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By Cheaper Accountant, Feb 24 2020 08:00AM

We are often asked about the company tax returns (CT600’s) that are needed during the first year of operating a limited company. This is often due to HMRC writing to a limited company and formally requesting for a company tax return to be filed for two different and separate periods of time. This blog post will explain why and when two returns are required to be prepared and filed with HMRC as well as the implications for the Annual Company Accounts.


What is a CT600 / Company Tax Return


The term CT600 is the name of the HMRC form that is used to file a company tax return for the purposes of declaring the corporation tax due on limited company profits.


The form CT600 is one element of the company tax return. A full company tax return comprises the following elements:


1. Form CT600

2. The Company Accounts

3. Tax Computations

4. Any supplementary pages


It is a requirement for all limited companies to file a properly completed for CT600, the computations showing how the figures in the return have been derived from the relevant contents of the company accounts, a copy of the Full Company Accounts.


Filing a Company Tax Return with HMRC


Since 2011 it has been compulsory for all companies to file the company tax return with HMRC online and this must be completed using the iXBRL computer language. This allows HMRC to receive one file containing the CT600, the corporation tax computations and the company accounts.


A qualified accountant will often use industry specific accountant software that is designed to complete this task. Furthermore, this professional accountant software is usually linked to the accountant’s HMRC agent account allowing the accountant to submit the company tax return to HMRC on your behalf. The accountant will generally only need your company’s UTR to complete this submission.


Why file Two Company Tax Returns (CT600s) following the first year?


When a new company is created this is can be on any day of any month but the filing date of the first set of accounts will be automatically set to end of the month 12 months later. This more often than not results in the first set of Company Accounts spanning more than 12 months in total, if even for only a few days.


A company tax return (CT600) can only be prepared for a maximum of 12 months. This is why two tax returns are required to be submitted to HMRC during the first year of operating a limited company.


For example, if you created your limited company on 13 September 2019 then the first company accounting period will end on 30 September 2020. This means that the first set of company accounts will be prepared for the period 13 September 2019 to 30 September 2020.


In the above example, two Company Tax Returns will be required as follows:


1. 13 September 2019 to 12 September 2020

2. 13 September 2020 to 30 September 2020


Do I need to complete Two set of Company Accounts?


The good news here is that only one set of company accounts spanning the full period (of slightly more than 12 months) is needed. The one set of accounts are filed with Companies House and in turn these one set of accounts form the starting point or the basis of the two company tax returns.


An accountant when preparing the CT600 element of the company tax return and the corporation tax computations will simply apportion the relevant figures between the long and short periods. The first return will be for the first 12 months and the second return will be for the rest of the period.


Overall the same amount of corporation tax will be due.


What about paying the Corporation Tax due?


When paying the corporation tax due for the period it is advisable to pay this as two separate amounts for the two separate periods. You do need your HMRC payslip reference to be able to make these payments. HMRC will post out two letters with a formal request to file a company tax return and you can find the required payslip references at the bottom of these letters. Another option is to complete the full agent authorisation process for corporation tax and then your accountant will be able to access the payslip references via the online HMRC account.


If you make the full payment for both period amounts against one payslip reference only, HMRC are likely to post a cheque refund to your company as they will assume that this in an overpayment. This means that you will need to bank this cheque and then make a further payment to HMRC. Getting the two payments right the first time round will avoid you needing to take this further action.


What happens if I miss one of the company tax returns or file it late?


If you do miss a company tax return or file it late you will receive an initial fine of £100 but this will increase over time depending on how late the return is. HMRC will also charge interest on any overdue corporation tax that remains unpaid.



If you are unsure of your filing obligations or need help from a qualified and affordable accountant then feel free to send an email to info@cheaperaccountant.co.uk

By Cheaper Accountant, Feb 13 2020 07:00AM

We are often asked by clients for what length of time they should keep on file their main accounting records for their limited company so we thought we would prepare a short blog update to address and answer this question. This narrative will explain what is meant by the term accounting records and then go on to confirm how long these records should be held for.


Accounting Records


It is a legal requirement for all limited company directors to maintain sufficient company and accounting records. A director must maintain certain records about the company itself in addition to financial records.


Some typical examples of company records are the forms that are required to be filed with Companies House, such as the Confirmation Statement, including the PSC register and shareholder listings.


