Corporation tax is the term used for tax contributions paid to HMRC on the taxable profits of any limited company. Corporation tax also applied to most unincorporated associations, as well as foreign companies with a UK office or branch. In order to be able to submit your tax return successfully, you will need to keep the appropriate records for your company.
Taxable profits is essentially any money you make after deductions and will include, but not limited to:
- Chargeable Gains (selling assets for more than they cost
- Trading profits
If your company is based outside of the UK, but has a UK officer or branch, you will only need to pay tax on money earned from activities within the UK.
Paying Corporation Tax
You'll need to take charge of the tax submissions yourself, or enlist the help of an accountant. You don't get a bill for corporation tax, so hiring an accountant is definitely recommended if your not comfortable yourself. Not only will they ensure that all deadlines are met in time, but they'll also be able to advise on things which you can claim the tax back on as business expenses.
If you decide to do it yourself, you'll need to prepare your companies annual accounts and calculate the total amount of profit in order to submit. HMRC have a variety of templates available on their website to make this process easier for you. You'll also find details on the website of any applicable 'reliefs' which you can claim back. This will be most things related to the running of your business such as the broadband connection, and stationary, so it's important to keep a good record of all you receipts over each year.
Once you've done that, you can then pay the applicable tax and file your company tax return for that year.
If you have no taxable profit
You'll still need to file a company tax return, and inform HMRC that no payment is due to avoid being fined.
If you business is dormant
On the other-hand if your business is 'dormant' or 'non-trading', you may also have no taxable profit to declare. In such instances, you'll need to inform HMRC who will verify if your business is considered dormant.
Some examples of why a business would be considered dormant include:
- No business taking place, or no income received
- Is an unincorporated association which owes less than £100 corporation tax
- A flat management company which qualifies as dormant
If you are unsure if this applies to you, HMRC will advise you for free, and give you written notification if exemption is applicable.