The corporate tax rate in the United Kingdom is among the lowest in Europe. However, it is high enough to make corporations in the UK wary about investing in businesses that they cannot manage personally. This is because a corporate tax in the UK may well be double or more than double the amount of the salaries of the corporation’s employees. This double amount is what the company must pay to the government on its behalf. In addition, it imposes a heavy tax burden on the owner of the company. It can, therefore, make it difficult for the company owner to keep track of expenses.
UK Corporate Tax Structure has a Unique Feature
The UK corporate tax structure has a unique feature, though: autonomous taxes are imposed on a vast array of corporate expenses, regardless of company profitability. In fact, the top rate is only forty percent (or less, in some cases) of a company’s gross domestic product. The company itself then charges twenty percent to the government for these taxes. All profits and income not taxed by the government are then distributed to shareholders as dividends.
Key Aspect of Corporate Tax Management in the UK
A key aspect of corporate tax management in the UK is that small businesses and individuals must have professional tax accountants who prepare and manage their accounts. Since the UK tax system is characterized by complex tax laws and a lack of transparent pricing mechanisms, tax professional management is absolutely essential. Without this highly trained and experienced tax expert on the company’s payroll, the owner of the business will not be able to learn how to effectively manage the business’ accounts and conduct business as usual.
For Small Business Owners
Some small business owners in the UK decide to outsource their accounting firms to save on costs. But the cost savings that result from this strategy may actually be money losses rather than savings. Because most accounting firms are not licensed or regulated to deal with UK tax matters, many do not have the expertise necessary to provide the best tax advice and accounting services. Moreover, in many instances these outsourcing firms do not employ staff with appropriate accounting knowledge or resources to handle daily accounting.
Corporate Tax Laws
Tax laws in the UK are notoriously complex and many aspects of corporate tax law are beyond the competence of most small business owners. This means that large business firms may be forced to hire large tax attorneys or CPAs to handle the intricate issues. This practice raises several questions about the suitability of such professionals for small businesses. In essence, are UK tax law firms really necessary at all? Are small businesses better off just paying out the appropriate tax amount to the government in the first place? The answer depends on a variety of factors which include the size of the business and the value of the services or goods it produces.
Specific Benefits that UK Tax Law Firms Provides
There are certain specific benefits that UK tax law firms can provide small businesses. They specialize in all areas of taxation including income and profit tax, employment tax and local tax. A corporate tax management company can also help an enterprise deal with both internal and external taxes and comply with legislation such as the Companies Act. For instance, it can represent and advise a company when it comes to issues such as complying with Giftshare Agreement provisions, writing off unpaid contract expenses and reserving office space.
What Kind of Help can a Business Get from a Corporate Tax Management Firm?
Small businesses may have problems with the complexity of UK tax law and they may not be aware of all the options available to them. By retaining a corporate tax advisor, they can receive professional advice to make sure they comply fully with UK tax law. Moreover, they can receive assistance with preparing and implementing strategies for reducing their tax liability. In some instances, the tax services can help increase a company’s cash flow by taking part in joint ventures, acquisitions and investment.
How much Should a Business Spend on Corporate Tax Management?
That all depends on the overall financial health of the business and its profitability. An advisor can recommend ways to minimize its tax bill without reducing the profitability of the business. He can negotiate with the government on behalf of his client so that his client receives the best possible deal. The right advisors at the right time can help a business recover from an economic downturn and emerge stronger than ever.