We often get asked questions from our clients about Corporation Tax so we thought we would put together a short Q & A about this tax.
What is Corporation Tax?
Corporation Tax or CT is the tax on profits of a limited company. It can also be applied to other types of businesses such as clubs, charities and other unincorporated bodies. The profit figure is based on the profits in your accounts, adjusted for disallowable items - eg depreciation on IT equipment and other items that get special levels of tax relief - eg the purchase of a computer.
What is the rate Corporation Tax is charged at?
The current small company tax rate is 20% - this is applied to the first £300,000 of taxable profit pa.
When does the company pay CT?
The normal due date for your payment of Corporation Tax is 9 months and 1 day after your company year end. However if it's your first year of trading it becomes due 21 months and 1 day after your incorporation date. HMRC usually start issuing reminders a good 5 months before these deadlines which understandably causes confusion about when it needs to be paid.
What is a CT600?
This is the corporation tax return to HMRC that every company has to complete and submit. It gives details of the company profits and the tax payable. It is like a Self Assessment for companies and is something that we complete and submit online once the director has agreed the accounts.
Do dividends affect Corporation Tax?
No - dividends are a distribution of profit and the amount taken as dividends does not change the company's corporation tax charge.