Everything on HMRC Business Tax Filing and Management
Updated: Jan 17, 2022
In addition to managing your incomings and outgoings, you need to make sure you’re on top of your HMRC Business Tax. This can be a daunting prospect, and you may want to seek advice from an accountant to help you navigate this. There are three key areas to be on top of: Self-Assessment, VAT and corporation tax.
1. Self-Assessment
Self-Assessment is a system HM Revenue and Customs (HMRC) uses to collect income tax. Once you’ve identified your business structure, you’ll need to register with the HMRC to file your taxes. You should register as soon as possible once you’ve started your business to avoid fines.
2. HMRC VAT
Value Added Tax, or VAT, is a tax that’s charged on most goods and services sold by VAT registered UK businesses. Unlike other taxes, VAT is collected on behalf of HMRC by registered businesses. Once you’re registered for VAT, you must charge the applicable tax rate on any products or services you sell.
If your business makes more than £85,000 over a 12-month period, or if you expect to make more than that over the next 30 days, you will need to register for VAT. If you fall below that threshold, it may be beneficial for you to voluntarily register. Being VAT registered may add to your business’s professionalism. Also, if you make a lot of purchases, you may be able to reclaim the value of VAT on these items.
There are several different VAT schemes that could help you save time and money.
How to submit VAT
If you’re VAT registered, you’ll need to submit a VAT return at regular intervals, usually every three months. All VAT returns must be submitted online through one of these methods:
HMRC’s free online service – log in to your VAT online account at online.hmrc.gov.uk and manually enter the values.
Purchase software (such as FreeAgent or Xero Cloud Accounting) – HMRC has a list of approved software you can use the VAT filing option directly to the gateway. With this method, the values from the software are transmitted directly to your VAT online account.
Authorise an agent or your accountant to submit your VAT return on your behalf.
You’ll have to pay VAT to HMRC electronically. Direct debit is the most popular method.
Sending the return
All VAT returns must be sent online. You must create a VAT online account as part of the registration process. There are several alternative methods available to complete the online submission process:
HMRC’s free online service – Log in to your VAT online account and manually enter the values.
Software you can buy – HMRC has a list of approved software you can use to send your VAT return directly to HMRC. With this method, the values from the software are transmitted directly to your VAT online account.
Staying compliant
To be compliant with VAT legislation there are two key things to bear in mind:
You must keep your VAT records for at least six years. You can store them in paper form, electronically or within software. Records must be accurate, complete, and accessible.
You need to make sure you create official VAT invoices.
The following 13 elements must be included on an invoice for it to comply with VAT regulations:
Unique invoice number that is a continuation from your last invoice
Your business name and address
Your VAT number
Date
The tax point (or ‘time of supply’) if it is different from the invoice date
Customers’ names or trading names and addresses
Description of the goods or services
Total amount excluding VAT
Total amount of VAT
Price per item, excluding VAT
Quantity of each type of item
Rate of VAT charged per item. If an item is exempt or zero-rate, make it clear that there is no VAT on that item
The total of these values separately
Using software that creates invoices is the best way to make sure your invoices are always compliant. It’s important to stay on top of this – HMRC can contact or visit your business to inspect your VAT records for accuracy.
3. HMRC Corporation Tax
HMRC Corporation Tax applies to:
Limited companies
Any foreign company with a UK branch or office
Clubs, co-operatives or other unincorporated association, (e.g. a community group or sports club)
As an owner of any of these business types, you are responsible for calculating and reporting your Corporation Tax as you are with all other HMRC Business tax.
You’ll also need to file your company tax return by the end of your accounting period. If you need help with Corporation Tax, you should appoint an accountant or tax adviser to help you.