R A Lister Ltd

Chartered Accountants in Wakefield, Yorkshire

Phone Number: 01924 291 388

Corporation Tax ReTURn

Nine months after the year end, every limited company is expected to prepare its annual accounts for filing at Companies House and HMRC. Furthermore, alongside a CT600 Return, a company can calculate their profits to know the amount of corporation tax due consequently. Depending on the size of the business, this submission is made through our software in either the FRS105 or FRS102 format.

What is Corporation Tax?

In the UK, corporation tax is the tax which all limited companies must pay on their earned profits. Corporation Tax is quite similar to Income Tax for firms with the only difference is that corporations are not granted personal allowance. Therefore, as soon as your company starts making a profit, it must commence the payment of Corporation Tax unless the company has previously made a loss.

Generally, Corporation Tax is charged on any profits the company makes while carrying out a business that is, trading profit, as well as its investments. Additionally, the sale of assets for more than they usually cost is subject to Corporation Tax. Examples of company assets include company shares, equipment and machinery as well as land and propert.

sticky note reminder for tax planning

Registering to Pay Corporation Tax

When setting up a small business, among the first things to do is to register for Corporation Tax on the GOV.UK website with HMRC. It needs to be registered within the first three months of trading. Furthermore, what is considered as trading include advertising, buying, selling, employing someone and renting out a property. If you fail to register on time, you may be subject to a fine.

What is the Corporation Tax return deadline?

The deadline for filling Corporation Tax differs from that of other taxes, making the Corporation Tax somewhat tricky. Typically, you must pay the Corporation Tax before filing your company tax return. Moreover, the payment date varies depending on your firm’s Corporation Tax accounting period with most company’s accounting period ending on 31 March.

company meeting to discuss finance

The payment deadline of your company’s Corporation Tax is nine months and one day after the end of the accounting period of the company’s previous financial year. Thus, if your company’s accounting period ends on March 31, January 1 is your firm’s Corporation Tax deadline.

Calculating how much Corporation Tax your company is expected to pay is done by calculating your company tax return. The deadline for filing your company’s tax return being 12 months after the accounting period which is covered. Your recently opened small business may have two Corporation Tax accounting periods since your accounting period cannot be longer than twelve months. However, businesses which have profits of more than £1.5 million have a different payment process of the Corporation Tax with the profits expected to be paid in instalments. 

Even if your firm is making losses and has no Corporation Tax due, you must still declare with the HMRC.

What are the Corporation Tax allowances?

When calculating how much Corporation Tax you are owed, there are some Corporation Tax allowances available for you to consider. Before calculating your total profit before tax while preparing your accounts, you must first deduct the running costs of running your business. Additionally, if either you or your employees use something, this must be treated as a benefit. 

Some of the examples of Corporation Tax allowable expenses which you can claim through your limited company include accommodation, training, and mileage. These expenses must, however, be wholly and entirely for business purposes and essential to the business, with this fundamentally meaning you do not get any personal use from them. Some costs of running your business are not allowed for Corporation Tax including client entertainment costs.

When calculating your taxable profit, the purchases of business assets you intend to keep for use in your business are not acceptable deductions. It includes machinery, equipment and vehicles.