Corporation Tax when you sell business assets

Overview

Your limited company usually pays Corporation Tax on the profit (‘chargeable gain’) from selling or disposing of an asset.

Company assets

Assets are things your company owns, such as:

land and property

equipment and machinery

shares

Who pays Corporation Tax

Corporation Tax on chargeable gains is paid by:

limited companies

most unincorporated associations, for example clubs and co-operatives

foreign companies with a UK branch or office

You pay Capital Gains Tax instead if you’re a self-employed sole trader or business partner.

Work out and report your gain

You’ll need to work out your gain to find out whether you need to pay tax.

Report your gains to HM Revenue and Customs (HMRC) when you file your Company Tax Return. How much tax you pay depends on any allowances and reliefs you claim.

There are different rules for intangible assets, for example intellectual property and business reputation (‘goodwill’).

Work out a chargeable gain

The gain is usually the difference between what you paid for the asset and what you sold it for.

You’ll need to use the asset’s market value if your business gave it away, or sold it for less than it was worth to help the buyer.

You can deduct any costs, for example solicitors’ fees or Stamp Duty.

Before you work out your gain you need to work out how much you would have paid for the asset in today’s money using the HM Revenue and Customs (HMRC) Indexation Allowance.

This will make your gain smaller and mean you pay less tax.

How to work out the gain

Work out the asset’s value when it was sold - this is usually the amount your company received.

Deduct the amount your company paid for the asset. If it was not acquired in a normal commercial transaction you need to use the market value at the time.

Deduct any money your company spent buying, selling or improving the asset, for example solicitors’ fees and Stamp Duty. (You cannot deduct maintenance costs.)

If you had the asset before December 2017, use HMRC’s Indexation Allowance December 2017 guide for the month when your company sold the asset. Then find the figure (‘inflation factor’) for the year and month when your company bought the asset. Multiply this by the amount you paid for the asset. Deduct the total from your profit.

If you made improvements to the asset, work out the effects of inflation in the same way. Deduct the total from your profit.

You now have your chargeable gain. You can ask HMRC to check your valuation by filling in a post-transaction valuation check form. Return it to the address on the form and allow at least 3 months for HMRC’s response.

If you make a loss when you sell an asset

You can reduce your total chargeable gains by deducting any capital losses.

You can only deduct capital losses from your chargeable gains - not from trading income or other profits.

The loss you can claim is reduced by any amount you’ve claimed as capital allowances.

Intangible assets

‘Intangible assets’ include intellectual property and business reputation (‘goodwill’).

How you’re taxed on gains from intangible assets depends on when your limited company first owned them.

After 31 March 2002

Include gains on intangible assets in your company’s business income (‘trading profits’) if your company acquired or created them after 31 March 2002. You pay Corporation Tax on trading profits.

Before 1 April 2002

Use the detailed guidance to work out gains on intangible assets or get help from a professional, like an accountant.

If your company’s intangible assets came from a change in business structure (for example from a business partnership or self-employed sole trader), use the date the assets were acquired or created before the structure change.


Dormant companies and associations

Overview

Your company or association may be ‘dormant’ if it’s not doing business (‘trading’) and doesn’t have any other income, for example investments.

Dormant means different things for:

Corporation Tax and Company Tax Returns

annual accounts and returns for Companies House if you have a limited company

Dormant for Corporation Tax

Your company is usually dormant for Corporation Tax if it:

has stopped trading and has no other income, for example investments

is a new limited company that hasn’t started trading

is an unincorporated association or club owing less than £100 Corporation Tax

is a flat management company

Trading includes buying, selling, renting property, advertising, employing someone or getting interest. HMRC has detailed guidance on what counts as dormant for Corporation Tax.

When HMRC thinks your company is dormant

You may get a letter from HMRC telling you:

they’ve decided to treat your company or association as dormant

that you don’t have to pay Corporation Tax or file Company Tax Returns

When you think your company is dormant

If your company has stopped trading and has no other income, you can tell HMRC that it’s dormant for Corporation Tax.

If you’ve never had a ‘notice to deliver a Company Tax Return’

You can tell HMRC your company’s dormant over the phone or by post.

If you’ve filed a Company Tax Return or had a ‘notice to deliver a Company Tax Return’

You’ll still need to file a Company Tax Return online - this will show HMRC that your company is dormant for this period.

Limited companies

You don’t need to pay Corporation Tax or file another Company Tax Return once you’ve told HMRC your company is dormant unless you receive a further notice to deliver a Company Tax Return.

You must still file annual accounts and a confirmation statement (previously annual return) - exactly what you must do depends on if you’re dormant for Companies House.

Find out how to restart your company.

If you’re registered for VAT

If you do not intend to trade again you must deregister for VAT within 30 days of your company becoming dormant.

However, if you plan to restart trading, you must send ‘nil’ (empty) VAT returns while your company is dormant.

If you employ people

If you do not plan to restart trading in this tax year, you should close your PAYE scheme.

Dormant for Companies House

You must file your confirmation statement (previously annual return) and annual accounts with Companies House even if your limited company is:

dormant for Corporation Tax

dormant according to Companies House

But if your company is dormant according to Companies House and also qualifies as ‘small’ you:

can file ‘dormant accounts’ instead

don’t have to include an auditor’s report with your accounts

Check what to include in your accounts if your company is small and dormant for Companies House.

Dormant according to Companies House

Your company is called dormant by Companies House if it’s had no ‘significant’ transactions in the financial year.

Significant transactions don’t include:

filing fees paid to Companies House

penalties for late filing of accounts

money paid for shares when the company was incorporated

You do not need to tell Companies House if you restart trading. The next set of non-dormant accounts that you file will show that your company is no longer dormant.


Expenses if you're self-employed

Overview

If you’re self-employed, your business will have various running costs. You can deduct some of these costs to work out your taxable profit as long as they’re allowable expenses.

Allowable expenses do not include money taken from your business to pay for private purchases.

If you run your own limited company, you need to follow different rules. You can deduct any business costs from your profits before tax. You must report any item you make personal use of as a company benefit.

Costs you can claim as allowable expenses

These include:

office costs, for example stationery or phone bills

travel costs, for example fuel, parking, train or bus fares

clothing expenses, for example uniforms

staff costs, for example salaries or subcontractor costs

things you buy to sell on, for example stock or raw materials

financial costs, for example insurance or bank charges

costs of your business premises, for example heating, lighting, business rates

advertising or marketing, for example website costs

training courses related to your business, for example refresher courses

You cannot claim expenses if you use your £1,000 tax-free ‘trading allowance’.

Contact the Self Assessment helpline if you’re not sure whether a business cost is an allowable expense.

Costs you can claim as capital allowances

If you use traditional accounting, claim capital allowances when you buy something you keep to use in your business, for example:

equipment

machinery

business vehicles, for example cars, vans, lorries

You cannot claim capital allowances if you use your £1,000 tax-free ‘trading allowance’.

If you use cash basis

If you use cash basis accounting and buy a car for your business, you can claim this as a capital allowance. However, all other items you buy and keep for your business should be claimed as allowable expenses in the normal way.

If you use something for both business and personal reasons

You can only claim allowable expenses for the business costs.

If you work from home

You may be able to claim a proportion of your costs for things like:

heating

electricity

Council Tax

mortgage interest or rent

internet and telephone use

You’ll need to find a reasonable method of dividing your costs, for example by the number of rooms you use for business or the amount of time you spend working from home.

Simplified expenses

You can avoid using complex calculations to work out your business expenses by using simplified expenses. Simplified expenses are flat rates that can be used for:

vehicles

working from home

living on your business premises

Office, property and equipment

Claim items you’d normally use for less than 2 years as allowable expenses, for example:

stationery

rent, rates, power and insurance costs

For equipment you keep to use in your business, for example computers or printers, claim:

allowable expenses if you use cash basis accounting

capital allowances if you use traditional accounting

You cannot claim for any non-business use of premises, phones or other office resources.

Stationery

You can claim expenses for:

phone, mobile, fax and internet bills

postage

stationery

printing

printer ink and cartridges

computer software your business uses for less than 2 years

computer software if your business makes regular payments to renew the licence (even if you use it for more than 2 years)

Claim other software for your business as capital allowances, unless you use cash basis.

Rents, rates, power and insurance costs

You can claim expenses for:

rent for business premises

business and water rates

utility bills

property insurance

security

using your home as an office (only the part that’s used for business)

Business premises

You cannot claim expenses or allowances for buying building premises.

Claim expenses for repairs and maintenance of business premises and equipment.

For alterations to install or replace equipment, claim:

You can also claim capital allowances for some integral parts of a building, for example water heating systems.

Car, van and travel expenses

You can claim allowable business expenses for:

vehicle insurance

repairs and servicing

fuel

parking

hire charges

vehicle licence fees

breakdown cover

train, bus, air and taxi fares

hotel rooms

meals on overnight business trips

You cannot claim for:

non-business driving or travel costs

fines

travel between home and work

You may be able to calculate your car, van or motorcycle expenses using a flat rate (known as simplified expenses) for mileage instead of the actual costs of buying and running your vehicle.

Buying vehicles

If you use traditional accounting and buy a vehicle for your business, you can claim this as a capital allowance.

If you use cash basis accounting and buy a car for your business, claim this as a capital allowance as long as you’re not using simplified expenses.

