The Memorandum of Association must state:

1. The name of the company with limited as the last word unless specific dispensation has been obtained to dispense with the word limited on the grounds of the company being formed for any of the objects specified or the liability of the members is unlimited. Before forming a company a name check should be carried out to ensure the proposed new limited liability company name is suitable and not too similar to an existing name.

2. The memorandum must state whether the registered office of the company is situated in England and Wales or in Scotland. The registered office of the company is where official documents such as Company House communications, notices, writs and summonses may be sent.

3. The objects of the company must be stated. The objects comprise of a main objects clause and a number of other clauses governing the activities of the company. Section 3A of the Companies Act 1985 permits the use of a shortened form of the objects clause which many newly registered companies adopt.

Composing an extended main objects clause takes research and great care to ensure it is all embracing within the industry and related activities of the company to avoid the possibility that the company may do business outside its stated objectives. The objects clause should also include all the activities a company may engage in to enable the main objects of the company to be carried out.

4. The Memorandum of Association must include a statement that the liability of the members is limited.

5. A limited liability company that is limited by shares must also state the amount of share capital the company proposes and the division of those shares into fixed amounts. For example, the share capital of the company is 1,000 pounds divided into 1,000 shares of 1 pound each.

6. The Memorandum of Association must also contain a clause regarding the subscription of the initial members of the company. This clause must state the name of each member, their address and description. A minimum of two members are required to register a new private company, the number of shares each subscriber is subscribing to and each subscriber should also sign the memorandum under their allocated shares.

7. The signatures of the subscribers to the Memorandum of Association must also be witnessed by a third party. No special qualifications are required by the third party witness except that the third party must be able to sign on the basis that the document has been signed by the subscribers who are who they say they are.

Whenever a new company is formed in the UK a Memorandum of Association must be supplied with the company formation documents that include Companies House forms 10 and 12 and the Articles of Association. Companies House forms 10 and 12 can be obtained from many sources include Companies House free of charge. In addition most newly formed companies who submit the details for company registration also adopt a standard set of Articles of Association, called Table A.

Technically Companies house do not require a copy of Table A to be submitted to them with the company registration if Table A is to be adopted. If the Articles of Association are not submitted then the company registration documents must include a letter advising Companies House that the new limited liability company wishes to adopt the standard Table A, Articles of Association as required under the appropriate Company Law un-amended.

Following the limited company formation a company may change the main objects clause of the Memorandum of Association by passing a special resolution that has to be approved by the members at an extraordinary general meeting. Details of the special resolution and a copy of the new Memorandum of Association are required to be registered with Companies House

Taxi receipts are entered on a series of excel worksheets within the taxi income work book preset with each day of the financial year. Weekly and monthly totals are added and transferred through the linking system from the taxi bookkeeping sheets to the taxi financial accounts sheet.

Taxi expenses are listed on a series of twelve monthly spreadsheets which have preset columns with appropriate headings for taxi drivers to record office and rental costs, fuel bills, other vehicle costs and licence fees. The total of each expense is entered on each row and a single letter used to then analyse the taxi expense to the column required. As with the taxi income sheet the columns are then automatically added which includes a check on data entry accuracy before being transferred to the taxi driver accounts sheet.

Cash and bank spreadsheets are not provided as not required by taxi drivers as taxi drivers do not need to produce a balance sheet.

In addition to entering purchases on the taxi expense sheet the only other entries required from the taxi driver to produce a set of taxi driver accounts is to also enter vehicle and any other assets purchased on the fixed asset spreadsheet. The fixed asset spreadsheet having already been preset with both depreciation rates and the capital allowances that taxi drivers can claim. The taxi accounts software is then complete.

The financial accounts file contains formulae to produce a monthly profit and loss account that includes the taxi capital allowances from the fixed asset schedule.

A unique feature is that both mileages covered and vehicle running costs can be entered. The tax rules in the UK state that drivers cannot claim both mileage allowances and vehicle running costs. It has to be one or the other and only at the end of the financial year when it becomes clear which is the most tax efficient.

This taxi accounts package compares both the mileage cost and the vehicle running cost and automatically selects the most expensive. This ensures the highest costs are selected into the calculation of the net taxable profits and highest cost equals lowest tax bill.

