Commonly Asked Queries
At Pertax Accountants and Registered Auditors, we recognize the importance of clear communication regarding your financial requirements.
Explore our FAQs covering accounts, self-assessment, taxation, audit and assurance services to enhance your financial understanding of the business.
Accounts
As a business owner, you usually need to create and keep accounts for several reasons, like fulfilling tax obligations, informing stakeholders, and managing finances. The exact criteria for preparing accounts rely on factors like your business’s legal structure and size.
First Accounts: If you’re filing your company’s first accounts, they must be filed:
From the date of incorporation: Your first accounts usually cover 12 month from the date you incorporated the company.
Deadline: 21 months from the date you registered with Companies House.
For all subsequent year accounts: For every year after your company’s first year:
From the end of the previous financial year: Your subsequent accounts cover a 12-month period from the end of your previous financial year.
Deadline – Private Limited Companies (Ltd): 9 months after the company’s financial year-end.
Deadline – Public Limited Companies (PLC): 6 months after the company’s financial year-end.
FRS 105 is a simplified financial reporting standard for micro-entities, reducing compliance burden and costs with streamlined requirements, fewer disclosures, ensuring consistency and facilitating easy transition to new standards.
Micro-entities are companies that meet two or more of the following requirements:
A turnover of £632,000 or less.
£316,000 or less on the company’s balance sheet.
10 employees or fewer.
Yes, a company can issue different classes of shares, each with its own rights and privileges. These shares can vary in terms of voting rights, dividend entitlements, and other attributes, allowing the company to tailor ownership structures to its specific needs and goals.
Self-Assessment
Self Assessment is a means of declaring your income, costs and profits to HMRC. You’re required to fill in your Self-Assessment tax return if you’re self-employed, a sole trader, or earn income that isn’t taxed automatically through PAYE.
Give us a call if you have any queries or unsure about your tax return.
The tax year runs from 6th April to 5th April each year.
The Self Assessment and any tax and National Insurance due to HMRC must be submitted by the 31st January of the following year. This is the last deadline for filing electronically.
Yes, penalties may apply for late submission or errors on your self-assessment tax return. Penalties vary depending on the severity and frequency of the issue, ranging from fines to additional interest on outstanding tax payments. It is important to file your return accurately and on time to avoid potential penalties.
Yes, you can claim tax deductions and allowances on your self-assessment tax return. These include business expenses, personal allowances, pension contributions, charitable donations, and property-related expenses. Keep accurate records to support your claims.
Audit & Assurance
Companies in the UK are generally required to have an Audit if they meet any two of the following conditions in a financial year:
- The company’s turnover is more than £10.2 million.
- The company’s assets are worth more than £5.1 million.
- The company has more than 50 employees on average.
However, there are exceptions and specific rules depending on the company’s legal structure and industry regulations.
Audits are important for businesses because they provide independent verification of financial information, ensuring accuracy and reliability. This helps to instil confidence in stakeholders such as investors, lenders, and customers, demonstrating transparency and integrity in financial reporting.
Additionally, audits can identify areas for improvement in internal controls and risk management, helping to enhance operational efficiency and mitigate the risk of fraud or errors. Overall, audits contribute to maintaining trust and credibility in your business, which is crucial for long-term success and growth.
An assurance report aims to enhance information by providing a precise depiction of various aspects of your organization, aiding in decision-making. It must deliver an unbiased, accurate assessment of facts, thereby mitigating the risks associated with misinformation.
Although smaller, privately held companies are no longer legally required to undergo annual audits, the option remains available should you wish to fulfil the lender requirements or leverage the advantages audits offer. Alternatively, you might want to opt for an assurance report to gain insights into your business.
The going concern assumption assumes that the entity will continue its operations for the foreseeable future. Auditors assess whether there is any substantial doubt about an entity’s ability to continue as a going concern.
An audit helps identify potential fraud or financial irregularities within your business by systematically examining financial transactions, internal controls, and accounting practices. Auditors look for discrepancies, unusual patterns, or inconsistencies that may indicate fraudulent activities. Additionally, they assess the effectiveness of internal controls in detecting and preventing fraud. Through thorough examination and testing, audits can uncover suspicious activities, unauthorized transactions, or manipulation of financial records, providing early detection and prevention of fraud within your business.