For all other types of vehicle, claim them as allowable expenses.

Clothing expenses

uniforms

protective clothing needed for your work

costumes for actors or entertainers

You cannot claim for everyday clothing (even if you wear it for work).

Staff expenses

employee and staff salaries

bonuses

pensions

benefits

agency fees

subcontractors

employer’s National Insurance

training courses related to your business

You cannot claim for carers or domestic help, for example nannies.

Reselling goods

goods for resale (stock)

raw materials

direct costs from producing goods

You cannot claim for:

any goods or materials bought for private use

depreciation of equipment

Legal and financial costs

Accountancy, legal and other professional fees can count as allowable business expenses.

You can claim costs for:

hiring of accountants, solicitors, surveyors and architects for business reasons

professional indemnity insurance premiums

You cannot claim for:

legal costs of buying property and machinery - if you use traditional accounting, claim for these costs as capital allowances

fines for breaking the law

Bank, credit card and other financial charges

You can claim business costs for:

bank, overdraft and credit card charges

interest on bank and business loans

hire purchase interest

leasing payments

alternative finance payments, for example Islamic finance

If you’re using cash basis accounting you can only claim up to £500 in interest and bank charges.

You cannot claim for repayments of loans, overdrafts or finance arrangements.

Insurance policies

You can claim for any insurance policy for your business, for example public liability insurance.

When your customer does not pay you

If you’re using traditional accounting, you can claim for amounts of money you include in your turnover but will not ever receive (‘bad debts’). However, you can only write off these debts if you’re sure they will not be recovered from your customer in the future.

You cannot claim for:

debts not included in turnover

debts related to the disposal of fixed assets, for example land, buildings, machinery

bad debts that are not properly calculated, for example you can not just estimate that your debts are equal to 5% of your turnover

Bad debts cannot be claimed if you use cash basis accounting because you’ve not received the money from your debtors. With cash basis, you only record income on your return that you’ve actually received.

Marketing, entertainment and subscriptions

advertising in newspapers or directories

bulk mail advertising (mailshots)

free samples

website costs

You cannot claim for:

entertaining clients, suppliers and customers

event hospitality

Subscriptions

You can claim for:

trade or professional journals

trade body or professional organisation membership if related to your business

You cannot claim for:

payments to political parties

gym membership fees

donations to charity - but you may be able to claim for sponsorship payments

Training courses

You can claim allowable business expenses for training that helps you improve the skills and knowledge you use in your business (for example, refresher courses).

The training courses must be related to your business.

You cannot claim for training courses that help you:

start a new business

expand into new areas of business, including anything related to your current business

How to claim

Keep records of all your business expenses as proof of your costs.

Add up all your allowable expenses for the tax year and put the total amount on your Self Assessment tax return.

You do not need to send in proof of expenses when you submit your tax return. But you should keep proof and records so you can show them to HM Revenue and Customs (HMRC) if asked.

You must make sure your records are accurate.


Machine Games Duty

What you pay it on

You may have to pay Machine Games Duty (MGD) if there are machines that give cash prizes on your premises. You pay duty on:

slot and fruit machines, and other gaming machines

quiz machines and other ‘skill with prize’ machines

This guide is also available in Welsh (Cymraeg).

You do not pay it on machines where the prize is less than the cost to play, or on takings from charity events, tournaments, lottery machines or if the machine is for domestic use.

Your takings from machine games will be exempt from VAT if you pay MGD.

If you’re responsible for MGD you’ll need to register, send regular returns, pay duty and keep records.

Who’s responsible for registering and paying

It’s your responsibility if you hold any of the following licences:

premises licence, for example for gambling or alcohol

family entertainment centre gaming machine permit

club premises certificate, a club gaming permit or club machine permit

prize gaming permit or amusement permit

registration certificate including a club registration certificate

bookmaking office licence or bingo club licence

licence to sell alcohol in Northern Ireland

There are different rules if you’re the tenant of a pub. You’re responsible for MGD, not the premises licence owner (usually the pub’s owner). When you stop being the tenant, you need to cancel your registration.

You are not responsible for MGD if you supply the machines, unless you also hold the licence or permit for the premises.

If your premises does not have a licence, HM Revenue and Customs (HMRC) will ask someone else, usually the manager or owner, to register and pay the duty.

You may have to pay a penalty if you do not register when you should.

Register

Register for Machine Games Duty (MGD) at least 14 days before you make your machines available to play.

You register by adding MGD to your HM Revenue and Customs (HMRC) account. If you do not have one (or only have an account for personal tax), create an account as an organisation.

To register for MGD, you’ll need:

any licence or permit numbers for your premises

your Unique Taxpayer Reference (UTR), if you’re registered for Self Assessment or Corporation Tax

your VAT number, if you’re registered for VAT

your National Insurance number

to know how many machines you have

your accountant’s MGD agent reference number and postcode, if you want them to file returns on your behalf

Register now

After you’ve registered

You’ll need to keep accurate records to show:

how you worked out the figures for your return

that the amount you’ve paid is correct

Keep your records for 4 years as HMRC might ask to see them.

If you want to file paper returns

Fill in and send the registration form if you want to file paper returns.

How much you pay

You pay Machine Games Duty (MGD) on the total net takings from your machine games.

This is what you charge to play the games minus the amount you pay as winnings, including non-cash prizes.

You do not pay it on takings from charity events, tournaments, lottery machines or if the machine is for domestic use.

MGD rates

| Cost to play | Prize | Rate you pay

Machine type 1 - lower rate | 20 pence or less | £10 or less | 5%

Machine type 2 - standard rate | 21 pence to £5 | £11 or more | 20%

All other machine types - higher rate | More than £5 | Any | 25%

If your machine has more than one type of game, you pay the rate for the highest rated game on all takings from the machine.

File your return

You must file a Machine Games Duty (MGD) return every 3 months.

Your return is due within 30 days of the end of the accounting period. You’ll get a reminder if you included your email address when you registered online.

You’ll need:

records of your total net takings from machine games

details of how you worked out the figures

You still fill in a return even if you do not owe anything, or your business has not traded during this accounting period. This can be for any reason, including if you’ve closed because of coronavirus (COVID-19). Enter ‘0’ in all boxes.

File your return

If you chose to file using paper forms

HM Revenue and Customs (HMRC) will send you paper forms when your return is due. If you do not receive them, contact the helpline.

After you’ve filed your return

Pay your Machine Games Duty bill within 30 days of the end of your accounting period.

You may have to pay a penalty if your return or payment is late. HMRC can also charge you an estimate of what you owe.

Change your details

Sign in to the Machine Games Duty (MGD) service to:

change your contact address or other details

cancel your registration if you’ve stopped trading, no longer have machine games or want to be registered as part of a group of companies

add, change or remove an authorised agent to file returns for you

You can also contact HM Revenue and Customs (HMRC) by phone or post. You’ll need to tell them your registration number.

Switch to file online instead of sending paper returns

If you already have an HMRC online account, sign in to add the MGD service.

Otherwise, register for an HMRC account and sign up for MGD.


Pay Machine Games Duty

Overview

You must file your Machine Games Duty (MGD) return and make your payment within 30 days of the end of your accounting period. An accounting period is 3 months unless you’ve arranged with HM Revenue and Customs (HMRC) to use a different accounting period.

This guide is also available in Welsh (Cymraeg).

If the deadline falls on a weekend or bank holiday, make sure you file your return and your payment reaches HMRC on the last working day before it (unless you’re paying by Faster Payments, debit card or credit card).

Pay now

Ways to pay

Make sure you pay HMRC by the deadline. You may have to pay a penalty and interest if you pay late.

The time you need to allow depends on how you pay.

You can no longer pay at the Post Office.

Same day or next day

online or telephone banking (Faster Payments)

By debit or corporate credit card online

CHAPS

At your bank or building society

3 working days

Bacs

By cheque through the post

Direct Debit - if you’re making a single payment and you’ve set up one for HMRC before

5 working days

Direct Debit - if you’re making a single payment and you have not set up one for HMRC before

10 working days before you file your first return

Direct Debit - if you’re setting up an automatic payment (known as a ‘variable payment plan’)

Penalties for late returns

You’ll get a penalty if you miss the deadline for filing returns.

When the penalty is applied | Penalty

1 day after deadline | Between £100 and £400, depending on how many late returns you’ve previously filed

6 months after deadline | £300 or 5% of the MGD due (whichever is higher)

12 months after deadline | £300 or 5% of the MGD due (whichever is higher)

If you disagree with a penalty

If you’ve been given a penalty and you think it’s wrong, you can appeal to HMRC.

Bank details for online or telephone banking, CHAPS, Bacs

Make your payment to HM Revenue and Customs’ account.

Account name | Sort code | Account number

HMRC Shipley | 08 32 10 | 12001020

Use your reference number

Your payment reference is your 14-character Machine Games Duty (MGD) registration number.

You’ll find it on:

the MGD Registration Certificate HMRC sent you

How long it takes

Payments made by Faster Payments (online or telephone banking) will usually reach HMRC on the same or next day, including weekends and bank holidays.

CHAPS payments usually reach HMRC the same working day if you pay within your bank’s processing times.

Bacs payments usually take 3 working days.

Check your bank’s transaction limits and processing times before making a payment.

Overseas payments

Use these details to pay from an overseas account.