Also in the taxi accounts file is an excel spreadsheet designed with the same layout, colour codes and box numbers as the inland revenue self assessment tax return. The taxi self assessment tax return is completed automatically by the cabsmart taxi accounts software. No entries are required leaving the taxi driver only to click print to produce the self assessment tax return.

Finally having calculated the net taxable profit for the year the accounting package also has a tax calculator that calculates the amount of income tax and national insurance to be paid.

The taxi driver accounts package has been tested many times and the annual receipts and expenses for a full year take approximately 2 to 3 hours to enter, and have been completed in less than 2 hours. The end product is a full set of taxi driver accounts including the self assessment tax return.

Both couriers and van drivers have similar businesses to taxi drivers in that they move items from one place to another in a similar way in which taxi drivers move people from one location to another. And because of the similarity in business activity then this taxi accounting package would be equally suitable for couriers and van drivers.

The approved mileage allowance for cars and vans is 40p per mile for the first 10,000 business miles and 25p per mile for each business mile over 10,000 miles in each tax year. The approved mileage allowance for motor cycles is 24p per mile for the first 10,000 business miles and 24p per mile for each business mile over 10,000 miles in each tax year. The approved mileage allowance for bicycles is 20p per mile for the first 10,000 business miles and 20p per mile for each business mile over 10,000 miles in each tax year.

These approved mileage allowances demonstrate complete irrelevance to the actual costs incurred in performing the business journey. The purchase price of a new motor vehicle would not be unusually 100 times the price of a bicycle, plus vehicle maintenance costs, vehicle insurance, licence fees and substantial fuel charges in operating the motor vehicle compared with zero costs for a bicycle. Few small businesses claim tax allowances for bicycle business journeys in their small business accounts.

The startling anomaly is that vehicle allowances are only twice the bicycle rate on the first 10,000 miles and only 25% more over 10,000 miles. Not that many people are likely to use a bicycle and cover in excess of 10,000 business miles in a single tax year.

In addition to the approved mileage allowances an additional 5p per business mile may also be claimed as a tax free expense if a fellow passenger is also carried on the business journey in the small business accounting records. That fellow passenger must also be on a work journey to enable the mileage allowance to be claimed in the small business accounts

Generally there are specific rules on justifying a business journey and the information that must be supplied to support the claim for a tax free mileage allowance. In practise the Inland Revenue often take a reasonable view of any claims provided the information provided in the small business accounts indicates that the claim is valid and has been incurred for real business journeys as opposed to an invention by the claimant.

When claiming a mileage allowance the essential information to provide is the date of the journey, the reason for that journey, the place visited and the actual mileage covered. Small businesses who claim this tax free allowance should maintain detailed records as part of the small business accounting to substantiate their expense claim should it later be challenged by the tax authority. Devising an expense sheet and submitting this sheet to the business is one way of ensuring sufficient documentation exists within the small business accounts.

Another way a small business can substantiate a mileage allowance expense claim is to enter each journey directly into the accounts for small businesses, perhaps recording the mileage against either sales invoices to customers or against purchase invoices from suppliers. With these transactions having already been recorded in the small business accounting records with a date, the location also stated on the invoice and the purpose of the journey being obvious the rules on supporting information are covered.

That is the easy part of making a valid claim but for many small businesses making such claims would seriously understate the true level of business journeys. Therefore also include in the small business accounts all other business journeys undertaken which may or may not have resulted in a specific purchase or a specific sale.

So what other journeys can the small business accounting system claim as a deductible expense against the taxable profit. The answer is basically any business journey and that should include all incidental journeys, perhaps visiting a supplier or a customer, visiting customers to quote for work, attending a business meeting, taking money to the bank.

Mileage allowances cannot be claimed for a business vehicle where the running costs of that vehicle are being claimed as a deduction from net taxable profits. Vehicle running costs include the capital tax allowances, licence fees, insurance, repairs and maintenance, membership of breakdown services and fuel costs.

Many small businesses may find that more than one vehicle is used for business journeys. The business vehicle running costs may be claimed for a specific business vehicle on which mileage allowances are not claimed this tax allowances may be claimed for the use of a private vehicle in the small business accounts.

