Registration with Companies House is just one of several steps involved in forming a new company in the UK. The next important step is to register for company and personal taxation with Her Majesty’s Revenue & Customs (HMRC) including:
- Company taxation: Corporation Tax, VAT and PAYE (not all companies need to register for VAT and PAYE, as we will discuss below).
- Personal taxation: Self Assessment.
In this article we will explain each type of tax, when registration for it is required and the process of registering for it.
When Should a company register for Corporation Tax?
During the process of a company’s incorporation Companies House ordinarily sends an automatic request for corporation tax registration to HMRC. It may sometimes be necessary to register for corporation tax separately if the company was registered with Companies House by post, through an agent or by using third-party software. In any of these three scenarios you have three months to register for corporation tax after you begin to trade. If you do not register until after this three-month deadline then HMRC may issue a penalty. The three-month time period begins from when the company becomes active for Corporation Tax purposes. This applies if you are:
- carrying out any a trade, service, or professional activity
- buying and selling goods
- providing services
- earning interest
- managing investments, or
- receiving any other income.
How to register for Corporation Tax
If your company was not automatically registered for Corporation Tax at the same time as its incorporation with Companies House then you must register it online through the HMRC website. The steps that you will need to take to register for corporation tax are as follows:
- Log into your business account on the HMRC website.
- Enter your Government Gateway user ID and password, or create one if you have not done so before.
- Enter your company’s 10-digit UTR (Unique Taxpayer Reference), which HMRC should have posted to your company within 14 days of its incorporation with Companies House. You can request your UTR if you have not received it.
- Enter the details requested, including:
- Your company registration number
- Your company name
- The date on which you started to do business (your accounting period will be based on this date)
- The date to which your company annual accounts will be made up
- The nature of your company’s business activities
- The main place of business
- The name and address of each of the company’s directors
Once you have completed the online registration process for corporation tax HMRC will advise you of your new corporation tax filing deadline. You must meet this filing date even if your company has made no profit and/or if no tax is payable.
Value Added Tax (VAT)
When should a company be registered for VAT?
Not all companies need to register for Value Added Tax (VAT). You are legally required to register for VAT only when:
- Your total company turnover has exceeded £85,000 in the last year, or
- You expect your company turnover to exceed the equivalent of £85,000 per annum within the next 30 days, in which case you must register by the end of that 30 day period.
It is important to note that the year to which HMRC refers regarding turnover is any 12 month period, not necessarily your tax period.
When calculating your turnover for the purposes of VAT you should include the total of all sales less any goods and services that are exempt, such as:
- financial services, investments and insurance
- garages, parking spaces and houseboat moorings
- property, land and buildings
- education and training
- healthcare and medical treatment
- funeral plans, burial or cremation services
- charity events
- gambling or lottery tickets
- sports activities
You must still include zero-rated goods and/or services provided to other countries with a reverse VAT charge.
How to register for VAT
You will need to log in and register for VAT online using your company’s Government Gateway user ID and password. You must then enter all of the information requested, including your company’s turnover (actual or expected) and details of the person completing the registration.
If you cannot apply online then you may register for VAT by post, using the VAT1 form.
Once you have registered for VAT you will receive a 9-digit VAT number. This must be shown on all of your future invoices. You will also be advised of when to make your first VAT return and payment. Any company submitting quarterly VAT returns will be expected to pay the VAT owed no later than one month and seven days after the end of the VAT period. For example, if a VAT return is submitted for the quarter ending 31st March then the payment will be due by 7th May at the latest.
Pay As You Earn (PAYE)
PAYE ensures that employers pay the required Income Tax and National Insurance Contributions (NIC) to HMRC on behalf of their staff each payday through payroll.
There are two ways to run your company’s payroll: Either by paying a third-party payroll provider or by using in-house payroll software. Even if you use an external payroll provider you are still, as the employer, legally responsible for collecting up-to-date details of your staff and keeping pay records.
Once registered for PAYE you will need to send a Full Payment Submission (FPS) to HMRC each time you do a pay run. The FPS document provides details of employees’ pay and deductions. Any deductions made from your employees must be sent to HMRC on a monthly basis. Smaller employers paying less than £1,500 each month can elect to pay HMRC quarterly.
When should a company be registered for PAYE?
PAYE registration is required if your company is an employer and at least one member of staff:
- receives pay of £123 or more each week
- receives expenses
- receives benefits
- has another job or
- receives a pension.
HMRC rules state that employers must register for PAYE before the first pay day. This should be done as early as possible because it takes up to five days to receive a company PAYE reference number. The earliest you can register for PAYE is two months before you begin to pay staff.
How to register for PAYE
Most companies can register for PAYE online. The process of PAYE registration is as follows (this process assumes that you have between one and nine company directors):
- Start the PAYE registration process on the HMRC website
- Answer the questions, which may include:
- “Does at least one company director have a UK National Insurance number?”
- “Is the company an offshore employer outside the European Economic Area that doesn’t pay UK National Insurance?”
- “Over the next 2 months, will the company pay out any non-cash incentive awards?”
- If HMRC confirms that you need to register for PAYE, based on the answers that you have provided, then you must sign in using your company’s Government Gateway account credentials and:
- Complete the PAYE registration form.
Once your company is registered for PAYE, HMRC will provide your employer reference number and tax office reference number. These are required when providing HMRC with company payroll and PAYE submissions.
Self Assessment tax
The Self Assessment system enables HMRC to collect personal income tax, including from those in business who receive company dividends. Those registered for self-assessment are required to submit a Self Assessment tax return each year, typically online or using software. You can complete this process yourself or ask an accountant to handle this for you.
When should a person register for Self-Assessed taxation?
The Self Assessment (SA) deadlines for 2022/23 are as follows:
- Registration for SA: 5th October 2022
- SA paper tax returns: Midnight 31st October 2022
- SA online tax returns: Midnight 31st January 2023
- Payment of SA tax owed: Midnight 31st January 2023
You may be required also to make “payments on account”. If so then you will be due to make another SA payment on 31st July.
How to register for Self Assessment
To register for Self Assessment as an employee of your company you must complete form SA1 online. Partners in a partnership must complete a different form. You will be asked to provide your personal details, National Insurance Number, employment start date and any other relevant details.
Once you have submitted your SA registration to HMRC you can expect to receive your personal UTR (Unique Taxpayer Reference) number within 10 working days. This is not the same as your company UTR and is used only for personal tax payments.
Complying with HMRC is an integral part of running a company. The challenge for most company directors is that tax registration, filing and payments can be extremely time consuming and errors and missed deadlines can be very costly. The benefit of using a company formation specialist such as Uniwide Formations is that we can handle the end-to-end process of your company incorporation and tax registration on your behalf to ensure that, when you start to trade, everything is in hand and you are ready to go.
Uniwide Formations provides many services, two that are relevant to this article being help with PAYE Registration and VAT Registration.