CORPORATION TAX SERVICES

CORPORATION TAX RETURN SERVICES Edinburgh

                                                        

What is corporation tax ?

Corporation tax is a type of tax that UK limited companies and some other types of businesses (see below) are required by law to pay to HMRC. Corporation tax is based on the annual profits that a company makes. Though all profits are taxable, however certain specific expenses can be deducted. There are also allowances you can make use of to help reduce your tax liability.

Corporation tax specifically applies to the following for a limited company:

  • Trading profits – earnings generated from doing business
  • Investments
  • Selling assets such as land, property, shares, and machinery for a chargeable gain

If you are a business owner spending ANY time worrying about finances then you DO need an accountant. 

What you need to know about business tax

What type of businesses pay corporation tax?

Corporation tax, also referred to as business tax, has to be paid by all UK limited companies.  Limited companies (whether public or private) are incorporated bodies and therefore have their own legal existence that is separate from their owners. The profits that limited companies generate are hence subject to Corporation Tax.

Sole traders and partnerships are both unincorporated businesses, which effectively means there is no legal separation between the owners of the business and the business itself.  This is why they do not pay corporation tax, instead they have to fill out a self-assessment tax return where income tax is applied to their business earnings.

Other types of businesses that may need to pay corporation tax despite not being incorporated as limited companies include:

  • Housing associations
  • Membership organisations
  • Clubs and societies
  • Co-operatives

How do you register for corporation tax ?

When starting up a limited company, you will need to register for corporation tax. You will be asked to fill in the following details about the business:

  • Company name
  • Registration number
  • Your business start date (the start date on your company’s accounting period)
  • The main address
  • Type of business
  • Name and home addresses of the directors

You have to do this within 3 months of commencing trade. Depending on the type of business you have, it can be tricky deciding whether your business is ‘trading’. HMRC has certain criteria to determine whether a limited company is ‘active’, ‘trading’, ‘non-trading’ and ‘dormant’, which you can check to make sure you’re compliant.

Who is responsible for filing the corporation tax ?

It is the duty of the company director to fill in the company tax return, file it, and then pay the bill. You can hire an accountant to do this on your behalf, however, responsibility from a legal perspective still rests with the director.  

How is corporation tax filed ?

A company tax return has to be completed and filed every year with HMRC. This is also known as the CT600 form. Your company tax return has to be filed with HMRC within 12 months after the accounting period that it covers has ended. Even if your business is loss making, you still need to file a CT600 to declare this matter. 

It is very important to remember than even though the deadline to file your corporation tax with HMRC is 12 months after the accounting period that it covers has ended, you must pay the corporation tax in full within 9 months after the accounting period that it covers has ended. This means you effectively have to pay the tax you owe HMRC earlier than the deadline for filing the tax return !

You also have to file your company accounts with HMRC and Companies House. Some of the items you will need to include in the CT600 are your turnover and profit for the reporting period, your tax calculations, and the allowances and reliefs you have made use of. 

If your profits are more than £1.5 million then you’ll have to pay your bill in installments. The due dates for these payments depend on the size of your company and the length of the accounting period. For a normal 12 month period, the payments are normally due quarterly with 2 of these installments due before the end of the accounting period.

The installments will be an estimate of the corporation tax liability due for that period with an adjustment required once the final liability has been calculated after the period end.

What is R&D tax relief ?

Do you have projects that develop new products, processes or services, or improve those that are already in existence whereby they lead to an advance in science or technology ? If so, you could qualify for R&D tax relief, be sure to click on the link to explore this more.

Where this is the case and depending on if you qualify under the SME (Small and Medium Size Enterprises) scheme, tax relief is provided in one of two ways. If your business is profitable, then tax relief is provided in the form of an enhanced deduction from taxable profits at a rate of 130% of the qualifying R&D expenditure.

In instances where your business is loss making, you can surrender all or part of the loss for a 14.5% repayable tax credit from HMRC. This means you can receive a cash payment from HMRC.

WHAT ARE STATUTORY ACCOUNTS ?

Every limited company, whether public or private, is required by law to produce financial statements, which are also available for anyone to inspect if they wish. You need to distinguish between statutory accounts and the annual report and accounts.

The statutory accounts are required to be produced under company law and a copy is filed with the Registrar of Companies, where it is available for public inspection. The statutory accounts are an important part of running your business so that your shareholders see how your company is performing. Statutory accounts also keep your records updated with Companies House.

The annual reports and accounts – often referred to as the corporate report – is available to every shareholder and contains:

  • the statement of profit or loss and other comprehensive income
  • the statement of financial position
  • the statement of cash flows
  • the statement of changes in equity
  • notes to the financial statements, including  a statement of the company’s accounting policies
  • directors’ reports
  • auditors’ reports

 

Every company director has a responsibility to ensure that the statutory accounts are produced and filed with the Registrar of Companies within a set of time. The filing deadlines after the end of the accounting period are as follows:

  • nine months for a private limited company (ltd)
  • six months or a public limited company (plc)

HOW WE HELP WITH YOUR ANNUAL ACCOUNTS

The reports can be overwhelming to put together, therefore work on them has to start early. Needless to say, it needs to be accurate and relevant.

LAS Accounting can help you:

  • prepare your statutory accounts early
  • understand how they reveal the performance of your business
  • submit them to shareholders and to Companies House
  • submit them to HMRC as part of your corporation tax return

Additional add on services:

I’d love to chat with you about how I can support you and your business.

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