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TAX CHECKLIST

NEW COMPANIES

Tell HMRC your company is ‘active’ for corporation tax

You must tell HMRC within 3 months of starting a business activity that your company is ‘active’ for corporation tax. The easiest way to do this is using the joint registration facility when incorporating your company at Companies House or using HMRC’s online registration service.

For further information see: www.hmrc.gov.uk/startingup/ www.hmrc.gov.uk/thelibrary/tax-help.htm

File Company Tax Returns annually

Company Tax Returns (Form CT600) are due annually and must be filed with HMRC by no later than 12 months after the end of the period to which it relates. The return must also be accompanied by the profit and loss account, the balance sheet and the tax computations showing how entries on the return have been calculated. You must keep adequate business and accounting records to file a return and calculate the amount of corporation tax due.

The amount of corporation tax that a company must pay is normally payable 9 months after the end of a company’s accounting period (unless you are a company with profits exceeding £1.5 million in which case different rules apply).

For further information see: www.hmrc.gov.uk/ctwww.hmrc.gov.uk/ct/managing/company-tax-return

Register your company for PAYE (Pay as you earn)

Your company is an employer of its directors and staff and therefore you must deduct tax under the PAYE system. Once you are registered for PAYE, HMRC will notify the employer of the “tax code” which applies to each employee; this tells you, as the employer, how much tax to deduct.

The top rate of income tax is currently 45% which applies to those with taxable incomes in excess of £150,000. For incomes in the bracket £31,866 to £150,000, the rate is 40% and for those with incomes not exceeding £31,865, the rate is 20%.

For further information see:www.hmrc.gov.uk/payerti/getting-started www.hmrc.gov.uk/payerti

The tax checklist is designed to cover some of the initial considerations that relate to tax and a start-up business.

It includes the types of registrations that a business and/or individual may need to make.

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Register your company for National Insurance Contributions

You must deduct National Insurance Contributions (NICs) from your employees pay each pay period and pay employer’s Class 1 NICs if they earn above a certain threshold. NICs payable by the employee are a percentage of relevant earnings subject to a cap.

As an employer you will be responsible for calculating and paying to HMRC your employees’ Class 1 NICs under the PAYE system. You also have to pay the employer’s share of Class 1 contributions together with Class 1A or Class 1B contributions in respect of any benefits provided.

For further information see: www.hmrc.gov.uk/ni

Register your company for VAT if the annual turnover of the company is over a certain threshold (currently £81,000) and submit a VAT return

The company will generally be charged VAT (which is its “input tax”) on the purchase price of goods and services supplied to it by UK suppliers and on imports of goods and services into the UK (unless those types of goods or services are specifically exempt or zero-rated).

Once registered, the company must itself charge VAT (its “output tax”) on supplies it makes to its customers, unless these customers are business customers outside the UK. The standard rate of VAT in the UK is currently 20%.

At quarterly intervals you must submit VAT returns to HMRC in order to account for the excess of your output tax over your input tax, or you can claim a repayment of surplus input tax.

For further information see: www.hmrc.gov.uk/vat

INDIVIDUALS

Self-Assessment If you are a company director, you will usually need to complete a Self-Assessment Tax Return (Form SA100) to tell HMRC about your own income and expenses after the tax year ends on 5 April each year. You can do this online or by way of a paper form. If you are filing the paper form this needs to be with HMRC by 31 October. If you are filing online, the return needs to be filed with HMRC by the following 31 January.

For further information see: www.hmrc.gov.uk/sa

National Insurance Contributions

If you are self-employed you must make National Insurance Contributions (NICs). Class 2 NICs are a fixed amount per week. Class 4 NICs may also apply once your profits reach a certain limit and are calculated as a percentage of your annual business profit.

For further information see: www.hmrc.gov.uk/ni

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EQUITY INVESTMENT

Equity Incentives Equity incentives are an ideal way for start-up companies to incentivise employees as they involve no cash cost to the company and are generally very flexible in terms of rewarding performance and achievement of growth.

Start-up technology companies are ideally placed to take advantage of the most tax efficient arrangements including enterprise management incentive (“EMI”) options and employee shareholder status.

Section 431 Election If you are both (a) a company director or employee and (b) shareholder in the company, you may wish to make a “section 431 election” in respect of your shares. This is a joint election between employer and employee that must be made within 14 days of you acquiring shares in the company. The effect of the election is to avoid certain employment tax charges under what are called the “restricted securities” rules, though employment tax charges arise on the acquisition to the extent you pay less than full market value for your shares (ignoring restrictions such as good and bad leaver provisions).

For further information see:www.hmrc.gov.uk/shareschemes/emi_one_part_election_under_section_431_itepa_2003.pdf

www.hmrc.gov.uk/shareschemes/emi_two_part_election_under_section_431_itepa_2003.pdf

Employment-Related Securities – Form 42

If your company issues shares or grants options to directors or employees, your company (as employer) will be required to notify HMRC of that fact. In most cases, this will be by way of a “Form 42”, which asks for details of certain reportable events in relation to shares and options obtained by directors and employees. A completed Form 42 must be filed with HMRC before 7 July following the tax year in which the reportable event occurred. For tax years 2014/2015 onwards, filing must be made electronically..

For further information see:http://search2.hmrc.gov.uk/kb5/hmrc/forms/view.page?record=NJqFykbW-0Y&formId=5221