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Guide to Tax Compliance, Planning, and Advice

Written by Sach

• Compliance
• Tax

Tax is one of the few things in life that carries a great certainty. Legislation in almost all countries in the world requires citizens and business owners to report their income to pay the appropriate level of tax.

But the process of maintaining compliance with changing tax laws and tax rates can be a challenge. This is especially true for international organisations that do business with partners from all over the world.

Challenges In Maintaining Tax Compliance

There are complexities involved in filing individual and corporate tax returns. This results in more people seeking a tax calculator and professional assistance. Irrespective of these difficulties, there is no scope for non-compliance when reporting income tax returns or following international tax laws.

This means that it is vital for businesses and individuals to be familiar with tax compliance, planning, and advice. If that is what you have set out to do today, then you are in the right place.

Today, we’ll take you through everything you need to know about tax compliance, planning, and advice.

What is Tax Compliance?

A UK based company is subject to corporation tax on its worldwide income and gains. Similarly, a company not resident in the UK may fall within the corporation tax regime if it carries on activities through a UK permanent establishment or deals in or develops UK land.

Since 6 April 2020, non-resident companies receiving rent from UK property are also subject to corporation tax instead of income tax. Hence, they would be required to file corporation tax returns. Given all this, the rules around UK tax residence and what constitutes a permanent establishment can be quite complex. 

It should further be noted that companies subject to corporation tax must prepare and submit a Company Tax Return (Form CT600) to HMRC. This should be done with accompanying computations and statutory financial statements.

A return is due for the same during each tax year accounting period. This will often be the same as the period of account for which the statutory accounts are drawn up. However, it should be noted that this is not always the case.

Tax compliance and tax returns in the UK should be prepared with the care that it demands. We at Pennyhills do precisely that, which is why we are always confident in the accuracy of the returns.

At Pennyhills, we provide a tax compliance service that is easy to use through a cloud based software that is Making Tax Digital (MTD) ready. We excel at delivering tax-efficient solutions and comply with current tax practices.

On top of this, we go above and beyond when it comes to answering clients’ queries on several topics, including income tax, tax rates, personal tax allowance, VAT, and inheritance tax in the UK. You get all this and more with our compliance approach that is geared towards the early preparation of tax returns with the highest efficiency.

What is Tax Planning?

Tax planning can be explained as the legal and complex process of arranging one’s affairs to minimise tax liability. The UK tax system is quite complex and is constantly changing.

This is why companies need proactive tax planning strategies. This is especially true for SMEs, corporates, and high net worth individuals. With proper assistance, one can get a wide range of reliefs and provisions that are available to legitimately reduce a tax liability without stepping into the area of tax avoidance.

Ideally, SMEs should look for qualified professional accountants who, with a high level of experience and knowledge, would execute the best tax planning for your business. At Pennyhills, we make sure that you get the best tax plan for your business, which would result in significant professional and personal improvements for you.

It should be noted that tax considerations are relevant at every stage and can include:

• Business Structure: Incorporate a limited company, set up a partnership, or stay as a sole proprietorship
• Business Growth
• Tax-efficient distribution of profit and income
• Succession Planning: Exiting a business or passing the business on to the next generation or management

Types of Tax Planning

Before jumping into the essential tax planning services any SME should be looking for, it is essential to understand the different types of tax planning.

The two major types of tax planning are:

Corporation Tax Planning

Corporation tax usually represents a substantial part of expenses in profit and loss accounts. On top of this, the increased reporting obligations, robust investigation policies on the part of the HMRC, and harsher penalties for non-compliance mean that an HMRC investigation can take a significant amount of your time and resources.

Further, with the introduction of MTD for income tax and MTD for corporation tax on the roadmap further compliance measures, businesses will need to fundamentally change accounting processes in order to comply.

Furthermore, new legislation brought in by the Government has raised the rate of corporation tax from 19% to 25%, putting further importance on corporation tax planning.

Ideally, organisations should have a dedicated outsourcing accounting partner that provides a range of services to help minimise corporate tax exposure. It will also help relieve one of the administrative burdens of complying with tax legislation. Some other services that businesses should also look at are:

• Taking complete advantage of tax allowances, reliefs, and tax credits
• See if you are eligible to claim for the Research and Development Tax Credit for SMEs
• Determining the most tax-efficient structure for your business
• Achieving the maximum revenue or capital tax treatment
• Acting on your behalf when in discussions with the tax authorities
• Making the most of tax opportunities that are specific to your industry
• Meeting the ever-increasing rigorous demands of compliance

Personal Tax Planning

It is now a fact that the tax regime is becoming more complex. With that, more emphasis is being put on the individual responsibilities of all taxpayers. Such as MTD for income tax, taxpayers will be responsible for using MTD compliant software to file their self-assessment income tax returns.

The free HMRC online filing tool will soon not be available. Hence, everyone needing to file a self-assessment income tax return should get professional advice and support if you do not want to pay more income tax than you need to and meet all of the filing requirements.

If a business wants to be in this ideal position when it comes to personal tax planning, then the services that your accountant should provide, include:

• Advice on minimising tax liability for all personal taxes, including income tax, Capital Gains Tax (CGT), Inheritance Tax (IHT), filing of tax returns, and completion of tax returns
• Advice on which payments are due and when
• Advice on estates and trusts

For a full breakdown of the information your accountant needs to complete your self-assessment, visit this blog.

Top Eight Services You Should Seek to Ensure Efficient Tax Planning

At Pennyhills, we believe in only providing our clients with the best services, which is why our tax specialists tailor the service to the precise needs and risk profile of your business. But what if you don’t know what you should be looking for when it comes to efficient tax planning?

In that case, you don’t need to panic as we have got you covered. Right now, we’ll take a look at some of the most important services that you should seek for effective tax planning.

Incorporating

Determining which business structure is most suitable plays an important role in deciding whether or not it would be efficient to incorporate as a limited company. If you do opt for that, then you can take advantage of the lower corporation tax rates.

If that is not suitable, the other option is to remain as a sole trader or create a partnership. It is vital for any business to receive professional assistance in different aspects of the appraisal and registration process.

Filing Returns

Preparing and reviewing VAT returns for a business cannot be done with just a VAT calculator. Instead, you need professional assistance when it comes to:

• Income tax
• Corporation tax
• Capital Gains Tax computations and returns
• Other related submissions like Corporate Interest Restriction (CIR) returns
• Ensuring correct disclosure
• Provisions

Preparing and reviewing deferred tax provisions and notes for inclusion in individual companies and consolidated group statutory accounts should be done under the UK GAAP and IFRS accounting standards.

Interim Reporting

Interim tax reporting should be managed for accounting purposes.

New Legislation

You should have access to guidance and advice on developing complex areas of your business like:

• Loss restrictions
• CIR rules
• Anti-hybrid rules
• Transfer pricing
• Research & Development (R&D) tax credits
• Liabilities

Tax liabilities should be calculated at the earliest instance giving you the longest period of time to pay them. This should be done along with due dates for payment for corporation tax, income tax, Capital Gains Taxes, and VAT.

Planning

Under this service, personal and corporate tax reliefs, capital allowances, and loss relief should be utilised effectively. This has to be done across time and across a group.

Claims

It is essential to have access to services related to monitoring, advising, and preparing potential claims. This service should also include elections for particular tax treatments to apply for offset losses against total profits and gains.

Tax Compliance, Planning, and Advice at Pennyhills

In every facet of business, tax plays an important role. This means that if you wish to avoid surprise losses related to tax, tax advice should be sought before you enter into any business transactions. This is why tax planning, compliance, and advice is best sought out in advance!

We at Pennyhills can help you with that and more! We take a look with fresh eyes on tax compliance, planning, and advice.

Here are a few other articles on tax compliance, planning and advice that can help your business:

• Avoiding Online Tax Scams: What Should Small Business Owners Look For?
• Taxes 101: How to become tax efficient
• The Complete Self Assessment Tax Return Checklist

Another unique thing about us?

We have worked with businesses across several sectors. And the common thread that all our clients share is that they are diverse! If you think that you fit the bill, get in touch and see how we can add value to your business.