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Corporation Tax

Corporation tax is a tax on your company’s profits taxable income or profits. For corporation tax companies have to:

• Work out their own tax liability
• Have to pay the tax without prior assessment by the Inland Revenue
• Are liable to penalties if you do not deliver a return by the statutory filing date, normally 12 months after the end of the accounting period.

Corporation Tax is due for 'Accounting Periods' which are normally 12 months long.

You can view the current rates and allowances at the HMRC website.

For most companies, the payment of Corporation Tax is due nine calendar months and one day after the end of the accounting period.

This is known as the 'Normal Due Date'. If the accounting period ends on the last day of a month, the normal due date will be the first day of the tenth following month.

For example, an accounting period ending on 31 May 2002 will have a due date of 1st March 2003. To find out how to pay your corporation tax visit the HMRC website.
 
You can find out further information about corporation tax here. 

Corporation Tax is chargeable on annual profits made by a company. If you are self-employed you do not need to pay corporation tax, however the following groups do need to pay the tax even if they are not limited companies;

• Societies and Associations (including trade associations)
• Individuals conducting business but not as a partnership, for example co-operatives.

There are two bands of corporation tax; the small companies and the main rate. Companies which fall between the two bands are eligible for a relief rate explained below.

The rates are as follows; 
     

*The relief is equal to; £1,500,000 – (profit x 0.025)

Changes to the rates

From tax year 2008/2009 the small companies’ rate will increase from 20% to 21% following the 2006 budget announcement. In tax year 2009/2010 the small companies’ rate will further increase to 22%, where it will remain. In the same year, the main rate will decrease from 30% to 28%.

If you chose to dispose of assets in the financial year, meaning to sell or gift them, then you may also be liable for a corporation tax on the profit you have made from the asset.

If you are found to have avoided paying Corporation Tax, then you will be forced to pay the amount whilst incurring additional penalties as well as interest charges payable to HMRC (Her Majesty’s Revenue and Customs). To avoid this, please ensure that you submit your company tax return on time and make sure you know your ‘normal due date’; the date on which your corporation tax is due.