If you’re a self-employed individual in the UK, you will need to pay corporate tax at the UK level. But what you’re taxed on actually depends on whether you’re classified as a UK resident or non-dominant tax paying citizen in the country. Basically, non-dominant taxpayers in the UK are not necessarily resident for tax purposes. This means they can’t normally deduct from their income tax from their UK income because they don’t live in the UK. On the other hand, domiciled taxpayers (who do live in UK) can typically deduct from their income tax from their UK income and claim it as a deduction for the UK tax year.
For the Majority of Businesses in UK
For the majority of businesses in the UK, the tax paying process usually begins with the assessment of corporation tax. This is the amount of tax that the company pays each year to the HMRC. The corporation then pays a certain percentage of its taxable profits directly to the HMRC and then pays other taxes depending on where the company is based in UK. A great example of a company is a pub landlord. If he’s based in England, he may be liable to pay taxes in England and Wales, as well as to pay corporation tax in England and receive dividends to his shareholders who also live in England.
Employees to be Paid Dividends
Generally, many business owners either buy or hire employees. Some companies even allow their employees to be paid dividends. Dividends are the payments made by a corporation to its shareholders as a share of its profits. The size of a company’s dividend offer is often related to its market value. This means that if the company’s market value is lower than the amount it pays out in dividends, the company’s income tax rate is lower.
Advantage of UK Corporate Tax Credits
In order to take the advantage of UK corporate tax credits, businesses need to be aware of their tax responsibilities. Corporations that have employees also have tax responsibilities. They have to withhold income taxes from the employee’s paycheck and give that money to the HMRC. If the employee is a non-domiciled British citizen, the company has to withhold its taxable income from the employee’s UK paycheck before it gives it to the HMRC. Payments for these taxes need to be made at specified intervals.
Tax Duty
Sometimes a corporation may be fine a tax duty. These fines, however, are the only apply if the corporation has not provided the appropriate advice required. Most companies offer tax advice free of charge through specially trained professionals who are available 24 hours a day. The expenses of a business incurs while providing tax advice can be deducted from its tax return.
Excise Tax
When a corporation has to pay the Excise tax, which charges for purchasing most kinds of goods, it has to issue a refund cheque to the government within a specify time. Sometimes the amount of the tax due is higher than the amount the company allows to deduct as tax rebates. A company also faces the penalty fine for failing to file an annual return within the prescribed time, known as the filing date, and for failing to surrender the right to collect dividends or the capital gains.
Minimize Its Tax Burden
In order to minimize its tax burden, a company must keep complete records of all its activities. All its commercial activities are report, audit, and record in its annual accounts. For the corporate tax purposes, however, only capital receipts and payments are consider. A company’s use of all tax schemes available to it is one way to avail the benefits of corporate tax rates in UK. These include income from the sale of property, the gain from the disposal of paid-in capital, income from the provision of services, rents, disbursements to shareholders, and other miscellaneous direct and indirect taxes. These taxes include in gross tax collections. All taxes that pays are also reports to the revenue.
Conclusion
A company’s use of all tax schemes available to it is one way to avail the benefits of corporate tax rates in UK. The use of alternative structures is another such option. Sometimes, tax schemes that would be disadvantageous to a company can actually be beneficial to it. Thus, it is advisable that before deciding to invest in a specific business in the UK. A company does proper market research and consult a chartered accountant or a corporate tax advisor.
