The UK corporate tax system is complex and varies from one region to the next. Sectors include Scotland, Wales, Northern Ireland and England & Wales. This article looks at online accounting firms in these sectors. A few things stand out for UK company tax, especially for the online accountant.
The UK corporate tax system applies to corporations (including limited by shares or trust) and other bodies including non-profit organizations and clubs. The UK corporate tax system does NOT apply to individuals, trusts or partnerships. The corporate regime is broken down into 5 different zones with corresponding duties and penalties.
The Lowest Rate of Duty Payable
Surtax – is charged on income that passes through the personal tax zone. The rate is usually 2.5% above the national rate. This means that salaries are taxed twice the amount earned from employment and only once if dividends are received. Capital gains are not taxed, although there are exceptions such as the first investment in a residential property and the first purchase of shares on the open market after one year from the date of purchase.
A Slightly Higher Rate of Business Taxes is Levied On Commercial Property
There is a flat rate called “stamp duty” which is paid on purchases, on transfers and on transfer of ownership. The rate is often equal to 35%. A fee is charged for entering non-residential land and for setting up an office in a non-residential area. Stamp duty does not apply to businesses that trade exclusively with the UK or benefit from UK trade agreements.
Multiple Countries and Incorporate in Multiple Countries
Some UK companies operate in multiple countries and incorporate in multiple countries need accounting services. They can therefore be said to be multi-national. In order to be able to incorporate in another country, they must register the company with the authorities of that country. Registration of a company saves both time and money in that country’s taxation system and also attracts more international business to the country where it is registered.
Certain Dividends are Subject to Double Taxation
These include dividends received by a company from certain types of assets. Assets are subject to income tax rates. Examples are profits from loans and advances, retained earnings, interest paid on accounts payable and dividends on shares. Certain types of transactions are treated as passive activities in the UK. These include trading in shares, shareholdings, options trading and certain types of derivatives.
The UK Corporate Tax Scheme Regime is Based on a Basic Principle of Simplicity
Companies are encouraged to reduce their business costs and maximize efficiency by avoiding a number of complex transactions. Tax benefits of many businesses have resulted due to the simplified tax system. The regime is also aimed at preventing the avoidance of inheritance tax and stamp duty by a company’s directors and also by its shareholders.
Single Market Tax
Companies in the UK are required to pay the Single Market Tax which is based on the individual income of the company and not on the value of its assets. This rate is specified by the UK tax laws and changes according to the personal circumstances of each company. The corporate tax accountant in the UK can make payments of tax abroad through their UK company. This payment is called a non-taxable profit and can be allowed by the tax authorities of the country of residence. Payment of a corporate tax resident in the UK to another country will not be considered as a taxable activity in the country of residence and is not subject to double taxation.
Tax Relief System for UK
The Self-Employment Allowance is another tax relief system for UK residents who work for other companies and earn income from such companies but cannot claim dividends or capital gains from them. The amount of tax paid on this amount depends on the profit made by the company in each year. The tax payer is liable to pay income tax if the company makes a dividend payment to any person, including the non-residential owner of the company’s shareholdings. A payment is also made to the National Insurance Fund. The businesses must pay corporate taxes on the income of the non-residential owner of the shares. There are also some businesses that get this allowance and are not subject to paying any taxes on dividends received.
Payments of Capital Gains Tax to the HMRC
Payments of Capital Gains Tax to the HMRC are necessary if the business is established and continues to carry on trading activities at a rate higher than the rate of income from trade. Businesses can choose to pay the income tax on capital gains that arise from selling assets or shares or paying unclaimed tax payments. There is no ceiling on the amount of taxes to be paid on the above-mentioned items. A tax-adjustable trading profits exception is applicable to all businesses.
A corporation that is not resident in the United Kingdom is considered to be a foreign company and has to pay the corporate tax of the country where it operates. Otherwise, the corporation would be liable only to a single rate of tax. UK tax law provides exceptions to the non-dominant nature of the business and the fact that it does not trade in its own country. Examples of these are public companies and those that are incorporated under the law of the constituent countries of the Union.