If you operate a small limited company (Ltd) with less than five employees, your accounts may be fairly straightforward. Therefore, it might be tempting to complete your company's annual tax return yourself rather than pay for the services of a professional accountant. What do you need to know in order to do this and what risks are involved?
Completing Your Annual Company Tax Return – What You Need To Know
In order to complete your company's annual tax return properly, you'll need to understand how the tax system works. For example, if you're self-employed, you should complete a self-assessment income tax return, rather than a company tax return (or Form CT600), which is used to calculate the corporation tax that a business owes. While HMRC should tell you which type of return you to complete, it's worth checking that you've got it right. You'll also need to know the deadlines for completing your return and paying any tax due. Many SME directors will need to complete both self assessment and company tax returns.
Additionally, you'll require in-depth knowledge of your company's finances during the period being assessed. You'll need to have details of your firm's turnover, the amount of profit or loss it made, details of any tax-deductible expenses, capital allowances, any other enhanced allowances such as R&D claims and chargeable gains that should be considered in your assessment, and information about any tax relief that you want to claim to hand, along with an array of other data. All of your calculations must be accurate, and the information that you provide in your tax return should match that included within your annual accounts and your VAT return.
In-House Tax Return Completion – What Could Go Wrong?
While there's no legal requirement to use a professional accountant when completing your company tax return, there are some risks involved in taking a DIY approach:
- If you miss the filing or the payment deadline, your business may be fined.
- If you make a mistake, you may need to pay a penalty. While there is an appeals process, going through it can be time-consuming and stressful, and there's no guarantee that HMRC will overturn its decision.
- If you make an error with your calculations, or don't understand exactly what deductions and reliefs you can claim, you could end up paying more tax than necessary. You may even find that you need to hire an accountant to correct the mistakes you've made.
- You may miss valuable claims and reliefs which could be costly.
All in all, opting to complete your company tax return yourself could turn out to be a false economy. Hiring a professional accountancy firm, like David Howard, could save you time and money, reduce stress, and leave you free to focus on your business goals. To find out how we can help you, please get in touch today.
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