Don't miss the main tax deadlines

The fact that we have to pay tax is a given and understood by all. However, what some fail to understand is the true complexity of the system and the fact that missing key dates for making a return or paying a tax bill can open up a huge can of worms. And with hairdressing high up on HMRC’s watch list because of the cash nature of the trade, salons don’t want to give the taxman an excuse to look closely at their business. Income Tax Starting with income tax, it’s clear that the tax you pay is going to depend on the profits made by your business, and for established businesses will, or the foreseeable future at least, be made in two estimated instalments; January 31 of the tax year you’re in (ie up to 5 April) and July 31 immediately following, with a balancing payment on 31 January after the tax year, at the same time as the return is due. The instalments are based on your previous year’s return, and set at half of last year’s liability. If you know that’s not going to be appropriate (for example you’ve made a lot less, or a lot more, this year) then you should contact HMRC using a Form SA300 to revise the amount up or down – that won’t affect the interest due/payable on over or underpayments once the position’s finalised, but it will stop HMRC chasing in the mean-time. Bear in mind that HMRC don’t send out payment reminders any more either, so you need to make sure it’s in your diary. With a nod to helping small businesses, those making up to £82,000 per year can apply HMRC’s cash basis for tax, which means that their taxable profit will automatically be based on the tax year. Hairdressing isn’t on the long list of businesses who can’t use the cash basis, but even so, you may not find it helpful (for example if you have more than £500 of interest/bank charges, or keep high levels of stock) so you may need to check with a professional adviser if it’s worth it. Tax trigger point: Tax Year – 5th April 2015 Deadline: Return filing –31 January 2016 (on-line only) Payments of tax – first instalment 31 January 2015, second instalment 31 July 2015, balancing payment 31 January 2016. (31 January 2016 is also payment date for first payment on account re tax year to 5 April 2016). Corporation Tax If you’ve incorporated your business, then the first line of tax will be on any profits retained in the business. The rate for small businesses (and from April 2015, larger businesses too) is 20%, so for every five pounds of profit the business makes, you must set aside one to pay the tax. The tax return is due within a year of your accounting period end (accounts date), but the tax is due before that, nine months and one day from the accounts date. However, since the Companies House annual return filing deadline is nine months from the accounts date, you should have all the information to hand by then, and there’s no reason not to finalise your tax return around the same time. HMRC only have 12 months from the date they receive a return to enquire into it, so the sooner you submit the sooner you can be sure they won’t investigate it. There’s no particular advantage to paying the tax early though, as the interest rate HMRC pays isn’t particularly high. Tax trigger point: Company Accounting Date (typically month end, usually March or December) Payment deadline: Nine months and one day for payment; 12 months for the supporting return. VAT If you’re registered for VAT then you’ll need to keep up to date with the returns for whichever scheme (say Cash, Flat Rate, Retail etc.) you use. Remember you’ll have to register if your “taxable supplies” – sales - exceeded £82,000 in the year to date, or will in the next 30 days alone. Taxable supplies are broadly turnover (not profit) excluding VAT exempt sales. VAT returns and payments all need to be made online. VAT returns are usually made quarterly based on the months HMRC will have given you, although if your turnover is under £1.35m you may be able to use the annual accounting scheme, which requires only one return per year. Whichever timetable you are under, payments will need to be made at least quarterly, to the precise amount if you’ve submitted a return, or as an estimate if you only do one return a year. Any refunds can only be triggered by a return, so if you’re business mostly makes zero-rated supplies and is in an overall net repayment position then the annual scheme (triggering only one refund a year) won’t be for you. The normal quarterly accounting for VAT needs your return and VAT payment to be with HMRC within one month and seven days of your quarter end. What you put into the return will depend on whether you account for VAT under the standard scheme or using the Flat Rate Scheme, for businesses turning over less than £150,000 per year. Under full accounting, you will need to document all taxable (VATable) supplies and all purchases and net off the VAT before paying the difference over to HMRC. Under the Flat Rate scheme, you charge VAT normally to your customers, but then have to pass only a percentage of that to HMRC (which for hairdressing is 13% as there’s no deduction for tax suffered on purchases (the only exception being for assets – say a computer or chairs - costing more than £2,000 which you can account for, and reclaim the VAT, on a case by case basis). Ascertaining whether the rate actually makes economic sense for your salon will mean a conversation with your accountant. Tax trigger point: VAT return period end date – always a month end. Payment deadline: One month and seven days from return period end date.   Jason Piper Jason Piper is senior manager for Tax and Business Law at the Association of Chartered Certified Accountants.