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Business Taxation for Expats in the United Kingdom

Submitted: April 2014

This guide covers tax issues for limited companies. For tax issues for self-employment and partnerships please see: Employment Taxation for Expats in the United Kingdom.

Registration

You are required to inform the HMRC within three months of a business starting activity.

The simplest form of company structure is a private company limited by shares (limited company), preferably with standard model articles (company rules). This must be registered with the UK Registrar of Companies at Companies House prior to registering for tax purposes with Her Majesty’s Revenue and Customs (HMRC).

The simplest way to register is to use the online Companies House Web Incorporation Service. All that is required is the company name and address, the details of a minimum of two company officers (Director and Secretary), the share capital and shareholder details. The fee for registration is £15. This service is linked to the HMRC so they are informed of your activity. HMRC will then send you form CT41G (Corporation Tax - Information for New Companies) containing your Unique Taxpayer Reference (UTR) and information regarding your legal responsibilities. For more information from HMRC see here. For more information from Companies House see here.

If you employ a tax representative you will have to complete a form 64-8 authorising the HMRC to discuss you tax matters with them.

If you need to contact the HMRC on business tax matters, you can find the correct contact details by filling in your company address on the enquiry form here.

Corporation Tax

Your company is liable for corporation tax on its worldwide income and gains on an annual basis. The HMRC tax year for companies runs from 1 April to 31 March; companies own accounting periods are often set to coincide with these dates.

You must file an online Company Tax Return form CT600 (or CT600 (Short) for companies with simple tax affairs), including related documents, within 12 months of the end your company’s corporation tax accounting period. However your payment of corporation tax is due by nine months and one day after the end of your accounting period, which is earlier than the return. Penalties and interest apply for late returns and payments. For more information on deadlines see here.

The two rates of corporation tax on profits for the year starting 1 April 2014 are as follows:

  • Small profits rate of 20% for profits not exceeding £300,000, and
  • Main rate of 23% for profits over £1,500,000.

For profits in between these two thresholds you may be able to claim Marginal Relief. For more information on rates see here. For more information on Marginal Relief see here.

A company may also be liable for corporation tax if it sells a company asset (for instance a building used by the company) at a higher price than it paid for it. Tax is calculated on the difference between the two prices, after it has been adjusted by various factors such as inflation. There are also reliefs available depending on how the proceeds were used. For more information on reliefs see here.

Pay As You Earn (PAYE) system

The PAYE system is used to pay income tax and National Insurance Contributions (NICs) for all company employees, including directors. On or before each payday you must complete online a Full Payment Submission (FPS) detailing for each employee’s gross and net income, together with deductions of income tax and NICs. The actual payments of these deductions to the HMRC are generally made monthly. If your average monthly payments are less than £1,500 they can be made on a quarterly basis.

The payment must be made by the 22nd day of the month following the relevant month or quarter if payment is done electronically, otherwise the deadline is the 19th of the month. Generally, if the 22nd falls on a weekend or bank holiday, payment will be required by the previous working day. Penalties apply for late payments. For more information on PAYE see here.

 

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