Corporation Tax
Business law and company taxes
Corporation tax is the tax levied on the taxable profits (what is left after you have subtracted all expenses from gross income) made by limited companies in the UK.
These profits include trading profits and investment profits as well as capital gains (known as ‘chargeable gains’ in the context of Corporation Tax).
It is the responsibility of the business to inform HM Revenue & Customs (HMRC) that it is liable for Corporation Tax, pay the right amount of tax on time, and file a Company Tax Return and supporting documents.
The deadline for paying Corporation Tax is 9 months after the end of your company or organisation’s financial year. So for example, if your financial year runs from 1 April 2009 to 31 March 2010 you must pay by 1 January 2011. Be careful not to confuse this with the deadline for your Corporation Tax Return, which is filed 12 months after the end of an accounting period.
If your profits exceed an annual rate of £1.5m then your Corporation Tax will normally be paid in installments, with the full balance being paid before your Corporation Tax Return deadline.
There are two thresholds for Corporate Tax: the Small Profits Rate (previously known as Small Companies’ Rate) which stands at 21% and applies to businesses whose profits do not exceed £300,000, and the Main Rate which stands at 28% and applies to businesses whose profits exceed £1.5m.
Firms that fall in between the two thresholds are eligible for Marginal Relief (previously known as Marginal Small Companies’ Relief). This is effectively a sliding scale where the business is charged the main rate but the amount they pay is calculated and adjusted to an amount appropriate to their actual profits.
You can deal with HMRC directly but it is advisable to use an accountant or tax adviser - known to HM Revenue & Customs (HMRC) as an agent – who can act on behalf of your company or organisation to tell HMRC it's liable for Corporation Tax and file your Company Tax Return. Your agent can also deal with HMRC on other Corporation Tax matters.
If you authorise an agent to act on your behalf to deal with your company or organisation's Corporation Tax, you must inform HMRC.
Corporation Tax rates for financial years starting April 1
|
2008 |
2009 |
2010 |
2011 |
Small Profits Rate |
21% |
21% |
21% |
20% |
Small Profits Rate can be claimed by qualifying companies with profits at a rate not exceeding |
£300,000 |
£300,000 |
£300,000 |
|
Marginal Relief Lower Limit |
£300,000 |
£300,000 |
£300,000 |
|
Marginal Relief Upper Limit |
£1,500,000 |
£1,500,000 |
£1,500,000 |
|
Standard fraction |
7/400 |
7/400 |
7/400 |
|
Main rate of Corporation Tax |
28% |
28% |
28% |
27% |
Special rate for unit trusts and open-ended investment companies |
20% |
20% |
20% |
|
(Source: HMRC)
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