Account number (IBAN) | Bank identifier code (BIC) | Account name

GB03BARC20114783977692 | BARCGB22 | HMRC Shipley

HMRC’s banking address is:

Direct Debit

You can only pay by Direct Debit if you’ve registered for Machine Games Duty (MGD) online.

Use your HM Revenue and Customs (HMRC) online account to set up a Direct Debit.

You can set up:

a single payment each time you file your return

automatic payment of the duty shown on your return (known as a ‘variable payment plan’)

Single payment

You can make a single one-off payment by Direct Debit online.

It takes 5 working days to process a Direct Debit payment the first time you set one up. It should take 3 working days next time if you’re using the same bank details.

Variable payment plan

You can set up regular automatic Direct Debit payments online only. Choose a ‘variable payment plan’ when setting up your Direct Debit.

It takes at least 10 working days to process a payment when you first set it up. Make sure your payment will reach HMRC before the deadline.

Your payment will then be taken automatically every time it’s due.

You’ll need to cancel your Direct Debit if you want to change to a different payment method.

By debit or corporate credit card online

You can pay online.

There’s a fee if you pay by corporate credit card or corporate debit card. The fee is not refundable.

There’s no fee if you pay by personal debit card.

You cannot pay by personal credit card.

Use your 14-character Machine Games Duty (MGD) registration number as your ‘charge reference’.

You’ll find it on:

HMRC will accept your payment on the date you make it (even on bank holidays and weekends) - not the date it reaches HMRC’s account.

If you’re unable to pay your Machine Games Duty bill in full by card, you should use another payment method like a bank transfer.

At your bank or building society

You can only pay Machine Games Duty (MGD) at your bank or building society if you file a paper MGD return.

Use the payslip HM Revenue and Customs (HMRC) sent you.

Make your cheque payable to ‘HM Revenue and Customs only’.

Write your MGD reference number on the back of your cheque. You’ll find the reference number on the payslip.

HMRC will accept your payment on the date you make it (if you pay it from Monday to Friday) and not the date it reaches HMRC’s account.

Pay online if you want to pay by debit or credit card.

By cheque through the post

You can send a cheque by post to HM Revenue and Customs (HMRC).

You do not need to include a street name, city name or PO box with this address.

Allow 3 working days for your payment to reach HMRC.

What to include

Write your Machine Games Duty (MGD) reference number on the back of the cheque.

You’ll find your MGD reference number on either:

the payslip HMRC sent you if you file a paper return

your HMRC online account if you file your return online

Your payment may be delayed if you do not fill in your cheque properly.

If you file a paper return, send your payslip with your cheque.

If you file online, send a letter including:

your name, address and telephone number

your MGD registration number

the amount you’re paying

Do not fold or staple your cheque.

Check your payment has been received

View your HMRC online account to see if your payment has been received - it should update within 6 working days.

Tell HMRC no duty is due

You must still file your return even if you calculate that you do not owe any Machine Games Duty (MGD). You may have to pay a penalty if you do not.

If you owe a negative amount (you’ve paid out more in winnings than you’ve taken in playing charges), it’ll be carried over to your next return and subtracted from the amount of MGD due.


Pay a Construction Industry Scheme (CIS) late filing penalty

Overview

HM Revenue and Customs (HMRC) will send you a late filing penalty notice telling you how much to pay if you’ve filed your monthly return late.

You must pay within 30 days of receiving the notice, or you can appeal:

through HMRC’s online service

by writing to HMRC - quote your Unique Taxpayer Reference (UTR) and the payment reference shown on the notice

Pay now

Ways to pay

Make sure you pay by the deadline. The time you need to allow depends on how you pay.

You can no longer pay at the Post Office.

Same or next day

online or telephone banking (Faster Payments)

CHAPS

online by debit or corporate credit card

at your bank or building society

3 working days

Bacs

Direct Debit (if you’ve set up one for HMRC before)

by cheque through the post

5 working days

Direct Debit (if you have not set up one for HMRC before)

If the deadline falls on a weekend or bank holiday, make sure your payment reaches HMRC on the last working day before it (unless you’re paying by Faster Payments).

Bank details for online or telephone banking, CHAPS, Bacs

You can pay by Faster Payments, CHAPS or Bacs to HM Revenue and Customs’ (HMRC) account.

Sort code | Account number | Account name

08 32 10 | 12001020 | HMRC Shipley

Reference number

You’ll need to use the 14-character Construction Industry Scheme (CIS) late filing penalty reference number from your late filing penalty notice. This number always starts with an X.

Do not use your Accounts Office reference number. Your payment may be delayed if you use the wrong reference.

How long it takes

Payments made by Faster Payments (online or telephone banking) will usually reach HMRC on the same or next day, including weekends and bank holidays.

CHAPS payments usually reach HMRC the same working day if you pay within your bank’s processing times.

Bacs payments usually take 3 working days.

Check your bank’s transaction limits and processing times before making a payment.

Overseas payments

Use these details to pay from an overseas account.

Account number (IBAN) | Bank identifier code (BIC) | Account name

GB03BARC20114783977692 | BARCGB22 | HMRC Shipley

HMRC’s banking address is:

By debit or corporate credit card online

You can pay online.

There’s a fee if you pay by corporate credit card or corporate debit card. The fee is not refundable.

There’s no fee if you pay by personal debit card.

You cannot pay by personal credit card.

You’ll need the 14-character Construction Industry Scheme (CIS) late filing penalty reference number from your late filing penalty notice. This number always starts with an X.

HM Revenue and Customs (HMRC) will accept your payment on the date you make it (even on bank holidays and weekends) - not the date it reaches their account.

If you’re unable to pay your late filing penalty in full by card, you should use another payment method like a bank transfer.

At your bank or building society

Use the payslip HM Revenue and Customs (HMRC) sent with your late filing penalty notice.

Do not use a payslip from your payment booklet because your payment will be credited to the wrong account and you may receive reminders to pay.

Make your cheque payable to ‘HM Revenue and Customs only’.

Write your 14-character Construction Industry Scheme (CIS) late filing penalty reference number on the back of your cheque. You will find the reference number on your penalty notice. It always starts with an X.

HMRC will accept your payment on the date you make it and not the date it reaches their account.

Direct Debit

You’ll need to set up a new Direct Debit through your business’s HM Revenue and Customs (HMRC) online account to make a single payment.

You cannot use your existing Construction Industry Scheme (CIS) monthly or quarterly Direct Debit.

You’ll need the 14-character CIS late filing penalty reference number from your late filing penalty notice. This number always starts with an X.

How much time to allow

Allow 5 working days to process a Direct Debit the first time you set one up. It should take 3 working days next time if you’re using the same bank details.

By cheque through the post

You can send a cheque by post to HM Revenue and Customs (HMRC).

You do not need to include a street name, city name or PO box with this address.

Allow 3 working days for your payment to reach HMRC.

What to include

Write your 14-character Construction Industry Scheme (CIS) late filing penalty reference number on the back of the cheque. This always starts with the letter ‘X’. Do not use your Accounts Office reference number.

Your payment may be delayed if you do not fill in your cheque properly.

Include the payslip HMRC sent you with the late filing penalty notice. Do not fold the payslip or cheque or fasten them together.

You can include a letter with your payment to request a receipt from HMRC.

If you do not have a payslip

Send your cheque with a letter with these details:

company name

address

telephone number

penalty reference number

how much you’re paying

Check your payment has been received

You can check your bank or building society statement to confirm the payment has left your account.

If paying by cheque through the post, you can include a letter with your payment to request a receipt from HM Revenue and Customs (HMRC).


Pay your Corporation Tax bill

Overview

The deadline for your payment will depend on your taxable profits.

Taxable profits of up to £1.5 million

You must pay your Corporation Tax 9 months and 1 day after the end of your accounting period. Your accounting period is usually your financial year, but you may have 2 accounting periods in the year you set up your company.

Taxable profits of more than £1.5 million

You must pay your Corporation Tax in instalments.

Check the rules and deadlines:

if your taxable profits are between £1.5 million and £20 million

if your taxable profits are more than £20 million

Ways to pay

Make sure you pay HM Revenue and Customs (HMRC) by the deadline. They may charge you interest if you do not pay on time. They’ll pay you interest if you pay your tax early.

Pay now

The time you need to allow depends on how you pay.

You can no longer pay at the Post Office.

Same day or next day

online or telephone banking (Faster Payments)

CHAPS

through your online bank account

3 working days

Bacs

Direct Debit (if you’ve set one up before)

online by debit or corporate credit card

at your bank or building society

5 working days

Direct Debit (if you have not set one up before)

You cannot pay Corporation Tax by post.

If the deadline falls on a weekend or bank holiday, make sure your payment reaches HMRC on the last working day before it (unless you’re paying by Faster Payments).

Make an online or telephone bank transfer

You can pay HM Revenue and Customs (HMRC) by Faster Payments, CHAPS or Bacs.

The back of your payslip, sent to you by HMRC, tells you which account to use. If you’re not sure, use Cumbernauld.

| Sort code | Account number

HMRC Cumbernauld | 083210 | 12001039

HMRC Shipley | 083210 | 12001020

Reference number

Use your 17-character Corporation Tax payslip reference for the accounting period you’re paying.

You’ll find the payslip reference:

on any payslip that HMRC sent you

through your company’s HMRC online account - choose ‘View account’ then ‘Accounting period’

Your payment may be delayed if you use the wrong reference number.

