Bookkeeping for Your Company Tax Return

All businesses which register with Companies House need to file a Company Tax Return every financial year, in order to pay Corporation Tax on the profits that they make.

Some business owners choose to undertake their tax return in-house by themselves or with an employee, whereas others will leave it in the capable hands of a qualified accountant. Whichever route you choose, it’s essential that your bookkeeping is accurate and up to date so that the tax return can be filed correctly.

Bad bookkeeping habits lead to errors and omissions which can, in turn, lead to penalties from HM Revenue & Customs (HMRC). The moral of the story here is to ensure that your bookkeeping is up to scratch so that you can submit your Company Tax Return on time with maximum precision and minimum stress.

In this article, we share the good bookkeeping habits you need to ensure your tax return runs smoothly each year, regardless of who is submitting on behalf of your business.

 

Keep a checklist of everything you need to cover

To file your Company Tax Return and pay your Corporation Tax, you’ll need to fill out and submit a CT600 form. The CT600 is notoriously complicated in parts and there’s a list of strict criteria that must be covered for compliance, including (but not exclusive to):

  • Income and turnover
  • Profit and loss for the financial year
  • Tax reconciliation
  • Tax deductions
  • Any tax relief you’re claiming

Keeping a full checklist of everything you need to cover means you’ll be able to tick all the necessary boxes in your bookkeeping throughout the year. It goes a long way towards ensuring all the information you need is to hand when it comes to submitting your return. If you fail to comply, you could find yourself facing a penalty from HMRC.

Don’t worry, this isn’t something you’re expected to rattle off the top of your head each time the deadline looms. HMRC has actually put together a comprehensive guide to CT600 to support you through the process. It includes what you must do to comply, and how to carry out some of the more complex calculations. Or alternatively, you could pass the responsibility onto a qualified accountant – but more on that later.

 

Understand (and complete) your statutory accounts

Your statutory accounts are the accounts you produce at the end of the financial year. These must be sent to HMRC as part of your Company Tax Return, so you need to ensure that all of the relevant information is present and correct – this starts with good bookkeeping.

Guidance from HMRC stipulates that your statutory accounts must include:

  • A balance sheet – this documents the value of “everything the company owns, owes and is owed” on the final day of the tax year.
  • Profit and loss account – this records your sales, running costs and the profit or loss you have made over the financial year.
  • Director’s report, unless you qualify as a ‘micro-entity’ (a company with a turnover of £632,000 or less, 10 employees or less, or £316,000 or less on its balance sheet).
  • Any additional notes about your accounts that might be relevant.

Good bookkeeping habits throughout the year will make preparing your statutory accounts significantly easier than if you’re having to scrabble them together at the last minute.

 

Invest in cloud-based bookkeeping software

Bookkeeping is like anything else – you need to have the right tools, skills, and resource to hand if you’re going to do it well.

One of the most effective things you can do to bolster your bookkeeping and streamline the Company Tax Return process is to invest in good cloud-based bookkeeping software. This will allow you to take advantage of features and applications that simplify and automate so many of the processes where it’s easy to go wrong.

Here are just a few of the many benefits of using cloud-based bookkeeping software:

  • Access your accounts at any time, from anywhere with an internet connection so you can do your bookkeeping on the move.
  • Integrate with applications like PayPal, as well as your personal and business bank accounts.
  • Take advantage of multi-user access so that more than one person can work on your accounts at any given time.
  • You can automate processes (e.g., invoices and payroll) and set up automated reminders.
  • Data will be stored on a secure cloud server and backed up regularly.

 

Enlist the expertise of a professional bookkeeper

Great bookkeeping is no mean feat, especially for business owners who are often spinning multiple plates at any one time. That’s why, if you can, we’d recommend enlisting the skills of an experienced bookkeeper who can save you valuable time. They’ll also have a good understanding of what the data should look like, helping to further reduce the risk of errors.

A professional bookkeeper has insight into the accounting industry and will also be able to support you with using your bookkeeping software. Working with a bookkeeper is another way to protect yourself against stress headaches and any trouble with HMRC.

 

Hire the skills of a good accountant

As we mentioned earlier, the Company Tax Return process can be pretty complex. For example, you’re required to make sure that all information in your CT600 is reported in Inline eXtensible Business Reporting Language (iXBRL).

Understanding and submitting your information can be super time-consuming and stressful, which is why we’d always recommend hiring an accountant to help you out. An accountant will also be able to help out in other areas. For instance, suggesting a budgeting strategy that ensures you’ve got a cash cushion to pay your Corporation Tax bill, and helping you claim for all your allowable expenses.

If you don’t want to hire two separate services for bookkeeping and accounting, look for an accountant that can take on both tasks. That way, you’ve got ultimate peace of mind when it comes to Company Tax Return time.

 

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Ronan Ferguson
Junior Marketing Executive and Part-Time Copywriter. When I'm not working, you'll likely find me in a boxing gym, or knocking balls around with a wooden stick on a green baize.