Corporation Tax: Obligations, Bands, and Reliefs
What is Corporation Tax?
Corporation tax is paid on the profits made by a company. These taxable profits cover:
The profits made from doing business, known as trading profits;
Any investments; and
Any chargeable gains.
Who needs to pay Corporation Tax?
Corporation tax must be paid by:
Limited companies;
Any foreign company with a UK branch or office;
Club;
Co-operative; or
Other unincorporated associations.
How much is Corporation Tax?
The current corporation tax main rate in the UK is set at 19% for all types of business profits. However, this is set to change from April 2023, and profits will be subject to the following rates:
Lower limit (≤£50,000)
19% (main rate)
Marginal rate (£50,000 - £250,000
Tax at the main rate & reduced by a marginal relief providing a gradual increase in the effective Corporation Tax rate.
Upper limit (>£250,000)
25%
If your profits are between £50,000 and £250,000, they will be subject to the highest rate, but you will be able to apply for a marginal relief. Changes to the Corporation Tax Rate can be found here.
How to pay for Corporation Tax?
Register your business for corporation tax. This can be done through the GOV website here.
You will need the following information:
To sign in to your business tax account to register for Corporation Tax;
Company’s 10-digit Unique Taxpayer Reference – provided by HMRC once the company has been incorporated;
Company’s Registration Number;
Incorporation date;
Date your annual accounts are made up to;
Main address;
Type of business;
Name and home addresses of the director(s);
Company needs to be registered within 3 months of starting to trade.
2. The company director must complete the company tax return (CT600) every year, file it and pay the required sum. This can be done here.
The Corporation Tax Return can be found here. For guidance on how to complete the form click here.
The CT600 requires details on:
Turnover and profits for the accounting year;
Tax calculations; and
Allowances and reliefs that have been used.
The date Corporation Tax needs to be paid depends on the company’s accounting period. It needs to be prepared 9 months and 1 day after the end of the company’s accounting period.
For example, if the period ends on the 31st of May, your corporation tax bill will be due on the 1st of March.
Reliefs
There are several reliefs available which can be deducted from the business profits before tax when preparing the company’s accounts, and they can be found here. Some examples of some reliefs include Capital Allowances, the R&D relief or the Patent Box.
Author: Irene Correro Garcia -
Author: Irene Correro Garcia -
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DISCLAIMER
This article has been written by law students for the sole purpose of providing informative insight. The information in this article is intended for educational purposes only and does not constitute legal advice, nor should the information be used for the purpose of advising clients. You should seek independent legal advice before relying on any of the information provided in this article.
