Corporation tax basics

This week, I 'ave been mostly looking at UK corporation tax (as the chap from the fast show might say).

So here are the basics:

Corporation tax is a tax on the "taxable profits" of limited companies (and some other clubs and organisations).

Taxable profits for a UK resident company, include worldwide profits from trading income, investment income (excluding dividends) and capital gains.

Overseas companies trading in the UK through a branch (permanent establishment) are subject to UKCT on profits arising from UK activities.

Current rates of UKCT

There are currently two rates of UKCT:  for the financial year starting 1 April 2014,  where profits do not exceed £300,000 the rate is 20%.  Where profits exceed £1,500,000 the main rate of 21% applies.  Marginal rate relief applies on profits between those figures.

How tax payable is calculated

UKCT is paid on taxable profits for each corporation tax accounting period.  This is usually the same as the period for which the accounts are drawn up but cannot exceed 12 months so that is the company's accounts are for a period longer than 12 months the period is split into two CT accounting periods - the first of 12 months and the second covering the remainder of the period of account (e.g. 3 months)  and separate UKCT tax returns must be filed for each of these CT accounting periods.

When UKCT is paid

UKCT liabilities are due for payment 9 months after the end of the company's corporation tax accounting period, however, if the company's profits exceed £1.5 million p.a (and reduced for the number of (world wide) associated companies)  then corporation tax is paid in quarterly instalments.

When UK corporation tax returns should be filed

A company's corporation tax return is due 12 months after the end of the CT accounting period.

Other than rates of tax not much seems to have changed here since the old days.  There is now a requirement for almost all payments and returns to be made electronically: The march of technology.

In the next post I'll look in more detail at how the taxable profits of a company are calculated.