A significant task for the new business owner is ensuring that the business is properly complying with the extensive tax and information filing requirements imposed by the various authorities.
Problems and penalties could arise if the new business is not registered with the appropriate tax authorities in a timely fashion.
Whilst this guide is not intended to be an all-inclusive list of filing requirements, it summarises some of the more prominent requirements common to most businesses.
HMRC is moving towards electronic forms and notifications via the internet. Paper forms are still required in some instances.
You must give HM Revenue and Customs (HMRC) specific information about your company within 3 months of starting up in business. You may get a penalty if you don’t.
Depending on the level of profit, sole traders and partners have a liability to Class 2 NIC at a weekly level of £3.05 (where annual earnings are £6,515 or more for 2021/22).
These contributions are collected with income tax and Class 4 national insurance.
You need to consider if it is beneficial to be VAT registered from the outset.
If you are registering for VAT, form VAT 1 needs completing, and if you are a partnership, form VAT 2 needs to be completed giving details of all the partners.
A new system of digital VAT record keeping and reporting called Making Tax Digital (MTD) started from 1 April 2019 where taxable supplies exceed the £85,000 VAT registration threshold.
This is being extended to all VAT registered businesses, irrespective of level of taxable supplies, from 1 April 2022.
MTD for VAT is currently not mandatory for those businesses below the VAT registration threshold (currently £85,000) however that threshold is being removed for MTD for VAT from 1 April 2022.
Under the MTD for VAT legislation there should be digital links between different accounting software packages where different parts of the business or group use different software.
Self-employed businesses and landlords with annual business or property income above £10,000 will need to follow the rules for MTD for Income Tax from their next accounting period starting on or after 6 April 2023.
Thus, if the business is already MTD compliant for VAT they will also be compliant for income tax.
The start date for MTD for corporation tax has yet to be confirmed.