Who Pays Corporate Tax in UK?

ax accountants from small towns like Southall
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Tax Accountants from Small towns Like Southall

As a business owner in UK, you will inevitably have to pay tax on the income you earn from your company. But what you are taxed on really depends on whether you’re classified as a UK resident or non-domestic taxpayer. This is important because it determines how much tax you have to pay on your earnings and how much you’re allowed to save in tax rebates and other savings. If you’re unsure whether you’re a resident or nonresident, you can always seek professional help from tax accountants from small towns like Southall, who are able to assist you with your tax affairs in this regard.

Tax Consultants

The majority of people who run small companies are UK residents, because they work and live primarily within the UK for most of the year. It’s usually the case that most companies to book their earnings and taxes at the local tax office where they happen to be based. However there are instances when you can actually save money by working elsewhere. Here are some of the best places where you can find tax consultants who can help you with your tax return:

 tax accountants from small towns like Southall

National Insurance Contributions in UK

There are several reasons why an individual could be non-domiciled in the UK – such as for tax purposes or if they are living permanently outside the UK. In these circumstances, the individual is not required to file income tax returns. This is because they are not legally required to declare their income and assets in UK. On the other hand, individuals who work for international clients and make money via the money or services they provide are considered to be domiciled in UK. This is because they pay all UK tax bills and are liable to inheritance tax and national insurance contributions in UK. A company that has one or more UK resident directors cannot be deemed non-domiciled for tax purposes unless it has an office and permanent address in UK.

Corporate Tax 

Companies that have offices or branches in low-income areas or those that have registration status in only a small number of tax havens will be taxed differently from larger corporations. Their corporate tax rate will also be lower than a company which operates from a UK address and pays its share in UK corporate tax. One of the exceptions to this general rule is the zero-rating status for many businesses in certain sectors like shops, restaurants and the manufacturing sector which can enjoy zero tax on income and dividends paid by them.

Businesses Operating in UK

Some businesses operating in UK may be incorporated in tax havens like Jersey and Guernsey. Such businesses can enjoy different tax rates when they earn their profits in UK. The two major tax havens in UK are Jersey and Guernsey. These countries allow businesses operating within their territories to incorporate and report their taxable earnings and profits. They can also enjoy all the benefits of the double taxation agreement between the UK and the countries in which they operate – thereby ensuring that they pay minimal corporate tax.

 tax accountants

Accounting Firms 

Many accounting firms in UK also use offshore corporate bank accounts to channel their assets and liabilities. In order to minimize their tax liabilities, the accounting firms use complex financial instruments to transfer their assets and liabilities from UK to non-UK jurisdiction. One such financial instrument used by many UK firms is the foreign exchange (Forex) trading. This involves buying and selling of foreign currencies, facilitating trade and making money. However, this kind of transaction is basically conducted within the UK and hence the companies have to pay tax only on the transactions made within UK.

 UK Tax Authorities 

Corporate tax is due on all income earned by a company. A company can earn income either during the working period or on the closing date. Most business houses make use of the ‘pay as you go’ scheme to tax their employees during their working period and after the end of the business. A company has to submit its income tax returns to the UK tax authorities on the 31 March of each year in order to receive its refund.

 tax accountants from small towns like Southall

Corporate Tax Returns

Apart, from that there are several other schemes that are implemented by the UK tax authorities to reduce the tax payments to the government. One of these is the increase in tax credits, which are paid to the company by the suppliers. The suppliers are allowed to claim tax credits on goods imported into the country. Other schemes that are implemented by the authorities include extending tax credits to certain investment schemes, the creation of special-purpose companies, tax credits for energy-efficient buildings etc. A recent survey showed that almost two thirds of all businesses in UK are not making use of these schemes. So we can safely say that there is a definite scope of tax savings for the UK corporates and that is why they are not submitting their corporate tax returns.

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