Tax Obligations

1.Corporation tax

Introduction

Corporation tax is paid by limited companies on their profits.

Corporation tax is not payable by the self-employed but does apply to the following organisations, even if they are not limited companies:

members' clubs, societies and associations
trade associations
housing associations
groups of individuals carrying on a business but not as a partnership, eg co-operatives

What you need to do

If your company is liable to pay corporation tax on your profits, there are several things you must do:

Tell your Tax Authorities (TA) that your company exists and that it is liable for tax.
File a self-assessment Company Tax Return for your company, on which you calculate your own corporation tax liability and pay it without prior assessment by TA.
Keep records of all company expenditure and income in order to work out your tax liability accurately.
If you don't let TA know that you are liable for corporation tax, file your Company Tax Return incorrectly, or pay your corporation tax late, you may incur a financial penalty. To avoid penalties and interest charges you should know your:
statutory filing date - the date by which your company tax return must be received by TA
normal due date - the date by which you must pay your corporation tax

Keeping records for corporation tax

To calculate your liability for corporation tax, you are legally obliged to keep "sufficient" records of your out goings and income to make a complete and correct Company Tax Return.

Sufficient records include:

details of all receipts and expenses incurred in the course of your company's activities
details of all sales and purchases made in the course of trade, if your company has a trade that involves dealing in goods
all other supporting documents

The precise records your company needs to keep will depend on the type and size of your business, but the records must be adequate to enable you to send in a correct Company Tax Return.

For tax purposes TA requires any organisation treated as a company to keep its records for at least six years from the end of your accounting period.

In certain circumstances, such as a late tax return or a TA enquiry, your company may need to keep records longer than the six-year period.

If your company does not keep records, TA can charge a penalty.

2.VAT

Most countries have an indirect tax. Sales tax and VAT are the more common, specially the second.

Set up records and invoice correctly for VAT

Once your business is VAT registered you will need to obtain, issue and keep various documents- including receipts and suppliers' invoices.
This guide will help you to set up basic VAT records and lay out your VAT invoices correctly. It also tells you where you can go to get more information and advice.

What a VAT invoice should include

Whenever you supply goods or services on which VAT is chargeable to another VAT-registered person or business, you must give them a document showing certain information about what you are supplying. This document is called a VAT invoice.

Normally you must issue a VAT in voice within 30 days of the date you make the supply, but this depends on the countries.

What details must you include on a VAT invoice?

You must show:

a unique and sequential identifying number
time of supply
date of issue (if different from time of supply)
name and address of your business
customer's name and address
your VAT registration number
a description sufficient to identify the supply
the quantity of the goods or services, with a unit price - excluding VAT
the rate of VAT per item
the amount of VAT
the rate of any cash discount

Basic VAT paperwork: what do I have to do?

As soon as your business is registered for VAT you must:

raise a VAT invoice whenever you make a standard-rated or reduced-rated supply to a VAT-registered customer
keep copies of all invoices you send and keep original invoices you receive
keep a note of all the VAT you have paid and charged
keep a summary of VAT for each tax period covered by your VAT returns

You don't have to keep records in any set way, but they must be complete and up to date. They must also be easy for TA to inspect and the figures that you have used to fill in your VAT return must be easy to find. Usually your normal business records can be adapted quite easily to give this information. Records must be kept for a minimum of six years.

VAT invoices must be set out correctly, showing the rate and amount of VAT charged and the VAT number given to your business when you registered.You must also make sure that invoices from your VAT-registered suppliers show the same information so you can reclaim the VAT you pay.