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CORPORATION TAX – A GUIDE FOR SMALL BUSINESS

Nidhi is a Content crafter at 123Financials.

 

Do you run a small business or a limited company? If yes! Then you’ll need to know about corporation tax.

Corporation tax is the same as income tax for your company, where you, as an individual, pay income tax to HMRC on earning each year; your company will pay corporation tax instead.

Besides, if you submit your corporation tax return late or if it contains errors, then you could be penalised.

So, it’s essential to be aware of some basics and facts related to the Corporation tax.

Here’s the guide to help you understand Corporation Tax in more detail.

 

What is Corporation Tax?

Any organisation doing business in the UK is required to pay corporation tax on its profits.

If the company in the UK, pays corporation tax on all its profit from the UK, and if the company is not UK based but has a branch here, then it only pays this tax on profits related to UK activities.

Corporation tax also applies to clubs, co-operatives, and other unincorporated associations, like sports clubs and community groups.

You’ll not get a bill for this tax, but you required to calculate, pay, and report on it yourself, or with guidance from your tax advisor or accountant.

 

Nidhi

What is the Rate of Corporation Tax?

The current tax rate is 19% for company profits.

The taxable profit includes the money you make from business, investments, and selling assets for more than they cost (chargeable gains).

For a chargeable gain, you are required to work out your gain to calculate tax.

Companies involved in oil rights or extraction in the UK or UK continental shelf have different tax rates, known as ring fence profits.

 

Small business responsibilities

Small businesses have some responsibilities associated with the Corporation Tax.

The first responsibility is to register for Corporation Tax when you start your business.

The second one is you must keep your business’s accounting records, prepare tax returns, and file it by your deadline.

You must do this even if your company made a loss, and you owe no tax.

Finally, you must pay the Corporation Tax you owe by your deadline.

 

How to pay Corporation Tax?

Firstly, you are required to register for Corporation Tax within three months of starting your business.

However, when exactly you start to do your business is rather complex; here’s HMRC guidance on what counts as trading for tax purposes.

After working out how much corporation tax you need to pay, you’ll need to pay it.

There are varieties of ways to pay it, depending on how urgently you want to pay:

If you want the money to reach HMRC the same or the next day:

  • Use faster payment services (online or phone banking).
  • Use Clearing House Automated Payment System – CHAPS.

 

If you want the money to reach HMRC within 3 to 5 working days:

  • Use Banker’s Automated Clearing Service – BACS.
  • Use Direct Debit – if you’ve set one up before.
  • Pay online by corporate credit or debit card.
  • Pay at your bank or building society.

If you want the money to reach HMRC within five working days, then set up a new direct debit.

If your payment deadline is on a bank holiday or a weekend, in such case, the payment must reach by the last working day before your deadline to HMRC.

You can find full instructions for payment and HMRC account details here, Pay your Corporation tax bills.

 

Deadlines for Corporation Tax

A Corporation Tax deadline depends on the accounting period, which is generally the same 12 months as the financial year in your annual account.

Businesses with profit up to £1.5 million must have to pay their tax in 9 months & 1 day after the end of their accounting period.

As an instance, if your business’s accounting period ended on 31 March 2020, your payment deadline would be 1 January 2021, and the tax return deadline would be 31 March 2021.

Deadlines are affected by COVID-19.

Large companies with taxable profits above £1.5 million must pay corporation tax electronically in instalments with different deadlines.

 

Reliefs on Corporation Tax

You may get deductions on your corporation tax.

You can deduct capital allowance on assets such as equipment, plant and machinery, business vehicle, and business running costs from pre-tax profits.

You can also claim for,

  • R&D relief
  • The patient box – if your business makes a profit from patented inventions
  • Creative industry relief (CITR) – if your business makes a profit from the film, theatre, animation, etc.
  • Disincorporation relief – in case you close the company and become a sole trader.
  • Capital, terminal, property income and trading losses.

 

Penalties for late filing of Corporation Tax

If you don’t pay Corporation Tax by the deadline, then HMRC may charge you penalties and interest.

It ranges from £100 for being one day late to 20% of the unpaid tax if you are 12 months late for filling the Corporation Tax.