Perhaps the small business runs a van for its main business and the running costs exceed the potential mileage allowance in which case the business should claim the vehicle running costs. If a different private vehicle is also used for some business journeys, perhaps even a spouse taking cheques to the bank, then mileage allowances could be claimed for that journey.

Each business should examine their tax allowance practises to ensure the maximum tax free allowance is claimed and supported with the required documentation to lower the tax burden when preparing the small business accounts.

The nature of the business journeys must adhere to certain rules in order for these expense payments to be tax free. Not usually an issue when an employee is paid expenses but nevertheless something each employee should be aware of.

In order that the payments are free of tax are three general rules. First the payments must be made to yourself and not to a third party, for example another company receiving the money on your behalf. The use of the vehicle must be a work journey and excludes travel to work where it is considered that work place is a permanent place of work. And finally the amount paid must be within the mileage allowances fixed by the government and part of the Inland Revenue rules on the limits for mileage payments.

Any other payments relating to the use of your own vehicle which do not fall within the above rules are regarded as additional income and subject to income tax and national insurance deductions as would be other forms of payment. Also any payments made in respect of non work journeys fall outside the rules and would be taxed as additional income.

A work journey is one which you must carry out as part of doing that job including when requested by the employer to conduct a specific business journey on its behalf. Visiting suppliers, clients, delivering goods and attending meetings outside the normal workplace would all be considered work journeys.

A journey to a normal place of business would not be considered a work journey and that rule also excludes detours during the journey for example to visit a client or drop off goods. However if the detour on the way to work is significant then the excess mileage covered would be allowable and the expenses paid not subject to tax.

The approved mileage allowance for cars and vans in the UK is 40p per mile for the first 10,000 business miles and 25p per mile for each business mile over 10,000 miles in each tax year. The approved mileage allowance for motor cycles is 24p per mile for the first 10,000 business miles and 24p per mile for each business mile over 10,000 miles in each tax year. The approved mileage allowance for bicycles is 20p per mile for the first 10,000 business miles and 20p per mile for each business mile over 10,000 miles in each tax year.

These rates are the maximum levels of expenses an employee can receive tax free during a tax year, were set in the financial year 2002-03 and still fixed at that level in the financial year 2007-08. Employees are not due any tax free payments on any other vehicle running costs. For example if you break down on a journey and your employer assists with the financial cost of repairing that vehicle any amounts paid over and above the maximum mileage rates quoted above would be taxable.

The bad news is if your employer pays you more than the above mileage allowances then the excess amount paid is taxable as additional income. If for example your employer pays 45p per mile for the first 10,000 miles then it would be normal for that employer to include the different between 45p and 40p in your wage slip and deduct income tax from the 5p.

The good news is if your employer pays you less than the mileage allowances then you are entitled to claim mileage allowance relief on the shortfall. If for example your employer pays 35p per mile then less than 10,000 miles you are entitled to claim the mileage allowance relief on the number of miles at 35p multiplied by the 5p shortfall.

To claim the mileage allowance tax relief employees must maintain a record of the work journeys and the amounts paid. Those records should state the date, mileage covered, a brief note of the journey and the amount paid by the employer, records which may be required to substantiate the mileage allowance relief. To actually make the claim for relief this can be done by sending a letter with the details to the Inland Revenue at the end of the financial year or alternatively request and complete the Inland Revenue form provided for this purpose.

Using different vehicles during the tax year is not relevant. The total mileage of all vehicles used is the relevant figure. However being paid a mileage allowance by more than one employer is relevant.

If during the financial year an employee has been paid a mileage allowance by more than one employer then the total paid from all employers must be added together to produce the total amount paid. For example if one employer paid 30p per mile for 1,000 miles and a second employer paid 35p per mile for a further 2,000 miles then the total payment would be 1,000 pounds (300 + 700) and the mileage allowance would be 1,200 pounds (400 + 800). The mileage allowance tax relief in this example would be 200 pounds at the employees maximum tax rate.

If an employee has not claimed mileage allowance relief in past years then application can be made to the Inland Revenue to reclaim the relief for a period up to six years after the year the claim was not made. When making a claim for unclaimed tax relief in previous years the Inland Revenue are likely to request some evidence of the claim which your previous employer may be able to provide.

