UK COMPANY ACCOUNTING
The UK trading company is obliged to provide an annual tax return of the company to the Inland Revenue.
If the annual trade turnover of the company is up to 6 500 000 GBP, the accounting report is to be filed, if above, the audit is required. If the company holds assets of more than 3,260,000 GBP, the audit report is to be filed, regardless of the amount of the trade turnover.
The cost of preparation of the report corresponds to the number of transactions to be conducted by the company and the time required for that. The minimum cost of the accounting report is from 1330 GBP and the minimum cost of the audit is from 6000 GBP.
Failure to submit information for the preparation of the report may result in substantial penalties and negative consequences for beneficiaries.
To prepare reports a standard agreement with an audit firm is to be signed and the following information is to be provided:
1. Bank statements of all accounts of the company. Each transaction must be supported by copies of invoices, contracts, as well as the explanation of the nature of payment (rent, telephones, electricity, investments, etc.), if it is not evident from the bank statement.
2. Copies of all incoming and outgoing invoices.
3. Copies of all contracts concluded by the company.
4. Data of all investment and property of the company.
General principles of the tax report
The product bought by the company by specification is to conform to the sold one. The difference between the amounts credited to the account and the amounts written off is not a net income for tax purposes. Income will be calculated as the difference between gross sales and gross purchases/expenses. The costs include only those amounts which relate to trading activity. It is necessary to distinguish between investments and gross revenues and costs. The costs are divided into two main categories: 'capital' and 'gross'.
Capital costs include the purchase or change (repairs, etc.) of industrial property or premises, the purchase of land, equipment, vehicles or original cost of working mechanisms. You cannot fully deduct capital expenses in the calculation of taxable profits, but the partial exemption is possible in the form of deductions from tax liabilities.
In general, it is possible to deduct all payments, made solely for profit, from the turnover. These costs are known as the possible costs. They include:
- Salary and rent of premises.
- Payments for vehicles and the cost of replacement of mechanisms (repair).
- Remunerations for professional activities.
- Bank charges and interest on loans of the company.
- The costs of business trips, accommodation in hotels during business trips, including meals.
- The materials used in business for the sale of goods and/or purchase of goods for resale.
- Electricity for heating, lighting, production and cleaning.
- The costs of promotion such as advertising, marketing and PR.
- Representation costs may also be shown in the annual accounts, but they are not included in the calculation of tax payable.
- All daily expenses that can not be considered as assets (long-term ownership) can be then considered as the possible costs.