Business Taxation Disputes
Prosperity Law LLP, have been involved in a high number of value taxation disputes. We represented Everest, the home improvement company, in a leading VAT case which has reported where Everest were successful on all points.
Prosperity Law LLP have also represented high net worth individuals in tax disputes to include inheritance tax dispute, residency dispute and taxable benefits dispute.
The Prosperity Law Guide to Business Taxation
One of the biggest challenges for prospective business owners is the understanding of taxation and the development of clear knowledge regarding exactly what they are obliged to pay on behalf of their company. In fact, many individuals perceive these matters to be so complex that they are put off launching their own firm or brand indefinitely. However, while business taxation may seem like a different language at first, getting to grips with it becomes easier with growing experience of handling a specific company’s finances. Of course, mistakes can prove costly, so the specialists at Prosperity Law have compiled this straightforward guide to the world of business taxation law , which includes advice on how to work out which taxes your company should be paying.
What taxes do businesses pay?
The main taxes levied against UK based businesses include value added tax or VAT, national insurance contributions, pay as you earn, corporation tax, stamp duty, business rates and capital gains tax. This may seem a great deal, but they apply to different companies to differing extents. Here is a breakdown of what each type of tax involves, and how it is calculated:
Value Added Tax (VAT)
VAT is charged when items or services are purchased for use by or within a company. It usually stands at 20%. Registered businesses and sole traders are able to claim back the VAT on a number of products and services by sending a completed form to HMRC. A company does not need to register for Value Added Tax unless the annual total value of its taxable supplies and purchases comes to more than £85,000 (in this case, a year means a “financial year”, usually beginning in early April). Smaller businesses in Manchester and the UK can opt into a “flat rate” VAT scheme, which means that instead of calculating the total VAT owed by the company after any that is claimed back, a fixed percentage of its gross turnover can be paid to HMRC annually.
National Insurance (NI) Contributions
Everyone from the bottom to the top of your company’s management model – with the exception of contractors, freelancers and those who earn less than £157 per week – counts as an employee of that company and must pay National Insurance Contributions. This includes the owner of the business. Employees who earn between £157 and £866 per week must contribute 12% of their earnings to National Insurance, but if they earn over £866 per week the size of their contribution drops to 2%. National Insurance was set up to be used towards the continuation and improvement of state benefits such as universal healthcare, state pensions and general national upkeep and welfare.
Pay As You Earn (PAYE)
PAYE is another way to refer to income tax, and its name succinctly describes its function. While sole traders in Manchester, do not need to pay PAYE tax, those who run limited companies do. Employers need to keep HMRC updated immediately every time employees are paid, to ensure that PAYE tax is worked out correctly. Matters connected with PAYE for business can be difficult to follow, so getting in touch with legal advisors for assistance with this subject can be extremely helpful.
If you run a limited company, you will need to pay corporation tax. This particular tax – currently standing at 20% – is taken from the income or profits of your business and needs to be calculated in-house and paid to HMRC annually, usually by the last day of your company’s accounting period.
There are two different types of Stamp Duty. Stamp Duty Land Tax refers to the purchase or rent of land or interest in land, while Stamp Duty Reserve Tax refers to the transferring and purchasing of shares. You only need to pay Stamp Duty Land Tax if the relevant property is worth over £150,000. The rate at which you must pay this tax comes to 1% of the purchase price for all properties valued between that level and £250,000. From this point up to property worth half a million pounds the rate rises to 3%, and if it is valued at more than half a million the company is required to pay 4%.
When it comes to Reserve Tax, the company is liable to pay 0.5% of the price paid for any shares worth more than £1000.
Similarly to Stamp Duty, Business Rates are paid based on rent or ownership of premises. It can be thought of as a little like council tax for businesses and is dependent upon the type of property it is applied to.
Capital Gains Tax
Capital Gains Tax is a taxation levied against business disposals – whether that be disposal of goods, product lines, property or whole chains. A flat rate of 18% is usually charged on any disposals. However, depending upon your business background, you may qualify for something called an Entrepreneurs Relief scheme, which lowers that rate to 10%, up to a final overall allowance of ten million pounds.
How much does a business pay in taxes?
The average small UK business currently pays around £5,000 in tax contributions per annum. However, as you can probably tell from the above descriptions, the value of tax paid per business can vary as widely as the number of businesses that exist, as many taxes depend on the size of the company, its turnover and its assets. Many companies find themselves paying dramatically different taxes annually as a result of this. It is vital for your business to invest in a well-organised finance department to ensure the detailed documentation of all taxable activities, ensuring you aren’t left high and dry at the end of the fiscal year. There are a number of tax relief systems available to assist business owners in keeping their costs down, depending on their ability to qualify for each of them.
Personal Tax Solicitors
Of course, outside help is always at hand. Self employed individuals and sole traders can make contact with a personal tax solicitor for assistance when calculating their contributions each year. In fact, these specialists can also help to set up a system that will allow clients to work out what they owe in a more straightforward way in the future.
Corporate Tax Solicitors
If you own a company or are planning to start one, corporate tax solicitors will be your best friends when it comes to understanding your financial obligations in detail. Before making any significant monetary commitments to your new business, you must be happy that you have chosen your ideal legal representatives to assist you in this field.
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