Corporation Tax is a tax on the taxable profits of limited companies. A limited company pays Corporation Tax instead of paying both Income and Capital Gains Tax. Corporation tax is payable on the net profit of a company.

The net profit is calculated by deducting authorised expenses from the trading income, chargeable gains (same as capital gains) and investment income such as rent. The more tax-deductible expenses that you can put through the company the less you will pay in Corporation Tax.

With tax help and financial advice from an independent financial adviser advice can be given on the exact expenses that you can claim. It is important to remember that only expenses that are necessary for expenditure of the business can be deducted. For example:

• Advertising and marketing costs
• Business bank charges
• Insurance for the business
• Pensions provided to employees
• Wages
• Interest on business loans
• Leasing rentals for business purposes
• Mobile telephone
• Accountants and auditors fees
• Employee business expenses
• Company car National Insurance
• Business software

If your company is subject to Corporation Tax as a small business owner you are required to:

• tell HMRC that your company is liable for Corporation Tax
• pay the right amount of Corporation Tax on time
• file a Company Tax Return and supporting documents

There are different deadlines for each of these requirements and if they are not met your company may be charged interest and/or penalties.

Unlike other taxes such as Income Tax or VAT – where in most cases the filing and payment deadlines are identical – this is not the case with Corporation Tax. The deadline to pay your Corporation Tax is before the deadline to file your Company Tax Return. Generally you must:

• pay by 9 months after the end of your company Corporation Tax accounting period
• file by 12 months after the end of your company Corporation Tax accounting period

Your company pays Corporation Tax on taxable profits for each Corporation Tax accounting period. Normally Corporation Tax accounting period is 12 months long and matches your company’s 12 month financial year.

Corporation Tax is not as daunting as it may seem and with tax help and financial planning from an independent financial adviser, you as a small business owner can obtain the best advice to reduce the Corporation Tax payable by your business.

Any questions on corporation tax?

Please call us on 01582 839280 or email us.