Small companies have to file documents at two places :
1 – Companies house ; and
2 – HMRC
Companies house: two documents
1 – Annual accounts – Companies house does not charge for filing this document.
2 – Annual return – Companies house charges a single annual charge, information can be updated for free throughout the year by filing further confirmation statements during the payment period.
HMRC: two document
1 – Companies Tax return
2 – Owner tax return
Bonus Material
Group Accounts – A company is exempt from the requirement to prepare group accounts if at the end of the financial year, the company is subject to the small companies regime. source Companies Act 2006 Section 399
Clear guidance given in HMRC agent toolkit Capital v Revenue – Page 18.
Sole Trader and partnership : No deduction allowed.
Company: treatment given below:
When was the goodwill acquired?
Tax deduction
Before 1 April 2002
No deduction allowed.
Between 1 April 2002 to 3 Dec 2014
Deduction allowed as per amortization in accounts – under Corporate intangible assets regime ; or At fixed rate of 4% WDA Deduction was also allowed for goodwill purchased from related parties.
3 Dec 2014 to 7 July 2015
Amortisation allowed but only if goodwill purchased from unrelated party.
From 8 July 2015 to 31 March 2019
No deduction allowed
From 1st April 2019
Relief @ 6.5% avaliable in certain cases – please see CIRD44050 Where no qualifying IP acquired, no relief. No relief for goodwill purchased from related parties.
Note: 1. Where deduction is not allowed for trading profits . Deduction should be taken for Capital Gains Tax calculation. 2. Please note rules only allow relief to be claimed when a company acquires a business directly rather than acquiring the shares in the target company. Purchased goodwill can only be recognized on a business acquisition but not on an acquisition of shares.
Moral of the story HMRC has prepared fantastic tool kits, please use it regularly to avoid mistakes.
We recently took a new restaurant client and were reviewing their employee pension arrangements under auto enrollment.
We noticed that the client (employer) was contributing pension on full pay rather than qualifying earnings.
Qualifying earnings – These are your earnings from employment, before income tax and National Insurance contributions are deducted, that fall between a lower and upper earnings limit that are set by the Government.
Example: CD Ltd has an employee Jane and her monthly salary is £1,500.
Additional employer’s contribution under full pay method is of £10.
This employer has c30 employees. Thus yearly savings are of c£3,500.
This employer also has couple of employees over upper limit, thus additional savings.
Restaurant trade inherently has a high staff turnover and it’s advisable to postpone staff pension deductions for three months to avoid deducting pension for staff members who work for a short time with the employer. We also implemented at this client which will result in additional savings.
Caution: Please ensure employees are communicated about these changes.
This is a simple topic for most of the businesses but has been presented by HMRC in a complex way.
Basically it’s about loans.
These rules covers the usual loans and also cases which are `deemed`. Whenever word `deemed` is used it means special cases specifically mentioned in legislation.
Recently I came across and very helpful webinar from BKL Tax (a tax consultancy), link below and I thought I should share it.
Some key points from the webinar:
• If a trade debt is released its taxable income. E.g. A Ltd sold £100 apples to B Ltd and later A Ltd forgave the trade debt for say bad debt. £100 will be taxable income for B Ltd.
• Interest expense deduction is taken on accrual basis not on paid basis. But there are some anti-avoidance rules around these – related parties beware!
• International accounting standard 23 and Loan relationships: Capitalised interest MUST be claimed in year interest arises (on accrual basis). CTA09 S 320
• Loan release not taxable in specific cases CTA09 S 322 :
1) Release is part of corporate insolvency
2) Consideration is inform of ordinary shares (debt re-structure in case lenders taking over a business)
3) Debtor company in insolvency/administration/liquidation etc.
• Pre trading LR rules also exist
Connected parties (CTA09 S466)
If companies are under the control of the same person – waivers among them are generally ignored for tax purposes i.e. for creditor company it will not be a tax deductible expenses and for debtor company it will not be a taxable income.
Webinar also mentions of a case where companies controlled by husband and wife are NOT connected. E.g. A ltd is 100% owned by Mr A and B Ltd is 100% owned by his wife Mrs B. A ltd and B Ltd are not connected. I think HMRC may challenge this.
Speakers also briefly mention Interpretation Act 1978 and its use in interpreting the term “same person”.
I recommend that you are interested please go to the webinar mentioned among above.