However, you can appeal against the penalty by writing to your corporation tax office, but for that, you must have a reasonable excuse.

 

Wrapping up

When it comes to deal with HMRC and Corporation Tax there’s one golden rule – it pays to be organised.

Always make sure that you don’t pay more than you need to by claiming any applicable reliefs.

Pay your Corporation Tax on time and with care to avoid penalties of late submissions.

And if you can’t get your head around any of it, you can always hire an accountant or tax advisor or an accountant to get professional advice.

 

Business

GOING GLOBAL: 7 TIPS TO GET STARTED

The idea of selling your products or services to new markets across the globe is an attractive prospect for any business, large or small. But while reaching new customers and unlocking the potential for further growth can seem exciting initially, adapting your business to foreign markets is no small feat. Factors such as cost, communication and cultural differences can all affect your business’ success when going global. This guide will explore some of the key considerations to make when you’re thinking of expanding your business overseas.

 

Evaluate Your Finances

One of the main questions to ask when looking to go global is whether or not your business can afford to do so. Crossing borders can be a complicated and expensive process which can take away time and resources from other opportunities at home. Growth for businesses abroad is often a slow process; establishing products and services in other countries takes time, so you will need to factor this into your planning. Thorough analysis of domestic and international markets should always be undertaken before making the decision to expand your business overseas.

 

Location, Location, Location

Choosing the right location is crucial to the success of your business expansion. International business network Going Global Live says that taking your business to the right countries initially can save you money on excessive marketing and advertising, putting you face-to-face with your target market from the outset. You should weigh up the pros and cons of potential locations, such as the likelihood of being able to fill your new HQ with prime, homegrown talent, as well as access to desired markets aided by foreign investment bodies. It is also important to consider the relevant laws and regulations laid out by national and regional governments.

 

Ensure You Have the Right Infrastructure

Making sure your business has the right infrastructure to handle expansion abroad will put you in a good place going forward. Implementing a clear management strategy, both locally and centrally, will set your business up for a smooth and successful launch overseas. Having up-to-date IT and communications systems at the centre of your business will allow you to share information and data securely. When it comes to shipping, choosing the best – and most efficient – transport and storage providers will give you the peace of mind that your products are safe in transit. Companies such as S Jones are ideal for businesses looking for more information on storage solutions for shipping overseas.

 

Build a Strong Team

Appointing a strong team to oversee your expansion is crucial to your company’s success in new markets. Hiring people with a good knowledge of your target market, as well as a focus on your business’ interests, is key when establishing your overseas HQ. Working with local partners can help you to communicate your business’ unique selling point in a meaningful way. Having an experienced partner or mentor that you can trust to oversee the expansion will allow you to stay focused on the bigger picture and ensure that your attention isn’t taken away from your core customer base.

 

Have Faith

Once you’ve made the move to globalise your business, be sure to have faith in your ideas and don’t be deterred by slow progress. Dr Shai Vyakarnam of the Cranfield School of Management says that while there is a fine balance between faith and stubbornness, you’ll need “incredible levels of self-belief and faith in your idea” to succeed, and that you “only need to be able to turn a few key people in your favour and the others will follow”. Making well-informed decisions quickly will allow you to stay on track and will nullify the threat of any lingering self-doubt. While progress may be slow at first, be sure to remain patient and be prepared to build personal relationships to gain the trust of your new partners and customer base.

 

Consider the Impact of New Ideas

When implementing new ideas for your business as whole, consider how they will be received by your new international customers, as well as by your existing customer base at home. What might be seen as a positive idea in your home country could be perceived as offensive or alienating by your customers abroad. Factors such as differing time zones, languages and cultural appropriateness should always be taken into consideration when making key decisions to eliminate the risk of alienating foreign customers and damaging your reputation overseas.

 

Be Adaptable

While it is important to have faith in your business and be patient initially, you should also be willing to make changes as things develop. Acting on the advice of experts is key to navigating new markets successfully. It may be that your products and services require innovation to meet demand, or that cultural differences lead you to make changes to your marketing strategy. Being adaptable will give you the best chance of meeting consumer demand on a global scale.