VAT (Value Added Tax)
You are required to register for VAT when your taxable turnover exceeds the current threshold set by HMRC, which is £85,000 in a 12-month period.
It is vital to consult a qualified accountant or tax professional to ensure you fully understand your VAT obligations and right time to get registered.
Businesses registered for VAT typically need to submit VAT returns every three months, known as the “VAT accounting period” or “VAT quarter.” The deadline for submitting your VAT return and payment is one calendar month and seven days after the end of each VAT quarter.
For instance, if your VAT quarter ends on 30th June, your VAT return and payment would be due by 7th August.
If you’re late in paying your VAT Return, HMRC will send you a ‘VAT notice of assessment of tax’ telling you how much VAT they think you owe. You may need to pay a surcharge or penalty for submitting your return after the deadline or paying it late.
For each VAT return submitted late, you’ll get penalty points. Once you reach the penalty threshold, you’ll get £200 penalty. If you are unsure about your VAT obligations, it is highly advised to contact us soon.
Making an error on a VAT return can happen. If the total value of errors is £10,000 or less, you can rectify them on your subsequent VAT return. However, if the errors exceed £10,000 and surpass 1% of your box 6 figure (total sales) on the return you’re correcting, you must report it to HMRC using a VAT652 form and send to HMRC corrections team.
You must cancel your registration if you’re no longer eligible to be VAT registered. For example if you have stopped trading or making VAT taxable supplies, or you have joined a VAT group. You must cancel within 30 days if you stop being eligible or you might be charged a penalty.
Tax Planning
Tax planning is legal and involves structuring financial affairs to minimize tax liability, while tax evasion is illegal and involves deliberately misrepresenting or concealing income to evade taxes.
Allowable expenses vary depending on the type of income or business activity but commonly include business expenses, travel costs, charitable donations, and certain healthcare expenses. It’s essential to keep accurate records to support deductions.
The general rule is that the expenses should be wholly and exclusively for the purpose of business.
Strategies to minimize tax liability include utilizing tax-efficient investment vehicles, taking advantage of available tax credits and deductions, structuring business transactions effectively, and planning for retirement using tax-advantaged accounts.
Tax on a company car includes both income tax and national insurance contributions (NICs) for employees’ personal use of the vehicle. The tax amount depends on the car’s value, CO2 emissions, and fuel type.
The amount of tax owed on a company car benefit is also affected by the fuel type of the car. For example, gas guzzlers have higher CO2 emissions than petrol/electric cars, which can result in a higher tax bill.
Provision of company vans over company cars often incur lower tax liabilities for employees and employers due to favourable HMRC regulations. Company vans are subject to less stringent taxation, including reduced Benefit-in-Kind (BIK) charges, making them a more tax-efficient option for businesses.
Corporation Tax
Corporation Tax is a tax on the taxable profits of limited companies and other organisations including sports clubs, societies, associations and other certain unincorporated businesses.
It is vital to consult a qualified accountant or tax professional to ensure you fully understand the Corporation Tax.
Corporation tax is due for limited companies based on their accounting period, also known as the financial year or the company’s “chargeable accounting period”.
The corporation tax payment deadline and Corporation Tax return (Form CT600) filing deadline are different.
Payment deadline – 9 months and 1 day after the end of your accounting period for the previous financial year
Corporation tax submission deadline – 12 months following the end of the financial accounting period that it relates to.
Please note that these deadlines are general guidelines, and your company’s specific circumstances might impact the exact due dates. It is essential to consult with us to ensure compliance with tax laws and avoid penalties for late payment or filing.
The rate of Corporation Tax you pay depends on how much profit your company makes. The size of the taxable profits of the company is being its taxable income less deductible expenses and allowances.
From 1 April 2023
The main rate of Corporation Tax increased from 19% to 25%.
The small profits rate (19%) applies to single companies with profits of less than £50,000.
The main rate (25%) applies to single companies with profits of more than £250,000.
The main rate (25%) also applies to single companies with profits between £50,000 and £250,000, but marginal relief will be given.
