currently 33.75% of the loan if it is outstanding over nine months after the end of the accounting period. The tax charge is repaid to the company nine months and one day after the end of the accounting period in which the loan is repaid. Further rules prevent the avoidance of the charge by repaying the loan before the payment date and then effectively withdrawing the same money shortly afterwards. This is a complex area so please do get in touch if this is an issue for you and your company. Tax Planning Ensure that sufficient salary and dividends are drawn from the business to prevent these charges arising unnecessarily on an overdrawn director’s current account. We can also ensure that overdrawn accounts are cleared properly. Please contact us if you would like to discuss the right options for you and your business. Employer obligations As an employer you will have many responsibilities. These will include employment law requirements and the need to enrol workers into a work based pension scheme (Pensions Auto Enrolment) which are not covered in this guide . Real Time Information Real Time Information (RTI) reporting is mandatory for almost all employers. Under RTI, employers or their agents are required to make regular payroll submissions for each pay
period during the year. The submissions detail salary and other employment payments made to and deductions such as income tax and NICs made from employees. These submissions must generally be made on or before the date the amounts are paid to the employees. Penalties apply to employers who fail to make returns on time. These penalties range from £100 to £400 per month depending on the size of the employer. Interest and penalties also apply for failing to pay on time. The employer must also report details of expenses and benefits provided to employees. Value Added Tax (VAT) VAT is a tax ultimately paid by the final consumer and businesses act as the collectors of the tax. What does VAT apply to? VAT is chargeable on the supply of certain goods and services in the UK when made by a business that is registered for VAT (see later).
A registered business must charge VAT on its taxable supplies (broadly the sales made) which is known as output VAT. There are currently three rates of VAT which can be payable. These are the standard rate of 20%, the reduced rate of 5% and the zero rate. The zero rate applies where the supply is deemed to be subject to VAT but the output VAT is charged at 0%, meaning that no VAT is actually payable. A business also pays VAT on the goods and services it buys. This is known as input tax and may be reclaimed by a VAT registered business. If the output tax exceeds the input tax, then a payment of the difference has to be made to HMRC. If input tax exceeds output tax a repayment of VAT will be made. This calculation is generally done on a quarterly basis. However where repayments occur regularly it is possible to opt for monthly VAT returns. Some input VAT is not reclaimable by a VAT registered business. Two common examples are VAT incurred on entertaining UK business customers and VAT on the purchase of a car. Certain supplies of goods and services are not subject to VAT at all and are known as exempt supplies. A business that makes only exempt supplies cannot register for VAT and will be unable to reclaim any input tax. Do I need to register? A business must register if its taxable supplies exceed an annual figure, currently £85,000 (fixed until April 2026). If taxable supplies are less than this a business may still register voluntarily. So, for example, if the business makes only zero rated sales, it can still register and reclaim the input tax suffered.
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Running a Business
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