Business profits are charged to income tax and class 4 national insurance contributions on the current year basis. This means that the profits taxed for each tax year are those earned in the accounting period ending in the tax year.
There are special rules which determine the amount of profits taxed for the beginning and final years of a business, and for those joining and leaving partnerships.
There are an increased number of penalties for not complying with the rules and regulations of government departments. We have already mentioned GRA ‘late registration’ penalty, covering late registration for income tax and Social Security Contributions, but other areas to avoid are:
- Late VAT registration
- Late filing penalties
- Late payment penalties and interest
- Penalties for errors in returns
- Penalties for failing to operate.
Although we will seek to help you steer clear of them, we need you to play your part by letting us have all the details for your accounts and tax returns in good time, and by telling us of all changes in your business, financial and personal circumstances.
Modernisation of the penalty rules means that many taxpayers could be liable to substantial penalties for understatements on their tax returns. Even if you make an honest mistake, GRA may argue that you have been careless. You will need to be absolutely sure that you tell us everything that may be relevant to your tax liability for a year.