What is Corporation Tax?

Becoming a company carries a new range of legal commitments and responsibilities. Corporation
Tax is one of those responsibilities. When you register as a limited company, you as
a company director, are subject to PAYE tax and National Insurance. You also need to file
a personal Self Assessment tax return. Your company is viewed separately for taxation
purposes. It is liable for Corporation Tax on its taxable profits or surpluses. Terms
like Corporation Tax may seem a bit daunting at first. But some understanding of what it
is and who it affects can help make it seem much more manageable. But Corporation Tax
is not just a tax on the taxable profits of limited companies. It also applies to PLCs,
unincorporated associations and some other organisations like clubs, societies and membership
organisations. Taxable profits include trading profits and investment income. They also include
capital gains which are known as chargeable gains for Corporation Tax purposes. If your
company is based in the UK, it will be liable for Corporation Tax on all its taxable profits
– even if those profits come from elsewhere in the world. If your company is not based
in the UK but operates here from an office or branch, it will only be liable for Corporation
Tax on profits from its UK activities. If your company is liable for Corporation Tax,
you need to tell HM Revenue & Customs. You need to pay the correct amount of Corporation
Tax electronically and on time. You also need to file a Company Tax Return online at the
right time. With Corporation Tax the payment and filing deadlines are different. The filing
deadline is twelve months after your accounting period ends. The payment deadline, however,
is only nine months and one day from when the accounting period ends. So, the deadline
to pay your Corporation Tax comes before the deadline for filing your Company Tax Return. You must normally file your Company
Tax Return 12 months after the end of your Corporation Tax accounting period. A Corporation
Tax accounting period is usually 12 months long but it can be shorter than this. For
example, if your company accounts cover a period of less than 12 months then the Corporation
Tax accounting period can be the same and you’ll normally file a Company Tax Return
for that period. A Corporation Tax accounting period can’t be longer than 12 months though.
If your company accounts cover a period longer than 12 months and your company is active
throughout, you’ll have to file two Company Tax Returns because you’ll have two Corporation
Tax accounting periods. If HM Revenue & Customs send you a notice to file a Company Tax Return
you must file a Return even if you have no Corporation Tax to pay. Unless your Corporation
Tax responsibilities are very straightforward, you may wish to appoint an accountant or tax
agent to deal with them on your behalf.

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