Good luck with your claim for mileage allowance relief. If you found this article useful please copy and submit the article to forums and blogs across the internet to make as many people as possible of the money out there waiting to be claimed. If posting this article then the author signature and links must also be included in the posting.

A regular source of receipts would be regarded as self employment income. Everyone considering themselves self employed should register with the Inland Revenue within 3 months of starting trading or risk a penalty fine of 100 pounds.

Keep a record of all transactions.

Sales turnover is the amount the business earns before deducting business expenses including receipts of any kind for goods sold or work done such as commission, tips, payments in kind, fees and insurance proceeds. Sales of fixed assets are excluded from sales turnover as are Business Start up grants which are entered in a different section of the self assessment tax return.

Excel spreadsheets make a good solution to record the sales income and bank receipts as part of the small business accounting software. Check the amounts deposited do not exceed the declared turnover which would indicate that you have understated your sales and your tax liability would at the least be increased unless you could provide a solid reason for the anomaly.

Ensure financial, purchase and sales records are compatible.

Compatibility will vary from business to business. Examples if you post 100 EBay items your records should show 100 items of income and 100 items of postage. Buy food for a restaurant for resale at four times cost, some wastage is inevitable but the underlying compatibility between sales generated and purchases should be reasonable.

The average number of meals sold from a take-away shop should be compatible with the number of take-away cartons purchased. A taxi driver should not claim fuel receipts during his holiday period and the fuel bills should be compatible with the fares obtained. Unusual and incompatible expenditure declared on the self assessment tax return can and do trigger Inland Revenue enquiries.

Many Inland Revenue enquiries result in a higher tax liability due to the scrupulous professional way in which compliance investigations are carried out.

Obtain receipts for everything.

Tax payers lose millions each year by not obtaining or retaining receipts for expenses. If you are claiming fuel costs for a business trip and fill up with 50 pounds of petrol get a receipt. The tax saved by including that receipt in your accounts is 11 pounds at basic tax rates and 20 pounds at higher tax rates.

If your business turnover is over the vat threshold of 64,000 pounds p.a. for 2007-08 the receipt is worth even more. 16.81 pounds vat and income tax at basic tax rate and 24.47 pounds at the higher income tax rate. The same is true for all other business receipts.

Obtain a receipt for everything.

If you lose a receipt then still include that expenditure in your accounting records but if your tax return is enquired into by the Inland Revenue that expenditure may be disallowed unless you can argue and sometimes prove the expense was in fact incurred. May help to note in your records - receipt lost.

Do not mix business and personal.

The general rule is that items solely for business use can be claimed for tax purposes and the business proportion of personal expenditure may be allowed although the rules are applied quite strictly. If you purchase both business and personal items from a supplier the business expenses only can be claimed but if you obtained all the items on a single receipt you would be disallowed the cost of that journey as it was not solely for business purposes.

Claim business expenses incurred prior to trading.

Business expenses incurred up to seven years prior to trading actually commencing can be deducted from business turnover if these expenses were solely for the future business purposes. Enter such expenses in your accounting records as if they had been incurred on the first day of trading but show the actual purchase date.

Claim home costs if you work from home.

If part of your home is identifiable as solely for business purposes then home costs can be claimed. The cost allowed is the proportion of the total area of the home the business area occupies. For example, excluding shared facilities of kitchen and toilet if the home has three bedrooms, living and dining room and one bedroom is used solely as an office then 1/5 of home costs could be claimed. The home costs to claim would be heat and light, insurance, general and water rates and mortgage interest excluding repayment amounts.

Where mortgage interest is claimed the revenue might also claim as a capital gain the increase in value of that proportion of the home, such Capital Gains Tax being subject to tapering relief over time. It may be safer not to claim mortgage interest as part of the home costs.

Take care if claiming the wages of a partner against profits.

Partner wages can be deducted as a business expense although there are rules which would be applied in such circumstances to ensure the amount paid is both real and reasonable. The business would need to operate a PAYE scheme for the partner wages, deducting income tax and national insurance, and produce all the statutory requirements.

The work carried out must be real not invented and the rate paid reasonable for the nature of the work and the time spent. Evidence may also be required that the partner wages were actually physically paid to that partner, for example in the form of a cheque.

Claim vehicle costs or mileage allowances.

