New and growing enterprises have various tax registration, reporting and compliance obligations. What are the most common tax registration issues to be considered when starting in business?
- Income tax – A self-employed person operating on their own or through a partnership, is required to notify HM Revenue & Customs (“HMRC”). A penalty may be charged if liability to tax is notified late.
- National Insurance – A self employed person is likely to have to pay National Insurance, although there are certain exceptions. Anyone who becomes liable to pay Class 2 NIC is required to notify HMRC immediately.
- Corporation tax – A company must notify HMRC of the commencement of business activities subject to corporation tax within 3 months of starting those activities.
- VAT – Whatever business entity is used, there is a requirement to register for VAT with HMRC when turnover exceeds an annually set limit. It is also possible to register for VAT voluntarily, which can in certain circumstances be advantageous in terms of VAT recovery on costs.
- Other – Depending upon the nature of business, it may also have obligations to register with HMRC for payment of other indirect taxes such as Insurance Premium Tax , Landfill Tax, Climate Change Levy or Aggregates Levy.
- Taking on an Employee – If an enterprise engages an employee it is required to register with HMRC as such and to operate Pay As You Earn (“PAYE”) on any wages paid. This is a system where the employer deducts income tax and national insurance from the employee’s pay and remits this to HMRC along with further national insurance (employer’s national insurance).
- Operating as a Contractor or Subcontractor – If a business operates as either a Contractor or Subcontractor within the construction industry it is required to register within the HMRC Construction Industry Scheme Tax Scheme (“CIS”). This is a system where payments for work done are made either gross, if certain conditions are met, or net of tax deducted by the Contractor and paid over to HMRC.
Tax registration is subject to certain requirements which carry penalties if not met. It may be helpful to engage a specialist to guide you through the initial registration and compliance procedures. You will need to authorise HMRC to correspond directly with your chosen adviser.
For more advice on tax registration please contact Guy Rigby on 020 7131 8213 or email Guy Rigby