How long it takes

Payments made by Faster Payments (online or telephone banking) will usually reach HMRC on the same or next day, including weekends and bank holidays.

CHAPS payments usually reach HMRC the same working day if you pay within your bank’s processing times.

Bacs payments usually take 3 working days.

Check your bank’s transaction limits and processing times before making a payment.

Overseas accounts

Use these details to pay from an overseas account.

| Account number (IBAN) | Bank identifier code (BIC)

HMRC Cumbernauld | GB62BARC20114770297690 | BARCGB22

HMRC Shipley | GB03BARC20114783977692 | BARCGB22

Multiple payments by CHAPS

Send an online CHAPS enquiry form if you want to make a single payment to cover more than one company for the same accounting period.

HMRC’s banking address is:

Approve a payment through your online bank account

You can pay your Corporation Tax bill directly using your online or mobile bank account.

When you’re ready to pay, select ‘start a payment’ and then ‘pay by bank account’. You’ll then be directed to sign in to your online or mobile banking account to approve your Corporation Tax payment.

The payment is usually instant but sometimes it takes up to 2 hours to show in your account.

You’ll need to have your online banking details ready to pay this way.

By debit or corporate credit card online

You can pay online.

There’s a fee if you pay by corporate credit card or corporate debit card. The fee is not refundable.

There’s no fee if you pay by personal debit card.

You cannot pay with a personal credit card.

You’ll find the payslip reference:

on any payslip that HM Revenue and Customs (HMRC) sent you

If you’re unable to pay your Corporation Tax bill in full by card, you should use another payment method like a bank transfer.

How long it takes

Allow 3 working days for your payment to reach HMRC’s bank account.

At your bank or building society

You can pay at a branch by cash or cheque.

You’ll need to use the payslip that HM Revenue and Customs (HMRC) sends you.

Make your cheque payable to ‘HM Revenue and Customs only’.

Write your 17-character Corporation Tax payslip reference number on the back of your cheque
for the accounting period you’re paying. You can find the reference number on the payslip sent to you by HMRC.

If you do not have a payslip

You’ll need to pay by another method instead, for example:

debit or credit card online

online or telephone banking

Direct Debit

Direct Debit

Set up and make changes to a Direct Debit through your company’s HM Revenue and Customs (HMRC) online account.

You can find the payslip reference:

on the payslip that HMRC sent you

How long it takes

Allow 5 working days to process a Direct Debit the first time you set one up.

It should take 3 working days each time you pay once you’ve already authorised a Direct Debit from HMRC.

Payments will appear on your bank statements as ‘HMRC NDDS’.

Payments for a group of companies

If your company is in a group, you can pay Corporation Tax under a Group Payment Arrangement. HM Revenue and Customs (HMRC) will write to tell you the correct payslip reference.

Tell HMRC no payment is due

Tell HM Revenue and Customs (HMRC) if you have nothing to pay. HMRC will send you payment reminders if you do not.

You can tell HMRC by either:

filling in the ‘nil to pay’ form

sending back the payslip on the reminder HMRC sends you, marked ‘NIL due’

You must still file your company tax return.

Check your payment has been received

Check your HM Revenue and Customs (HMRC) online account to see if your payment has been received. It should be updated within a few days of HMRC receiving the payment.


Pay your VAT bill

Overview

Before you pay your VAT bill, make sure your deadline has not passed. Your deadline will be shown on your VAT return.

There are different deadlines if you use:

the Annual Accounting Scheme

payments on account

Pay now

There’s a different way to pay a VAT Mini One Stop Shop (VAT MOSS) bill.

Ways to pay

Make sure your payment will reach HM Revenue and Customs’ (HMRC) bank account by the deadline. You may have to pay a surcharge if you do not pay on time.

You can use the VAT payment deadline calculator to work out how much time to allow.

Same or next day

online or telephone banking (Faster Payments)

CHAPS

3 working days

Direct Debit

Bacs

standing order (only for businesses using the Annual Accounting Scheme or Payments on Account)

online by debit or corporate credit card

at your bank or building society

If the deadline falls on a weekend or bank holiday, your payment must arrive in HMRC’s bank account on the last working day before it (unless you pay by Faster Payments).

Direct Debit

Use your VAT online account to set up a Direct Debit.

Set up the Direct Debit at least 3 working days before you submit your online VAT return, otherwise the payment will not be taken from your bank account in time.

Once you’ve set up the Direct Debit, payments will be collected automatically from your bank account 3 working days after the payment deadline on your VAT return.

If you file your VAT return late, your payment will be taken 3 days after you file the return.

You cannot pay by Direct Debit if you have a ‘payments on account’ arrangement.

If you’ve signed up to Making Tax Digital

Businesses that have signed up for Making Tax Digital and usually pay VAT by Direct Debit do not need to set up a new one.

HMRC will transfer your Direct Debit to the new system.

If you use the Annual Accounting Scheme

Businesses that use the Annual Accounting Scheme can only set up an automatic Direct Debit online for balancing payments.

You can set up a Direct Debit for regular payments using form VAT 623.

Getting VAT repayments

The bank account details you use to set up your Direct Debit will not be used for VAT repayments.

To get VAT repayments paid into your bank account, update the registration details in your VAT online account. Otherwise HMRC will send you a cheque.

Make an online or telephone bank transfer

You can pay HM Revenue and Customs (HMRC) by Faster Payments, CHAPS or Bacs.

Sort code | Account number | Account name

08 32 00 | 11963155 | HMRC VAT

Reference number

You’ll need your 9-digit VAT registration number to make a payment.

Find your registration number:

in your VAT online account

on your VAT registration certificate

Do not put any spaces between the digits when paying your VAT bill.

Your payment may be delayed if you use the wrong reference number.

How long it takes

Payments made by Faster Payments (online or telephone banking) will usually reach HMRC on the same or next day, including weekends and bank holidays.

CHAPS payments usually reach HMRC the same working day if you pay within your bank’s processing times.

Bacs payments usually take 3 working days.

Check your bank’s transaction limits and processing times before making a payment.

Overseas payments

Account number (IBAN) | Bank identifier code (BIC) | Account name

GB36BARC20051773152391 | BARCGB22 | HMRC VAT

HMRC’s banking address is:

By debit or corporate credit card online

You can pay online.

There’s a fee if you pay by corporate credit card or corporate debit card. The fee is not refundable.

There’s no fee if you pay by personal debit card.

You cannot pay by personal credit card.

Find your registration number:

in your VAT online account

on your VAT registration certificate

Allow 3 working days for your payment to reach HM Revenue and Customs’ bank account.

If you’re unable to pay your VAT bill in full by card, you should use another payment method like a bank transfer.

At your bank or building society

You’ll need to order paying-in slips online or by phone from HM Revenue and Customs (HMRC) before you can pay this way. It can take up to 6 weeks for them to arrive.

Use the paying-in slips to pay at your own bank or building society by cash or cheque. Make your cheque payable to ‘HM Revenue and Customs only’.

Write your 9-digit VAT registration number on the back of your cheque. You will find your registration number:

in your VAT online account

on your VAT registration certificate

Standing order

Businesses using the Annual Accounting Scheme or making payments on account can pay a VAT bill by standing order. Standing orders take 3 working days to reach HM Revenue and Customs’ (HMRC) bank account.

Annual Accounting Scheme

Ask to pay by standing order on your application form for the Annual Accounting Scheme.

After you’ve received a letter from HMRC accepting your application, set up a standing order using either:

form VAT 622

online or telephone banking

Payments on account

Set up a standing order using either:

form VAT 622

online or telephone banking

Check your payment has been received

View your VAT online account to see if your payment has been received - it should update within 48 hours.

Pay your UK VAT MOSS bill

The UK VAT Mini One Stop Shop (VAT MOSS) scheme closes on 10 January 2021.

You must send your final UK VAT MOSS return and payment by 20 January 2021. You will not be able to submit a return after 31 January 2021.

If you sell digital services to customers in the EU you must either register for VAT MOSS in an EU country, or pay VAT in each country you supply to. Find out about registering for VAT in EU countries.

Ways to pay

Businesses that are VAT registered in the UK can pay by Faster Payments, CHAPS or Bacs to the Union VAT MOSS account. Businesses outside the EU should use the Non-Union VAT MOSS account.

Use the payment reference HMRC sent you when you submitted your VAT MOSS Return. You can also find it by logging in to your online account and checking the confirmation message.

Union VAT MOSS account details

08 32 00 | 12001047 | HMRC VAT ON E

You cannot combine your VAT MOSS payment with your normal UK VAT Return payment, because it goes to a different bank account.

How long it takes

Payments made by Faster Payments (online or telephone banking) will usually reach HMRC on the same or next day.

Non-Union VAT MOSS account details

Use the Non-Union VAT MOSS bank details if your business is based outside the EU.

GB34BARC20051710753491 | BARCGB22 | HMRC VAT ON E

To avoid underpaying HMRC because of bank charges, ask your bank to use the code ‘OUR’ in the ‘Detail of charge’ field when they process your payment.

HMRC’s banking address for Non-Union VAT MOSS payments is:


Reclaiming VAT

What you can and cannot reclaim

You can usually reclaim the VAT paid on goods and services purchased for use in your business.

If a purchase is also for personal or private use, you can only reclaim the business proportion of the VAT.

