Regulations related to Tax Records held by a Company Register with Companies House UK and Enquiry of Compliance Checks, Accountability of Accounting Officer, and Corporation Tax Payment

24 Oct

This blog will be discussing the records that are kept by the companies, the compliance checks details, determinations, discovery assessments, appeals, personal accountability in a large company of that of a senior officer and the payment of the interest and the corporation tax along with the types of groups of companies that can exist.

The keeping of the records by the companies must be done until the latest of:

  • The date when any compliance checks are finished.
  • Six years since the termination of the accounting period.
  • The date after which there is no chance of commencement of the compliance checks.

All the business accounts and records, that includes the receipts and the contracts, should be held, or the information that proves that the company formation companies house has completed the preparation of a correct and complete tax return.

If the demand of a return is made more than six years after the termination of the accounting period, any records that the company formation companies house still contains must be held until the later of the termination of any check of compliance and as soon as the right to start a compliance check is expired.

If the company fails to keep the records, then this can result in a penalty of up to 3000 pounds each for every accounting period that gets affected. However, this penalty is not applicable in the case where the only records that have not been held are the ones that could only have been required to fulfill the purposes of elections, claims or notices that are exclusive of the return.

Compliance Checks and their Enquiry

An enquiry of a compliance checks into a return; election or claim can be initiated by an HMRC’s officer within a restrained or a limited duration.

Initiating an Enquiry of a Compliance Check

The HM Revenue and Customs may make a decision of conducting an enquiry of compliance checks on a return, election or claim that is submitted after setting up a business UK, in the same manner as in the case of individuals.

A written notice must be provided by the officer of HM Revenue and Customs that intends to conduct an enquiry of compliance check.

The notice must be issued by the later of the due filing date’s first anniversary in the case of group companies or the actual filing date in the case of any other party who is setting up a business UK, if the return’s delivery was done on or prior to the due filing date, or the notice must be issued by the later of the quarter day following the first anniversary of the original filing date, in the case if the return’s filing is done after the filing date that was due. The quarter days are January 31st, April 31st, July 31st and the October 31st.

If the company makes an amendment in the return after the filing date that was due, the window of the enquiry of the compliance check is extended to the quarter day following the first anniversary of the date the filing of amendment was performed. Where the enquiry of compliance check had not yet begun within the limit that would have applied had no filing of amendment been done, the enquiry is contained to the matters present in the amendment.

Conduct of Enquiry of the Compliance Check

The procedure to conduct the enquiries for the compliance check that are related to individuals, is also applicable in the case of setting up a limited company UK.

Rules Related to Determinations

Once again, the rules of determinations in the case of individuals are same for the case of setting up a limited company UK.

Appeals and the Discovery Assessments

A discussed earlier for the rules related to determinations, the rules that are applicable to individuals are also applied to the companies for the appeals and the discovery assessments.

Senior Accounting Officer’s Personal Accountability in a Large Company

In order for a senior accounting officer of a large company to ensure that it has the right and appropriate systems of finance in place, the officer is liable to personal accountability that makes sure that the reporting of gains and profits liable to tax is done accurately by the company.

The senior accounting officer of a company that qualifies has a personal accountability to make sure that the systems of finance’s maintenance is performed rightly by the company that enables the company to report the profits and gains liable to tax, in a correct manner. A company that qualifies or a qualifying company is the one that, in the preceding year of finance, had a relevant turnover of 200 million pounds or/and a balance sheet of total sum of more than 2 billion pounds.

The senior accounting officer, that can be the director of finance of the company, should take reasonable measures in order to monitor and establish the systems of accounting contained within the company that are appropriate and fitting for the purposes of reporting the tax accurately. The senior accounting officer should also provide a certification every year that the systems of accounting are operating rightly or report if there are any problems or inadequacies.

The company must give a notification to the HMRC mentioning the identity of the senior accounting officer of any company. The senior accounting officer personally and the company may be subject to a financial penalty for a deliberate or careless failure to fulfill these requirements. The penalty that is applied to the senior accounting officer is approximated to be around 5000 pounds.