Vehicle running costs and expenses such as fuel, excise duty, insurance, repairs and breakdown membership may be claimed as business expenses if the vehicle is used solely for business purposes. Travel from home to work is not business use and disallowed. The proportion of vehicle running costs and capital allowances which are claimable are dependent upon the proportion the vehicle is used for business and personal use.

Parking fees for business purposes may be claimed. Parking fines and penalties for motoring expenses are not claimable as business expenses for tax purposes. An alternative to claiming vehicle running costs and vehicle capital allowances would be to claim mileage allowances which at the time of writing are 40p for the first 10,000 miles and 25p per mile thereafter.

Write off expenditure against taxable profit unless the item is a fixed asset.

Depreciation is not allowed and replaced by Capital allowances for the purposes of calculating the tax payable. Capital allowances are designed to write off the cost of purchasing a fixed asset over the life of the asset rather than in the financial year in which it was purchased thereby spreading the tax relief on the asset over those years.

Many assets purchased by small businesses fall into a grey area as whether they are fixed assets or normal business expenses. Generally a fixed asset would be defined as an item that would be used by the business over several years and usually of significant value. 100% tax relief is obtained on items purchased which are not fixed assets and automatically claimed whatever the small business accounting software.

Avoid fines and penalties by submitting tax returns on time.

Accounting records and Self assessment tax returns should be prepared well in before the first submission date of 30th September to enable the information to be checked and verified before submission to ensure all possible claimable expenses have been included. The final deadline for submission is 31st January with late returns and payments being subject to penalty fines and interest payments which should be avoided.

All businesses must keep records of the financial transactions and submit these accounts annually to HM revenue and customs in the format of the self assessment tax return which are supplementary pages included in the self employed annual tax return.

Different standards for accounting by sole traders are applicable compared to the accounting requirements of a limited liability company and consequently much simpler bookkeeping can be applied. Bookkeeping for a limited company invariably requires a double entry system of accountancy that produces not just a profit and loss account but also a balance sheet. The financial accounting solution has to deal with business bank accounts, debtors and creditors and produce reconcilable results.

While advisable for self employed businesses to maintain a separate bank account it is not an essential requirement.

The accounting software used by anyone self employed should keep accurate records of fixed assets although it is not essential that this also produces a balance sheet. With these factors in mind accounting software for the self employed can be much simpler and greatly advantageous if that accounting solution also produces the numerous and sometimes onerous burden of HM revenue and customs tax returns and working papers.

Self-employed accounting software requirements

Accounting software for anyone self-employed does not have to be double entry. The bookkeeping can be a single entry system which makes the value of using excel spreadsheets feasible and due to the simplicity highly desirable.

Such accounting software being excel based is fast and easy to use, utilising all the benefits and advantages excel offers. Small Business Accounting Software that is also highly visible at the click of a button.

Accountancy software on a database hides the financial transactions that the software has to query to retrieve the required information. It is this element of a database system that often requires some technical accountancy knowledge to operate efficiently. Accounting software written on excel spreadsheets is, due to its visibility, much easier to use and understand and requires little or no accounting experience making it an ideal small business accounting solution.

Good financial records are the key to the success of any self-employed business and especially to the value of Accounting Software. A quality accounting software package is an essential component of your business to identify potential problem areas and capitalise on success to drive the business forward.

Accounting software and HM revenue and customs returns

Different types of accounting software are available for the self-employed and some of this software has been specifically designed to cater for the precise size and requirements of the self-employed business. There are basic packages available for business that is not vat registered and have no employees. Standard packages for the business that is vat registered.

The vat threshold limit at which businesses are liable for vat is 64,000 pounds from April 2007 and subject to possible changes after that date. Advanced and more sophisticated accounting software for the self-employed who also employ staff are available with integrated payroll software included in the small business accounting software packages.

The best accounting software will not only produce the financial accounts but also produce the HM Revenue and Customs returns. Accounting software that has automated the vat returns each quarter, payroll software that completes the time consuming P11 employee deductions working papers and simplifies the P60 year end certificates and P35 employer annual paye return. And most crucially a system that automates the self assessment tax return.

Accounting software and self assessment tax returns

The self assessment tax return is a complex document for the initiated. It does not have to be, for a small business with turnover less than 15,000 pounds the self assessment tax return can be completed by entering totals of sales, expenses and net profit on page one.

