A guide for businesses, large and small.
What is Corporation Tax?
Corporation Tax is basically an income tax on companies – the difference between a company and an individual is that a company does not have a tax free personal allowance.
It needs to be paid by all limited companies (both Public and Private) on their profits, with the current rate being 19%
What income must it be paid on?
When a company makes profits it must pay Corporation Tax.
Profits maybe be generated by doing business (trading profits), it’s investments or by selling assets for more than it paid for them (known as chargeable gains).
Company assets can include machinery, equipment, vehicles, shares in other companies and land\property.
Corporation Tax Rates?
The rate of Corporation Tax you pay depends on how much profit your company makes.
Rates for Corporation Tax years starting 1 April.
|Small Profits rate|
|Main Rate (all|
ring fence profits)
|Special Rate for|
Unit Trusts and
You will need to pay the rate that applied in your company’s accounting period for Corporation Tax (the time covered by your Corporation Tax Return).
Corporation Tax Payment Deadlines.
Corporation Tax is due nine months and one day after your company year end. If your company year end is 31 December, then your Corporation Tax payment deadline will be 1 October.
Corporation Tax will need to paid before you file your Company tax Return (CT600) – which is due no later than 12 months after your company year end.
Different rules apply depending on your company’s profits – for example if there are profits greater than £1.5 million then Corporation Tax will need to be paid in installments. Even if there are no profits, i.e. the company ids loss making and no Corporation Tax is due – this still needs declaring to HMRC.
Are there any Allowances?
Although there are no tax free allowances for companies as there are for individuals, you can deduct the costs of running your business from our company’s profits when you prepare your accounts. If you or your employees get a personal benefit from anything the business pays for (for example a company car) then this must be treated as a Benefit In Kind (BIK) and a P11D submission must be made for those employees.
Mileage (wholly and exclusively for business purposes), accommodation and training are some examples of allowable expenses for limited companies.
Business assets that are bought to use in the business – such as vehicles, equipment and machinery) can’t be deducted from your company’s income when working out the taxable profits. For these you may be able to claim capital allowances.
Reliefs – what can I claim back?
There are certain reliefs you could use to reduce your Corporation Tax bill, known as Corporation Tax Reliefs:
- R&D (Research and Development) relief is available when you comapny has undertaken work on innovation projects in the fields of Science and Technology.
- Creative Industry Tax Relief allows companies working in industries such as Film, Television, Video gaming (the Creative Industries) to claim larger deductions when working out taxable profits.
- Terminal, Capital, Property Income Losses and Trading Losses could allow you to make a claim for relief against such charges\costs\losses.
- Patent Box applies to profits earned from patented inventions and similar discoveries, allowing the comapny to take advantage of a lower rate of Corporation Tax.
At Nazman Accountants
Call us on (01274) 736000 to discuss how we can help minimise your Corporation Tax bill and make sure you claim all the relevant allowances and reliefs.