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What is Corporation Tax?

All UK-based businesses are required to pay corporation tax, which is calculated based on their yearly profits, similar to personal income taxes. Limited liability companies are required to pay a corporation tax rate of 19% on their profits, a rate that has been in place for the last 4 years (Previously, rates used to differ based on the actual profits of the company). Unlike individual income taxes, companies aren’t entitled to any tax-free allowances, meaning that they have to pay taxes on all profits. However, they are allowed to claim deductions and expenses for reducing their overall bill. Corporation taxes can be paid by submitting Form CT600 to the HMRC.

Apart from UK-based limited liability companies, these organizations are also required to pay taxes on their profits, even though they might not have been incorporated:

· A group of individuals engaged in a business

· Housing associations

· Trade associations

· Members’ clubs, associations, and societies.

Partnership firms and sole traders are not subject to corporation tax. They pay taxes via self-assessment income tax returns, based on their profits. The charge of ensuring that the corporation’s returns have been filed and taxes paid falls upon the company’s directors. They are still liable for it even when they’ve hired an accountant for this purpose.

How Can I Register With The HMRC ?

After incorporating a company, the HMRC must be informed of the same within a period of 3 months of trading. But the definition of ‘trading’ may vary depending on what business it is. To prevent confusion, the HMRC has issued extensive explanations and definitions of terms like ‘dormant’, ‘non-trading’, ‘trading’, and ‘active’. You can go through these explanations to learn the category your business falls into.

What If I’m Not Liable to Pay Any Taxes?

Businesses that don’t need to pay any corporation tax still have to submit company tax returns. They’ll be issued payment reminders by the HMRC automatically unless they submit the ‘Nil to Pay’ form. They may also mail their payslip to the HMRC with a ‘Nil Due’ statement on their HMRC reminder for this purpose. In case the business has been shut down, the HMRC must be informed of this immediately. Once they’ve made sure that everything is in order, the owner will be issued a confirmation letter, informing them that they aren’t required to file returns or pay corporation taxes anymore.

Tax Deadlines

The tax return must be submitted during the period between the end of the financial year and the statutory filing date. The latter happens to be twelve months after your company’s accounting year concludes or 3 months after the notice to file returns has been issued by the HMRC – whichever happens to be the latest.

Corporation taxes need to be paid off before the due date. All companies with taxable profits below £1.5 million are required to pay their corporation taxes within a period of 9 months and 1 day after your company’s accounting year draws to an end. However, businesses that exceed the £1.5 million turnover limit are required to pay corporation tax in installments.

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