When trying to expand your business to an entirely new customer base, try to bear in mind some of the above points. As long as you remain patient and open-minded, then you should have little difficulty in marketing your business globally.

 

Sources

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Banking

REDUCING FRICTION ONLINE HAS BECOME BUSINESS CRITICAL

Andrew Shikiar, Executive Director at the FIDO Alliance

 

The global pandemic has pushed the importance of remote access and authentication right up the agenda for many businesses. All those occasions where people would normally show up in person to open a bank account or pick-up some high street essentials were simply not possible for large parts of the year. Even as restrictions have eased across the country, these kinds of face-to-face transactions remain an unappealing prospect or a last-resort to many.

Not surprisingly, this has led to unprecedented demand for online and remote services. This brings with it a host of challenges and opportunities, and we have seen many examples of companies brilliantly adapting and reacting to this new way of life. But one issue that businesses and individuals have been grappling with for years – that of frictionless transactions and authentication – has now been put under a brighter spotlight as it is increasingly critical to get right.

 

Friction impacts the bottom line

The core challenge facing businesses is how to strike the right balance between giving customers the best possible experience of online service, and the necessary regulatory and security implications that directly affect – and often contradict – that ideal user experience.

We’ve all likely experienced the very real kinds of friction I’m talking about – it’s the account you gave up on registering for, or the purchase you abandoned because the process was just too frustrating.

Friction like this has direct bottom line impacts through the loss of sales and/or disaffected customers –  and it is substantially more pronounced in the current climate. People have less money to spend, they are spending a greater proportion of this reduced pot online, and businesses are competing for their livelihoods to claim their share. Providing a frictionless experience can be the difference between success and failure.

 

Banking and retail lose out

Nowhere is this problem more keenly felt than in the retail and banking industries. Countless transactions simply don’t happen each year due to issues with passwords or mobile One Time Passwords (OTPs) at the point of signing-up or checking-out.

Data from Statista shows that 69.57% of digital shopping carts and baskets are abandoned and the purchase not completed. And Mastercard’s analysis estimates that up to 20% of mobile e-commerce transactions are abandoned or otherwise fail (e.g., from undelivered SMS OTPs) mid-way.

In addition, independent web usability research institute Baynard found that one out of five consumers abandoned their online shopping carts citing the checkout process as “too long and complicated”. That means 20% of customers taking their custom elsewhere, likely to a competitor, because the process presented too much friction.

 

Passwords are a major part of the problem

Organisations have struggled to strike that balance between frictionless yet secure online log-ins in large part because of historical dependence on passwords – which simply aren’t fit for purpose in today’s online economy. Passwords were designed to be simple but, as we can all likely attest, they have become incredibly cumbersome and difficult to manage.

The demands placed on consumers to remember and keep track of the array of different passwords they need, and the different requirements of password complexity which varies from provider to provider, is proving to be untenable.

Not only are passwords a major cause of consumers giving up on purchases or preventing them from signing up for new services, but they also fail in delivering on their primary objective: to protect accounts and sensitive data. All too often the password has proven to be a single point of failure, and one that is all too easy for hackers and fraudsters to get hold of – a trend accelerated by the coronavirus pandemic.

 

Reducing friction

There has been a move toward developing and adopting open standards that enable any online service provider to authenticate users in a way that is both highly secure and almost completely frictionless – with all major platform and cloud service providers coalescing around a common approach.

It’s clear from the way consumers have embraced using their fingerprints and FaceID to unlock their devices that simple, natural gestures work – and that they are often preferred over using a password. By adopting the latest authentication standards, organisations can enable their customers to use these same easy gestures on their every-day devices to prove their identity and approve even the most sensitive of transactions.

The standards also improve security by moving away from the traditional model where your password or similar piece of ‘secret’ information is stored on a server, to one where credentials are stored on an individual’s device. This means they cannot be phished or divulged through other means of social engineering, while also inherently stopping the large-scale breaches that impact millions or billions of users in one go.

Due to these developments, the kind of poor user experience that leads to abandoned shopping carts and lost customers during the sign-up process is completely avoidable. There is now nothing stopping banks, retailers, and a range of other businesses from offering a superior, and low-friction user experience while also maintaining the safety and integrity of the networked economy.

 

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