Typically, your accounting records will include records of:


1. Money spend by the company, such as receipts.

2. Money received by the company, such as invoices and till rolls.

3. Other items such as company bank account statements.


How should I keep these records?


Generally speaking, you will need to retain the above accounting records for a period of 6 years from the end of the last company financial year.


This is why we often advise clients to keep these records on file for 7 years just in case. If you are towards the end of an accounting period then some of your accounting records will be closer to being 7 years old than a straight six years.


What happens if I don’t keep any accounting records?


To put it in simple terms, you can be fined £3,000 by HMRC or be disqualified as a company director.

By Cheaper Accountant, Jan 13 2020 07:00AM

The deadline for filing an individual’s Self Assessment Tax Return is fast upon us. The final deadline date that must be met to avoid a fine being issued is 31 January 2020 so there are only a couple of weeks remaining.


If you are registered for Self Assessment with HMRC then you must act now.


Extended hours during this period


We have extended our working hours during this period as we are committed to meeting the filing deadline for all clients, both new and old. If you are new client then feel free to send an email to us at info@cheaperaccountant.co.uk as there is still time for us to complete and file your personal Self Assessment Tax Return.


We will be working double our usual hours to ensure that all work is completed up until 31 January. The best part is that our fee for a basic self assessment tax return remains a low £50. We believe that this represents exceptional value for all of our clients.


So, make sure that you have your personal UTR and P45’s/P60 to hand as well other a few other items that we will ask for.


What happens if my Self Assessment Tax Return is submitted late?


If your self assessment tax return is submitted one second after midnight on 31 January you will be fined £100 by HMRC. We don’t want anyone to wake up to this reality during February as it’s simply not worth paying a fine.


What’s worse is that the fine increases if the tax return isn’t filed within three months following the 31 January deadline.


If you have attempted to complete your Self Assessment Tax Return but have reached your wits’ end half way through or simply need help to complete the return, then please get in touch now. Send an email to info@cheaperaccountant.co.uk and you will receive a quick response outlining the information we need and the fee you will be charged should you wish to proceed.


Let’s all have a great start to 2020!

By Cheaper Accountant, Nov 1 2019 07:00AM

It can be very tempting to spend money from your company on entertainment expenses such as dinner or drinks with clients, but the big question is does this qualify as a tax reducing expense. This blog post will address this in detail and clarify where you can gain a tax benefit.


To begin the discussion, it is worthwhile clarifying the entertainment expenses are not usually tax deductible within the UK. This means that any expenditure on entertaining that is put through the company will not qualify as a tax reducing expense and will not reduce the company profit that corporation tax is calculated on. So, in essence there will be no benefit to you from putting such expenses through your limited company, for example.


However, as with many other aspects of taxation this is not always the case and it’s not as clear cut as this. If an event is for staff only then there are circumstances where the expenditure can be classed as an employee reward, rather than entertainment, and then qualify as tax deductible expenditure.


What is Tax Deductible?


A Christmas party is a great example of this type of expenditure that can be classified as an employee reward rather than entertaining. The costs are exactly the same in nature in reality (dinner and drinks, for example) but under these circumstances they are now tax deductible.


However, the following guidance should be noted:


1. The total spend per head must not exceed £150.

2. This cannot include the entertaining of clients.

3. If there are staff and clients at the event, then only the staff related proportion of the total costs will be tax deductible.


What about VAT?


The rules here follow a similar theme and you can’t generally include entertainment expenses on your VAT return.


You may be able to add the costs of providing staff rewards and incentives such as the example provided above.


If you have any questions about tax deductions, then contact one of our cheap accountants who will be happy to provide you with further advice and guidance.

By Cheaper Accountant, Oct 29 2019 07:00AM

To begin with a micro-entity is basically a very small company. This is defined as a company with an annual turnover of no more than £632,000 and a balance sheet total of no more than £316,000. In addition to this the company must have a maximum of ten employees or less. Well, when I say must …. only two of the three criteria need to be met to qualify as a micro-entity.


The UK Government appreciates that in the majority of instances micro companies are owner-managed and do not have a separate shareholder and management relationship when it comes to communicating the company’s financial performance. As such it stands to reason that the burden of preparing a comprehensive set of accounts may be unsuitable and considered disproportionate when compared to other larger companies.