Company Making Payment of Interest and Corporation Tax

The large companies make s payment of their corporation tax in the instalments of four quarters. The other companies make the payment of their tax nine months after the termination of an accounting period.

Due Dates for the Payment of Corporation tax by the Companies

The corporation tax must be paid by the companies that do not make the payment of the tax at the main rate, nine months plus one day after the termination of the accounting period. So, in the case if an accounting period terminates on December 31st, 2013, the corporation tax for that period must be paid by October 1, 2014.

However, the large companies must make the payment of their corporation tax in the form of instalments. In a broad manner, a large company can be defined as any company that makes the payment of the corporation tax at the main rate. It should be kept in mind here that the augmented profits exceed 15,00,000 pounds in a period of 12 months where no associated companies are present.

The due date for an instalment is the 14th day of the month, that begins in the seventh month. If the condition that the accounting period is twelve months long, is met, then the subsequent installments remain due in the tenth month during the accounting period and in the first and the fourth months after the termination of the accounting period.

In the case of an accounting period being less than twelve months long, the due time for the subsequent instalments is the interval of three months but with the condition that the final payment is due in the fourth month of the coming accounting period.

The instalments are based on the corporation tax liability estimated for the present or the current period and not the preceding period. It is extremely important for the companies to predict their liabilities of tax in a correct and accurate manner. The large companies whose directors are not very expert at making the estimation, may find the significant interest charges being incurred by the company. The company is supposed to make the estimation of the liability of its corporation tax prior to the termination of the accounting period and must hold the revision of its estimate each quarter.

Exceptions do Exist!

A company is not needed or supposed to make the payment of the instalments in the first year that if is large, unless the amount of its augmented profits is more than 10 million pounds. The limit of 10 million pounds is decremented in a proportionate way if there exist any associated companies. To fulfill this purpose only, a company will be considered and regarded as one of the associated companies where it was actually an associated company at the beginning of an accounting period. This is, however, different from the normal approach in which being an associated company for any part of the accounting period affects the thresholds of the CT of both the companies for the entire accounting period.

Any company is not supposed to make the payment of the tax in the form of instalments if its liability does not exceed or is less than an amount of 10,000 pounds.

Interest to be Paid in the case of Overpaid or Late Tax

The interest is operational from the due date on underpaid or overpaid instalments. This position is pondered upon in a cumulative manner after the due date for each instalment. The HMRC performs the calculation of the position of the interest after the company makes a submission of its return of the corporation tax.

The companies that do not make the payment in the form of instalments are charged with an interest if they make the payment of their corporation tax after the due date has passed, and will acquire interest in the case of them overpaying the tax or paying it earlier.

The interest that is acquired or paid on over payments or the late payments of corporation tax is dealt with as the income of investment as the interest paid or acquired on a relationship of a non-trading loan. In order to fulfill the purpose of considering the rate of interest for the year of 2014, it is taken as 3 percent in the case of underpaid tax and the supposed or assumed rate of interest in the case of the overpaid tax is taken to be 0.5 percent.

Arrangements made for the Group Payments

In the case when multiple companies or more than one company in the form of a group is liable to make the payment of their tax in the form of instalments, then special arrangements must be made in order for the payment of the instalments to be made by one company, that is, the nominated company, and the allocated or chosen company from among the group. The introduction of these provisions was involved due to the fact that the groups mostly have uncertainties or doubts regarding the liabilities of the tax of the individual group members until and unless all the reliefs for the relevant group and the claims are decided upon following the termination or the end of the accounting period.

It must be taken into account that the companies that are in the form of groups are still considered to be distinct and separate entities having their own liabilities to tax, but the law of tax considers the close relationship between the group companies. In the case of certain conditions being fulfilled, the companies can share their losses and also can pass the assets between each other without the need of the chargeable gains.

Types of Companies’ Group

A group can exist for the purposes of tax in the case when one company is a subsidiary of another company. The percentage shareholding that is involved defines the consequences of taxation of the fact that a group exists.

There are three examinable types of relationship for the purposes of tax that include:

  • 75 percent of the subsidiaries
  • The Associated Companies
  • The groups to fulfill the purposes of the chargeable gains

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