Question 1

Which Tax Office deals with my Income Tax affairs?

Accepted Answer

If you are self employed you will be dealt with by a Tax Office locally. Employed persons and persons receiving pensions from former employers are dealt with by the Tax Office dealing with the employer's Head Office. Your local Tax Office will be able to tell you which Tax Office deals with your affairs, or, if you are employed, your employer will also know.

Question 2

What are the rates of tax for this tax year?

Accepted Answer

Click Here to view the Tax rate for this year.

Question 3

What is Self Assessment?

Accepted Answer

Under Self Assessment it is clearer what you have to do to get your tax right first time, when you have to do it, and what happens if you don't meet the deadlines. It applies to everyone who gets a tax return. However most people do not get a tax return and pay through PAYE or other deduction at source arrangements.
The first Self Assessment tax return was issued in April 1997. The Self Assessment tax return is made up of a basic core return together with separate supplementary pages - which ones you get will depend on your circumstances and the type of income you receive.
One of the biggest changes is that your tax bill will be based on the figures that you provide on your tax return without us first checking them in detail and agreeing them. We will check them later, within a year of the final deadline for sending the return back to us (31 January).
You need to fill in your return giving full details of all taxable income and gains you received in the year, and claim any allowances as well. This means that you are responsible for ensuring that you pay the right amount of tax, even if you do not actually work out the tax yourself.
We will work out your tax bill for you, (in fact, we'd prefer to do this) but you can work it out yourself if you wish. We will send you a statement showing what you owe and what you've paid.
There will be one tax bill and one set of payment dates.

Question 4

What are the important dates under Self Assessment?

Accepted Answer

Click Here for important dates that you need to know for Self Assessment.

Question 5

I am taking someone on - what do I have to do?

Accepted Answer

Click Here to view the Inland Revenue guide for taking on employees.

Question 6

What is Construction Industry Scheme (CIS)?

Accepted Answer

Businesses operating in the construction industry are known as contractors and subcontractors and they may be companies, partnerships or self-employed individuals. Contractors pay subcontractors for construction operations and subcontractors are those businesses that carry out building work for contractors.
The Construction Industry Scheme sets out the rules for how payments to subcontractors for construction work must be handled by contractors in the construction industry and certain other businesses.
Under the Scheme, all payments made from contractors to subcontractors must take account of the subcontractor’s tax status as determined by HM Revenue & Customs. This may require the contractor to make a deduction, which they then pay to HM Revenue & Customs, from that part of the payment that does not represent the cost of materials incurred by the subcontractor.
As of 6 April 2007 a New Construction Industry Scheme started. Its aims are:

to reduce the regulatory burden of the Scheme on construction businesses.
to improve the level of compliance by construction businesses with their tax obligations.
to help construction businesses to get the employment status of their workers right.

Question 7

Should I Be Registered for VAT?

Accepted Answer

Value Added Tax (VAT) is a tax charged on the sale of most goods and services. Examples of taxable supplies include sale of goods, hire purchase, rental, exchange, and gifts in kind. These are charged at one of three rates:
Zero rate - has nil percentage rates applied to goods such as books & newspapers, children's clothing and new house construction. Reduced rate - a 5% rate is charged on domestic fuel and power.
Standard rate - currently 20%, which is applied to goods and services that are not exempt, zero or reduced, rated. Services that are exempt include insurance, education and some sales & leases of property.
If your sales reach, or are likely to reach the current VAT threshold of £79,000 per year, then you must register for VAT. There is also an option to register for VAT even if your sales have not reached the current threshold allowing you to claim back VAT on purchases if:

You make zero rated supplies - because your customers will not have to pay VAT.
Your customers are themselves VAT registered - because they may be able to claim back VAT you charge them.
VAT is a very important part of business and cannot be ignored. It can be very confusing and you may wish to seek expert help from a local accountant or a business adviser. You should be aware that the VAT threshold and rates may change from time to time and are the responsibility of the Chancellor of the Exchequer

Question 8

What is the cash accounting scheme?

Accepted Answer

The cash accounting scheme allows you to account for VAT (output tax) on your sales on the basis of payments you receive, rather than on tax invoices you issue. This is different from the normal rules that require you to account for VAT on your sales as they take place or as soon as you issue a VAT invoice, even if your customer has not paid you.
However, if you choose to use the scheme, you can only reclaim the VAT incurred on your purchases (input tax) once you pay your supplier. Under the normal method of accounting for VAT you can reclaim VAT on purchases you make as soon as you receive a VAT invoice even if you have not paid your supplier.

Question 9

We may issue a penalty...

Accepted Answer

whenever there has been a significant or repeated lack of care in preparing VAT returns, leading to errors in the true amount of tax payable or repayable. Where you submit an inaccurate VAT return which:

shows too little tax due; or
claims a repayment which is too large;
you may be liable to MP or MP(R).
Where:
you have not submitted a return; and
we assess you for the tax due for the period; and
you fail to tell us within 30 days that the assessed amount is too low;
you may be liable to MP (but not MP(R)).

However, both of these penalties are subject to objective tests.

Question 10

What is the VAT penalty rate?

Accepted Answer

For both penalties the rate is 15% of the amount of the misdeclaration for the period in question. However, we may reduce the penalty if there are mitigating factors. I would like to know when purchasing goods and services, which have VAT added and which don't. If VAT has been added, traders are obliged by law to show this on your receipt. The exact method varies - if you have your car serviced, you would expect to see the amount of VAT set out separately and the rate shown. If you go to a supermarket, they may just indicate by putting a star against the VAT registered items.
A Valid VAT receipt must show the VAT registration number, which is nine digits long.

Question 11

I am a company director, what are my responsibilities?

Accepted Answer

Every company director has a personal responsibility to ensure that statutory documents are delivered to the Registrar as and when required by the Act. In particular:

accounts (only for limited companies);
annual returns;
notice of change of directors or secretaries or in their particulars; and
notice of change of registered office.

Question 12

What details are required on a company's letterhead?

Accepted Answer

The full company name, registered number, registered office address and place of registration (e.g. registered in England and Wales) must be shown on all business letters and order forms.

Question 13

How do I set up a new limited company?

Accepted Answer

We can set up a new limited company for you online and will have all the documentation within 3hours.

Frequently asked questions