UK Accounting & Tax

Corporation Tax

As from April 2015 the standard rate of corporation tax in the UK is 20%

Close investment-holding companies are always chargeable at full rate. All profit limits are reduced pro rata for associated companies and for accounting periods of less than 12 months. The main rate of corporation tax has decreased to 23% and will go down to 21% as from 1 April 2014. As from 1 April 2015 it will be further reduced and unified with the small profits rate resulting in a new unified tax rate of 20%.

VAT

The standard VAT rate is 20% (reduced rate 5%).

Annual turnover limits in last 12 months (or in next 30 days):-

As from 1 April 2015:

  • Registration – €81,000;
  • Deregistration – €79,000;
  • Annual Accounting – €1,350,000;
  • Cash Accounting – €1,350,000.

The registration thresholds do not apply to non-established taxable persons (NETPs), From 1 December 2012, NETPs must register for VAT in the UK and account for UK VAT with HMRC if they make taxable supplies in the UK. An NETP is any person who is not normally UK resident, does not have a UK establishment and, in the case of a company, is not incorporated in the UK.

Taxation on Capital Gain

A company is chargeable to corporation tax on its chargeable gains. The company determines the gain by deducting from the consideration the cost of acquisition of the asset and also taking into account the applicable indexation allowance. Gains from the disposal of a Substantial Shareholding may be exempt from CGT.

Tax Residence

A company that is incorporated in the United Kingdom shall be regarded as subject to taxation in the country. However in order for the company to avail itself of the UK double taxation treaty network it must demonstrate that its effective management and control is located in the UK.

Audit Exemptions (companies and LLPs)

At least two of the following conditions must be met for a company to qualify for an audit exemption:-

  • Annual turnover must be £6.5 million or less;
  • The balance sheet total must be £3.26 million or less;
  • The average number of employees must be 50 or fewer.

A company which is a group company and which has an accounting period ending on or after 1 October 2012 is entitled to audit exemption if the following conditions are met:-

  • The group qualifies as a small group in relation to the financial year
  • The group was not at any time in the year an ‘ineligible’ group

Small Group

To qualify as small, a group of companies must meet at least two of the following conditions:

  • Aggregate turnover must be £6.5m net (or £7.8 million gross) or less
  • The aggregate balance sheet total must be £3.26 million net (or £3.9 million gross) or less
  • The aggregate average number of employees must be 50 or fewer

Statutory Obligations

All private and public limited companies and limited liability partnerships must annually file a set of financial statements and an annual return with Companies House. Medium-sized and small companies may opt to prepare and file ‘abbreviated accounts’. Changes to the filing rules were brought about by the Companies Act 2006 with the following main provisions:

  • The time allowed for delivering accounts to Companies House has been revised and is 9 months from the accounting year end for private companies and 6 months from the accounting year end for public companies.
  • The late filing penalties regime has also been revised. All penalties have been increased and will increase at a faster rate for accounts filed more than one month late. Penalties will be doubled for accounts filed late in two subsequent years.
  • Companies House is sending notifications of removal of companies from its register immediately following failure to deliver the financial statements or the annual return by the due date.
  • For most companies, the payment of corporation tax is due 9 calendar months and 1 day after the end of the accounting year end and a corporation tax return filed within 12 months from the same date.