You must keep records to support your claim and show how you arrived at the business proportion for a purchase. You must also have valid VAT invoices.

From 1 April 2019, most businesses will need to keep digital VAT records and use software to submit VAT Returns.

What you cannot reclaim

You cannot reclaim VAT for:

anything that’s only for private use

goods and services your business uses to make VAT-exempt supplies

business entertainment costs

goods sold to you under one of the VAT second-hand margin schemes

business assets that are transferred to you as a going concern

Purchases before registration

You may be able to reclaim VAT paid on goods or services bought before you registered for VAT if the purchases were made within certain time limits.

Partly exempt businesses

You need to make separate calculations for purchases that relate to both VAT-exempt and taxable supplies, such as phone bills or accountancy fees.

Business assets of £50,000 and more

There are special rules for reclaiming VAT for:

individual computers and single pieces of computer equipment costing £50,000 or more before VAT

aircraft, ships and boats costing £50,000 or more before VAT

land and buildings costing £250,000 or more before VAT

You may need to adjust the amount of VAT you reclaim over several years using the Capital Goods Scheme.

How your VAT refund is repaid

Claim your refund by submitting a VAT Return.

You need to give your account details to HM Revenue and Customs (HMRC) - even if you’ve already set up a Direct Debit for VAT Returns. Add or change them by going to the registration details in your VAT online account.

You can also use your online account to view any refund you’re owed, unless you’ve signed up for ‘Making Tax Digital for VAT’.

You will usually get your refund within 10 days of HMRC receiving your return but it may take longer. Only contact HMRC if you have not heard anything after 30 days.

Vehicles and fuel costs

Buying a new car

You may be able to reclaim all the VAT on a new car if you use it only for business.

The car must not be available for private use, and you must be able to show that it is not, for example it’s specified in your employee’s contract.

‘Private use’ includes travelling between home and work, unless it’s a temporary place of work.

You may also be able to claim all the VAT on a new car if it’s mainly used:

as a taxi

for driving instruction

for self-drive hire

Leasing a car

If you lease a car, you can usually claim 50% of the VAT. You may be able to reclaim all the VAT if the car is used only for business and is not available for private use, or is mainly used:

as a taxi

for driving instruction

Self-drive hire cars

If you hire a car to replace a company car that’s off the road, you can usually claim 50% of the VAT on the hire charge.

If you hire a car for another reason (for example you do not have a company car), you can reclaim all the VAT if all the following apply:

you hire it for no more than 10 days

it’s used only for business

it’s not available for private use

Commercial vehicles

You can usually reclaim the VAT for buying a commercial vehicle (like a van, lorry or tractor) if you only use it for business.

If they’re used only for business, you can also reclaim VAT on:

motorcycles

motorhomes and motor caravans

vans with rear seats (combi vans)

car-derived vans

Fuel costs

There are different ways of reclaiming VAT on fuel, if you do not pay a fixed rate under the Flat Rate Scheme.

You can reclaim all the VAT on fuel if your vehicle is used only for business. There are 3 ways of handling VAT if you use the vehicle for both business and private purposes. You can:

reclaim all the VAT and pay the right fuel scale charge for your vehicle

only reclaim the VAT on fuel you use for business trips - you’ll have to keep detailed mileage records

choose not to reclaim any VAT, eg if your business mileage is so low that the fuel scale charge would be higher than the VAT you can reclaim

If you choose not to reclaim VAT on fuel for one vehicle you cannot reclaim VAT on any fuel for vehicles used by your business.

Additional costs

You can usually reclaim the VAT for:

all business-related running and maintenance costs, such as repairs or off-street parking

any accessories you’ve fitted for business use

You can do this even if you cannot reclaim VAT on the vehicle itself.

Used vehicles

The sales invoice for your used vehicle must show the VAT. You cannot reclaim if it does not, for example if the seller uses the VAT margin scheme.

Staff travel

You can reclaim VAT on employee travel expenses for business trips, including meals and accommodation that you pay for.

You cannot reclaim VAT if you pay your employees a flat rate for expenses.

There are special rules for motoring expenses.

You cannot reclaim VAT on entertainment costs.

Who counts as an employee

The following people count as employees for VAT reclaims:

someone directly employed by you (not through an agency)

directors, partners, any other managers

self-employed people who are treated as employees (you cannot reclaim on travel expenses for this group)

helpers or stewards who help run events

The following people do not count as employees for VAT reclaims:

shareholders who are not employed by the business

pensioners and former employees

someone applying for a job, for example interviewees


Simplified expenses if you're self-employed

Overview

Simplified expenses are a way of calculating some of your business expenses using flat rates instead of working out your actual business costs.

You do not have to use simplified expenses. You can decide if it suits your business.

Who can use simplified expenses

Simplified expenses can be used by:

sole traders

business partnerships that have no companies as partners

Simplified expenses cannot be used by limited companies or business partnerships involving a limited company.

Types of expenses

You can use flat rates for:

business costs for some vehicles

working from home

living in your business premises

You must calculate all other expenses by working out the actual costs.

How to use simplified expenses

Keep records your business miles for vehicles, hours you work at home and how many people live at your business premises over the year.

At the end of the tax year use the flat rates for vehicle mileage, working from home, and living at your business premises to work out your expenses.

Include these amounts in the total for your expenses in your Self Assessment tax return.

Use the simplified expenses checker to compare what you can claim using simplified expenses with what you can claim by working out the actual costs. This will help you work out if simplified expenses suits your business.

Vehicles

Calculate your vehicle expenses using a flat rate for mileage instead of the actual costs of buying and running your vehicle, for example insurance, repairs, servicing, fuel.

You can use simplified expenses for:

cars (except cars designed for commercial use, for example black cabs or dual control driving instructors’ cars)

goods vehicles (for example, vans)

motorcycles

You cannot claim simplified expenses for a vehicle you’ve already claimed capital allowances for, or you’ve included as an expense when you worked out your business profits.

Vehicle | Flat rate per mile with simplified expenses

Cars and goods vehicles first 10,000 miles | 45p

Cars and goods vehicles after 10,000 miles | 25p

Motorcycles | 24p

You do not have to use flat rates for all your vehicles. Once you use the flat rates for a vehicle, you must continue to do so as long as you use that vehicle for your business.

You can claim all other travel expenses (for example train journeys) and parking on top of your vehicle expenses.

Working from home

Calculate your allowable expenses using a flat rate based on the hours you work from home each month.

This means you do not have to work out the proportion of personal and business use for your home, for example how much of your utility bills are for business.

The flat rate does not include telephone or internet expenses. You can claim the business proportion of these bills by working out the actual costs.

You can only use simplified expenses if you work for 25 hours or more a month from home.

Hours of business use per month | Flat rate per month

25 to 50 | £10

51 to 100 | £18

101 and more | £26

Living at your business premises

A small number of businesses use their business premises as their home, for example a guesthouse, bed and breakfast or small care home.

You can use simplified expenses instead of working out the split between what you spend for your private and business use of the premises.

With simplified expenses you calculate the total expenses for the premises.

Then use the flat rates to subtract an amount for your personal use of the premises, based on the number of people living on the premises and claim the rest as your business expenses.

Number of people | Flat rate per month

1 | £350

2 | £500

3+ | £650

If someone lives at your business premises for part of the year, you can deduct only the relevant flat rate for the months they live there.


Tax when you buy shares

Overview

When you buy shares, you usually pay a tax or duty of 0.5% on the transaction.

If you buy:

shares electronically, you’ll pay Stamp Duty Reserve Tax (SDRT)

shares using a stock transfer form, you’ll pay Stamp Duty if the transaction is over £1,000

You’ll have to pay tax at 1.5% if you transfer shares into some ‘depositary receipt schemes’ or ‘clearance services’.

You pay tax on the price you pay for the shares, even if their actual market value is much higher.

Transactions you pay tax on

You pay tax when you buy:

existing shares in a company incorporated in the UK

an option to buy shares

an interest in shares, for example an interest in the money from selling them

shares in a foreign company that has a share register in the UK

rights arising from shares, for example rights you have when new shares are issued

When you do not pay tax

You do not have to pay tax if you:

are given shares for nothing

subscribe to a new issue of shares in a company

buy shares in an ‘open ended investment company’ (OEIC) from the fund manager

buy units in a unit trust from the fund manager

You do not normally have to pay Stamp Duty or SDRT if you buy foreign shares outside the UK. But you may have to pay other taxes.

When you sell the shares

You may need to pay Capital Gains Tax when you sell your shares.

Help and advice

Contact Stamp Duty share enquiries for general information about Stamp Duty on shares.

Contact Stamp Duty Reserve Tax enquiries if you have questions about Stamp Duty on electronic paperless share transactions.

You can also get professional help (for example, from a tax adviser) with your tax.

Buying shares electronically

You’ll pay Stamp Duty Reserve Tax (SDRT) if you buy shares electronically through the ‘CREST’ system (a computerised register of shares and shareowners).

The tax is taken automatically when you buy the shares, so you do not need to do anything else about your tax.

SDRT is charged at 0.5% when you buy shares electronically.

If you do not pay cash for your shares but give something else of value to buy them, you pay SDRT based on the value of what you gave.

If you’re given shares for nothing, you do not have to pay any tax.

Buying shares ‘off-market’

You must also pay SDRT on ‘off-market’ transactions. This is when shares are transferred outside CREST.

