Corporate Tax Accountants

Understanding how much corporation tax a limited company has to pay should be important to a business owner. At Spotlight Accounting not only do we work with clients to ensure that they understand their corporation tax bill we also offer tax advice services such as our diagnostic tax review, to highlight areas where potential tax savings can be made.

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What is corporation tax (CT600)?

Corporation tax is the tax that limited companies pay on the profits that the company makes. This is reported to HM Revenue & Customs on a CT600 tax return (the corporation tax return form) with a the company accounts and tax computations attached for the same accounting period.

The accounts submitted with a company tax return contain more detail than those which are normally submitted to companies house.

How is corporation tax calculated?

Corporation tax is calculated based on the profits of the business, with adjustments for income and expenditure that is not allowable, claiming for allowances such as capital allowances on plant and equipment as well as claims for Research and Development Tax Credit and similar tax incentives where they are applicable to the business.

An accountant will normally calculate the amount of corporation tax due when they complete the annual year end accounts.

Corporation tax rate

The rate of corporation tax is currently 19%, this is due to increase to a rate between 19% and 25% depending on how much profit the limited company makes from April 2023.

Where research and development tax credits produce a corporation tax refund, the rate of the refund is lower. The current rate is 12% for large corporates.

When do I need to file my company tax return?

A corporation tax return needs to be filed within 12 months of the accounting period end date. However, a company corporation tax liabilities need to be paid to HMRC within 9 months and a day from the end of the accounting period.

Whilst a company will normally run a 12 month accounting period, it can extend to up to 18 months. A corporation tax return can only cover a 12 month period and in these situations two corporation tax returns will need to be produced, which will result in payment being due earlier.

What happens if I miss the company tax return deadline?

HM Revenue and Customs apply an automatic £100 penalty as soon as a corporation tax return is late. An additional £100 penalty is issued once a return is three months late, then additional penalties are applied once a return is over 6 and 12 months late.

If tax returns are late three years in a row, then the £100 penalty gets increased to £500.

Spotlight Accounting corporate tax services

Our expert team offers three levels of corporate tax services. These being:

Tax compliance services

Our tax compliance services ensure that small business clients get peace of mind that all HMRC filing deadlines are met and that the correct amount of tax is paid. This service normally coincides with preparation of your year end accounts for Companies House. We look after the whole process from start to finish.

Tax advisory services

Our corporate tax advice service involves looking at specific business decisions and the tax implications that this may have. For example, a new business may be undertaking research and development activities, advice would be specific to that business and what actions can be taken to ensure that they get maximum benefit of the R&D tax regime.

Another example could be looking at a clients aspiration to retire in 10 years and how to structure their remuneration, including pension contributions, to maximise the value that they can extract out of the business to meet this goal.

Tax planning is looking at a businesses particular situation and applying the regulations to ensure that they are running in the most tax effective way.

Tax consultancy

Our tax consultancy service looks at both a client’s personal and business circumstances and applies the main tax-efficient ways of extracting value out of the business.

Accountants can only offer advice based on what they know. Tax consultancy is understanding not only a clients current situation, but involves looking at their long term plan and ensuring that they understand all the tax beneficial ways of extracting value out of their business.

Tax consultancy is considering both a clients current situation and their long term plans and aspirations.

Frequently asked questions about corporation tax returns

Do I pay corporation tax on dividends?

Corporation tax is calculated based on the profits of a business and dividends are a distribution of profit after tax. Therefore, whilst corporation tax is not payable on dividends, they are connected in respect that:

• Dividends are not a tax-deductible expense
• Corporation tax needs to be considered when calculating the required business profits to draw the dividend income a small business owner requires.

Do you pay corporation tax if you make no profit?

If a company makes a loss then no corporation tax is paid. Where businesses make a loss this can be offset against previous, future or past profits subject to HMRC rules. An accountant will calculate how to use these losses to the benefit of the business.

Do small businesses pay corporation tax?

Small businesses that are trading through a limited company will pay corporation tax and have the same filing requirements as all other limited companies.

Do sole traders pay corporation tax?

Sole traders are taxed through self assessment and tax due is reported through their personal tax return so they do not pay corporation tax.