Frequently Asked Questions
Q: What is Self Assessment?
A: 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. 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.
Q: What is Self Assessment?
A: Self Assessment applies to:
- self employed people including business partners
- company directors
- other people with more complicated tax affairs including people who pay higher rate tax
- pensioners with more complex tax affairs
- people who received rent or other income from land and property in the UK
- trustees and personal representatives
- trustees of approved self-administered pension schemes
- non-resident company landlords
Q: How long do I need to wait for a UTR number (Taxpayer Identification Number)?
A: It takes approximately 4 – 6 weeks from the date of registration.
Workers who will work in the construction sector as subcontractors must also report this to the tax office to avoid taxation of 30%.
Q: When is the deadline for completing tax return?
A: The main deadlines are:
- paper tax returns – midnight 31 October
- online tax returns – midnight 31 January
- final payment of any tax due – midnight 31 January
Q: What are the consequences of submitting self assessment after the deadline?
A: You should send your tax return, even if you don’t have any tax to pay or you’ve already paid it.
You’ll get a penalty of £100 if your tax return is up to 3 months late. You’ll have to pay more if it’s later than this, or you pay late.
Q: What are the main benefits of becoming a limited company (LTD)?
- Limited liability
- Shareholders are responsible for the actions of the company to the amount of the contribution;
- Minimization of taxes;
- Protection of the company name – Companies House will not register another company with the same name;
- A more reliable form of activity – the register of companies and their status is given to the public, every potential customer can check at Companies House news about the company (status, address, financial reports, etc.);
- No limit to the minimum initial capital.
Q: What are directors’ responsibilities?
A: As a director of a limited company, the law says you must:
- try to make the company a success, using your skills, experience and judgment
- follow the company’s rules, shown in its articles of association
- make decisions for the benefit of the company, not yourself
- tell other shareholders if you might personally benefit from a transaction the company makes
- keep company records and report changes to Companies House and HM Revenue and Customs (HMRC)
- make sure the company’s accounts are a ‘true and fair view’ of the business’ finances
- register for Self Assessment and send a personal Self Assessment tax return every year
Q: What are the ways to take money from Limited Company?
A: As a director of a limited company, you can do this in three ways;
In a form of Salary, expenses and benefits, by becoming a employee, but first you need to register as an employer. The company must take Income Tax and National Insurance contributions from your salary payments and pay these to HMRC, along with employers’ National Insurance contributions.
In a form of dividends if the company has made enough profit. You can’t count dividends as business costs when you work out your Corporation Tax.
Q: What are the tax thresholds for Limited companies?
A: Businesses profit below £ 300,000 pay tax at the rate of only 20% compared to the standard rate of tax for the self-employed in the amount of 20% or above 40%, 45% and 9%
Q: When may I need to carry out an audit?
A: Your company may qualify for an audit if your company has both:
- an annual turnover of more than £6.5 million
- assets worth are more than £3.26 million
Q: How the directors who are shareholders of the company, reduce the tax on taking money out from Limited Company?
A: They can do this by selecting the ” low salaries and high dividends”.
Q: How long do I need to keep records of my company?
A: You must normally keep records for at least 6 years from the end of the last company financial year they relate to.
Q: Under what circumstances I may need to keep my records longer?
- they show a transaction that covers more than one of the company’s accounting periods
- the company has bought something that it expects to last more than 6 years, like equipment or machinery
- you sent your Company Tax Return late
- HMRC have started a compliance check into your Company Tax Return
Q: When do I need to submit Company annual return?
A: You must send Companies House a company annual return every year, within 28 days of the anniversary of the company’s incorporation.
Q: When do I need to register for VAT?
A: You must register for VAT with HM Revenue and Customs (HMRC) if;
- your business’ VAT taxable turnover is more than £81,000.
- you receive goods in the UK from the EU worth more than £81,000
- you expect to go over the threshold in a single 30 day period
Q: What is the VAT rate in the UK?
A: The standard rate for most goods and services is 20%.
There is also an reduced rate of 5% for services such as home energy and 0% zero rate for services such as children’s’ clothes.
Q: What is the accounting period for VAT?
