Payments on account towards 2009/10

Payments on account are normally required from any taxpayer who is assessed to income tax, of any amount, for the preceding tax year (HM Revenue and Customs).
These payments are due by the end January and July each year.
You will be asked to make two payments on account for the current tax year if the total tax due in the previous tax year is less than 80 per cent of the tax deducted at source through the Pay As You Earn system and your Self Assessment tax bill for the previous year was over £500.
Each payment on account equals half of the total tax bill that you had to pay directly to HMRC on your income for the previous tax year.
If you expect your income for the current year to be significantly different from the previous year you can ask for these payments to be adjusted. You can reduce your payments on account by filling in an additional form called SA303.
If you ask for your payments to be reduced and it turns out that you did not pay enough tax on account, you would have to pay interest on the difference from the date the payment was due.

HMRC charges interest at a variable rate, currently 2.5% since (applicable since 24/03/09).

From 6 April 2009, the threshold below which taxpayers do not need to make in-year payments on account of their annual income tax liability under the income tax self-assessment system will double from £500 to £1,000.
So if your tax liability in 08/09 is less than £1000, will not have to make instalment payments on 31 January and 31 July 2010 towards that 2009-10 liability, but will instead make a single payment on 31 January 2011.

If you would like to know more about payments on account and in what circumstances they can be reduced, Taxfile's tax agents could help.
Just drop us an email at info@taxfile.co.uk or ring us on 020 8761 8000.
Alternatively, you could pop in to see us at our office in Tulse Hill on the South Circular.

Corporation Tax (CT)

The fourth largest source of government revenues is Corporation Tax, charged on the profits and chargeable gains of companies. The main rate band is 30%, which is levied on taxable income above £1.5m. The small companies rate of 19% is charged on the first £300,000 of profits where profits are between £50,000 and £1,500,000.
Profits between the lower and upper profit thresholds (£300,000-£1,500,000), are in effect charged at a marginal rate of tax of 32.75%.
Companies that are resident in the UK are subject to Corporation Tax on their profits (income plus gains) arising in an accounting period which cannot be more than 12 months.
Non-resident companies may be subject to Corporation Tax (CT) where they trade in the UK through a permanent establishment.
• A company incorporated in the UK is treated as UK resident.
• A non-UK incorporated company is treated as resident in the UK if its central management and control is exercised in the UK.

A company's trading losses can normally be set against:
• Income and gains of the same accounting period.
• Income and gains of the previous year.
• Trading profits from the same trade in future years.

In terms of Dividends, companies do not have to pay tax at the time they pay a dividend. Corporation tax is paid at the normal time on the company's taxable profits without any deduction for dividends paid. For small companies, profits that are paid out as dividends are charged at not less than 19%.
A shareholder receives the dividend with an accompanying tax credit equal to 10% of the dividend plus tax credit. The tax credit is equivalent to the basic rate of income tax on dividends. Companies pay no tax on dividends received.
Companies normally have to file their return within 12 months of the end of the accounting period. If a return is filed late, the company is automatically charged a fixed penalty of between £100 and £1,000, depending on how late the return is and whether lateness is habitual. An additional tax-linked penalty is charged if the return is filed more than six months late.
If you need to know more about corporation tax, our tax experts at Taxfile in South London and Exeter can help you understand it better and at the same time minimize your tax liability, making sure you pay the right amount of tax.