The UK trading company is obliged to provide an annual tax return of the company to the Inland Revenue.

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 expenditure

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.

Gross costs

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.

Provision of information to directors

At the end of the reporting period directors should be provided with the following information for the reporting period, which is a year from the date of incorporation:

1. Residues of goods in stock at the beginning and at the end of the reporting period.

2. Contributed and/or received investment at the beginning and at the end of the reporting period.

3. Granted and/or received loans and remains of their returns and amounts of interest at the beginning and at the end of the reporting period.

4. The declared and actually paid authorized capital of the company at the beginning and at the end of the reporting period.

5. The presence of subsidiaries, representative offices, related entities, associates, ownership of corporate rights of the company in other companies at the amount of 50% or more.

6. Proofs of transport, travel expenses.

7. The amount of the transferred accounts receivable and payable at the beginning and at the end of the reporting period with itemization. It should be noted that payables and receivables, having arisen in the reporting period, are included in the amount of turnover. Accounts receivable, not repaid within six years, may be included in the gross income of the company.

8. Bank statements, relating to the reporting period of the company, with respect to all accounts in all banks. If card accounts relating to the account are opened, statement of these accounts should be submitted. It should be noted that personal expenses made from card accounts are not relevant to the company's costs.

9. Contracts and/or invoices in an electronic form with a summary table, grouped by contractors.

If there was no activity in respect of any item, information is not provided.

All documents need to be provided in a scanned electronic form in English.

Types of accounts

The company can file financial statements in the UK without an audit if:

• the company’s annual receipts do not exceed GBP 6.5 million.;

• the company’s balance was less than GBP 3.26 million;

• the number of employees was less than 50 persons.

Companies need to undergo an audit only if two of these three criteria are met.


Failure to provide information for the preparation of accounts may result in considerable penalties and negative consequences.

The company may not fail to file the accounts and submit the tax return at all, even if it did not conduct any activities. In case of the late submission of accounts the penalties are imposed on the company by Inland Revenue as follows:

The period of accounts submission delay

The amount of penalty (GBP)

Open-end companies

Close-end companies

0-1 month



1-3 months



3-6 months



more than 6 months



Moreover, if the accounts for the previous fiscal year have also been filed with delay, penalties stated in the table are doubled.

The company has also to submit the income tax return (CT600) to the tax inspection (Her Majesty Revenue and Customs). The deadline for filing accounts is 12 months from the end of the fiscal year.

In case of late submission of accounts to the Companies House the penalties are imposed on the company as follows:

The period of delay

The amount of penalty (GBP)

0-3 months


more than 3 months


If the company is late with the submission of accounts three or more years in succession, the penalties are increased significantly and are as follows:

The period of delay

The amount of penalty (GBP)

0-3 months


more than 3 months


In addition to the mentioned fixed penalties the penalties depending on the amount of the tax can be added:

The period of delay

The amount of penalty (GBP)

5-12 months

 10% of the amount of tax     

more than 12 months

  20% of the amount of tax     

The terms and consequences of failure to file the accounts

It should be taken into account that for the preparation of accounts the time for the coordination of all issues is needed. Furthermore, income tax must be paid no later than 9 months after the financial year end. Therefore, the accounts have to be prepared at least in part of the preliminary calculation of the tax not later than after 9 months, and if you submit information to us later than four months after the end of the reporting period, the company enters the zone of risk of penalties application.

If the company’s accounts are not submitted within the fixed time limit, it is regarded as the decision on its liquidation. The deposit contributed by you during the company’s incorporation (if any) is used for preparation of the liquidation accounts and subsequent liquidation of the company.

In the event if the company’s representative does not respond to the requirement of the preparation of accounts and does not pay penalties (if any), a criminal case may be brought against the company.

The cost of the accounts preparation

The cost of the accounts preparation corresponds to the number of transactions conducted by the company and the time required to carry it out. The minimum cost of the accounts preparation is from 1330 GBP, the audit is from 6000 GBP.