Corporation tax returns are mandatory for all UK companies registered at Companies House. Tax is due on your calculation of tax-adjusted trading profit over the twelve months of your accounting period.
Corporation tax calculations are almost always best handled by qualified accountants. At Perrys our professional knowledge helps you make sure you can claim all allowances correctly, and minimise your tax liability.
What are tax adjusted trading profits?
Your business pays Corporation Tax on tax-adjusted trading profits. The starting point is your revenue minus your expenditure as recorded in your annual trading statement. The task then is to record a range of adjustments to your profit figure.
What are Corporation Tax adjustments?
Filing the right Corporation Tax allowances and reliefs is key to making sure you pay as little tax as possible. It’s an area of company finances where experience counts for a lot, and at Perrys we’ve a long track record of saving our clients significant sums of money.
Capital Allowances
Capital allowances cover machinery, equipment, computers and business vehicles including cars, vans and lorries. You can deduct all or some of the value from your profits. An extended period of relief for depreciation is also available in some circumstances as a Writing Down Allowance.
Annual Investment Allowance (AIA)
AIA generally applies to plant and machinery, and also to certain features, fixture and alterations to business buildings.
Chargeable Gains
Chargeable gains can arise when a business sells an asset for more than it paid for it. The calculation needs to cover any fees and costs involved, as well as an adjustment for inflation.
Corporation Tax Losses
You can carry forward trading losses to later accounting periods. Loss making years are an important consideration for all businesses, and especially for start-ups which lose money in their first years before entering into profit. At Perrys Accountants, we have a dedicated service for startups which has proved to be of enormous help for entrepreneurial clients.
Research and Development Relief (R&D relief)
R&D relief is designed to support innovative projects in science and technology. It can even be claimed on unsuccessful projects.
Creative Sector Relief
This relief is available for if your company is in theatre, film, television, animation or video games.
What doesn’t qualify for Corporation Tax relief?
Just as it’s important to understand what qualifies for relief, it’s essential to understand what doesn’t. The main topics are:
- Depreciation of assets
- Entertaining clients and suppliers
- Movements in general provisions
- Remuneration not paid within 9 months of the period end
Like so many aspects of Corporation Tax, expert advice can prove invaluable. The Perrys team can guide you through all the detail and complexities of Corporation Tax relief.
How do I pay Corporation Tax?
HMRC’s Company Tax Return (form CT600) runs to nearly 1,000 fields. To file your return accurately you need to have a detailed understanding of the relevant information for your business. For the uninitiated it can be a daunting process. Unless your return is filed properly, you could be seriously out of pocket.
You can pay online or through telephone banking using Faster Payments. Payment will be made same day or next day. You can make same day payment by CHAPS as long as you set it up within normal bank opening hours. BACS is another option, although payments will take three working days to clear.
What is the deadline for Company Tax Returns?
Businesses need to file a Company Tax return to Companies House and HMRC after the end of their trading year, together with their full annual accounts.
The deadline for annual accounts is nine months after the end of your financial year. Your Company Tax return has to be filed within 12 months after the same date, with penalties payable if you are late by a day or longer.
What are Corporation Tax rates?
Since 1 April 2023 the main rate for corporation tax has been 25%. This applies for companies with taxable profits over £250,000.
The small profits rate for companies with taxable profits under £50,000 has been 19%. Companies with profits between £50,000 and £250,000 are taxed at the main rate of 25% less marginal relief, which means they pay at an effective rate between 19% and 25% depending on their taxable profit.
These limits above are reduced proportionately by companies being under common control.
For example, a company making profits of £40,000 would be taxed at 19% so its corporation tax liability is £7,600. On the other hand, a company with profits of £500,000 would be taxed at 25% and hence have a corporation tax liability of £125,000.
