19 September 2023

Maple Gif Sept23 1

If you’ve missed any of our #Tuesday Tax Terms on LinkedIn, we’ve put them together in this handy blog,  jargon-busting from the team here at Maple Accountancy. A summary and brief description of UK taxes

  1. Corporation Tax (CT)

Corporation Tax is a tax on the profits of companies. The current CT rate is between 19% and 25%, depending on the profits of the company, and companies must file a tax return and make the payment within 12 months after their accounting period ends.

  1. Value Added Tax

VAT is a sales tax on goods and services and is typically  20%. Businesses with an annual turnover over £85,000 must register for VAT. They submit regular VAT returns to HMRC, pay VAT on sales (outputs), and reclaim VAT on purchases (inputs). There are some varying rules on VAT with certain goods and services.

  1. Capital Allowances

Capital allowances are tax reliefs that allow businesses to deduct a portion of the cost of qualifying assets from their taxable profits. Types of allowances include the Annual Investment Allowance (AIA) for plant and machinery, First-Year Allowances (FYA) for energy-efficient investments and Writing Down Allowance (WDA) for other qualifying expenditures.

  1. Business Rates

Business rates are a tax on non-domestic properties, such as offices, shops, and warehouses. The local government sets the rateable value of the property and thus the amount to pay. Some small businesses may be eligible for business rates relief or exemptions.

  1. Employers National Insurance (NIC)

If you have employees, you must pay employer’s NICs. These contributions are a percentage of each employee’s earnings above a certain threshold and help fund various social security benefits and healthcare services. This is a cost to the business and not on the employee’s income. There are some allowances for small businesses.

  1. R&D Tax Credits

Research and Development (R&D) Tax Credits are offered by the government as tax incentives to businesses engaged in qualifying R&D activities. These credits allow companies to reduce their tax liability or claim cash refunds based on their eligible R&D expenditure.

  1. Stamp Duty

Stamp duty is a tax on certain transactions, such as the purchase of shares or real estate. The rate and threshold vary depending on the type of transaction and the value involved.

  1. Capital Gains Tax (CGT)

If your business disposes of an asset (such as property, shares, or equipment) and makes a profit, it may be subject to capital gains tax. CGT is a percentage of the gain. There is an annual allowance.

  1. Flat Rate VAT

The Flat Rate VAT Scheme is where businesses pay a fixed rate of VAT to HMRC. Businesses keep the difference between what they charge customers and pay to HMRC. It’s really simple as they don’t reclaim the VAT on individual purchases – except for certain capital assets over £2,000. The flat rate to use varies based on the industry sector.

  1. Cash Accounting for VAT

On the cash accounting scheme, you only pay the VAT on sales when you receive payment. Meaning the VAT on a sales invoice isn’t paid when the invoice is raised but once the money has been received by your business. For purchases, the VAT can only be reclaimed once the money has been paid to the supplier, not when the purchase invoice is originally raised.

You are eligible for the cash accounting scheme if your estimated annual VAT taxable turnover is £1.35 million or less . If it is higher, you will need to switch to the accrual scheme.

  1. BADR

Business Asset Disposal Relief (BADR) is a capital gains tax relief. BADR reduces the amount of Capital Gains Tax due after disposing of an asset from 20% to 10%.

The lifetime limit on BADR claims is £1,000,000.

  1. Reverse VAT Charge

Reverse VAT Charge is where customers are responsible for charging themselves VAT and directly paying it to HMRC, instead of the supplier invoicing for VAT.

Working within these sectors we understand that this scheme applies, but not exclusively to, businesses that provide specified services under the construction industry scheme.  Reverse VAT Charge is applicable only to businesses or individuals registered for VAT.

  1. Accrual VAT

VAT Schemes sometimes simplify the way some VAT-registered businesses calculate and account for VAT to HMRC.

The Accrual scheme (Standard VAT) is when VAT is recorded and paid based on the date the invoices are issued.

For example, if an invoice raised in the VAT quarter ending 31 May 2023, but was paid 1 June 2023, the VAT relating to the invoice would still need to be paid in the May quarter.

You can follow us on LinkedIn for all the up-to-date information https://www.linkedin.com/company/maple-accountancy

Read more here:57 Ways to Grow Your Business – Maple Accountants

Taxing Tax To The Next Level – Maple Accountants

UK Flat Rate VAT (Value Added Tax) – Maple Accountants

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01332 207336
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