Glossary

Finance vocabulary, explained plainly

These definitions follow UK law. Each entry says what the notion is, who files it and with whom — HMRC and Companies House are two separate filings, and confusing them is the most common mistake — and how it maps into Odoo.

A

Accounting reference date: An accounting reference date is the date to which a UK company's statutory accounts are prepared each year, marking the end of its financial year for Companies House purposes. It is normally set to the last day of the month in which the company was incorporated, unless the company later changes it.
Auto-enrolment: Auto-enrolment is the employer duty to automatically enrol eligible workers into a workplace pension scheme and to contribute to it alongside the employee. It applies regardless of whether an employee asks to join, though eligible workers can choose to opt out after being enrolled.

B

Bank reconciliation: Bank reconciliation is the process of matching the transactions recorded in a business's accounting system against the transactions shown on its bank statement, to confirm the two agree. Differences between them are investigated and resolved rather than left outstanding.

C

Capital allowances: Capital allowances are the tax relief available on qualifying capital expenditure, allowing a business to deduct a proportion of the cost of assets such as plant and machinery from its taxable profit. They replace accounting depreciation for tax purposes, since depreciation itself is not deductible in the Corporation Tax computation.
Chart of accounts: A chart of accounts is the structured list of nominal codes a business uses to categorise every transaction it records, grouping them into income, expenses, assets, liabilities and equity. It defines the level of detail available in the nominal ledger and, ultimately, in the business's financial reports.
Companies House filing: Companies House filing refers to the documents a UK company must submit to Companies House to keep its public record current, separate from anything filed with HMRC. This includes the statutory accounts, an annual confirmation statement, and notifications of changes such as new directors or a change of registered office.
Confirmation statement: A confirmation statement is the annual filing a UK company makes at Companies House to confirm that the core information held on the public register — registered office, directors, shareholders, and persons with significant control — is up to date. It replaced the older annual return and confirms rather than restates the company's details each time.
Construction Industry Scheme: The Construction Industry Scheme, or CIS, requires contractors in the building and construction industry to deduct money from payments to subcontractors and pass it to HMRC as an advance towards the subcontractor's own tax and National Insurance. Subcontractors register with HMRC so the correct deduction rate is applied, and the deductions are later set against what they actually owe.
Corporation Tax: Corporation Tax is the tax UK companies pay on their taxable profits, covering trading profits, investment income and chargeable gains. A company self-assesses the amount due and reports it to HMRC through its own tax return rather than receiving a bill calculated by HMRC.
Corporation Tax payment: Corporation Tax payment is the act of settling the tax due on a company's taxable profits with HMRC, normally made electronically ahead of the return itself being filed. Larger companies pay in instalments across the accounting period rather than as a single sum after the year end.
Credit control: Credit control is the set of processes a business uses to manage the credit it extends to customers and to collect payment for what it is owed, from setting credit terms up front to chasing overdue invoices. Its purpose is to keep cash flowing into the business without turning away otherwise good customers.

D

Digital links: A digital link is an electronic transfer of data between software, or within a single system, that carries VAT-relevant figures forward without manual re-entry. Making Tax Digital requires every step between a transaction and the VAT return to be joined by digital links rather than by typing or copying figures by hand.
Domestic reverse charge: The domestic reverse charge is a UK VAT mechanism for the building and construction industry under which the customer, rather than the supplier, accounts for the VAT on specified construction services. It was introduced to prevent a form of fraud in which a supplier charges VAT and disappears before paying it to HMRC.

F

Fixed asset register: A fixed asset register is the internal record a business keeps of the assets it owns for use in its operations, tracking each asset's cost, date of acquisition, depreciation and current status. It underpins both the fixed asset figures in the statutory accounts and the capital allowances claimed for tax purposes.
Flat Rate Scheme: The Flat Rate Scheme is a simplified way for eligible small businesses to work out VAT due to HMRC, applying a single percentage set for their trade sector to their gross turnover rather than tracking input VAT against output VAT line by line. A business joining the scheme generally cannot reclaim input VAT on most purchases, since that cost is already built into the flat percentage.
Form CT600: Form CT600 is the company tax return a UK company files with HMRC to report its Corporation Tax position for an accounting period. It is submitted together with the company's statutory accounts and a tax computation showing how the taxable profit was derived.
FPS and EPS: An FPS, or Full Payment Submission, reports the pay and deductions for employees on or before each payday, while an EPS, or Employer Payment Summary, reports adjustments that affect what an employer owes HMRC when no FPS captures them, such as recoverable statutory payments. Employers submit an FPS for every pay run but only send an EPS when there is something to adjust.
FRS 102: FRS 102 is the principal UK accounting standard used by most private companies that are not small enough to use the micro-entity regime and do not report under full international accounting standards. It sets out the recognition, measurement and disclosure requirements that statutory accounts prepared under UK GAAP must follow.

