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Corporation Tax is often a little complicated to get your head around, but at 2020, we’re here to explain exactly what it is, and how it works.
As a Contractor, you must pay Corporation Tax on profits from doing business as a limited company or any foreign company with a UK brand/office. You don’t get a bill for Corporation Tax. There are specific things you must do to work out, pay and report your tax.
Corporation Tax has been cut to 19% from April 2017 (from 20%) and is set to be reduced to 17% in 2020. You pay Corporation Tax at the rates that applied in your company’s accounting period for Corporation Tax. Your ‘accounting period’ for Corporation Tax is the time covered by your Company Tax Return. It can’t be longer than 12 months and is normally the same as the financial year covered by your company or association’s annual accounts. It may be different in the year you set up your company.
At 2020, we can do the following for you however, these are the steps you need to take:1. Register for Corporation Tax when you start doing business or restart a dormant business. Unincorporated associations must write to HMRC.2. Keep accounting records and prepare a Company Tax Return to work out how much Corporation Tax to pay.3. Pay Corporation Tax or report if you have nothing to pay by your deadline - this is usually 9 months and 1 day after the end of your ‘accounting period’.4. File your Company Tax Return by your deadline - this is usually 12 months after the end of your accounting period.
You may be able to get deductions or claim tax credits on your Corporation Tax. These are known as reliefs. The rate you pay on profits from before 1 April 2016 depends on the size of the profits. Work out your profits when you prepare your Company Tax Return.
Your accountant can submit your CT600 return any time between the date of your company year end your statutory filing date. Eg. If your accounting year end is 31st December, then your corporation tax payment will be due by 1st October of the following year. If you submit your corporation tax return late, or the contents are inaccurate, you – and not your accountant – will be charged a penalty.
Finally, you must pay your company’s corporation tax liability to HMRC electronically. If you are late paying, you will be charged interest. To learn more about Corporation Tax, get in touch with us at 2020 and let us support your Accountancy and Contractor needs.