Any limited company based in the UK is liable to pay corporation tax on their annual profits. The amount is calculated and paid annually and is based on the company’s accounting period, which usually matches dates of the financial year in which the company operates.
What is corporation tax?
Corporation tax is a specific tax that is payable from all the taxable profits of any UK based company, regardless of where the profit was generated. If the company is based outside of the UK, it is liable to pay corporation tax on all taxable profits that were made in the UK in a financial year.
Corporation tax also applies to PLCs and unincorporated associations, plus some clubs and membership organisations.
How is corporation tax calculated?
Corporation tax is calculated and charged as a percentage of the annual profits of a company.
A company accountant will typically oversee the task of ensuring the correct amount of corporation tax is paid, but the company directors are ultimately responsible for ensuring tax is paid in full and on time.
Each tax year, a company must complete a corporation tax return (Form CT600), plus any required supporting documents. All corporation tax returns must now be filed with HMRC online.
The CT600 tax return must include:
- The company name
- The company registration number
- The address details of the registered office
- The company tax reference number
- The turnover and profit for the period
- The tax calculation
- Details of any allowances such as capital allowances, plus any reliefs claimed
Who is exempt from paying corporation tax?
A company accountant can submit the complete CT600 return any time between the date of the company’s financial year end and the statutory filing date. This is typically the latest of 12 months after the end of the financial year end, or 3 months after the delivery of a notice to deliver a return.
If the company has made a taxable profit of up to £1.5 million, the corporation tax must be paid by 9 months and 1 day after the end of the accounting year.
For example, if the accounting year end is 31st December, then your corporation tax payment will be due by 1st October of the following year.
What are the penalties for paying corporation tax late?
A company must pay their corporation tax liability to HMRC electronically. If the payment is late, interest will be applied to the figure.
If the corporation tax return is submitted late or the contents are inaccurate, the company – not the accountant – will be charged a penalty.