For larger businesses more complex calculations are required. Capital allowances, balancing charges, base periods and expense analysis are beyond many self employed. Self-employed businessmen are experts in their field of operations and often require help with these accounting based elements that an accountant or accounting software can provide.

The best small business accounting software can take the simple lists of financial transactions and by clever use of formulae built into excel spreadsheets transform the year end experience by automating the production of the self assessment tax return. It is not impossible, if a calculation can be made mathematically then a quality accounting software package can automate the process using formulae within excel to produce the calculations and offer the businessman an automated self assessment tax return.

A function that accounting software can do at a fraction of the price an accountant might charge for this service. Small business accounting software for the self-employed should produce the self assessment tax return as the end product. The self assessment tax return is the self-employed end product of his financial endeavours and therefore the self assessment tax return has to be the end product of any quality small business software.

Businesses whose customers are vat registered should consider opting for voluntary vat registration as sales would not be affected by vat registration and registering would permit that business to also reclaim vat input tax on purchases. Businesses with mainly non vat registered customers may wish to delay vat registration until the point is reached at which liability to vat tax becomes inevitable.

Consideration should be given to maintaining sales below the vat threshold provided this does not result in a significant loss of profit. When the vat threshold of 64,000 pounds p.a. is exceeded customs & excise should be advised. It may be possible to delay vat registration if sales breached the vat threshold due to an abnormal sales period that may not necessarily be repeated in the foreseeable future. Having reached the point of vat registration consideration should be given to the various vat schemes which are available to either simplify the vat calculation or smooth the vat tax liability.

Choose the right vat scheme for your business

Unless a vat scheme is adopted then the standard inputs and outputs vat scheme would be applied. This involves charging all customers vat on sales known as output vat and paying this amount to the vat office each quarter. Vat registered businesses can also deduct from the vat liability the input vat on purchases that suppliers have charged the business. It is important to ensure all sales and purchase invoices are retained and an audit trail from the individual transactions to the vat tax liability is maintained as customs & excise do inspect vat records, the frequency of those visits, often once every three years can increase dramatically if the vat records are considered inadequate.

Accounting software can provide a solution to record keeping with automated vat calculations from the basic data entry of sales and purchases on excel spreadsheets.

Vat Schemes

Vat flat rate scheme

The vat flat rate scheme can be adopted by businesses that have an annual turnover excluding vat of under 150,000 pounds p.a. businesses that have adopted a vat flat rate scheme pay vat at a percentage of sales rather than the difference between vat on sales and vat on purchases. The exact percentage paid is in line with the average for that trade sector. Vat is not reclaimable on purchases under the flat rate scheme. The customs & excise website contains details of the vat flat rate percentages for each sector.

Customers are charged vat at the normal vat rate, 17.5% if standard rated goods. The actual vat payable is then calculated at the appropriate percentage of the total sales figure including vat. An adjustment to the accounts would then be required to adjust for the difference between the vat paid and the amount payable if an inputs and outputs basis had been used. The flat rate calculation can be automated by calculating the vat on sales at the flat rate and expensing the vat input to the purchase accounts. Businesses in their first year of vat registration also receive a 1% reduction in the vat flat rate for their trade sector which can save tax.

Annual vat accounting scheme

Not suitable if you receive repayments of vat, the annual accounting scheme is based upon an annual estimate of the vat bill which is then paid in monthly or quarterly instalments throughout the year with the balance payable or received at the end of the year when the annual vat return has been submitted. The vat threshold for this scheme is businesses with a sales turnover not expected to exceed 1.25 million pounds. The main benefit of the annual accounting scheme is to smooth the vat payments over the year.

Vat cash accounting scheme

Under the vat cash accounting scheme the vat return and liability to pay vat is based upon the date sales were received and the date purchases were paid rather than the invoice tax points. The vat threshold for the cash accounting scheme is businesses with a sales turnover excluding vat of under 1.35 million pounds that can be extended for existing users to a turnover of 1.6 million pounds and left in place for up to 6 months after the vat threshold has been breached.