A: You usually submit a VAT Return to HM Revenue and Customs (HMRC) every 3 months.
Q: What are the responsibilities of being VAT registered?
- charge the right amount of VAT
- pay any VAT due to HMRC
- submit VAT Returns
- keep VAT records and a VAT account
- you must submit a VAT Return even if you have no VAT to pay or reclaim.
Q: Can I charge VAT invoices even if I am not yet VAT registered?
A: You can’t charge or show VAT on your invoices until you get your VAT number. However, you’ll still have to pay the VAT to HMRC for this period.
Q: When is it possible to recover the claims for VAT?
A: It is possible from the date of registration.
Q: Is it possible to recover VAT expense suffered before the VAT registration?
A: Yes, but there’s a time limit for backdating claims for VAT paid before registration. From your date of registration the time limit is:
- 4 years for goods you still have, or that were used to make other goods you still have
- 6 months for services
You can only reclaim VAT on purchases for the business now registered for VAT. They must relate to your ‘business purpose’. This means they must relate to VAT taxable goods or services that you supply.
Q: What is the “Flat Rate scheme”?
A: It is a scheme in which you pay fixed rate of VAT to HMRC, you keep the difference between what you charge your customers and pay over to HMRC and you can’t reclaim the VAT on your purchases – except for certain capital assets over £2,000.
Q: When can I register for flat rate?
A: This is available for companies whose turnover does not exceed £ 150,000 per year.
Q: What cannot reclaim?
A: You can’t reclaim VAT for; anything that is only for private use, goods and services which are from VAT-exempt supplies, business entertainment costs, anything you’ve bought from other EU countries and business assets that are transferred to you as a going concern.
Q: How long do I need to wait in order to get a VAT refund?
A: You will usually get your refund within 10 days of HMRC receiving your return but it may take longer.
Q: What are the main duties of working in the Construction industry?
A: If you are a contractor or subcontractor, you must register with HM Revenue & Customs (HMRC). Contractors deduct money from a subcontractor’s payments and pass it to HM Revenue and Customs.
The deductions count as advance payments towards the subcontractor’s tax and National Insurance.
Contractors must register for the scheme. Subcontractors don’t have to register, but deductions are taken from their payments at a higher rate if they’re not registered- 30% instead of 20%.
Q: What kind of building services are covered under CIS?
A: CIS covers most construction work to buildings, including site preparation, decorating and refurbishment. There are few exceptions, which means that you do not need to register if you only do certain jobs such as; architecture and surveying, scaffolding hire (with no labour), carpet fitting, delivering materials, work on construction sites that is clearly not construction, e.g. running a canteen or site facilities.
Q: Who is the contractor?
A: Contractor is a person who pays subcontractors for construction work and his business does not do construction work but he spends an average of more than £1 million a year on construction in any 3-year period.
Q: Who is a subcontractor?
A: Subcontractor performs work in the construction industry on behalf of another entity (contractor) you can be both a contractor and subcontractor.
Q: What are the duties of the contractor?
A: The Contractor is required to register with HMRC before the commission’s first job was a subcontractor. Subcontractor, the contractor must verify with HMRC to ensure that the subcontractor is registered to the CIS and entitled to a standard deduction of tax at the rate of 20% of the gross amount due for work done (to calculate the tax should not be counted against the possible amount of the refund for purchased materials that subcontractor).
Contractor is required to provide to HMRC month to the 19th of every month, information on the amount of tax withheld from subcontractors and pay the appropriate amount to the account of the HMRC issue a monthly statement (CIS Statement) for the subcontractor, this statement should be in the gross amount, withholding CIS (20 % or 30%) and the net amount transferred to the subcontractor.
Q: What happens if the subcontractor is not verified with the CIS system?
A: In the event that the subcontractor is not registered to the CIS or verification is not possible (subcontractor failed to provide relevant information) the amount of tax withheld will be 30%.
Q: When can you reclaim overpaid tax in the CIS?
A: Tax withheld by the contractor, can be recovered at the end of the tax year (5 April). During the annual settlement HMRC should take into account the amount of tax withheld (the sum of the monthly statements of money being), HMRC will refund the tax withheld after deduction of all liabilities (income tax and national insurance contribution scheme class 4) as long as they occur.
