draft financial statements to close the year Secondly, get the financial statements audited(if required) and submit to both Companies House and HMRC

Statutory Accounts The company has to prepare all financial statements and send it to companies house It includes:Balance SheetProfit and loss accountCash Flow StatementStatement of Changes in EquityDirectors Remuneration ReportNotes to the statements

Small Companies Small companies don’t have to send full set of accounts It needs to send only abbreviated balance sheet and profit & Loss Account with brief notes A company qualifies as small (and eligible to use the FRSSE) if, during a financial year, it satisfies any two of:Turnover less than £10.2 millionTotal assets less than £5.1 millionNumber of employees less than 50.

What is Abbreviated Accounts  The advantage of abbreviated accounts is it requires much less information than full accounts, therefore competitors and the general public will not see detailed information regarding your accounts. Also, most small companies do not require a full audit.  Abbreviated accounts contain a basic balance sheet, which show the assets and liabilities of the company. Assets include things such as bank balances, equipment, vehicles, trade debtors (money customers owe you). Liabilities may include loans, overdrafts, trade creditors (money you owe suppliers. By adding up assets and taking away liabilities it gives a snapshot of your company’s net value. This of course doesn’t provide the full picture, as doesn’t take into account your order book, goodwill, brand, reputation etc.

Accounts for Micro-Entities Micro-entities are very small companies. Your company will be a micro- entity if it has any 2 of the following:  a turnover of £632,000 or less  £316,000 or less on its balance sheet  10 employees or less If your company is a micro-entity, you can:  prepare simpler accounts that meet statutory minimum requirements  send only your balance sheet with less information to Companies House  benefit from the same exemptions available to small companies

Format of balance sheet £ X Non-Current assets/Fixed Assets X Non-Current assets/Fixed Assets X Property, Plant, Equipment etc. Current Assets Inventory, Trade Receivable, Cash etc. Total AssetsEquity XShare Capital, Share Premium Retained Earnings etc. X XLiabilitiesLoan, Trade Payables,Total Equity & Liabilities

Format of Profit & Loss £ X Sales/Revenue (X) Cost of Sales X Gross Profit (X) Other Expenses X Admin, distribution, finance etc. (X) Net Profit before Tax X Corporation Tax Net Profit

Introduction to corporation tax Corporation Tax is a tax on the taxable profits of limited companies and other organisations including clubs, societies, associations and other unincorporated bodies. This guide gives you a basic overview of Corporation Tax. It tells you what Corporation Tax is, who's liable and what you must do, and when, if you are subject to Corporation Tax requirements. It outlines how the tax is calculated and what the tax rates are.

What is Corporation Tax Corporation Tax is a tax on the taxable profits of limited companies and some organisations including clubs, societies, associations, co-operatives, charities and other unincorporated bodies. Taxable profits for Corporation Tax include:  Profits from taxable income such as trading profits and investment profits - except dividend income which is taxed differently  Capital gains - known as 'chargeable gains' for Corporation Tax purposes

Chargeable gains andCorporation Tax If your company or organisation is based in the UK, you'll have to pay Corporation Tax on all your taxable profits - wherever in the world those profits come from. If your company isn't based in the UK but operates in the UK - for example, through an office or branch (known to HM Revenue & Customs (HMRC) as a 'permanent establishment') - you'll only have to pay Corporation Tax on any taxable profits arising from your UK activities.

What you need to do for Corporation Tax/Year end Procedures If your company or organisation is subject to Corporation Tax requirements you must:  Tell HM Revenue & Customs (HMRC) that it's liable for Corporation Tax  Pay the right amount of Corporation Tax on time and electronically  File a Company Tax Return and supporting documents online and in a particular format

What you need to do forCorporation Tax There are different deadlines for each of these requirements. If you don't meet those deadlines, your company or organisation may be charged interest and/or penalties.

Pay before you file Unlike other taxes such as Income Tax or VAT - where in most cases the filing and payment deadlines are identical - this is not the case with Corporation Tax. The deadline to pay your Corporation Tax is before the deadline to file your Company Tax Return. Generally, you must:  Pay by 9 months and one day after the end of your company or organisation's Corporation Tax accounting period  File by 12 months after the end of your company or organisation's Corporation Tax accounting period

Pay before you file For example, if your company or organisation's financial year runs from 1 April 2015 to 31 March 2016, and your Corporation Tax accounting period is the same, you must:  Pay your Corporation Tax for that period by 1 January 2017  File your Company Tax Return for that period by 31 March 2017

Pay before you file If your company's profits for an accounting period are at an annual rate of more than £1.5 million, you must normally pay your Corporation Tax for that period in instalments, all of which are due before the deadline to file your Company Tax Return.

