Getting to grips with Corporation Tax
With Brexit dominating most of the UK headlines, there’s much discussion around what will eventually
happen to Corporation Tax as a result of Brexit, and how it’ll affect British businesses. In fact, Prime Minister
Theresa May has already made public promises* to cut Corporation Tax rates to bolster post-Brexit Britain.
Here at Footprints Accountancy, we’re following the story closely to see how it’ll unravel for ourselves and
our clients. But in the meantime, here’s the basics around Corporation Tax.
The bottom line
If you’re a UK limited company, then you’re required to pay Corporation Tax. That means paying 19% on
any profit you make, both in the UK and abroad.
Put simply, the Government say that the 19% is applied to any profits you make from trading; from
investments you’ve made; or through any assets you’ve sold.
Key timings today
Small and Medium Enterprises (SME) are sometimes overwhelmed by the things they have to remember to
do, when it comes to things like tax. According to research by the Federation of Small Businesses (FSB)**,
46% of small firms say it’s hard to determine what they’re required to pay. So, here’s some important timings to be aware of.
- When you register your limited company with Companies House, you get up to three months to
register your business for Corporation Tax. You can register online, or you can get an accountant to
sort it all out for you. Remember though, you’ll need your company’s 10-digit Unique Taxpayer
Reference number (UTR) to do it – which you receive when you initially set yourself up as a limited
- Nine months and one day after your ‘accounting period’, or your ‘financial year’ – is the time to pay
your Corporation Tax, or declare that you’ve nothing to pay (if you haven’t made a profit). For
example, a company with a year end of March 31, will have to pay their corporation tax by 1
- Do be aware though, that whilst HM Revenue and Customs (HMRC) offer lots of ways to pay, there
are different timescales associated with each. For example, it takes three working days to pay
through your bank, compared to the same or next day, if you pay by CHAPS or Bacs.
- Remember, HRMC will charge you interest if you’re late paying them (0.5%), but will pay you
interest if you’re an early payer too (0.5%).
- The only exception to all of this, is if you make more than £1.5 million in profit – then you have to
pay your Corporation Tax in instalments.
If you read our blog on Making Tax Digital (MTD), you’ll be aware that from April 2019, all VAT registered
businesses and organisations with a taxable turnover above the VAT threshold of £85,000 will be required to maintain their accounting records digitally, and submit their VAT returns to HMRC using compatible software. After MTD takes effect, the single annual filing for Income Tax and Corporation Tax will be supplemented by four quarterly reports.
Help is at hand
According to the Federation of Small Businesses (FSB), the average small business spends 15 hours a year
on Corporation Tax and nearly 40% of them say that Corporation Tax is difficult to understand. If that’s you,
we can help.
Here at Footprints Accountancy we pride ourselves in taking the tax stress away from busy, business
owners – allowing them to concentrate on what they do best – running their own business.
But please don’t take our word for it, watch our short video to see what our clients say about us.
- Explain everything tax related in a language you understand
- Take away any tax worries you have
- Make sure you’re fully equipped to comply with HRMC regulations
- Explore what tax relief or incentives may be applicable to you
- Free up your time to run your own company.
A little light tax relief before you go
“I couldn’t complete my tax return because my wife left me and took our accountant with her.” ***
According to the HRMC, that’s one of a list of extraordinary excuses they get from small businesses who fail
to comply to tax deadlines. It certainly made us giggle here at Footprints Accountancy.
In a nutshell then
If you’re making a profit, you need to pay HMRC 19% of that. And what’s more, there are some key dates
you need to stick to – but they may change, as the UK migrates to Making Tax Digital. We recognise that
some small businesses fear tax deadlines and struggle to get their head around it all – especially whilst
running their own operation. We understand that, and are happy to erase that worry off your list. But fear
not, none of us intend to run off with your wife!