The £50,000 threshold is known as the lower limit and the £250,000 threshold is known as the upper limit. The upper and lower limits are apportioned according to the number of companies which are Associated for Corporation Tax. The limits are also apportioned for short accounting periods. It is essential to consult with a qualified accountant to ensure compliance with tax laws.
There are various kinds of Tax Reliefs available if applicable to your business. You can deduct the costs of running your business from your profits before tax when you prepare your company’s accounts. Similarly Capital Allowances can be made if you buy assets that you keep to use in your business, for example, equipment, machinery or business vehicles.
Similarly, there are many other reliefs and allowances available. Your accountants will be able to apply them as applicable to your business.
There are penalties for late filing of corporation tax.
If you have passed 1 Day after your deadline, there’ll be a charge of £100. for 3 months another £100, for 6 months HM Revenue and Customs (HMRC) will estimate your Corporation Tax bill and add a penalty of 10% of the unpaid tax, for 12 months another 10% of any unpaid tax will be added. If your tax return is late 3 times in a row, the £100 penalties are increased to £500 each.
Common Accountancy & Taxation Questions
Yes – it lets you transfer unused £1,260 of your wife of civil partner. It will reduce your tax bill by £252.
It is a tax relief scheme available aimed at individuals who rent out a furnished room or rooms in their main residence. Under this scheme, income of up to £7,500 per year tax-free from renting out a furnished room or rooms in their main residence. This threshold is halved if the property is jointly owned.
Gift Aid is a government scheme that allows charities or community amateur sports club (CASC) to reclaim the basic rate tax paid by the donner. Charities and CASC can reclaim 25p of tax for every £1 donated by taxpayer.
If you’re a higher rate taxpayer, you can claim back the difference between the tax you’ve paid on the donation and what the charity got back. You do this through your Self-Assessment tax return.
Yes, you can pay your spouse/civil partner from your business, but it’s essential to ensure that the payments are for legitimate work or services provided to the business. If your spouse/civil partner is actively involved in the operation of the business and performs tasks or provides services that contribute to its operations or growth, then paying them a salary or compensation is common practice and admissible expenditure.
The most common state benefits you do not have to pay Income Tax on are:
- Attendance Allowance
- Bereavement support payment
- Child Benefit (income-based – use the Child Benefit tax calculator to see if you’ll have to pay tax)
- Child Tax Credit
- Disability Living Allowance (DLA)
- free TV licence for over-75s
- Guardian’s Allowance
- Housing Benefit
- Income Support – though you may have to pay tax on Income Support if you’re involved in a strike
- income-related Employment and Support Allowance (ESA)
- Industrial Injuries Benefit
- lump-sum bereavement payments
- Maternity Allowance
- Pension Credit
- Personal Independence Payment (PIP)
- Severe Disablement Allowance
- Universal Credit
- War Widow’s Pension
- Winter Fuel Payments and Christmas Bonus
- Working Tax Credit
Electric Vehicle(EV) Tax Implications
For the first of purchase of electric vehicle, business can claim 100% capital allowance for the cost of vehicle. It means that all the cost in acquiring the vehicle is admissible against the profit chargeable to the corporation tax.
As taxation of cars are based on the CO2 emission of cars, it is evident from the information below that how beneficial it is to invest in electric cars.
Type of car: New
- Electric: 100% First Year Allowance (FYA)
- Zero Emissions: 100% FYA
- CO2 emissions 1g/km to 50g/km: 18% Writing Down Allowance (WDA)
- CO2 emissions more than 50g/km: 6% WDA
Type of car: Used
- CO2 emissions up to 50g/km: 18% WDA
- CO2 emissions more than 50g/km: 6% WDA
If business provides an electric car to an employee for private use, they may be liable for Benefit-in-Kind (BIK) tax implication. However, electric cars generally have lower BIK rates (2%) compared to petrol or diesel cars, all the way up to 37%.
If a company invests in one or more EV charging points, it can claim 100% relief on the cost of installation under the ‘first year allowances’ rules.
It is a common misconception that VAT is recoverable on the purchase of electric cars, due to some perceived underlying environmental or ‘green’ reason. There is no difference in treatment for VAT purposes between electric cars or those with hybrid or traditional fuel technologies.
If you buy a car of business and it is exclusively used for the business purposes, the business car recovers 100% input VAT.