Formation Company & Tax Advisory

Monday, July 16, 2018

Income Tax Return of British Companies (UK)

The "Tax System" of the United Kingdom has various taxation. Because of the principle of double taxation, in accordance with all general international and community principles, residents in the UK are subjected to the payment of taxes on the total of their income produced, while those who are not UK residents are subjected to tax in the UK only in a partial way, that is when their income was gained there.

In the United Kingdom the Source Rule demands something must be taxed only if there is a specific Law that issues the allocation to a particular tax.

It should be noted that in the UK each company has its own fiscal year (determining the effect of the next twelve months since the date of establishment of the company itself). At the end of the twelfth month, the "Accounting Reference Date" is counted; it is possible to require, maximum once every five years, the possibility of extending the fiscal year, lenghtening it to eighteen months.

All companies are required to file annually an Annual Return, that provides and/or confirm to the Authority a series of indications of UK companies. Some companies are also subjected to file a Balance Sheet and a Profit and Loss Statement every year, as well as accounting and any other documentation. This documentation must be filed within nine months after the fiscal year has ended.

Income received by legal entities are subjected to Corporation Tax. This tax is applied to:

  • Income earned by a legal entity that is a resident in the United Kingdom.
  • Income earned by a permanent establishment of legal entities that is not a resident in the United Kingdom.

For permanent establishments we mean Legal entities that own fixed locations (branch, office, workshop or factory bulding site or similar) in the United Kingdom or they employ agents in that Country. If fixed seats, however, have merely preparatory or auxiliary activities, they are not permanent establishments.

A Legal entity will therefore be subjected to tax if it is incorporated in the United Kingdom and/or if its activity is mainly carried out in that Country.

In the UK there is a system of Income Tax Return. Under this system the taxpayer declares all the details on his labor income and capital gains. The tax liability can be calculated by the Revenue Department or the taxpayer himself.

The UK company is required to declare all its taxable income by:

  • The Tax Return system for determining the Corporation Tax to pay. the Tax Return must be filed each fiscal year.

The Corporation Tax is issued and administered by the Service of Her Majesty's Revenue and Customs - HMRC.

The tax on Legal entities shall be approved annually by the British Parliament, under a lack of legitimacy at its collection. For the tax year 2015 has been scheduled for a single rate of 20%.

This percentage is calculated on the entire taxable income, if the same income is higher than 1.5 million GBP which can be fractionated in the case of an association among legal entities and only if the entity which is a resident in the UK controls other legal entities, whether resident in the UK.

Tax Return of Individuals is due every fiscal year which runs from April, 6th of the current year to April,5th of the following year.

In the UK, there are specific simplifications to apply to small companies. These companies have shortened Balance Sheets deposit time and no other documentation is necessary to revise accounts by Auditors.

A proper preparation of both the Annual Return and the Tax Return favors access to credit and it allows you to find, easier, new partners, and to conclude business transactions easier. Bright Business Consulting LLP and the banks BBC-LLP with experience and advanced tools for management of business ratings are the reference point for companies UK seeking to operate at peak efficiency.

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