Baker Watkin chartered accountants and chartered tax adviser

Baker Watkin

Suite 3, Middlesex House

Rutherford Close

Stevenage SG1 2EF

t: 01438 750555

e: enquiries@bakerwatkin.co.uk

An introduction to corporation tax

Corporation tax is paid by most limited companies, although it can also apply to some organizations such as members clubs and trade associations.

Business Tax (sole traders, partnerships and LLPs)

If you are the owner one of these types of business you do not pay corporation tax. Instead you pay income tax on your share of the profits assessed through your individual tax return.

Partnerships and LLPs also have to send a Partnership Tax Return to HM Revenue and Customs.

Both individual and partnership tax returns must be sent to HM Revenue & Customs. The deadline for submitting these forms and paying the tax is 31 January following the end of the tax year (5 April).

Most business owners will also have to make interim tax payments on 31 January and 31 July each year on account of thast fiscal year prior to calculating the final liability. If the payments on account are in excess or short of the actual income tax liability, an adjustment is paid or refunded the following 31 January.

Business tax (limited companies)

Corporation tax is based upon your company’s profits, normally at a rate of 20%. Larger businesses or those that are part of a group or are associated companies (controlled by the same people) can pay up to 32.5%.

You must inform HM Revenue & Customs that your company has commenced to trade and that it is liable to corporation tax. If it is liable for corporation tax you must:

• Pay the tax by the due date of 9 months and 1 day following the end of accounting period;
• Send a company tax return to HM Revenue & Customs within 12 months following the end of the accounting period;
• Keep records of all company income and expenditure to calculate the tax accurately.

Normally the end of the “accounting period” for corporation tax will be the same as your accounts. However this may not be so, particularly where you have accounts that cover more than a 12 month period.

Interest is charged on late payment of corporation tax and penalties arise for the late filing of a corporation tax return or for completing the form incorrectly.

Why not give us a try and book a free pre-engagement session – a no obligation way to find out what it’s like to be one of our clients.

Simply call James Abbott on 01438 750555 or email enquiries@bakerwatkin.co.uk.