UK Corporation Tax and Your Company

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Corporation tax is a type of tax charged on the taxable profits of UK limited companies. It does not apply to sole traders or partnerships.  If you would like to learn how to register for Corporation Tax, how the Corporation Tax process works and how to assess your Company – keep reading.

Remember, this is a simple summary of Corporation Tax and it is essential that you seek professional advice from an Accountant or Tax Advisor before making any decisions relating to your Corporation Tax. 

What is corporation tax?

Corporation tax is charged on the taxable profits of all registered companies that have been incorporated at Companies House. 

Who is HMRC? 

HMRC is a government organisation which controls the collection of taxes and also the spending of collected taxes to fund UK Public services.

What is a Taxable Profit? 

Taxable profit is the amount of profit remaining after the deduction of tax allowable expenses and reliefs. Corporation tax is payable on the taxable profits made during a specific accounting period. A tax period cannot be more than 12 months long.

Different types of Taxable Profits:

Trading profits – the income from the company’s trading activities after allowable expenses have been deducted.

Capital gains – the chargeable gain or profit made when a company asset such as land or buildings is sold.

Any other income – for example, money made from leasing land or buildings or interest on savings.

What is the rate of UK Corporation Tax 

For the financial year starting 1 April 2019, the corporation tax rate is 19% and will be reduced to 17% from 1 April 2020.

How to register for UK Corporation Tax 

You will need to register a company with Companies House first. You can find our affordable company formation packages here. 

Once your company has been successfully formed and admitted to the Register of UK Companies, HMRC will send a Unique Taxpayer Reference (also known as a UTR) to the company’s registered office within 7-10 working days. 

This letter will explain how to set up an online account to submit and manage company tax returns and give the dates for the accounting period on their records.

Dormant Companies and Corporation Tax 

If you are registering a Dormant Company, you will need to let HMRC know that your company is in fact dormant. 

There are 2 ways to let HMRC know that your company is dormant – by phone on +44 151 268 0571 or by post: Corporation Tax Services, HM Revenue and Customs, BX9 1AX, United Kingdom.

HMRC must be informed once the company becomes active within three months of the start of the accounting period to avoid penalties.

Corporation tax self-assessment

Corporation Tax Self Assessment means that HMRC leaves the calculation of Corporation Tax as the responsibility of the Company and it’s Directors. So HMRC does not bill you but instead expects that you will follow the following steps to ensure that you are able to accurately calculate your Corporation Tax Due of Refundable: 

  • It is your responsibility to check their filing and payment deadlines and make sure you adhere to these.
  • It is the Company’s Duty to prepare accurate and reliable Annual Accounts.
  • Based on these Annual Accounts, a company must calculate and pay the tax due on taxable profits 
  • It is the responsibility of the company to ensure they have used the corporate tax rates, allowances and reliefs. 
  • Lastly, a company must report these figures to HMRC by filing a company tax return each year. (also known as a CT600) 

What happens if you have no Tax to pay? 

If no tax is due you still need to let HMRC know before the deadline of your Corporation Tax return and payment. You can let HMRC know here. http://www.hmrc.gov.uk/gds/payinghmrc/ct-nil.htm

Finding an Accountant

An Accountant can help you meet your Corporation Tax obligations and complete your Corporation Tax Self Assessment.  We recommend finding a qualified professional accountant on one of the following websites:

  1. The Associate Charted Certified Accounts (ACCA) Website https://www.accaglobal.com/uk/en/member/find-an-accountant
  2. The Institute of Chartered Accountants in England and Wales (ICAEW) https://www.icaew.com/about-icaew/find-a-chartered-accountant

All our Company Formation Packages include a FREE 30 minute consultation with a professional Accountant. View UK Company Formation Packages

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