Corporation Tax is payable by all companies on their taxable profits.
Corporation Tax is payable by all companies on their taxable profits. This figure is different to the Net Profit figure in the accounts because some expense items on the Profit & Loss account are not deductible under tax law. There are also some additional allowances that are deductible for tax purposes, but cannot be shown in the accounts under accounting standards.
Filing the Company Tax Return (CT600) and Paying Corporation Tax
Virtually all companies and organisations must file their Company Tax Returns online and pay their Corporation Tax to HMRC electronically.
Strangely, the payment date for Corporation Tax is earlier than the deadline for filing the CT600. The CT600 has to be filed within 12 months of the end of the accounting period, whereas the tax is due 9 months and 1 day after the end of the accounting period.
Rates
The rate of Corporation Tax can vary each Financial Year (which runs from 1 April to 31 March each year, unlike the Fiscal Year which runs from 6 April to the following 5 April) and the rate is announced in the annual Budget Statement by the Chancellor of the Exchequer. The current rate is 25% of taxable profits, although smaller companies may pay a reduced rate of 19%.
Instalment Payments for Large Companies
Large companies (defined as those with profits above the Upper Limit of £1,500,000) may have to pay their Corporation Tax in instalments.
The first instalment is due 6 months and 13 days after the first day of the accounting period and the last instalment is due 3 months and 14 days after the last day of the accounting period. Other instalments are due every three months after the first, until you reach the final payment. For a 12 month accounting period you will have 4 evenly spaced instalments, but for shorter periods there may be fewer instalments and short spacing between the penultimate and final payments.
As the first instalments are before the period has finished, the total tax payable has to be estimated based on the year to date figures at the time. If it turns out that too little is paid then interest will be due on the underpayment.
Companies that were not large in the previous accounting period and have profits under £10 million, or companies with a tax liability of less than £10,000 do not have to pay by instalments.
Associated Companies
Companies under common control (controlled by an identical group of shareholders) are associated.
The Corporation Tax Limits and the £10 million instalment payment profit limit (above) are divided by the number of associated companies; i.e. if the company has 4 associated companies then the Upper Limit to become a large company is £300,000 (£1,500,000 / 5).
If you would like more information regarding Corporation Tax, please email customerservice@taxinnovations.com or call 01962 856 990.
Please call us on 01962 856 990 or visit our contact page.