Submitting your Company TaxReturn and how to pay Virtually all companies and organisations must submit their Company Tax Returns online. You must also pay any Corporation Tax that's due electronically. Additionally your tax computations and, with very few exceptions, the accounts that form part of your Company Tax Return, must be submitted in Inline eXtensible Business Reporting Language (iXBRL) format.

Using an accountant or taxadviser You can deal directly with HM Revenue & Customs or you can appoint someone to deal with them on your behalf for your Corporation Tax affairs. This is known as appointing an agent.

What is Corporation Tax SelfAssessment? HM Revenue & Customs (HMRC) also uses the term 'Corporation Tax Self Assessment'. This simply means that that it's up to you, rather than HMRC, to work out how much Corporation Tax your company or organisation must pay for each Corporation Tax accounting period. In other words you 'self assess' your own Corporation Tax. You do this by submitting your Company Tax Return to HMRC.

What is Corporation Tax SelfAssessment? Corporation Tax Self Assessment for limited companies and organisations is a different tax from Self Assessment for individuals, self-employed, sole traders or partners. One common feature is that you self assess your liability for the tax.

What is an accounting periodfor Corporation Tax?  Your company or organisation pays Corporation Tax on taxable profits for each Corporation Tax accounting period.  A Corporation Tax accounting period is different from similar terms used by other HM Revenue & Customs (HMRC) tax areas - such as VAT accounting periods - or other government agencies - such as Companies House accounting reference periods.  Your company or organisation's Corporation Tax accounting period is normally 12 months long. This accounting period normally matches your company's 12 month financial year. Your company's financial year begins and ends with the dates covered by your company's annual report and accounts (financial accounts) as submitted to Companies House. These accounts are sometimes called statutory accounts or audited accounts.

What is an accounting periodfor Corporation Tax? But in some instances your Corporation Tax accounting period won't be the same as your company's financial year if for example:  Your accounts cover a period of more than 12 months - such as if your newly-formed company is preparing its first accounts to cover a period of more than 12 months, or your existing company changes its financial year end  Your company has been dormant and once again starts to carry on business activity, your Corporation Tax accounting period may start on a different day from the start of your financial year

What is an accounting periodfor Corporation Tax? Accounting periods if your company accounts cover a period shorter or longer than 12 months A Corporation Tax accounting period can be shorter than 12 months. For example, if your company accounts cover a period of less than 12 months, then the accounting period can be the same and you'll simply file one Company Tax Return covering that period.

Accounting period longer than 12 months A Corporation Tax accounting period can't be longer than 12 months. If your company accounts cover a period longer than 12 months and your company is active throughout, you must file two Company Tax Returns because you'll have two Corporation Tax accounting periods. This is the case even though you only need to file one set of accounts at Companies House:  The first accounting period covers the first 12 months  The second accounting period covers the rest of the time

Accounting period Example For example, if your company has its accounts prepared for 15 months from 1 January 2015 to 31 March 2016, your Corporation Tax accounting periods will be:  1 January 2015 to 31 December 2015 (12 months)  1 January 2016 to 31 March 2016 (3 months) You'll need to file two Company Tax Returns to cover these two Corporation Tax accounting periods.

Taxable profits for CorporationTax & how they are calculated To work out how much Corporation Tax your company or organisation will have to pay, you need to work out the profits you'll have to pay tax on, known to HM Revenue & Customs (HMRC) as your 'taxable profits for Corporation Tax'. To work out your taxable profits, you start with your company's pre-tax profit figure - sometimes known as 'profit before tax' - in your company's financial accounts for a financial year.

Taxable profits for CorporationTax & how they are calculated You then:  Add back any depreciation charges you have included in your accounts  Deduct your capital allowances - they take the place of depreciation charges  Add any other relevant income or chargeable gains  Deduct any other relevant deductions, reliefs, allowances or losses You then:  Apply the relevant tax rate(s) to calculate your gross Corporation Tax payable  Deduct any relevant tax credits and any Income Tax already deducted from interest income your company received – i.e. the tax deducted by your bank before it paid you interest

Taxable profits for CorporationTax & how they are calculated Finally, you deduct any Corporation Tax you have already paid - eg tax paid early - to find the amount of Corporation Tax you need to pay, or the amount of Corporation Tax you can claim back as an overpayment.

