Editors Note: Expert content needs an expert content writer and Yorkshire Powerhouse is pleased to publish this business advice article on business taxation, kindly written by a real expert in his field – Donald Inglis of Inglis Chartered Accountants.
Please consider contacting Donald for any aspect of tax advice, accountancy, bookkeeping or cloud accounting – just click on the advert links above or below – and please mention Yorkshire Powerhouse if you do make contact.
Welcome to this introduction to corporation tax, which hopefully you will find useful.
At its simplest, corporation tax is only paid by companies who are registered in the UK. If you’re operating as a sole trader or partnership you don’t need to worry about corporation tax.
However, life (and certainly tax) can never be that straightforward. Corporation tax is also payable by any other company who has a UK branch or office or the main management function is undertaken within the UK. Similar to residency rules for individuals, UK-registered companies pay tax based on their global profits, whereas those registered overseas only pay tax on profits generated from their UK profits.
Importantly there is no threshold on profit before you start paying corporation tax. All companies pay the same rate of tax regardless of profit – currently, this is 19%. From 1st April 2023 companies with profits over £250,000 will be taxed at 25%. Profits between £50,000 and £250,000 will be taxed at a marginal rate between the two. It is therefore more important than ever to plan, plan, plan – and well before your year-end.
At the end of each financial year, you have 9 months to submit your accounts to Companies House, and 9 months to pay your tax. The filing date for the corporation tax return is 12 months after the end of the financial year. In other words, small companies (profits of less than £1.5 million), need to pay their tax, before HMRC even know how much it is.
I would suggest that it is much simpler to file your tax return, submit your company accounts, and pay the tax all at the same time.
If you haven’t made any taxable profit in your financial year, you won’t have any corporation tax liability. However, you will still need to inform HMRC by filing a ‘nil return’.
Corporation tax is applied to all the company’s profits – irrespective of the type of income. This will include:
- Profit from trading (e.g. sales)
- Income generated from company investments (e.g. rental income from property)
- Money associated with selling assets for more than you originally paid for them (e.g. equipment or machinery).
In addition, there are various allowances and reliefs that can be used to reduce the amount of corporation tax payable. These include capital allowances, research and development, patent box reliefs etc.
It is more important than ever to plan for the future, plan for what your corporation tax liability might be, and then plan how to reduce it.
If in doubt – talk to an accountant and plan.
Taxation can be complicated and challenging to get right … find an expert (an accountant or taxation expert!) who can support your business and work with you for the future growth you aspire towards.
Thinking about tax at Yorkshire Powerhouse
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