Owners and managing directors may be unsure what they need to do to meet HMRC small business compliance requirements, both at the individual and business level.
As a small business owner, there are several things you need to do to ensure you are tax compliant:
- Obtain a Tax reference number: Every business will have a Tax ID number, also known as a Unique Taxpayer Reference (UTR) or simply a “tax reference”. This 10-digit number is used to identify your business for tax purposes. If you do not know your business UTR, you can obtain it in a number of ways which are explained on the government website. Usually, however, HMRC will issue the business with a UTR when your business is incorporated at Companies House.
- Keep accurate records: To ensure HMRC individual and small business compliance it is essential to maintain accurate records of all financial transactions. This includes sales invoices, receipts, bank statements, and other financial documents. You should also keep track of all business expenses, including business-related travel and entertainment expenses.
- File tax returns: You must file a Company Tax Return every year, even if you didn't make any profit. This must be filed within 12 months of the accounting period it covers. If you are late in filing your tax return, you will have to pay a penalty which starts at £100 and rises based on how late your filing is and any history of late filing.
- Pay estimated taxes: HMRC small businesses compliance requires your business to pay its corporation tax, usually within 9 months and 1 day from the end of your “Accounting Period”. As you have 12 months to file the tax return for the accounting period this may lead to estimating the amount to pay. Once the return is complete you will need to pay any balance if your estimate was too low. It is best to do this immediately as interest will be charged from the 9 months 1 day point until fully paid. If your estimate was too high, HMRC will refund you plus interest.
- Understand tax deductions: As a small business owner, you can take advantage of tax deductions to reduce your tax liability. Some common deductions include office expenses, business travel, and equipment purchases.
- Seek professional help: If you are unsure about any of these requirements, it is always best to seek professional help. An accountant or tax professional can help you navigate the complex tax system and ensure that your small business is HMRC compliant with regard to all tax legislation.
Accountants can play a crucial role in helping small businesses to be tax compliant by providing a range of services, including:
- Tax planning: Accountants can help small businesses to plan and manage their tax obligations by identifying potential tax savings and ensuring HMRC compliance.
- Record-keeping: Accountants can help small businesses with bookkeeping services and cloud accounting systems [link to cloud accounting page] to maintain accurate financial records, including invoices, receipts, and financial statements, which are essential for calculating taxes and preparing tax returns.
- Tax return preparation: Accountants can prepare and file tax returns on behalf of small businesses, ensuring that all relevant tax deductions and credits are included, and that the returns are submitted on time.
- Tax audit support: In the event of a tax audit, accountants can provide support to small businesses by representing them before the tax authorities and helping to resolve any issues or disputes.
- Compliance advice: Accountants can provide small businesses with advice on HMRC individual and small business compliance matters, such as how to comply with tax laws and regulations, how to structure their business to minimize tax liabilities, and how to stay up-to-date with changes in tax laws and regulations.
In summary, working with an accountant can help small businesses to stay tax compliant and avoid potential penalties and fines, while also maximizing their tax savings and optimizing their financial performance.