Corporation Tax Explained – What is it and when is it due?
Your guide to corporation tax explained: Corporation tax in its simplest form is the rate of tax charged on a Limited Company’s taxable profits.
The Financial Year for corporation tax purposes runs to 31 March. The corporation tax rate for each Financial Year is set by government and it is currently on a planned downward trend. The corporation tax rate for the financial year to 31 March 2017 was 20% and this has fallen to a rate of 19% for the Financial Year to 31 March 2018. Under the current government this rate is set to fall by a further 1% per annum until it reaches 17% for the financial year beginning 1 April 2019.
If your limited company’s financial year end is not coterminous with 31 March and there has been any change in corporation tax rates as set out above then your taxable profits for the trading year in question will be allocated proportionally between the Financial Year ends for corporation tax purposes. For example if you have a 30 September 2017 accounts year end then six months of your taxable profits will be charged at a 20% corporation tax rate and six months of your profits will be charged at a 19% corporation tax rate as this trading period spans two Financial Year ends.
Payment of corporation tax is due by the company nine months and one day after it’s trading year end. Interest applies if payment is made late.
Different rules apply if your company has a trading period longer or shorter than 12 months. If this is something that affects you then please contact us and we can explain how corporation tax works for businesses in this situation – this is often the case in the initial period of setting up a limited company and commencing trading.
Limited companies are required to submit a form CT600 calculating the corporation tax due on their trading results. This form must be completed and submitted to HMRC within 12 months of the accounts year end of your company. Penalties apply for late submission.
For any queries relating to your corporation tax, please don’t hesitate to contact us: