Financial reporting and auditing are governed by various regulations and standards:

1. Financial Reporting:
   • UK Generally Accepted Accounting Practice (UK GAAP) and International Financial Reporting Standards (IFRS) guide how companies prepare financial statements.
   • Larger companies often use IFRS for consolidated financial statements.
2. Auditing:
   • The Companies Act 2006 establishes legal requirements for company audits, auditor appointments, and audit reports.
   • Auditors follow International Standards on Auditing (ISAs) and UK-specific standards issued by the Financial Reporting Council (FRC).
   • The FRC oversees accounting and auditing standards, while other bodies like the Audit Quality Review (AQR) and Professional Oversight Board (POB) regulate audit firms.

Keep in mind that regulations can change, and staying updated with the latest rules is important. The UK has been undergoing reforms to strengthen auditing and corporate governance, so it's essential to follow current developments.

1. Personal Allowance: A certain amount of income is tax-free, known as the personal allowance. Beyond this threshold, income is subject to taxation.
2. Basic Rate: Income above the personal allowance up to a certain threshold is taxed at the basic rate. This rate is typically lower than the higher tax bands.
3. Higher Rate: Income above the basic rate threshold up to another threshold is taxed at a higher rate, which is greater than the basic rate.
4. Additional Rate: Income above the higher rate threshold is subject to the additional rate, which is the highest rate of income tax in the UK.

In addition to these basic rates, there are other tax considerations like the dividend tax and capital gains tax. The rates and thresholds may vary from year to year as determined by the government's fiscal policies.

1. Register with HM Revenue and Customs (HMRC) as employers.
2. Collect employee information, like names, addresses, and National Insurance numbers.
3. Use payroll software to calculate and deduct Income Tax and National Insurance Contributions (NICs).
4. Pay employees on time and provide payslips.
5. Report earnings and deductions to HMRC using Real Time Information (RTI).
6. Manage National Insurance Contributions for both employees and employers.
7. Enroll eligible employees in a workplace pension scheme.
8. Provide year-end forms like P60 and submit annual returns to HMRC.
9. Keep payroll records for at least three years.

Be aware that regulations may change, so staying informed and seeking professional guidance is crucial to ensure compliance

To claim R&D tax credits in the UK:

1. Ensure eligibility as a limited company engaged in qualifying R&D activities.
2. Clearly identify R&D projects meeting criteria.
3. Keep detailed records of R&D activities and costs.
4. Calculate R&D costs (wages, subcontractors, consumables, etc.).
5. Prepare your claim with a tax advisor.
6. Submit your claim to HMRC online or via paper form.
7. Await HMRC review and provide additional info if needed.
8. Receive approved credits as a reduction in corporation tax or cash payment.
9. Maintain R&D records for future claims.
10. Consult a professional for expert guidance.

In April 2023 the Corporation tax rate was raised from 19% to 25%. However, tax rates and regulations can change, so it's important to verify the current rate with Her Majesty's Revenue and Customs (HMRC) or a qualified tax professional. The due date for Corporation Tax in the UK typically depends on the company's accounting period. In general, Corporation Tax is due 9 months and 1 day after the end of the accounting period.

The Construction Industry Scheme (CIS) in the UK regulates taxation within the construction sector. It involves contractors and subcontractors registering with HM Revenue and Customs. Contractors verify subcontractors' tax status before making payments, with deductions based on the subcontractor's status. Monthly reporting to HMRC is mandatory, and contractors must pay the deducted taxes. Compliance is crucial to avoid penalties, and end-of-year statements are provided to subcontractors. Disputes can be appealed with HMRC. CIS aims to enhance tax compliance and reduce evasion in the construction industry, ensuring accurate tax payments by subcontractors.

Value Added Tax (VAT) is a consumption tax imposed at different stages of production and distribution, ultimately passed on to the end consumer. VAT registration is mandatory when a business reaches a specific annual turnover, typically set by each country, or when engaged in specific taxable activities. In some instances, voluntary registration is an option for businesses below the threshold but looking to recover input tax. The due dates for Value Added Tax (VAT) payments vary by country and can also depend on the specific circumstances of the business. In many countries, VAT payments are typically due on a regular basis, such as monthly, quarterly, or annually. The specific due dates are often determined by the tax authorities and can be influenced by factors like the business's turnover, industry, and filing frequency.

Here are some common VAT payment schedules:

1. Monthly: Some businesses, particularly those with high turnover, are required to remit VAT on a monthly basis.
2. Quarterly: Many businesses, especially smaller ones, are on a quarterly VAT payment schedule.
3. Annually: In certain cases, businesses with very low turnover may file and pay VAT annually.
4. Custom Schedules: Some businesses with unique circumstances or international operations may have custom VAT payment schedules.

It's essential for businesses to understand their specific VAT payment schedule, as well as the deadlines and requirements set by their country's tax authority. Missing VAT payment deadlines can lead to penalties and interest charges, so compliance is crucial.

businesses can take various legal forms, including sole proprietorships, limited companies, partnerships, limited liability partnerships (LLPs), community interest companies (CICs), non-profit organizations, and franchise businesses. Each of these structures comes with distinct tax implications, making it essential for business planning. Sole proprietorships are straightforward but hold the owner personally liable for debts, subjecting profits to Income Tax. Limited companies are separate entities and pay Corporation Tax, with tax considerations for dividends and salaries. Partnerships distribute profits and losses among partners, who report this on their personal tax returns. LLPs combine limited liability and tax transparency. Community Interest Companies have unique tax rules due to their community-focused objectives, and non-profit organizations benefit from tax relief and exemptions. Selecting the right structure and effectively managing tax obligations are critical for business success. Business owners must grasp the tax intricacies associated with each structure, such as liability, tax rates, and eligibility for tax deductions and credits. Seeking guidance from tax professionals is often advisable to navigate these complexities, optimize tax planning, and make informed choices aligned with business objectives. Understanding the tax implications of the chosen structure is paramount for effective financial management and decision-making.

Making Tax Digital (MTD) represents a fundamental transformation in how the UK manages its tax processes. This initiative mandates that businesses maintain digital records of their financial transactions and submit tax returns electronically. The significance of understanding and adhering to MTD requirements cannot be overstated. Compliance with MTD is a legal necessity, backed by the potential for penalties and fines imposed by HM Revenue and Customs (HMRC). By encouraging real-time financial record-keeping and digital submissions, MTD aims to enhance accuracy and efficiency, thereby reducing errors, late payments, and the risk of tax investigations. Furthermore, embracing MTD provides businesses with up-to-date financial data that can inform strategic decisions and financial planning. It also promotes financial transparency by offering a real-time view of tax obligations throughout the year, alleviating the stress traditionally associated with year-end tax filings. It is imperative for businesses and individuals in the UK to remain informed about MTD's evolving regulations, ensuring continued compliance and the full utilization of the benefits it offers in terms of accuracy, efficiency, and financial management.

Claiming VAT on residential developments is not as straight forward as it seems, we strongly suggest you engage a Property Accountant when considering development as there are many pitfalls. As an example, only new build is Zero Rated where refurbishment, or conversion, from Commercial to Residential development is 5%. However there are many examples that vary, your contractors should charge you zero-rated or 5% dependent on producing an HMRC certificate confirming your status. It is common for materials and consultants to charge VAT. The type of build contract also varies the VAT. Further information can be found at HMRC Information or alternatively contact Steve Watts at Merranti Property Accounting.

Question: Can I claim VAT on white goods for Property Development. Although the development of residential property for a new build is 0%, refurbishment is 5%, there are still items that you cannot claim the VAT back on. One of these is any White goods that you supply with the property, for example, washing machines, fridges and cookers. This doesn't matter if they are built-in or free standing. If they are being supplied by your contractor then they should issue a separate invoice with the full VAT included and this should then be listed in your VAT return in such a way where you do not claim the VAT back. It is also important that you hold a valid certificate to be able to make or receive a zero-rated vat supply for any building work or development. A refurbishment project qualifies for a reduced VAT rate of 5% if the property was originally commercial and is now being converted to residential. Additionally, if the residential property is being converted to a smaller or larger number of units it will qualify for the reduced VAT rate. Additional elements need to be considered for VAT, hiring of equipment, scaffolding and if the additional buildings are built further than 5m away from the original development. With property development getting the VAT right is important at the beginning as these are costs that you may not later be able to recover, many main contractors have found themselves with issues where they make what they thought was a zero-rated vatable supply only to find out later it's chargeable. HRMC require this payment from you immediately and although you can pass this charge on if the company is no longer in existence, ( as most developments are under and Special Purpose Vehicle) then they are left holding this cost. Not to confuse this with supplies that invoiced from Consultants as there can be claimed, if it part of a Design and Build Contract can be invoiced at Zero Rated. For further information, Stephen Watts is our resident Property Accounting development expert.      

Do I need to go VAT registered?

The simple answer is Yes if you fall into certain parameters, the following information will assist in this question.

VAT – Your need to know

  VAT registered businesses act as unpaid tax collectors and are required to account both promptly and accurately for all the tax revenue collected by them. The VAT system is policed by HMRC with heavy penalties for breaches of the legislation. Ignorance is not an acceptable excuse for not complying with the rules. We highlight some of the areas that you need to consider. It is however important for you to seek specific professional advice appropriate to your circumstances.

What is VAT?

A transaction is within the scope of VAT if:

• there is a supply of goods or services
• it was made in the UK
• it was made by a taxable person

it was made in the course or furtherance of business.

Inputs And Outputs

Businesses charge VAT on their sales. This is known as output VAT and the sales are referred to as outputs. Similarly VAT is charged on most goods and services purchased by the business. This is known as input VAT. The output VAT is being collected from the customer by the business on behalf of HMRC and must be regularly paid over to them. However, the input VAT suffered on the goods and services purchased can be deducted from the amount of output tax owed. Please note that certain categories of input tax can never be reclaimed, such as that in respect of third party UK business entertainment and for most business cars.

Points to consider

Supplies

Taxable supplies are mainly either standard rated (20%) or zero rated (0%). There is, in addition, a reduced rate of 5% which applies to a small number of certain specific taxable supplies. There are certain supplies that are not taxable and these are known as exempt supplies. There is an important distinction between exempt and zero rated supplies.

• If your business is making only exempt supplies you cannot register for VAT and therefore cannot recover any input tax. ·Property Development has differing rules, this is exempt and although supplier can invoice at 0% ( for new build residential) often they don’t, however, you can still claim back almost all your inputs however there are exceptions like kitchen appliances, for more information visit out Property Accountant website page.

If your business is making zero rated supplies you should register for VAT as your supplies are taxable (but at 0%) and recovery of input tax is allowed.

Registration - Is It Necessary?

You are required to register for VAT if the value of your taxable supplies exceeds a set annual figure (frozen at £85,000 from 1 April 2017). If you are making taxable supplies below the limit you can apply for voluntary registration. This would allow you to reclaim input VAT, which could result in a repayment of VAT if your business was principally making zero rated supplies. If you have not yet started to make taxable supplies but intend to do so, you can apply for registration. In this way input tax on start up expenses can be recovered.

Taxable Person

A taxable person is anyone who makes or intends to make taxable supplies and is required to be registered. For the purpose of VAT registration a person includes:

• individuals
• partnerships
• companies, clubs and associations
• charities.

If any individual carries on two or more businesses all the supplies made in those businesses will be added together in determining whether or not the individual is required to register for VAT.

