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What is Corporation Tax?

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If you operate a limited company, a foreign company with a UK branch, or an unincorporated association, you are liable to pay Corporation Tax. This is the tax your company pays on its operating profits and any money it makes from its investments and the selling of assets for more than they cost. 

Corporation Tax must be paid annually before a specified deadline. For the current tax year, the rate is 19%. This rate is applied to the profits your company makes, once the costs of staff salaries and other relevant expenses have been taken into account. If you want to save on your tax bill, it is therefore wise to make use of every expense you possibly can. If your company operates solely in the UK, you must pay tax on all company profits. However, if your business has foreign headquarters, but has a branch in the UK, you need only pay Corporation Tax on profits made as a result of operating in Britain. 

If, in the unfortunate situation that your company makes a loss, it is possible to for this to be offset against any profits your business makes in future accounting periods. 

What is the Corporation Tax Deadline?

The deadline for paying corporation tax falls nine months and a day after your year-end accounting period. However, it is possible to pay your tax bill before the deadline; you can actually pay it immediately after submitting your accounting information to HMRC. If you choose to do this, you can take advantage of the fact that HMRC will pay you interest at a rate of 0.5% from six months and thirteen days after the start of your accounting period to the tax deadline. 

In order to reduce the chance of cash flow issues later down the line, we recommend that you build the costs associated with Corporation Tax into your company forecasting and budgeting. 

How To Pay

If you enlist the services of MCC Accountants, the payment process is very simple. You will need to submit a CT600 form to HMRC, which details any income your company made, and which records also expenditure the company has made, for example on staff salaries. When HMRC have received your form, you will be told the amount of tax your company owes. With this information, you may make an online payment via the HMRC website. If your company had operating profits in excess of £1.5 million, you must pay your tax bill in instalments. 

Should you fail to pay your corporation tax bill by the deadline, you will be liable to pay a fine, which increases the longer you fail to pay. If the delay in paying is up to one month, you will have to pay £150; that figure increases to £375 for 1-3 months; for 3-6 months you can expect to pay £750 and if you still haven’t paid after 6 months you must pay £1500. Note that if you fail to pay your tax bill on time two years in a row, your fine will double. Clearly the sums involved are large and a failure to pay can have a huge effect on your small business accounts. It is therefore crucial that you have your records in order and have money set aside to pay your tax bill when it is owed. 

MCC Accountants’ Tax Services

Need help with your bookkeeping and tax affairs? We can work with you to get your records in order to send them off to HMRC. We can help you calculate your tax bill and put aside the funds to pay it off when the time arrives. Contact our team of tax consultants in Eccles, Irlam and Manchester to find out how we can help. 

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