What is Corporation Tax return?

The corporation tax is what limited companies need to pay tax to the HMRC (HM Revenue & Customs). This tax is paid on the company's trading profits and the capital gains from increased value assets sold, e.g. property and company shares. The corporation tax rate depends on how much taxable profit the company makes in the accounting period, whether small businesses or large companies. Based on that, the company pays the corporation tax bill. UK companies must pay corporation tax on all the taxable income they earn from the UK and foreign companies. In contrast, companies whose offices are not based in the UK and have a branch here only need to pay UK corporation tax on profits from their UK activities.

The corporation tax rate is 19 per cent on the profits made by a limited company in its financial year. The UK corporation tax rate may change from time to time. So always ensure that you pay the correct basic rate in your company's accounting period before nine months. For any tax changes, you can follow the gov site.

A corporation tax return is a return filed by companies or associations to declare their profits, spending and company tax figures to HMRC on their business activity, usually once a year. A UK company must file their corporation tax returns in its accounting periods before the deadline to meet its legal obligations and avoid late penalties. Our experts are specialized in handling all aspects of technical tax and can guide you on UK corporation tax allowances, exemptions and deductions you may need to learn.

If your company's taxable profit is £1.5m or less, the corporation tax deadline is nine months and one day after the end of the previous financial year. If the profits arising or the profits earned by the company are more than this, the corporation tax payment you will pay in instalments.

There are ways in which you can reduce your corporation tax bill by corporation tax allowances and corporation tax reliefs.

Corporation tax allowance:

You can have some corporation tax allowance while calculating how much you need to pay. the cost of business purposes can be deducted from company profits while managing the annual accounts. The accommodation and training come under allowable expenses, and entertaining clients' costs don't come under allowable expenses.

Corporation tax reliefs:

A few corporation tax reliefs are also available to minimize the corporation tax bill:

Research and Development (R&D) relief, the Patent Box, Creative industry tax reliefs, disincorporation relief, terminal, capital and property income losses, trading losses, marginal relief, relief of goodwill, and relevant assets.

There are many ways for corporation tax to pay, but whatever way you opt for, the payment should be reached on time to HMRC. These are the few methods by which a company pays corporation tax. You can choose according to your suitability.

• Allow same day/next day: CHAPS.
• Allow same day/next day: online or telephone banking (Faster Payments)
• Allow three working days: Bacs
• Allow three working days: direct debit (if you've already set one up)
• Allow three working days: online payment by debit or corporate credit card
• Allow three working days: At your bank or building society
• Allow five working days: direct debit (if you've never set one up before)

According to the UK tax policy, let's calculate how much corporation tax penalties are paid. If you do not file your return before the corporation tax deadline, you will have to pay penalties to HMRC:

1. If you're one day late - A penalty of £100 will be levied
2. If you're three months late - A penalty of another £100 will be levied
3. If you're six months late - A penalty of 10% on the unpaid tax after estimating the Corporation tax bill by HMRC.
4. If you're 12 months late - A penalty of 10% of any unpaid tax.

If you are late three times in a row, the £100 penalties are increased to £500 each. If you are still six months late, HMRC will write to you about the corporation tax payment they think you must pay, which is a tax determination. It's better to arrange payment reminders to avoid paying additional taxes.