Accounting for vat using the cash accounting scheme may require businesses to record sales and purchases on cash received and paid basis and adjust accounting records for accruals. Alternatively, sales and purchases can be entered into the accounting records based upon the invoice tax points and a quarterly adjustment made for debtors and creditors at the beginning and end of each quarter. Such accounting adjustments would not be suitable for everyone.

Vat retail schemes

Retailers selling to the general public may not easily be able to produce vat sales invoices to individual customers and there are various vat retail schemes available on the customs & excise website that retailers can adopt. The main benefits of the vat retail schemes are to dispense with every customer being issued a vat invoice unless requested. Vat retail schemes can be used in conjunction with both flat rate schemes and the annual vat accounting scheme.

Company tax records must include all original sales receipts and purchase expenses. Under the Companies Act legislation registered companies must also keep accounting records.

Companies are responsible for calculating their own corporation tax liability and paying the corporation tax without prior assessment by the Inland Revenue. Companies which fail to deliver their tax return by the statutory fling date which is normally 12 months after the accounting period are liable to penalties.

An accounting period normally being 12 months - can be shorter but never longer. Should a company submit the CT600 Corporation Tax return form without the accounts then it is treated as not having submitted a tax return form.

Current Company Tax Return Forms

The latest version of the CT600 form for 2007 has been available for download from the Inland Revenue website since 31 August 2007. The Corporation Tax Return Form CT600 Version 2 contains two small changes from the previous 2006 version.

CT600 (short) for small companies has an additional box on Page 1 so that a company which is a member of a group other than a small group can identify itself. The same additional box is on CT600 plus a new box on page 3 of the 8-page form so that a company with ring fence profits can show the ring fence profits included in its figure of total profits.

There are no changes to other forms in the CT600 series at present and all the CT600 Supplementary Pages published in 2006 remain valid and will probably remain so until at least after the 2008 Chancellor Budget.

Corporation Tax Rates

While the main rate of Corporation Tax remained at 30% in 2006 and 2007 which will be reducing to 28% in 2008. The small company corporation tax rate applicable to companies with annual profits less than 300,000 pounds was increased from 19% in 2006 to 20% effective on profits earned after 1 April 2007 and is set to increase further on 1 April 2008 to 21% and to 22% from 1 April 2009.

Corporation Tax on ring fenced profits being income and gains from oil extraction activities or oil rights in the UK and UK Continental Shelf remain at 19% for small companies and 30% for larger companies. Interest is charged on late payments and at a lower rate on installment repayments of Corporation Tax as is the practice on all late tax payments.

Accounting Periods straddling 1 April

The effective date for changes in the Corporation Tax rate applicable in recent years has been 1 April each year as opposed to the 5 April for unincorporated businesses. For companies with accounting periods that straddle the 1 April separate calculations are required for the period before 1 April and after 1 April based upon the number of days in each accounting period. As a proportion of 365 (366 in leap years such as 2008)

No Corporation Tax Due

Companies are required to advise HMCE by either submitting a company tax return or informing them by completing the HMCE form for this purpose or at the very least returning the payment slip marked with no payment to be made. All communications should state the corporation tax payment reference which can be found on the payment slip. This reference number is specific to each accounting period and must be quoted accurately.

Filing Corporation Tax Return Online

Most companies and their agents can file company tax returns online. The computations, financial accounts and other supporting documentation must be sent in PDF format with some approved software products being sent in XBRL format. Filing the company tax return online has the advantages of speed, can be done 24 hours a day and the software calculates the tax liability.

Using the CT Online service also allows the company tax position to be viewed including any interest or penalties that have been charged. Company details such as telephone, fax, addresses and email addresses can be changed and agent details can be added or changed. Authorised agents can also view client company corporation tax positions and liabilities.

Inland Revenue enquiries into Company Tax Returns
Enquiries into Company Tax returns are governed by rules and codes of practice. HMCE have at least 12 months from the statutory filing date to commence an enquiry when the company tax return has been submitted on time and longer if the return is submitted late.

Companies are advised in writing when an enquiry starts and ends. If no adjustments are required HMCE advise the enquiry has finished. Any adjustments are also advised in writing and the company then has 30 days to file an amended Company Tax Return failing which HMCE will amend the return.

