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Her Majesty's Revenue & Customs (HMRC) are responsible for applying the law in the case of taxation and there is a great deal of information available on their web site. What we provide here is an outline of the important issues
Company accounts are subject to UK law in that there is a legal requirement for the enterprise to make annual returns to HMRC which show, accurately, the income and outgoings for the year and from the difference the tax liability is calculated. For SMEs the tax will be paid either as Personal Income Tax in the case of sole traders and partnerships or as Corporation Tax in the case of a private limited company
Similar European law applies to VAT which is a tax on the transfer of goods and services
The rules are quite simple - keep the records properly, make the returns on time and have all of the necessary supporting documentation for any inspection that is required by HMRC
Under certain conditions tax can be avoided by making use of the allowances that are provided and these are updated every year by the Government. However the deliberate evasion of tax is a serious offence. Remember HMRC have deep pockets and can fight a long battle in the courts to get what they think is theirs and if you lose the costs alone of that fight can far exceed the amount that would otherwise be paid to the tax man !!
Records for both Tax and VAT purposes have to be retained for at least six years
Comments and suggestions for improving this site are appreciated and should be addressed to administration
Last Update 08-Jan-2012
Date first published 07-Nov-2005