Corporate Tax Credit

How To Keep Accurate Corporation Tax Records

Executive Summary About How To Keep Accurate Corporation Tax Records By Terry Cartwright

All companies are required by law to maintain records of those company transactions in a manner that must be adequate to enable the company to produce an accurate Company Tax Return. Company tax records must include all original sales receipts and purchase expenses. Under the Companies Act legislation registered companies must also keep accounting records.

Companies are responsible for calculating their own corporation tax liability and paying the corporation tax without prior assessment by the Inland Revenue. Companies which fail to deliver their tax return by the statutory fling date which is normally 12 months after the accounting period are liable to penalties.

Should a company submit the CT600 Corporation Tax return form without the accounts then it is treated as not having submitted a tax return form.

Current Company Tax Return Forms

The latest version of the CT600 form for 2007 has been available for download from the Inland Revenue website since 31 August 2007. The Corporation Tax Return Form CT600 Version 2 contains two small changes from the previous 2006 version.

CT600 (short) for small companies has an additional box on Page 1 so that a company which is a member of a group other than a small group can identify itself.

Corporation Tax Rates

While the main rate of Corporation Tax remained at 30% in 2006 and 2007 which will be reducing to 28% in 2008. The small company corporation tax rate applicable to companies with annual profits less than 300,000 pounds was increased from 19% in 2006 to 20% effective on profits earned after 1 April 2007 and is set to increase further on 1 April 2008 to 21% and to 22% from 1 April 2009.

Corporation Tax on ring fenced profits being income and gains from oil extraction activities or oil rights in the UK and UK Continental Shelf remain at 19% for small companies and 30% for larger companies. Interest is charged on late payments and at a lower rate on installment repayments of Corporation Tax as is the practice on all late tax payments.

For companies with accounting periods that straddle the 1 April separate calculations are required for the period before 1 April and after 1 April based upon the number of days in each accounting period.

Filing Corporation Tax Return Online

Most companies and their agents can file company tax returns online. Filing the company tax return online has the advantages of speed, can be done 24 hours a day and the software calculates the tax liability.

Authorised agents can also view client company corporation tax positions and liabilities.

Inland Revenue enquiries into Company Tax Returns
Enquiries into Company Tax returns are governed by rules and codes of practice. HMCE have at least 12 months from the statutory filing date to commence an enquiry when the company tax return has been submitted on time and longer if the return is submitted late.

Companies are advised in writing when an enquiry starts and ends. Any adjustments are also advised in writing and the company then has 30 days to file an amended Company Tax Return failing which HMCE will amend the return.

Tax Software and Company Corporation Tax Return

Tax accounting software for a private limited company in the UK includes the using accounting software to produce the vat tax return and calculate the company net profit with the tax software calculating the outstanding tax liability and producing an automated corporation tax return.

Company Accounting Software

The company accounts package often does not include capital and tax allowances on fixed assets which are essential elements to enable final tax accounting which the production of the tax liability.

In any event many systems require the current year tax allowances to be input.

Tax accounting packages do exist where the current tax rates and rules issued by the taxation authority for a specific financial tax year. Every quality tax accounting software package should calculate the corporation tax liability which is one of the most significant costs of every business. If the accounting software does not produce an automated calculation of the tax liability then the tax due has to be entered manually usually by journal entry.

Manually entering the tax liability is a function frequently best dealt with by an accountant since the transaction also involves the final completion of the company accounts and potentially journal entries to account for distributions from the after tax profit and retained profits.

Vat Tax Return Software.

The vast majority of companies have a sales turnover which exceeds the vat threshold limit at which vat registration is obligatory; most companies sales turnover exceeds this threshold at which point vat registration is mandatory.

Tax Software and CT600 Corporation Tax Return.

In the UK a private limited company has to complete a corporation tax return each financial year. Known as the CT600 companies with a sales turnover which qualifies as a small company can complete the CT600 short return.

It is no simple task for many accountants who do not specialise as a tax accountant.

Most accounts packages do not include tax software encrypted within the packages to produce the corporation tax return but may include an online feed to assist in the submission of ther company tax return.

Using the right tax software the CT600 corporation tax return can be completed automatically.

To do so the company accounts package has to include all the relevant tax rules and rates applicable for fixed assets and the calculation of the tax liability. Both tax rates and the rules in which tax is collected are frequently changed. Suitable tax software is essential to perform this annual process.

The tax accounting takes the tax rates and rules automating the work of a tax accountant to produce the tax liability. The term tax software indicates automation based upon data input which the computer package then processes to produce the desired output. Company tax software produces the tax requirements of the company including both the corporation tax liability and completion of the tax return.

Corporate Tax Planning; the Current Year and Beyond

Executive Summary About Corporate Tax Planning; the Current Year and Beyond By William Piner

A greeting to you all my friends, it is time to write another year end tax planning article. How about a C corporation taxpayer (a corporation that is not a subchapter S and pays tax as though operating as an individual) that has a sizeable profit, a father-son ownership team, and reports for tax purposes on the cash basis method of accounting. For the current year, why not allow the Company to pay tax on $75,000 of income. By leaving this amount of taxable income inside of the C Corporation, the 15% and 25% tax brackets will be exploited. The father ‘son owners have a much higher marginal tax rate facing them-35%. The Company would then make a corresponding S corporation election (due by March 15th for calendar year corporations-use form 2553). A gift tax return will have to be filed by father and a valuation will need to be performed on the gifted shares. If father will strip most or all of the earnings and the gift term is say ten years (the recognition period for the S corporation, when it is converted from a C corporation, in order to avoid liquidation tax), the value of the gift will be significantly reduced thus preserving the estate tax exemption for other assets in his estate. The gift tax return is filed on form 709 and is due by the filing of Father’s personal income tax return.

Remember, a major trait of the S corporation involves the flow-through of profits to the shareholders, thus avoiding corporate level tax. Regarding cash basis C corporations converted to S corporations, the would-be taxable income of the entity would have to be eliminated to avoid a corporate level tax. Because it would be the goal of the corporation to eliminate taxable income, in order to reduce the exposure to gift tax consequences, we have effectively killed two birds with one stone. There will be no corporate level tax; the corporation can continue to use the cash basis method of accounting, and Father will have a limited exposure to estate and gift taxes. Nice.

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