Every business is required to pay tax once a year on the profits it earns. This is a form of business taxation known as corporation tax. For non-ring fence profits, there is a single Corporation Tax rate.
You must work out how much tax you owe yourself – a process known as Corporation Tax Self Assessment – and then file your Company Tax return to HMRC online.
- The tax year for which Corporation Tax is payable is called the ‘financial year’ or ‘fiscal year’ and currently runs from 1 April to 31 March. This is different from the tax year for individual taxpayers, which typically runs from 6 April to 5 April.
- If your accounting period doesn’t run from 1 April to 31 March and spans two Corporation Tax financial years, you will need to apportion your company’s taxable profits between the two financial years on a time basis.
- If your company or organisation is liable for Corporation Tax you’ll have to file a Company Tax Return for each accounting period. Generally, you must file a return even if your company or organisation hasn’t made any taxable profits.
- The Chancellor sets out the rates of Corporation Tax in the Budget each year – it usually takes place in March or April – and also in the Pre-Budget Report the previous November or December. Normally any changes are announced at least a year before they are due to come into effect in order to give small firms time to understand how the changes will affect them and to give them a chance to plan ahead and make changes to their accounting and financial reporting systems.
- If your business is based in the UK you will have to pay tax on all your taxable profits, regardless of where in the world those profits come from. If your company isn’t based in the UK but does operate in the UK through an office or branch then you will only have to pay tax on the taxable profits arising from your UK activities.
Things to consider
Three are three stages to paying corporation tax – telling HMRC that your company is liable for Corporation Tax; paying the right amount of Corporation Tax on time and electronically, and filing a Company Tax Return and supporting documents online and in a particular format.
There are different deadlines for each of these requirements. You must do all of the above even if your business doesn’t actually have any Corporation Tax to pay. If you don’t meet those deadlines, your company may be charged interest and/or penalties.
Unlike Income Tax Self Assessment or VAT, where the dates for filing returns and making payments are usually the same, the tax deadline for paying your Corporation Tax is always before the deadline for filing your company tax return. Don’t get caught out.