Things to consider for accounting when it comes to business tax

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In business, tax is one important key consideration. But if your area of expertise is not in tax laws and regulations, trying to understand these and how they impact your enterprise can be daunting.

However, with the right guidance and expertise, it becomes more manageable. This is where an adept accounting team comes in. As a business owner, it’s important to understand why accounting is a vital aspect of any business and the role accountants play in managing taxes.

 

Why accounting is important

Accounting provides a systematic way to track financial transactions, analyse performance, and make informed decisions that affect the business. An accountant’s expertise can help to shape your business plan and give you the insights you need to move your company in a certain direction. From expanding overseas to hiring new talent, it all comes down to the business’ accounts.

In addition, accountants’ insights mean that stakeholders can assess profitability and you can have an idea of your business’ cashflow. Managing payroll, tracking expenses, and preparing financial statements, a knowledgeable accounting team ensures that the business operates smoothly and remains financially solvent.

When it comes to tax compliance, accurate accounting practices are key. They ensure that businesses meet their tax obligations promptly and avoid penalties or legal complications.

 

How does business taxation work in the UK?

Business taxation is governed by a complex framework of laws and regulations administered by HM Revenue & Customs (HMRC). The main types of business taxes include Corporation Tax, Value Added Tax (VAT), Employer’s National Insurance Contributions (NICs), and Business Rates.

  • Corporation Tax is imposed on the profits of UK-based companies and some non-UK companies with business operations in the UK.
  • VAT is a consumption tax imposed on the sale of goods and services and is collected by VAT-registered businesses on behalf of the government.
  • Employer’s NICs are contributions paid by employers on the earnings of their employees.
  • Business Rates are taxes on non-residential properties used for business purposes.

Understanding and complying with these tax requirements can be challenging for businesses, especially with the regular changes to tax legislation. Failure to comply with tax laws can result in financial penalties, reputational damage, and even legal proceedings. Businesses must stay informed about their tax obligations and seek professional guidance to ensure compliance.

 

How accounting helps with business tax

Your accounting team’s role includes managing your business tax obligations effectively. Here’s how your accountant can help:

  1. Tax planning and compliance: Accountants help businesses develop tax planning strategies to minimise their tax liabilities while ensuring compliance with relevant laws and regulations. For instance, a business’ VAT compliance is part of an accountant’s duties. By staying keeping with changes to VAT – and other tax legislation – and using tax reliefs and allowances, accountants can make sure the business is compliant and tax efficient.
  2. Financial recordkeeping: Accurate financial recordkeeping is essential for calculating tax liabilities and preparing tax returns. Accounting professionals organise financial records, including income statements, balance sheets, and records of transactions. This helps with the tax filing process.
  3. Tax return preparation: Accountants prepare and file tax returns on behalf of businesses, including Corporation Tax returns, VAT returns, and PAYE (Pay As You Earn) returns for employee taxes. They make sure that tax returns are accurate and submitted to HMRC ahead of the deadlines.
  4. Tax advisory services: In addition to tax compliance, accountants provide tax advisory services to help businesses make decisions that impact their tax liabilities.

Investing in the services of an accountant will ensure your business is compliant. You’ll avoid penalties and allow a professional to take ownership of some of the more detailed, yet crucial aspects of your company.

 

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