I

Input VAT: Input VAT is the VAT a business pays on its own purchases of goods and services used for its business activity. A VAT-registered business can generally reclaim input VAT against the output VAT it charges, provided the purchase relates to taxable business use and is properly evidenced.
iXBRL tagging: iXBRL tagging is the process of marking up a company's accounts with standardised data tags so that HMRC's systems can read individual figures automatically rather than only as formatted text. HMRC requires accounts submitted alongside a CT600 to be in this tagged format rather than as a plain PDF or Word document.

M

Making Tax Digital: Making Tax Digital is HMRC's requirement for VAT-registered businesses, and over time other taxpayers, to keep records digitally and file returns through compatible software rather than manual or paper processes. It replaces free-form entry into HMRC's online portal with a chain of digital records, digital links and software-generated submissions.
Micro-entity accounts: Micro-entity accounts are the simplified statutory accounts available to the smallest UK companies under FRS 105, requiring minimal disclosure and an abridged balance sheet. A company qualifies by staying under size thresholds covering turnover, balance sheet total and headcount, generally needing to meet most of them rather than just one.
MTD-compatible software: MTD-compatible software is software, or a combination of software linked by digital links, capable of keeping the required VAT records digitally and submitting returns directly to HMRC through its Making Tax Digital interface. Software that can only produce a VAT figure for someone to retype elsewhere does not meet the requirement on its own.

N

National Insurance contributions: National Insurance contributions are payments made by employees and employers, and by the self-employed, that fund entitlement to certain state benefits including the State Pension. Different classes of contribution apply depending on employment status and income, each with its own rules for who pays and how.
Nominal ledger: A nominal ledger is the core accounting record that holds every transaction posted to a business's income, expense, asset, liability and equity accounts, organised by nominal code rather than by customer or supplier. It is the record from which the trial balance, profit and loss account and balance sheet are all ultimately drawn.

O

Output VAT: Output VAT is the VAT a business charges on its taxable sales of goods and services. It is collected from customers on behalf of HMRC and is set against input VAT on the VAT return to determine the amount due or repayable.

P

P11D: A P11D is the form a UK employer uses to report benefits in kind and certain expenses provided to an employee that were not put through payroll. It tells HMRC about non-cash value an employee received, such as private medical insurance or a company car, so the associated tax can be collected.
P60: A P60 is the certificate a UK employer gives each employee still on their payroll at the end of the tax year, summarising their total pay and deductions for that year from that employment. It is the document an employee typically uses as evidence of income and tax paid for the year.
PAYE: PAYE is the system through which UK employers deduct income tax and National Insurance contributions from employees' pay and remit them to HMRC on the employees' behalf. It applies to most employment income and operates alongside separate reporting obligations that tell HMRC what was paid and deducted.

R

Real Time Information: Real Time Information, or RTI, is the requirement for UK employers to report payroll data to HMRC each time they pay their employees, rather than in a single annual return. Each payment triggers its own submission, so HMRC holds an up-to-date record of pay and deductions across the tax year rather than reconstructing it afterwards.

S

Statutory accounts: Statutory accounts are the annual accounts a UK company must prepare under the Companies Act, covering the balance sheet, profit and loss account and supporting notes for its financial year. They are presented to the company's members and, in most cases, also filed at Companies House.

V

VAT number: A VAT number is the unique reference HMRC issues to a business when it registers for VAT, used to identify that business on invoices, VAT returns and correspondence with HMRC. It must appear on VAT invoices issued once registration takes effect and is used by customers to verify a supplier's VAT status.
VAT registration: VAT registration is the process of enrolling a business with HMRC to charge and account for VAT, whether because its taxable turnover requires it or because it chooses to register voluntarily. Once registered, the business must charge VAT on its taxable supplies and can generally recover VAT on its own purchases.
VAT return: A VAT return is the periodic summary a VAT-registered business submits to HMRC, setting out the VAT charged on sales and the VAT paid on purchases for the period. The balance is either paid to HMRC or reclaimed as a repayment.

These definitions are for guidance and do not replace professional advice. Each entry carries its last-updated date. Filing deadlines are not listed here: they change every year.