TAXATION OF COMPANIES

How is a company taxed?

Companies pay corporation tax. This tax is charged on the Company's profits which include both income and chargeable gains. A Company's income for tax purposes is basically calculated in accordance with income tax rules. Chargeable gains are basically calculated with capital gains tax rules.

What happens if the Company incurs a loss?

If the Company incurs a loss it can offset those losses against any other income in the same year or against future years profits in the same business.

Companies must submit a corporation tax return no later than nine months after the end of the Company's accounting year end date.

Companies HouseHow do I go about setting up a company?

If you wish to set up a Company you would be best advised to talk to an Accountant first. All companies are registered with the registrar of companies at companies house. Once set up a Company is a legal entity separate from the persons who formed it, the directors or shareholders. Specialist agents can be found to set up a Company on your behalf or your Accountant should be able to help you in this respect.

If I set up a Company, how will I be taxed as a director?

If you are a director of a company you will probably be paid by the company and as such you will be an employee of the Company and your pay will be subject to normal deductions under PAYE.

How do I decide whether to trade as a sole trader or as a Company?

There are many factors that should be considered before you set up a Company and your individual circumstances will dictate whether you should do so or not. In addition to the taxation issues, you need to consider, there are various other practical and legal matters which should be taken into account when setting up a Company and on which you should seek advise from your Accountant.

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