A Complete Understanding of Corporation Tax for Businesses

Corporation tax for Businesses  

When you start your own business, there are several factors to consider and one very important one is how to manage your taxes effectively and legally?    

A corporation is an entity with a separate legal identity from the business owners who control it through the shares they have in the company.    

Definition of Corporation Tax

Corporation tax is the direct tax being levied on the income or capital of corporations. In the UK, corporate tax is imposed on the resident companies and also on companies who are registered outside the UK but have permanent premises in the UK. At the moment, the corporate tax rate in the UK is at 19%.   

Who needs to file corporation tax returns?    

All business owners must file their corporation tax returns with the government. It is best to shortlist a list of a few accountants as they are better equipped to deal with the complexities involved when preparing company accounts and ct600 tax returns. Some people, however, prefer to make the calculations and submissions by themselves.    

Dates for Corporation tax    

The accounting period for a corporation tax return cannot exceed 12 months. This means that any company that wants to prepare statutory accounts that are longer than 12 months have to prepare more than one return.     

After the end of an accounting period, larger companies whose profits are above 1.5m, have 9 months to file their accounts and 12 months to file their corporate tax returns. They, however, have to pay their tax electronically in quarterly instalments.

Small businesses have only nine months after their accounting period ends to submit their accounts and pay their corporation tax. They can, however, submit their tax returns 12 months after the year-end. Filling wrong returns or failing to file the corporation tax returns on time usually attracts penalties from the government.    

The Unique Taxpayers Reference Number    

This is a 10-digit number given to someone once they register for self-assessment or when their company is established and registered for corporation tax. Every taxpayer in the UK has its own unique UTR number. You can get this number online, by phone or by post.    

The UTR number is used by HMRC to identify which companies owe them money and how much. It is very important to make sure that you do not lose this number since you will need it to pay tax.    

Key things you should know about Corporate tax    

1. Who Pays Corporation tax    

As long as you are running a business, and it is making a profit, you are expected to pay corporation tax.

You must pay tax if you are in business as;   

A company with a permanent residence in the UK but registered abroad or if you are a limited company registered in the UK

Or

If you are an unincorporated association such as a cooperative, a community, a sports club or, within any other category.   

2.Registering for Corporation tax    

Once you have established your business and have started operating, you have three months to report it to the relevant authorities in order to be levied the correct tax on your profits. Her Majesty’s Revenue and Customs (HMRC) will send you a unique 10-digit taxpayer reference number that you will be using to pay your taxes.     

3.The Unique taxpayer’s reference number    

You cannot file your corporate tax returns without the UTR number. Every citizen and company has its own number, which the HMRC uses to identify who owes taxes and how much. You acquire this number when you register a limited company or when you register for self-assessment.    

• Filing Corporation Tax Returns    

It is very important for every company to make sure that they file their tax returns with the government. There are stipulated dates for every business to be aware of when they are required to turn in their filed returns. You can hire an accountant or do it by yourself. Late payments or wrong payments are subject to penalties by the law.    

• Reducing your Corporate tax    

Tax avoidance or evasion in the UK is not acceptable. There is tough legislation that will demand all the disputed tax upfront. This will either leave you completely bankrupt or with a myriad of lawsuits that won’t leave you in a better position either. It is possible to reduce the amount of corporate tax that you pay to the government without having to break any laws. Make sure you find out what they are and gather exhaustive information on them.    

How to file Corporate tax Returns    

Whether you make a loss or have no corporate tax to pay, you must always make sure that you file in your returns. There are a few competitive accountants in London who can help you file your returns as it can be a complex process.    

You can file your corporate tax returns online through the help of accountants for tax or by yourself through setting up an online account with HMRC. All small businesses in the UK have a personal tax account. Most companies prefer hiring a personal tax accountant to manage this process for them.    

Is an accountant necessary when filing corporate tax returns?    

It is not a requirement, but it is a good idea to use a chartered accountant or chartered tax adviser when you are filing your returns. The reason behind the recommendation is as they have more experience in this area and they can ensure that you are doing everything correctly. Remember that wrong returns are subject to penalties. The accountant goes through all of your documents and calculates everything for you.    

Legitimately reducing corporate tax    

Reducing your tax bill doesn’t have to be illegal. You can do one of the following:

Make sure that you closely monitor how you spend your money and what you spend it on.  Use your investment allowance to buy any business-related equipment that you require. You could involve yourself in the production of a British film and earn the creative industry tax relief. Taking part in projects aiming for technological advancement can earn you reliefs in Research and development. You can also pay your taxes early so that HMRC can pay you interest.   

In conclusion, paying taxes responsibly can be done without using incorrect or illegal means.

Clear House Accountants are specialist Accountants available in London, our in-house tax accountants will make sure that you are always compliant while helping you reduce tax and improve cash flow. Our tax planning solutions can help you keep more of your money while submitting taxes correctly. Speak to us to learn more.