Corporation Tax is a charge on the taxable profits or surpluses of Limited Companies (LTD), Public Limited Companies (PLC), unincorporated associations, and certain organisations such as sports clubs, societies, and members organisations.
In this brief article we’re going to focus on Corporation Tax from the point of view of a Limited Company. If you’re the owner of a Limited Company and wish to hand your Corporation Tax dealings (and other accounting processes) over to somebody else, see below for how to contact our experienced accountants for a complimentary consultation.
When you register as a Limited Company you become a company director, making you subject to PAYE Tax and National Insurance Contributions (NICs) in an almost identical fashion as you would have been subject to when you were traditionally employed in a former career.
As a company director you’ll have to file a personal Self Assessment tax return, but it should be noted that you and your company are viewed as entirely separate for tax purposes, and you shouldn’t confuse anything described below with your personal tax responsibilities.
Dissecting Your Taxable Profits
One reason why Corporation Tax is often seen as a scary, somewhat daunting process to deal with is because many company directors simply don’t understand what the Government do and don’t deem to be taxable profits.
For Corporation Tax purposes, taxable profits are trading profits, any investment income, and capital gains, which are known as chargeable gains in this circumstance.
As a UK-based Limited Company you’re liable to pay Corporation Tax on all taxable profits, even if some of them come from outside the UK. If your company isn’t based in the UK, but you operate from here via way of a company branch, workplace, or shop, you’re only liable for Corporation Tax on taxable profits created via means of your UK activities.
How and When to Pay Corporation Tax
If you believe your company is liable to pay Corporation Tax you or your accountant must inform HMRC as soon as possible.
You must pay Corporation Tax every twelve months, with your payment deadline being nine months and one day from the end of your accounting period. The chosen date for the end of your accounting period is entirely down to you, but many business owners choose 5 April or 31 March to fall in line with the end of the tax year.
Your Corporation Tax payment must be the correct amount and it must be paid electronically. You also need to complete a company tax return for the accounting period in which your Corporation Tax is due, with the deadline for said return being twelve months after the end of your accounting period — meaning you must pay your Corporation Tax owed three months before you report how much you owe.
Keep in mind that you must file a company tax return the moment HMRC send you a notification to do so, even if you have no Corporation Tax to pay on your previous accounting period.
To speak with a professional to discuss your necessary Corporation Tax payments, or any other taxation issues, contact us today on 020 8780 2349 or get in touch with us via our contact page to arrange a complimentary, no obligation meeting.
This blog is a general summary. It should not replace professional advice tailored to your specific circumstance.