How to pay

Tax is not deducted automatically when you buy shares off-market.

You’ll need to send HM Revenue and Customs (HMRC) a written notice with details of the transaction.

If you do not pay on time, you’ll be charged interest from the due date until the date you pay. You may also get a penalty.

Buying shares using a stock transfer form

You must pay Stamp Duty on your shares if:

you buy shares through a stock transfer form

the transaction is over £1,000

You pay 0.5% duty, which will be rounded up to the nearest £5.

For shares under £1,000, you will not need to pay anything.

Get a stock transfer form

You can get a stock transfer form from:

a broker

a lawyer or an accountant who deals in shares

You can also download a stock transfer form from the internet.

Find out what you need to include in a stock transfer form.

Send the transfer form to HMRC and pay Stamp Duty

You must send a copy of your stock transfer form to the Stamp Office within 30 days of it being signed and dated.

Email an electronic version or a scan of your paper form to stampdutymailbox@hmrc.gov.uk.

If you cannot email your stock transfer form, send a photocopy by post. You must keep the original signed document for your records.

There is a different address to send a stock transfer form by courier.

You must also pay the Stamp Duty within 30 days of the stock transfer form being signed and dated.

You may get a penalty if you do not pay on time.

Special share arrangements

You pay Stamp Duty Reserve Tax (SDRT) or Stamp Duty at 1.5% if you transfer shares into some ‘depositary receipt schemes’ or ‘clearance services’.

This is when the shares are transferred to a service operated by a third party (for example, a bank). The shares can then be traded free of Stamp Duty or SDRT.

Not all of these schemes work like this. Sometimes the higher rate is not charged and you pay Stamp Duty or SDRT in the normal way. Check the details of your scheme with your stockbroker.


Tax when your limited company gives to charity

Overview

Your limited company pays less Corporation Tax when it gives the following to charity:

money

equipment or trading stock (items it makes or sells)

land, property or shares in another company (shares in your own company don’t qualify)

employees (on secondment)

sponsorship payments

You can claim tax relief by deducting the value of your donations from your total business profits before you pay tax.

There are different rules for sole traders and partnerships.

Donating money

Your limited company can pay less Corporation Tax when it gives money to a charity or community amateur sports club (CASC).

Deduct the value of the donations from your total business profits before you pay tax.

Payments that don’t qualify

You can’t deduct payments that:

are loans that will be repaid by the charity

are made on the condition that the charity will buy property from your company or anyone connected with it

are a distribution of company profits (eg dividends)

If you’re given something in return

Any benefits you’re given in return for your donation (eg tickets to an event) must be below a certain value.

Donation amount | Maximum value of benefit

Up to £100 | 25% of the donation

£101 - £1,000 | £25

£1,001 and over | 5% of the donation (up to a maximum of £2,500)

This applies to benefits given to any person or company connected with your company, including close relatives.

If you get a benefit that’s related to the company your donation qualifies as a sponsorship payment.

Equipment and trading stock

Your limited company pays less Corporation Tax if it gives equipment or items it makes or sells (‘trading stock’) to a charity or community amateur sports club (CASC).

Giving equipment

You can claim full capital allowances on the cost of equipment.

To qualify, the equipment must have been used by your company. This includes things like:

office furniture

computers and printers

vans and cars

tools and machinery

Giving trading stock

If your company donates its trading stock to a charity or CASC, you don’t have to include anything in your sales income for the value of the gift. This means you get tax relief on the cost of the stock you’ve given away.

VAT

If your company is VAT-registered, you’ll need to account for VAT on the items you give away.

However, you can apply zero VAT to the items - even if you normally charge the standard or reduced rate - if your company makes the donation specifically so that the charity can:

sell the items

hire out the items

export the items

This means you can reclaim the VAT on the cost of the trading stock you donate.

If you can’t zero rate the items, use the VAT rate you normally apply to them.

Land, property and shares

Your limited company could pay less Corporation Tax if it gives or sells any of the following to charity:

land or property

shares in another company

You can’t claim for gifts or sales of shares in your own company.

Contact your chosen charity first to make sure it can accept your gift.

What you get

If you give these to charity (including selling them for less than they’re worth):

you won’t have to pay tax on capital gains

you can deduct the value of the gift (its ‘market value’) from your business profits before you pay tax

If you donate or sell to a community amateur sports club (CASC), you don’t pay tax on capital gains but you can’t deduct the value of the gift from your business profits.

Work out the market value

You’ll need to know how much the gift would sell for in an open market (its ‘market value’) to calculate your tax relief. You can get professional help with this.

What you need to do

You must keep documents relating to the donation to show that you’ve made the gift or sale and that the charity has accepted it. You must keep these records for at least 6 years.

Land or property

You must get a letter or certificate from the charity which contains:

a description of the land or property

the date of the gift or sale (the ‘disposal date’)

a statement confirming that it now owns the land or property

Shares

You must fill in a stock transfer form to take the shares out of your company’s name and put them into the charity’s name.

Selling land, property or shares on behalf of a charity

When you offer a gift of land, property or shares, the charity may ask you to sell the gift on its behalf.

You can do this and still claim tax relief for the donation, but you must keep records of the gift and the charity’s request. Without them, you might have to pay Corporation Tax.

Seconding employees

You can deduct any costs as normal business expenses if:

your company temporarily transfers an employee to work for a charity (known as a ‘secondment’)

an employee volunteers for a charity in work time

Your company must continue to pay the employee and run Pay As You Earn (PAYE) on their salary. You can set the costs (including wages and business expenses) against your taxable profits as if they were still working for you.

You can’t claim the costs of employees on secondment or volunteering at a community amateur sports club (CASC).

Sponsoring a charity

Charity sponsorship payments are different from donations because your company gets something related to the business in return.

You can deduct sponsorship payments from your business profits before you pay tax by treating them as business expenses.

What qualifies

Payments qualify as business expenses if the charity:

publicly supports your products or services

allows you to use their logo in your own printed material

allows you to sell your goods or services at their event or premises

links from their website to yours

If you’re unsure whether a charity payment qualifies as a sponsorship payment or a donation, contact the charities helpline.

How to claim

There are different ways to claim tax relief depending on the type of donation you make.

Deduct from your profits

Claim relief in the Company Tax Return that covers  the accounting period during which you made the donation or sale if you have:

donated money

given or sold land, property or shares

Enter the total value of your donations in the ‘Qualifying donations’ box of the ‘Deductions and Reliefs’ section of your tax return.

There are special rules for working out the value of your donation if you give or sell land, property or shares to a charity.

Deduct as business expenses

Deduct costs as normal business expenses in your company’s annual accounts if you have:

seconded employees

sponsored a charity

Claim capital allowances

Claim capital allowances on the cost of equipment you donate in your company’s annual accounts.

If you donate more than your profit

The most you can deduct is the amount that reduces your company’s profits to zero.

If you donate more than your total profits you can’t:

declare trading losses on your tax return

carry over any remaining amount to your next tax return


VAT Returns

Overview

You usually submit a VAT Return to HM Revenue and Customs (HMRC) every 3 months. This period of time is known as your ‘accounting period.’

This guide is also available in Welsh (Cymraeg).

The VAT Return records things for the accounting period like:

your total sales and purchases

the amount of VAT you owe

the amount of VAT you can reclaim

what your VAT refund from HMRC is

You must submit a VAT Return even if you have no VAT to pay or reclaim.

Final VAT Returns

You have to submit a final VAT Return when you cancel your VAT registration.

HMRC will send you a paper version to complete if your registration is cancelled because you’re insolvent.

Fill in your return

Complete and send your VAT Return online.

You cannot use your online account to send your VAT Return if you’ve signed up for ‘Making Tax Digital for VAT’. Use compatible accounting software instead.

If you need help there’s guidance on:

what to put in each box

filling in your return if you’re on the Flat Rate Scheme

If you are registered for VAT in Northern Ireland, you must include EU sales on your VAT Return and complete an EC Sales List.

Working out what you can claim

If your business is a charity, you pay VAT at a reduced rate on some goods and services.

VAT-registered businesses can usually reclaim the VAT they’ve paid on business purchases and expenses. The claim must be for a business activity (you have to work out the business element if it also had a personal use).

You must keep records to support your claim and show the VAT was paid.

Exceptions

You cannot reclaim the VAT on:

entertainment expenses

purchases if you use the VAT Flat Rate Scheme (except some capital assets worth more than £2,000)

There are special rules for working out how to reclaim VAT for:

cars, for example buying, repairing, fuel costs

staff travel expenses, for example accommodation and transport expenses

businesses that are partly exempt from VAT

Estimated figures

Ask HM Revenue and Customs (HMRC) for permission to use estimated figures. You’ll need a good reason why you cannot give accurate figures on your VAT Return.

If you’re allowed, you will not be charged a penalty unless you miss the deadline or make a careless or deliberate error. You’ll normally have to give the correct figures in your next VAT Return.

Bad debts

You can reclaim the VAT you’ve paid HMRC but not received from a customer if it’s a ‘bad debt’ (one you’ve written off). To qualify for the relief:

the debt must be between 6 months old and 4 years and 6 months old

you must not have sold the debt on

you must not have charged more than the normal price for the item

You should reclaim them via your VAT Return (add them to your Box 4 figure) and keep records about the debt.