Why you cannot just pay Corporation Tax onyour pre-tax profits in your accounts Your accountant will prepare your company's accounts using recognised accounting standards. But the profit figures calculated in this way don't necessarily represent the appropriate amount of profit on which to pay Corporation Tax. Also, your company's accounts may cover a different period from your Corporation Tax accounting period.

Why you cannot just pay Corporation Tax onyour pre-tax profits in your accounts So you need to make those various calculations and adjustments to your accounting profit before tax to work out your taxable profit for Corporation Tax. You do this by completing and filing a Company Tax Return. A Company Tax Return includes a return form and other supporting documents.

Corporation Tax financial years  For Corporation Tax, the tax year is called the 'financial year' or 'fiscal year' and runs from 1 April to 31 March. This is different from the tax year for individual taxpayers, which runs from 6 April to 5 April.  The Chancellor sets out the rates of Corporation Tax and various allowances, reliefs and credits in the Budget each year (usually in March or April) and also in the Pre-Budget Report the previous November/December. Normally any changes are announced one or more financial years in advance of the year to which they will apply

Corporation Tax rates There are currently one rates of Corporation Tax, depending on the company or organisation's taxable profits

Company Tax RatesRate Profits £ 2017/18 2016/17 2015/16Small 0 - 300,000 Effective % Effective % Effective % 20 20 19Marginal 300,001 - 19 20 20 1,500,000Main 1,500,001 and 19 20 20 above

If your Corporation Tax accountingperiod doesn't coincide with theCorporation Tax financial year If your accounting period doesn't run from 1 April to 31 March it spans two Corporation Tax financial years. You'll need to apportion your company's taxable profits between the two financial years on a time basis.

If your Corporation Tax accountingperiod doesn't coincide with theCorporation Tax financial year For example, if your company's Corporation Tax accounting period runs from 1 July 2011 to 30 June 2012:  The first 9 months (274 days) fall into Corporation Tax financial year 2011 (from 1 April 2011 to 31 March 2012). So you'll pay tax on 274/365ths of your taxable profit at the financial year 2011 rates.  The remaining 3 months (91 days) fall into the financial year 2012 (from 1 April 2012 to 31 March 2013). So you'll pay tax on 91/365ths of your taxable profit at the financial year 2012 rates.

Use of CT600 CT600 should be used when submitting tax return It is a software based on adobe pdf format Through this software you need to submit all information You can also attach IXBRL format documents

What is IXBRL  IXBRL stands for Inline eXtensible Business Reporting Language.  It is an electronic filing format – a computer language used in the electronic filing of company accounts.  All tax returns filed in iXBRL are marked, tagged, read and understood by HMRC computers. Since it keeps the content and layout of all documents passed through it the same, all iXBRL tax returns will look exactly the same as any paper copies you file.  There are many software providers in the market where you can buy the tool to add IXBRL Tagging (i.e. VT)  If you are using HMRC online tool, IXBRL is not compulsory

Corporation Tax Penalty If your company or organisation has Corporation Tax to pay but you don’t receive a ‘Notice to deliver a Company Tax Return’ from HMRC, you still must tell HMRC it’s liable for Corporation Tax. You must do this within 12 months of the end of your Corporation Tax accounting period. How the penalty is calculated The amount of the penalty is calculated by applying a percentage to the amount of tax that you owe. The percentage applied depends on whether your error (or failure) was: careless - a lack of reasonable care deliberate - such as intentionally sending incorrect information deliberate and concealed - such as intentionally sending incorrect information and taking steps to hide the error

Penalties for late filing You’ll have to pay penalties if you don’t file your Company Tax Return by the deadline.Time after your deadline Amount1 day £1003 months another £1006 months - HM Revenue and Customs (HMRC) will estimate yourCorporation Tax bill and add a penalty of 10% the unpaid tax12 months - Another 10% of any unpaid tax

Dormant Company Accounts (DCA) In order to file your dormant companies house, you need to login to your companies house account with the company number and authentication code. You can file your dormant accounts from the ‘submit your accounts option’ and choose dormant accounts. Dormant accounts can also be submitted by paper. Use form AA02 which needs to filled and signed by director.

Close down your limited companyYou can close down your limited company by getting it‘struck off’ the Companies Register, but only if it: hasn’t traded or sold off any stock in the last 3 monthshasn’t changed names in the last 3 monthsisn’t threatened with liquidation has no agreement with creditors to apply to struck off a limited company, you must send companies house a form DS01 which needs to signed by shareholder.

Change of address with companies house You can change the address with companies house by login in to your companies online account. You will need your authentication code to login to companies house account. Address can also be changed by using submitting a form AD01, which must be signed by the company director or secretary.