At any time during an enquiry a company can apply to the Inland Revenue Commissioners for an enquiry to be closed. Separate codes of practice exist for local offices and specialist compliance offices

You should register as an employer and operate a paye system if your employee already has other employment, or if the employee earnings are equal to or above the paye threshold. The paye threshold for 2007-08 is earnings of 100 pounds per week or 435 pounds per month at which point income tax and national insurance deductions may be required. These limits include the value of any benefits in kind that may be paid.

Employer Registration Information Required

Generally the information to be provided includes the business name, trading address, type of business, name and address of the employer, national insurance number and tax office reference of the employer, contact telephone number and email address if applying by email. In addition details will be required of the likely number of employees, frequency of payment, the date the first employee was appointed and the first payment date. Also have available the address where the payroll records will be kept and the contact details of the person responsible for the payroll.

Where partners are involved details of each partner names, addresses, national insurance numbers and tax office references will be required and the LLP number for limited liability partnerships. Limited companies will be required to supply the address of the company registered office, date of incorporation and company registration number plus details of the directors; names, addresses, contact telephone numbers, national insurance numbers, tax office references

How to register as a paye employer

Employers can register for paye online at the HMCE website. Click employers - register as an employer - first steps as an employer - scroll down the page until you can click email which then presents you with online registration form to complete and send. Alternatively contact HMCE employer helpline at 0845 6070 143.

Paye and payroll records

Accurate payroll records are essential, full stop. Employers must keep payroll records for both HMCE purposes and employees. The employee records must include the name and address of the employee, national insurance number, date of birth, income tax code, all payments and benefits made and all deductions for income tax, national insurance and voluntary deductions.

When registering to operate a paye system immediate arrangements should be made to ensure these records are maintained either by setting up the records yourself using the help and advice contained in the revenue CD-ROM provided to all new and existing employers or employing a payroll service to produce the records or using a payroll software package.

Various payroll software packages are available with different degrees of complexity. An ideal solution for small employers with little payroll experience would be one written on excel spreadsheets that produces accurate deduction calculations, payslips and completes excel copies of the compulsory HMCE forms significantly easing the administrative burden.

Paying employees

Employees must be paid the national minimum wage which for adults was raised on the 1st October 2007 to 5.52 pounds per hour. Every employee must receive a payslip that shows the amount of income tax and national insurance deducted from the gross pay. In addition every employer must also calculate the employer national insurance contribution. If you are an employer and not operating a payroll software system as an employer you must design a payslip to give to your employees to satisfy legal requirements.

HMCE Payroll Forms

P11 Employees deductions working sheet

The working paper is a record of the weekly or monthly pay for each employee and the income tax and national insurance deductions.

P14 End of year employee deductions summary

Summary of the employee income tax and national insurance deductions recorded on the P11 deductions working sheet

P35 Annual employers return

Summary detailed by employee of the annual totals of income tax and employee national insurance deductions and employers national insurance liability

P45 Details of employee leaving

Only available from the employer helpline the P45 is a certificate of the amount paid to the employee and the income tax deducted during that employment. Every employee that leaves the employers employment should be issued with a P45.

P60 End of year employee certificate

The P60 is a certificate of an employees total earnings and total income tax deducted during the tax year including previous those of previous employers and also the amount of national insurance deducted by the current employer and should be issued to every employee the employer has at the 5th April each year.

Each of these HMCE paye forms can be automatically completed by payroll software and produce excel copies of the HMCE forms making such a package suitable for both inexperienced employers and those wishing to minimise the administrative burden payroll can place on an employer.

Paye payments and online bonuses

Deductions of income tax, employees national insurance and employers national insurance must be paid to HMCE each month, the standard final payment date being the 19th of the month following the payroll month. If monthly payments of income tax and national insurance deductions including employer national insurance are less than 1,500 pounds per month then employers have the option to pay the amount due to the HMCE on a quarterly rather than a monthly basis.

Payments of income tax and national insurance to the HMCE can be made online electronically. At the end of each financial year, 5th April, every employer must submit the P35 annual employers return to HMCE detailing the amounts paid to each employee and the deductions made for income tax, employees national insurance and employers national insurance with the amount that has already been paid to HMCE in respect of the income tax and national insurance contributions.

Employers with less than 50 employees are eligible for a tax free online bonus when the P35 employer annual return is submitted online which has been a tax free 250 and 150 pounds in recent years.