If the debt is paid, you must pay the relief back via your VAT Return by adding the amount to your ‘Box 1’ figure.

How to submit your return

You must submit your return online unless:

your business is subject to an insolvency procedure - if you have a Company Voluntary Arrangement or an Individual Voluntary Arrangement you can submit your return online if you want to

you object to using computers on religious grounds

you cannot because of your age, a disability or because of where you live, for example you do not have internet access

Contact HM Revenue and Customs (HMRC) to find out how to submit your return, for example paper filing, if you cannot submit online.

Submit your VAT Return online

You need a VAT number and a VAT online account. You can then submit your VAT Return using HMRC’s free online service or commercial accounting software.

Getting online

If you need:

a VAT number and online account - register for VAT

an online account - sign up for an online account and select ‘VAT submit returns’

a VAT number - log in to your online account and apply for a VAT number

HMRC’s free online service

Sign in to your VAT online account and complete your VAT Return.

Using accounting software

Most accounting software lets you submit your VAT Return to HMRC directly. This means you will not have to enter your figures separately in HMRC’s online service.

HMRC has a list of software you can use to submit your VAT Return.

Keep any reference number you receive as proof you’ve sent your return.

Using accountants or agents

You’ll need to authorise them before they can submit your VAT Return. You can do this through your VAT online account.

Find an accountant or a solicitor to help you with your VAT return or tax.

Get help

You can get help with your VAT return or if you do not understand something about your tax.

Help with online services

Contact the VAT Online Services Helpdesk if you need any help using VAT online services.

Deadlines

Check your VAT Return and payment deadlines in your VAT online account.

Your VAT online account tells you:

when your VAT Returns are due

when the payment must clear HM Revenue and Customs’ (HMRC) account

The deadline for submitting the return online and paying HMRC are usually the same - 1 calendar month and 7 days after the end of an accounting period. You need to allow time for the payment to reach HMRC’s account.

Exceptions

The deadlines are different if, for example, you use the VAT Annual Accounting Scheme.

Pay your VAT bill

You must pay VAT to HMRC electronically, for example through direct debit or internet banking. Most businesses are not allowed to pay by cheque.

Contact HMRC if you cannot pay your VAT bill.

Surcharges and penalties

HM Revenue and Customs (HMRC) record a ‘default’ if:

they do not receive your VAT return by the deadline

full payment for the VAT due on your return has not reached their account by the deadline

Surcharges

You may enter a 12-month ‘surcharge period’ if you default. If you default again during this time:

the surcharge period is extended for a further 12 months

you may have to pay an extra amount (a ‘surcharge’) on top of the VAT you owe

If you submit a late return, you will not have to pay a surcharge if you:

pay your VAT in full by the deadline

have no tax to pay

are due a VAT repayment

HMRC will write to you explaining any surcharges you owe and what happens if you default again.

How much you pay

Your surcharge is a percentage of the VAT outstanding on the due date for the accounting period that is in default. The surcharge rate increases every time you default again in a surcharge period.

This table shows how much you’ll be charged if you default within a surcharge period.

You do not pay a surcharge for your first default.

Defaults within 12 months | Surcharge if annual turnover is less than £150,000 | Surcharge if annual turnover is £150,000 or more

2nd | No surcharge | 2% (no surcharge if this is less than £400)

3rd | 2% (no surcharge if this is less than £400) | 5% (no surcharge if this is less than £400)

4th | 5% (no surcharge if this is less than £400) | 10% or £30 (whichever is more)

5th | 10% or £30 (whichever is more) | 15% or £30 (whichever is more)

6 or more | 15% or £30 (whichever is more) | 15% or £30 (whichever is more)

Penalties

HMRC can charge you a penalty of up to:

100% of any tax under-stated or over-claimed if you send a return that contains a careless or deliberate inaccuracy

30% of an assessment if HMRC sends you one that’s too low and you do not tell them it’s wrong within 30 days

£400 if you submit a paper VAT return, unless HMRC has told you you’re exempt from submitting your return using your VAT online account or Making Tax Digital compatible software

Assessments

If you do not send your VAT Return and pay any VAT due on time, you will get a ‘VAT notice of assessment of tax’ from HM Revenue and Customs (HMRC), telling you how much VAT they think you owe.

What you need to do

Send your VAT Return and any payment due immediately.

If the assessed amount of VAT is too low you must tell HMRC within 30 days. Do this by sending a correct VAT Return and VAT payment or contacting them. You may be charged a penalty if you do not.

If the assessment is too high, you cannot appeal it. You must send a correct VAT Return and VAT payment.

Contact HMRC if you cannot pay your tax bill and contact the VAT helpline if you cannot send the return.

Interest on underpaid or overpaid VAT

HM Revenue and Customs (HMRC) may charge you interest if you do not report and pay the right amount of VAT. If you pay too much VAT because HMRC make a mistake, you can claim interest.

When interest is charged

Interest may be charged if you:

report less VAT than you charge, or reclaim more than you pay

pay an assessment that HMRC later find was too low

let HMRC know you owe them VAT because of a mistake on your VAT Return

How much interest is charged

You’ll be charged 2.6% interest.

There’s a different interest rate for tax that was underpaid before 21 November 2017.

Use your VAT online account to check the amount you owe.

HMRC will also send you a notice telling you how much you owe and how it’s worked out.

If you do not pay within 30 days, further interest is charged on the VAT due from the date of the notice. You’ll be charged interest for as long as you do not pay, up to a maximum of 2 years.

You cannot deduct the interest HMRC charges you when working out your taxable profits.

Claiming interest

You may be able to claim interest if HMRC’s mistake means:

you pay too much VAT

you reclaim too little VAT

a payment to you from HMRC was delayed

Normally HMRC will not repay interest if you’ve paid too much VAT because of a mistake you made.

How much interest can you claim

You can claim 0.5% interest. This is normally paid for the whole period from when the VAT was overpaid or reclaimed until the date repayment is authorised.

There’s a different interest rate for tax that was overpaid before 29 September 2009.

If you caused a delay to any payments (for example by not claiming straight away) HMRC might leave this time out.

You have to claim the interest separately from the repayment itself.

Write to HMRC with details of the repayment, explaining why you’re owed interest. You must do this within 4 years of the repayment’s authorisation date. Use the postal address on the VAT correspondence you have from HMRC.

Any interest you get from HMRC counts as taxable income.

Paying interest to your customers

You must pay any of the interest you get (as well as the VAT) to your customers if HMRC’s mistake means they paid too much VAT.

Contact the person at HMRC who dealt with your claim if you need to find out how the interest was calculated. This can help you work out how much you need to repay each customer. You must give the money back to HMRC within 14 days if you cannot get in touch with a customer to repay them.

Interest rates

HMRC only charge or pay simple interest (interest on the original amount, not interest on interest).

Challenging an HMRC decision

You cannot appeal the decision to charge you interest but you can challenge the actual amount.


VAT registration

Overview

You must register your business for VAT with HM Revenue and Customs (HMRC) if its VAT taxable turnover is more than £85,000.

When you register, you’ll be sent a VAT registration certificate. This confirms:

your VAT number

when to submit your first VAT Return and payment

your ‘effective date of registration’ - this depends on the date you went over the threshold, or is the date you asked to register if it was voluntary

You can register voluntarily if your turnover is less than £85,000, unless everything you sell is exempt. You’ll have certain responsibilities if you register for VAT.

You can reclaim the VAT you’ve paid on certain purchases made before you registered.

Your VAT responsibilities

From your effective date of registration you must:

charge the right amount of VAT

pay any VAT due to HMRC

submit VAT Returns

keep VAT records and a VAT account

Most VAT registered businesses that earn over £85,000 must also follow the rules for ‘Making Tax Digital for VAT’.

While you wait

You cannot charge or show VAT on your invoices until you get your VAT number. However, you’ll still have to pay the VAT to HMRC for this period.

You should increase your prices to allow for this and tell your customers why. Once you’ve got your VAT number you can then reissue the invoices showing the VAT.

How to register

Register for VAT

Most businesses can register online - including partnerships and a group of companies registering under one VAT number.

By doing this you’ll register for VAT and create a VAT online account (sometimes known as a ‘Government Gateway account’). You need this to submit your VAT Returns to HM Revenue and Customs (HMRC).

Using an agent

You can appoint an accountant (or agent) to submit your VAT Returns and deal with HMRC on your behalf.

When you receive your VAT number from HMRC, you can sign up for a VAT online account (select option ‘VAT submit returns’).

When you cannot register online

You must register by post using VAT1 if:

you want to apply for a ‘registration exception’

you’re joining the Agricultural Flat Rate Scheme

you’re registering the divisions or business units of a body corporate under separate VAT numbers

Register by post using form:

VAT1A if you’re an EU business ‘distance selling’ to Northern Ireland

VAT1B if you import (‘acquire’) goods into Northern Ireland worth more than £85,000 from an EU country

VAT1C if you’re disposing of assets on which 8th or 13th Directive refunds have been claimed

Getting your certificate

You should get a VAT registration certificate within 30 working days, though it can take longer.

It’s sent either:

to your VAT online account

by post - if an agent registers you or you cannot register online

What you need to know

You need to provide details like your turnover, business activity and bank details.

Your registration date is known as your ‘effective date of registration’. You’ll have to pay HMRC any VAT due from this date.

