The tax system for companies

There are two rates of corporation tax and one effective marginal rate, as follows:

Year commencing 1 April 2014 1 April 2013
Taxable profits    
First £300,000 20%  20%
Next £1,200,000 21.25% 23.75%
Over £1,500,000 21%  23%

Future changes in corporation tax rates

  Main rate Small profits rate
From 1 April 2015 20% 20%

Estimate your liability to corporation tax with our corporation tax calculator.

The rate bands are proportionately reduced where a company has associated companies (members of the same group or companies controlled by the same persons) or where the accounting period is less than 12 months.

Corporation tax self assessment requires companies to work out their own tax bills as part of their return, and accounting for the 'self-assessed' liability to corporation tax.

The company tax return

The corporation tax return (CT600) has to be accompanied by accounts and computations, which form part of the return. The return has certain supplementary pages, and some companies have to include extra information such as international interests and loans to shareholders. These must generally be filed online, and tagged using iXBRL.

Failure to file on time

An automatic penalty of £100 will be imposed if you file your return more than twelve months after the end of the accounting period. This rises to £200 if the failure to file continues beyond a further three months. The third consecutive late return attracts penalties of £500, this rises to £1,000 if the failure to file continues beyond a further three months.

In the absence of a return, HMRC may make a determination of the tax to the best of its information and belief. No appeal can be made and the tax must be paid. The determination can be displaced only by filing a completed return and self assessment.

Note that the penalties apply even where no tax is payable by the company.

If the return is submitted 18 months after the end of the accounting period, there is a 10% tax geared penalty. If the return is submitted 24 months after the end of the accounting period, there is a 10% geared penalty.

Amending returns

Tax-geared penalties are payable for incorrect returns, and a company has up to twelve months from the statutory filing date to amend its return. HMRC can correct obvious errors or omissions no more than nine months after the filing date.

Enquiries

Enquiries are subject to rules similar to those applying to income tax. If HMRC does not start an enquiry within the prescribed time (normally one year from the date of filing the return), the company´s self assessment will become final.

Keeping records

The Companies Act already requires registered companies to keep accounting records. For most companies in most situations, this is enough to satisfy HMRC record keeping requirements, so long as they are kept for six years from the end of the accounting period.

Corporation tax payments

There are arrangements under which a large company will pay its corporation tax by quarterly instalments. The conditions are that either:

  • The company had taxable profit of £1.5 million in the current year and previous year, or
  • The company has a taxable profit of £10 million in the current year.

Most companies are too small to be affected, so will carry on paying their tax in one sum nine months and one day after the end of the accounting period.

Interest

Interest will automatically be payable on late paid tax and penalties, or receivable on overpayments of tax.

Do call us if you would like further help or advice on this subject.