Understanding your Corporation Tax obligations

If you manage or run a limited company, you are required to register for Corporation Tax which means you need to know your obligations and ensure you are paying your bill on time.

Corporation Tax is a form of business tax that companies pay on their taxable trading profits.

The amount of Corporation Tax you pay is dependent on the profits and you must register with HM Revenue and Customs (HMRC) within three months of trading.

It’s important you understand your Corporation Tax obligations to avoid facing any potential sanctions or fines which could have a detrimental effect on your company.

What are the current Corporation Tax rates?

The rate of Corporation Tax you pay is dependent on the level of profits your company generates.

Currently, incorporated businesses generating under £50,000 in profit are required to pay a Corporation Tax bill at 19 per cent, known as the small profits rate. For companies making over £250,000 in profit, they are taxed at the main rate of 25 per cent.

It’s slightly more complex for companies generating profit between the two rate bands. These companies effectively pay 19% on the first £50,000 of profit and 26.5% on next £200,000, so effective planning on sharing profits across connected companies and actions like company pensions contributions can make big savings – we can advise on these actions to keep more money in your company bank account. Remember you pay tax on profits, not on sales – costs associated with running your company, such as staff wages, renting office space, buying supplies and equipment, are exempt from Corporation Tax.

What are your legal obligations?

By law, you are legally required to register your incorporated business with HMRC, and this must be done within three months of your company starting to trade or generate income.

(MV note; this is wrong, HMRC set up the tax accounts and they are the ones who issue the UTR)  If your company does not have income, then you have to tell HMRC, otherwise HMRC will generate filing penalties, even though the company is dormant.  If you do start trading you have to tell HMRC the main activities, and the date on which your company became liable for Corporation Tax.

You must file a Company Tax return every year, regardless of whether your business is operating at a loss or does not have any tax to pay and include all annual account details when submitting your tax return

Any Corporation Tax bill must be paid no later than nine months and one day after your company’s most recent accounting period.

Is support available for company owners?

You need to understand your Corporation Tax obligations, as failing to follow the regulations in place can land you and your business in serious hot water and at risk of fines and sanctions.

If you do need support with any Corporation Tax matters, our expert team can advise and support you. We can answer your queries, look at your current payments and ensure you understand what is required legally.

For all Corporation Tax concerns, contact our team today.