VR & AR Guide 6: Corporation Tax

Introduction

A UK Limited company pays corporation tax on its taxable profits for the accounting period. Corporation tax is due 9 months and 1 day after the accounting period end. For example, a company with a 31 March year end, would be required to pay any tax due by the following 1 January. However, the company tax return is due 12 months after the accounting period end.

The corporation tax rate for 2020/21 is 19%. 

Important points to consider

Accounting profits vs taxable profits:

Profits taxable for corporation tax are often different to profits appearing in the company accounts and this can be for a number of reasons such as:

  • Not all business expenses are allowable for tax purposes e.g. client entertaining or depreciation; and must be added back into the profits for tax purposes.
  • Capital additions, which are depreciated in the accounts, attract different rates of allowances for tax purposes. For example, if you buy a computer, the cost might be written off in the accounts over 3 years, but for tax purposes, you are likely to obtain full relief in the year of purchase.
  • Taxable profits can be reduced by way of R&D.

Tax losses

  • If a company has made a taxable loss for the accounting period, these losses can be carried forward and offset against future profits of the same trade.
  • If the company had a corporation tax liability in the previous period, the losses for the current accounting period can be carried back, enabling you to claim a corporation tax refund.
  • Losses created by R&D can be surrendered for repayable tax credits..

Tax planning

The corporation tax liability can be manipulated through effective, legitimate pre year-end planning including bringing forward planned expenditure or extra pension contributions.

 

Want to learn more?

Get in touch with our in house expert Luke Thomas to see how we can help.

 

See how we can help you...

We believe in being involved with the local business community and that is why we network extensively, host regular business seminars, write blogs and have many trusted, professional contacts