Q: What is a PAYE?
A: Usually an employer, have to operate PAYE as part of his employees’ payroll. PAYE is HM Revenue and Customs’ (HMRC) system to collect Income Tax and National Insurance from employment.
Q: Who have to register?
A: Every employer who’s’ employees are paid £111 or more a week.
Q: How is PAYE tax paid?
A: The payroll software will calculate how much tax to deduct from employee wages / occupational pension taxpayer. You must pay your PAYE bill to HM Revenue and Customs (HMRC) by the 22nd of the month (or the 19th if paying by post) when you’re running payroll.
Q: How is PAYE tax paid?
A: If the tax office does not have sufficient information to issue a tax code, it determines provisional codes that can be modified after the required information are obtained.
- the letter refers to the type of deductions (tax-free), which belong to the taxpayer
- number specifies the amount of deductions that can be made from the wages, which are tax-deductible
The letter in the code indicates the type of tax deductions, which belong to the taxpayer, and may include:
L if you are aged 65 years and receives the personal allowance. This code is granted to unmarried persons, persons in married or civilian who is not claiming relief for married couples, or people on a temporary tax code.
P is for unmarried taxpayers or married women aged 65-74, which entitled to the full allowance related to their age.
V is a married man aged 65-74 if their wives are under the age of 74 years, and they are entitled to full relief related to their age and by the office of that tax will be paid at the basic rate.
T may be granted for various reasons. These may include:
- When you request it, because I do not want to reveal your actual code; or
- When you are entitled to Child Tax Credit and pay tax at the higher rate; or
- the taxpayer or his partner are over 75 years of age; or
- when the code contains a reduced age-related relief
K of people whose income is higher than the personal tax allowances. If your income consists of benefits and / or pension, interest or welfare benefits can be obtained if the code K.
Y is given to persons over 75 years of age with full individual tax relief.
NT means that a person does not have to pay tax. This code does not include the number.
BR is for people who do not receive any allowances and pay tax at the basic rate. This code can be given where you have more than one job.
DO means that you pay tax at the higher rate.
OT means that no allowances have been given or left over after the introduction of relevant amendments. The tax will be paid at the lower, basic or higher rate, depending on income.
Q: What does the number on the tax code?
A: The number of the tax code means the sum of all available allowances, after deduction of the sum to cover other income or benefits.
Q: Where can I find his tax code?
A: You can find it on
- encoding information sent by the tax office; or
- payslip (payslip); or
- in the statement announcing the receipt of a pension if the employee receives a pension.
Q: When is the information about the tax codes issued to the tax payer?
A: A notice of the tax code is usually sent out in January or February for the fiscal year starting from April 6 of that year. This code applies only to that particular tax year. Along with the code also sends information to explain how the code has been fixed.
Not everyone gets a notice of coding each year. It depends on the type of allowances and reliefs, and whether they change from year to year. Therefore, it is important to check that the notice of coding gives the correct allowances and reliefs because otherwise it will be wrong to pay the tax.
Q: How many hours per week you can work by law in the UK?
A: By law, most workers should not work more than an average of 48 hours per week, including overtime. However, you can work more than 48 hours per week, subject to the agreement of the employer.
Q: What should I do if my employer does not want to pay my sick pay (SSP)?
A: In the case when your employer does not want to pay SSP (Statutory Sick Pay) he should provide you with form SSP1, stating there the reasons for his refusal.
This form should be used as an application for a benefit for people whose health condition is not allowing them to work Employment and Support Allowance (ESA). The form should be send to the local branch of the Department for Work and Pensions (DWP – Ministry of Labor and Pensions and Annuities Benefits).
REQUEST A FREE CONSULTATION
Fill out the form below to recieve a free and confidential intial consultation.
Tel: 020 8422 4499
Mob: 079 8327 1437
49 Oldfields Circus,
Northolt, London UB5 4RR
Monday & Thursday: 10:30 – 16:30
Tuesday, Wednesday, Friday: 10:30 – 18:30
Saturday: 10:00 – 15:00