You do not need to authorise an agent to register you for VAT.

When to register

You must register for VAT if your VAT taxable turnover goes over £85,000 (the ‘threshold’), or you know that it will. Your VAT taxable turnover is the total of everything sold that is not VAT exempt.

You can also register voluntarily.

Compulsory registration

You must register for VAT if:

you expect your VAT taxable turnover to be more than £85,000 in the next 30-day period

your business had a VAT taxable turnover of more than £85,000 over the last 12 months

You might also need to register in some other cases, depending on the kinds of goods or services you sell and where you sell them.

If you’ll exceed the VAT threshold in the next 30-day period

You must register if you realise that your total VAT taxable turnover is going to be more than £85,000 in the next 30-day period.

You have to register by the end of that 30-day period. Your effective date of registration is the date you realised, not the date your turnover went over the threshold.

If you exceeded the VAT threshold in the past 12 months

You must register if, by the end of any month, your total VAT taxable turnover for the last 12 months was over £85,000.

You have to register within 30 days of the end of the month when you went over the threshold. Your effective date of registration is the first day of the second month after you go over the threshold.

If you sell goods or services that are VAT exempt and are based in Northern Ireland

You’ll need to register if you only sell goods or services that are exempt from VAT or ‘out of scope’ but you buy goods for more than £85,000 from EU VAT-registered suppliers to use in your business.

If you take over a VAT-registered business

You may have to register for VAT.

Businesses outside the UK

There’s no threshold if neither you nor your business is based in the UK. You must register as soon as you supply any goods and services to the UK (or if you expect to in the next 30 days).

Late registration

If you register late, you must pay what you owe from when you should have registered.

You may get a penalty depending on how much you owe and how late your registration is.

Voluntary registration

You can register voluntarily if your business turnover is below £85,000. You must pay HMRC any VAT you owe from the date they register you.

Get an exception

You can apply for a registration ‘exception’ if your taxable turnover goes over the threshold temporarily.

Write to HMRC with evidence showing why you believe your VAT taxable turnover will not go over the deregistration threshold of £83,000 in the next 12 months.

HMRC will consider your exception and write confirming if you get one. If not, they’ll register you for VAT.

Selling or moving goods in Northern Ireland

If you’re a VAT-registered business, you need to tell HMRC if any of the following apply:

your goods are located in Northern Ireland at the time of sale

you receive goods in Northern Ireland from VAT-registered EU businesses for business purposes

you sell or move goods from Northern Ireland to an EU country

This means that:

you’ll be eligible to use VAT simplifications when you trade with the EU

your suppliers are able to zero rate goods that they dispatch to you from the EU

your trade with the EU will remain acquisitions and dispatches when accounting for VAT

Tell HMRC

You’ll need:

the Government Gateway user ID and password you used when you registered for VAT

your VAT registration number

the name of your business

Start now

After you’ve registered

When you are trading with the EU and sell goods in Northern Ireland, you’ll need to:

put an ‘XI’ prefix in front of your VAT number when communicating with an EU customer or supplier (your invoices will show XI in front of your VAT number - for example, XI 123456789 - instead of GB)

complete an EC Sales List if you’re selling goods from Northern Ireland to VAT-registered customers in the EU

If you’ve stopped selling or moving goods in Northern Ireland

If you’ve stopped selling goods in Northern Ireland or moving goods between Northern Ireland and the EU, you need to tell HMRC.

Registering for VAT in EU countries

You may need to register for VAT in the EU country you’re selling to. Find out how to register for VAT in EU countries on the European Commission website.

Supplying digital services

If your business supplies digital services to consumers in EU countries, you need to register for either:

VAT MOSS in any EU country

VAT in each country where you’re supplying digital services

Register for VAT MOSS in an EU country

You’ll need to register for the VAT MOSS scheme in an EU country by the 10th day of the month after your first sale to an EU customer.

Use the European Commission website to:

check if you should register for either the union or non-union VAT MOSS scheme

find contact details to register for VAT MOSS in an EU country

Register for VAT in an EU country

If you do not want to use the VAT MOSS scheme, you must register for VAT in each EU country where you supply digital services.

Find out how to register for VAT in EU member states on the European Commission website.

Calculate VAT taxable turnover

VAT taxable turnover is the total value of everything you sell that is not exempt from VAT.

You must register for VAT with HM Revenue and Customs (HMRC) if it goes over the current registration threshold in a rolling 12-month period. This is not a fixed period like the tax year or the calendar year - it could be any period, for example the start of June to the end of May.

The current threshold is £85,000. It usually goes up on 1 April each year. If your business is based in Northern Ireland, there are different thresholds for buying and selling from EU countries.

What to include

To check if you’ve gone over the threshold in any 12-month period, add together the total value of your UK sales that are not VAT exempt, including:

goods you hired or loaned to customers

business goods used for personal reasons

goods you bartered, part-exchanged or gave as gifts

services you received from businesses in other countries that you had to ‘reverse charge’

building work over £100,000 your business did for itself

Include any zero-rated items - only exclude VAT-exempt sales, and goods or services you supply outside of the UK.

If you’re over the threshold

You must register for VAT - though HMRC may allow you ‘exception from registration’ if your turnover goes above the threshold temporarily.

You must register straight away if you expect the value of everything you sell in the next 30 days to be over £85,000. You do not need to include anything that is VAT exempt.

You should check your rolling turnover regularly if you’re close to going over the threshold.

Thresholds for previous tax years

Check historical information about VAT thresholds if you think you should have been registered in previous tax years.

Purchases made before registration

There’s a time limit for backdating claims for VAT paid before registration. From your date of registration the time limit is:

4 years for goods you still have, or that were used to make other goods you still have

6 months for services

You can only reclaim VAT on purchases for the business now registered for VAT. They must relate to your ‘business purpose’. This means they must relate to VAT taxable goods or services that you supply.

You should reclaim them on your first VAT Return (add them to your Box 4 figure) and keep records including:

invoices and receipts

a description and purchase dates

information about how they relate to your business now

Changes to your details

You must keep your VAT registration details up to date. You can change your details:

online - through your VAT online account

by post - using form VAT484

by webchat or phone

You must send form VAT2 to the VAT Registration Service to report any changes to a partnership.

Some changes can affect your VAT registration or mean you have to cancel it.

When to tell HMRC

You need to tell HM Revenue and Customs (HMRC) about any changes to the following within 30 days or you could face a financial penalty:

the name, trading name or main address of your business

the accountant or agent who deals with your VAT

the members of a partnership, or the name or home address of any of the partners

Changing bank details

You must tell HMRC at least 14 days in advance if you’re changing your bank details.

You’ll also have to tell your bank to change your Direct Debit details if you pay your VAT by Direct Debit, but you should not do this within 5 banking days before or after your VAT return is due.

You must write to the Annual Accounting Registration Unit to change your Direct Debit details if you use the Annual Accounting Scheme. Include your registration number.

Death and illness

You must tell HMRC within 21 days if you take on the VAT responsibilities of someone who has died or is ill.

You can only do this by sending form VAT484 in the post, including details of the date of death or the date the illness started.

Cancel registration

You must cancel your registration if you’re no longer eligible to be VAT registered. For example:

you stop trading or making VAT taxable supplies

you join a VAT group

You must cancel within 30 days if you stop being eligible or you may be charged a penalty.

You can ask HM Revenue and Customs (HMRC) to cancel your registration if your VAT taxable turnover falls below the deregistration threshold of £83,000.

How to cancel

You can cancel your VAT registration online.

Cancel your registration

You can also fill in and send form VAT7 to cancel your VAT registration by post.

What happens next

It usually takes 3 weeks for HMRC to confirm your cancellation and the official cancellation date. This is either the date when the reason for your cancellation took effect (for example, when you stopped trading), or the date you asked to cancel if it’s voluntary.

HMRC will send confirmation to your VAT online account (or through the post if you do not apply online). From the date of cancellation you must stop charging VAT and keep your VAT records for 6 years.

HMRC will automatically re-register you if they realise you should not have cancelled. You’ll have to account for any VAT you should have paid in the meantime.

VAT after you cancel

You’ll have to submit a final VAT Return for the period up to and including the cancellation date. You must account for any stock and other assets you have on this date if:

you could reclaim VAT when you bought them

the total VAT due on these assets is over £1,000

Do not wait until you’ve received all your invoices before submitting your final return. You’ll still be able to reclaim VAT on anything you bought for your business while still registered once you get the invoices.

Transfer registration

You can transfer a VAT registration from one business to another, or if the status of your business changes.

For example, if:

you take over a company and want to keep using its VAT number

your business changes from a partnership to a sole trader

If you’re taking over a company, the previous owner must cancel their VAT registration before you can apply to transfer the VAT number.

If the status of your business changes, you must cancel your existing VAT registration and re-register.

You can apply to cancel or transfer a VAT registration:

online - through your VAT online account

by post - using form VAT68

What happens next

It usually takes 3 weeks for HMRC to confirm the transfer.

If you’re selling your business:

cancel your accountant’s access to your VAT online account - for example if you authorised them to deal with your VAT

cancel any direct debits on your VAT online account

You must also give your records to the buyer if you’re passing on your VAT number.

If you’re buying a business:

contact HMRC within 21 days of the transfer application if you want to keep the seller’s accountant

replace any self-billing arrangements with new ones

set up new direct debits on your VAT online account