This is exactly why the micro-entity regime began. This new company classification aims to reduce the time and cost of meeting company statutory reporting requirements by:


1. Allowing a far more simplified format of company accounts, containing fewer elements;

2. Simplifying the accounting standards that should be applied.


So, as we mention in point 1 above micro-entity accounts are a far more simplified format of accounts that contain far less information. These are in simple terms a summarised balance sheet only. The full contents of micro-entity accounts are:


• Simple balance sheet and footnotes;

• Signature of a director and name printed at the bottom of the balance sheet;

• Statement on the balance sheet above the director’s signature that the accounts have been prepared in accordance with the micro-entity provisions.


What are the main benefits of micro-entity accounts?


• Highly simplified presentation of the balance sheet with very little detail required.

• No requirement to file a profit and loss account for the public record.

• No requirements to file an auditor’s report.

With less disclosure required for the public record, less company information will be available to competitors.


Should you need any further help or guidance with your company statutory accounts then feel free to email one of our cheap accountants who will be very happy to assist you with all your accounting needs.

By Cheaper Accountant, Sep 17 2019 07:00AM

If you are the director of a limited company and you work from home, as a lot of our clients do, you should consider renting a room to your limited company. This is fairly straight forward to set up and the rent paid by the company can be used to reduce any taxable company profits and in turn reduce your corporation tax bill.


Things to consider


1. You will need to create a valid rental agreement to support this arrangement.

2. You will need to calculate a suitable rent to be paid by the limited company.


What about personal taxes on the rental income I receive?


When the rent that is charged to the company is calculated you need to remember that the rent charged should be equal to the cost of the room to you. This way the rental income that you receive will be equal to the cost of the room and as such there is no taxable gain.


You will need to remember to disclose the rental income received and the associated costs on your self-assessment tax return but no income tax will be due.


Who can do this?


The best part to all of this is that you can operate this arrangement if you rent your home or if you own your home, so no one is excluded. The rental calculations will be slightly different as the rent you pay to your landlord will need to be considered if you rent your home vs the mortgage interest you pay if you are a homeowner.



If you are interested in setting up an arrangement like this then feel free to contact one of our cheap accountants who will be able to advise you further and calculate an appropriate rental charge for you as well as drawing up a rental agreement to support the arrangement. It’s also worthwhile noting that the professional advice and guidance you need to enter into a transaction like this is provided free of charge to all of our paying clients.

By Cheaper Accountant, Sep 6 2019 07:18AM

It may be tempting to simply not register for Child Benefit if you are a high earner due to the High-Income Child Benefit Charge (HICBC) which can result in the full amount of child benefit for the year being repaid when your self-assessment tax return is filed. Makes sense. However, you could be missing out on a subtle benefit that not many people will be aware of. Let me explain further below.


The repayment mechanism that was introduced by the Government some years ago now as part of the "Austerity" reforms is applied when the parent claiming child benefit, or their partner, earns more than £50,000 a year. The repayment rate increases from above £50,000 all the way up to £60,000. At an income of £60,000 the charge (or repayment) is equal to 100% of the child benefit received.


If you are a parent earning more than £60,000 a year the temptation may be to simply not to make a claim for the child benefit, since this will need to be repaid in full.


However, what not everyone realises is that a claim for child benefit also confers state pension rights. A parent who claims and is registered for child benefit relating to a child under the age of 12 will automatically receive Class 3 National Insurance credits. These National Insurance credits provide a qualifying year for state pension purposes of up to 12 years.


An individual needs 35 qualifying years for the full single-tier state pension and at least 10 qualifying years for a reduced state pension. Now you can see the appeal here!


Failing to register for child benefit can mean missing out on an automatic entitlement to 12 qualifying years towards the state pension. This could be a huge miss if the parent is a stay-at-home parent or even working part time. This is a strong chance that not enough NI contributions would have been paid through employment to make it a qualifying year.


Don't worry about having to repay the child benefit if you do earn more than £60,000. You can simply call HMRC and elect not to receive it; this is very different to not claiming it.


You can also backdate a claim for child benefit by up to three months. So if you are in this position you should claim without delay.

