When are Corporation Taxes due?

What Corporation Tax does a limited company pay? 

Currently, limited companies will need to pay Corporation tax at a 19% rate. This is the same for all companies, unless you are involved in oil extraction or oil rights in the UK

Registering for Corporation Tax

When you register your business with Companies House then you will also need to register it for Corporation Tax with HMRC. Even if your company is loss-making and does not owe Corporation Tax you will still need to file your accounts with HMRC to prove this is the case

What are Corporation Tax allowances?

Allowances are costs that are deductible for Corporate Tax purposes. These allowances will only qualify if they are used for legitimate business purposes, but is not all encompassing. Some common allowances are: phone and broadband bills for the office, travel fees, uniform, salaries etc. These expenses must be clearly documented in your accounting records to qualify for Corporate Tax allowance, so it is worth investing isn a suitable process to track these. The list of allowable expenses is specific and there are ones which do not qualify, for example: legal costs that relate to buying new property, depreciation or client entertainment costs. 

What does this look like in reality? For example, your business makes £1 million in revenue a year that breaks down into £900k in costs and £100k profit. After reviewing the list of allowable expenses, you realise that only £800k of those costs are allowable. This means that 800k of allowable costs will be tax-free. However, the £100k in non-allowable expenses and £100k of profits will incur a Corporation Tax liability at 19%.  

What are corporate tax reliefs? 

Corporate tax reliefs are additional tax incentives that HMRC will give companies for certain business activities. There are a range of reliefs available for activities such as: research & development, patenting, investing in productivity-enhancing plant and machinery assets, employee share schemes etc. Companies are able to take advantage of allowances and reliefs but they must qualify under certain rules for the latter. 

Adding on to the above example, if your company earns profits from a patented invention then you could qualify for the Patent Box Regine relief. This means you could apply for a lower rate of Corporation Tax of 10%. So, the £200k (£100k in non-allowable expenses and £100k of profits) that is liable for Corporation Tax could be eligible for a reduced tax rate – rather than 19% it could be reduced to 10%! 

Are there any tax deadline changes due to Covid-19?

For 2020/21 HMRC announced extra measures in light of the Covid-19 pandemic. A key change was an extension in claiming trading loss. Prior to the pandemic, businesses were only able to ‘carry back’ losses by 12 months. This means that if your business makes a loss then you could reduce the amount of profit made in previous years and cut your tax bill. This lifeline measure has been temporarily extended from 12 months to three years and is for losses up to £2 million.  

You may also be interested in 

Still have some questions? That’s what we’re here for

There have been many unprecedented changes in recent times that have affected every aspect of life. It can be, and has been, incredibly overwhelming but it’s our job to take care of the tax sides of things. Guidance is always changing in response to the current climate so if you need support on staying up-to-date, just let us know.