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News – 10.04.24
Form PF: Are you up to speed with the latest developments?
Through this insight we will bring to your attention the main changes in a bitesize manner so that you can stay abreast of the requirements as they may apply to your firm. … Read more
Insight – 16.04.24
US and UK tax on carried interest
US and UK tax on carried interest … Read more
Upcoming event – 29.04.24
Governance code updates and advice for Further Education colleges from Buzzacott and the ESFA
Join Buzzacott and the ESFA for a governance update for further education colleges … Read more
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If the fundamental processes are running seamlessly, you’ll have more time to focus on the day-to-day joys of building your business. To help you achieve this we’ve created this complete guide for scale-ups(like yours) to take the complexity out of Corporate Tax.
Corporation Tax is essentially the tax companies are required to pay on the profits they make. Tax is paid on a business’ taxable income – this is the total revenue minus the costs of the essentials of running your business e.g. cost of goods, marketing and sales materials, operating costs etc. If your business has started to make a profit then you will be required to pay Corporation Tax – the current rate for 2020/21 is 19%.
If you are a sole trader then you will not need to pay Corporation Tax as you’ll instead pay Income Tax and National Insurance. If, however, you are a Limited Company then you will need to file your profits with HMRC and pay Corporation Tax.
You will need to register with HMRC to let them know that you are officially running a business and then provide them with information on your income and outgoings. This can be a daunting prospect but ensuring you are correctly registered with HMRC and updating them will help make the tax process easier when it comes around. You can register with HMRC here.
You’ll need the following things to file your tax return:
From your business’ inception you must accurately record all your income and outgoings as this is what you will need to give Companies House and HMRC when you file your annual tax return. This can be tricky but it is an essential step because this is what will be used to determine the amount of Corporate Tax you owe. Whether you track these yourself or use an accountant, there are a number of handy accounting tools available to simplify the process.
It is important to note that there are different deadlines for filing and paying the tax. However, many business owners tend to complete step 1 and step 3 at the same time.
| Steps for Corporation Tax success | Deadline | Example scenario for a company that has a year-end of 31 January 2021 |
| 1. File annual accounts with Companies House | Nine months after your company's financial year end | 31 October 2022 |
| 2. Pay your Corporation Tax | Nine months and a day after your company's financial year ends. | 1 November 2022 |
| 3. File your Company Tax return (also known as a CT600 form) | Must be submitted within 12 months after the accounting period end. | 31 January 2022 (Amendments can be made up to 31 January 2023) |
Even if your company is loss-making, and no Corporation Tax is due, you must still file your tax return as evidence for HMRC to review. This is very important as you could be charged with a penalty if you don’t. No matter what your situation, it is best practice to keep HMRC informed to avoid any issues down the line.
HMRC provides tax reliefs and allowances which could help reduce your tax bill. The reliefs are for specific circumstances and industries but it is worth reviewing them against your business. Here are a few common ones:
| Reliefs available | For who/what? |
| Capital allowances | Purchases of assets used in your business (e.g. machinery, vans etc.) cannot be deducted when calculating your taxable profit. Instead, you can claim capital allowances. |
| Research and Development (R&D) Relief | This relief by the UK government to encourage companies to undertake innovation and development activities. |
| The Patent Box | Companies that make a profit from patented inventions. |
| Creative industries (CITR) | Companies that make a profit from theatre, film, television, animation or video games. |
There are a number of methods for paying your Corporation Tax – it’s up to you to decide. However, an important factor to consider when making your choice is the time needed to process the payment. If you pay your tax bill late then you may incur a late penalty fine.
| Time needed to process the payment | Method of payment |
| Same day or next day |
|
| 3 working days |
|
| 5 working days | Direct Debit (if you have not set one up before) |
| Don't forget! If your deadline falls on a weekend or bank holiday, make sure your payment reaches HMRC on the last working day before it. | |
You might find the rest of our series on Corporation Tax and our Scale-Up guide useful:
There’s a lot to consider when running a business and it’s easy to become quickly overwhelmed. Hopefully this guide has simplified the process for you somewhat but, if you need any further support just let us know. We’re always happy to help and support your scale-up on its journey to success.
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