By Cheaper Accountant, Apr 1 2019 07:00AM

As we enter the 2019/20 tax year, which begins on 6 April 2019, the strategy of paying yourself a low salary from your limited company topped up with dividends remains as important as ever when seeking to minimise the tax take on your income. In fact, this strategy remains the lowest tax option. So the strategy to pay yourself remains the same but this blog article will explain how much you can pay yourself without incurring any income tax and national insurance charges.


The good news is that the monthly sum that we recommend you pay yourself has increased to £715 a month (up from £702 a month during 2018-19) which results in an annual director’s salary of £8,580. You should then pay yourself dividends on top of this low level of salary.


At this level of salary you won’t have to pay employer or employee national insurance contributions and no income tax will be due to be paid to HMRC on the wage you receive. The dividends you receive will be subject to dividend tax but a tax-free dividend allowance of £2,000 will apply during 2019-20.


The total director salary of £8,580 is less than the personal allowance (£12,500) for the 2019-20 tax year but don’t be tempted to pay yourself up to the personal allowance as you will then end up paying more tax.


If you pay up to the personal allowance you will be liable to pay national insurance contributions that can be avoided at the £8,580 salary level.


The lowest tax option is to simply pay yourself dividends instead to use up the remainder of your personal allowance and then use the dividend tax free allowance. This means that you can receive a total of £14,500 tax free (personal allowance plus the dividend allowance).

By Cheaper Accountant, Nov 26 2018 06:26AM

We previously blogged about the Rent a Room scheme that allows an individual to receive up to £7,500 a year completely tax free by letting out a furnished room within your home. Your home can be rented or owned with this tax free scheme applying to both scenarios.


How does this work?


You will receive automatic tax relief when the rental income you receive remains below the threshold of £7,500 during the tax year (6 April to 5 April the following year).


Where more than one individual receives income from letting a furnished room the threshold is reduced by 50% meaning that each separate person can receive up to £3,750 tax free.


If you receive rental income from letting a furnished room that is over and above the threshold of £7,500 (or applicable reduced threshold if income is received by more than one person) then you will pay tax on the excess amount only.


What if I make a loss?


Utilising the Rent a Room scheme may not always be the best option for all taxpayers. You will benefit more from not using the scheme if your expenses are greater than the rent received and you make a loss. Being able to carry forward any loss will reduce the tax due on future rental profits.


What are the New Changes?


To ensure that the tax relief gained from using the scheme is aligned to the aim of increasing the supply of affordable residential accommodation, rather than the benefit simply going to users of websites such as Airbnb, a new shared occupancy test will be introduced.


Shared occupancy test


Under this new test, the individual receiving the rental income must have a ‘shared occupancy’ for all or part of the letting period.


This indicates that the physical use of the property in question by the tenant must overlap with the use of the residence as sleeping accommodation by the landlord or a member of his or her household.


A second tenant cannot be used to satisfy the test. As things currently stand a period of overlap of only one night would satisfy the test but this could change when further guidance is issued by the Government during the coming months.


So a tax on Airbnb landlords I hear you say!!! ….. you could be right.

By Cheaper Accountant, Aug 20 2018 05:55AM

We sometimes receive client questions about paying voluntary national insurance contributions and is this an option and what are the benefits of doing so. This blog article will highlight what can be done with regards to making additional national insurance payments (or contributions) and what this means for you and your state pension.


Voluntary National Insurance Contributions


It is an option to make payments for voluntary national insurance contributions to plug any gaps in your contributions record.


A full 35 qualifying years of national insurance contributions are needed to receive the full single-tier state pension. This state pension is paid to individuals who reach the state pension age.


Where an individual does not meet the 35 qualifying years requirement they will receive a reduced state pension. A minimum of 10 qualifying years is needed. Anyone with less than the 10 years will not receive a single-tier state pension.


Where an individual does not have the full 35 years they can choose to pay voluntary contributions to boost their pension entitlement.


Check your National Insurance Record


You should check your national insurance record before making any voluntary contributions. This can be done online here: https://www.gov.uk/check-national-insurance-record


You will then be able to identify any gaps in your contributions and decide if you want to make any voluntary contributions to ensure that the full 35 years is reached.



If you are in any doubt about future strategies for paying NI contributions feel free to contact one of our cheap accountants who can provide you with the accounting advice and guidance you need.