Administration

Once registered you must make a quarterly return to HMRC showing amounts of output tax to be accounted for and of deductible input tax together with other statistical information. All businesses have to file their returns online. Returns must be completed within one month of the end of the period it covers, although generally an extra seven calendar days are allowed for online forms. Electronic payment is also compulsory for all businesses. Businesses who make zero rated supplies and who receive repayments of VAT may find it beneficial to submit monthly returns. Businesses with expected annual taxable supplies not exceeding £1,350,000 may apply to join the annual accounting scheme whereby they will make monthly or quarterly payments of VAT but will only have to complete one VAT return at the end of the year.

Amended VAT Payment Deadlines Due To COVID-19

The VAT deferral period ended on 30 June 2020, and as far as ongoing liabilities are concerned, it's business as usual. It was originally announced that any VAT payments deferred between 20 March 2020 and 30 June 2020 should be paid in full on or before 31 March 2021. The Winter Economy Plan changed the rules, giving extra time to pay. The VAT deferral 'New Payment Scheme' allows payment in 11 equal interest-free instalments in the 12 months to 31 March 2022. Businesses will need to opt-in to do this, and HMRC will provide a means of doing so early in 2021 . If businesses prefer, they can still pay in full, or make payments towards the deferred VAT, at any point before 31 March 2021. HMRC has advice on how to do this

Record Keeping

It is important that a VAT registered business maintains complete and up to date records. This includes details of all supplies, purchases and expenses. In addition, a VAT account should be maintained. This is a summary of output tax payable and input tax recoverable by the business. These records should be kept for six years.

Inspection Of Records

The maintenance of records and calculation of the liability is the responsibility of the registered person but HMRC will need to be able to check that the correct amount of VAT is being paid over. From time to time therefore a VAT officer may come and inspect the business records. This is known as a control visit. The VAT officer will want to ensure that VAT is applied correctly and that the returns and other VAT records are properly written up. However, you should not assume that in the absence of any errors being discovered, your business has been given a clean bill of health.

Offences And Penalties

HMRC have wide powers to penalise businesses who ignore or incorrectly apply the VAT regulations. Penalties can be levied in respect of the following:

• late returns/payments
• late registration
• errors in returns.

Cash Accounting Scheme

If your annual turnover does not exceed £1,350,000 you can account for VAT on the basis of the cash you pay and receive rather than on the basis of invoice dates.

Retail Schemes

There are special schemes for retailers as it is impractical for most retailers to maintain all the records required of a registered trader.

Flat Rate Scheme

This is a scheme allowing smaller businesses to pay VAT as a percentage of their total business income. Therefore no specific claims to recover input tax need to be made. The aim of the scheme is to simplify the way small businesses account for VAT, but for some businesses, it can also result in a reduction in the amount of VAT that is payable.

Making Tax Digital for Business: VAT

Under Making Tax Digital for VAT (MTDfV), businesses with a turnover above the VAT threshold must keep digital records for VAT purposes and provide their VAT return information to HMRC using MTD functional compatible software. Keeping digital records and making quarterly updates will not be mandatory for businesses below the VAT threshold which have voluntarily registered for VAT, although such businesses can opt to join the scheme. There are some exemptions from MTD VAT. However, the exemption categories are tightly-drawn and are unlikely to be applicable to most VAT registered businesses.

How we can help

Ensuring that you comply with all the VAT regulations is essential. We can assist you in a number of ways including the following:

• tailoring your accounting systems to bring together the VAT information accurately and quickly
• ensuring that your business is VAT efficient and that adequate finance is available to meet your VAT liability on time
• providing assistance with the completion of VAT returns
• negotiating with HMRC if disagreements arise and in reaching settlements
• advising as to whether any of the available schemes may be appropriate for you
• helping you comply with the MTD for VAT regime.

If you are starting, or have recently started a business in the London area and you would like to discuss any of the points mentioned in this VAT summary please contact us at Merranti Accounting.