Summary of Corporation Tax
What is Corporation Tax?
Corporation tax is levied on the profits of a company. Taxable profits include trading profits,
capital gains, income from letting property, interest on deposits, and other income.
Key Components
1. Taxable Profits:
- Profits are calculated separately for different sources due to varying rules.
- Taxable profits can be reduced by reliefs like capital allowances and deductible expenses
(e.g., for plant and machinery).
2. Tax Rates:
- From April 2017, the standard corporation tax rate is 19%.
- Companies with profits from patented inventions may pay a reduced rate of 10% under
the Patent Box scheme.
3. Payment Timelines:
- Small and medium companies: Tax is due 9 months and 1 day after the accounting period
ends.
- Larger companies: Tax is paid in quarterly instalments.
4. Losses:
- Trading losses can be offset against profits from the same or previous accounting periods
or carried forward.
- Capital losses are offset against capital gains only.
5. Minimizing Tax Bills:
- Use loans instead of shares for financing (interest is tax-deductible).
- Take advantage of capital allowances, R&D tax relief (230% for SMEs), and reinvest
proceeds from asset sales to claim reliefs.
- Dividends and benefits in kind can be tax-efficient ways to withdraw profits.
6. Filing Requirements:
- Corporation tax returns must be filed online within 12 months of the end of the accounting
period.
- Penalties apply for late filings or payments.
7. International Activities:
- UK-resident companies are taxed on worldwide profits.
- Non-residents pay tax only on profits from UK branches.
What is Corporation Tax?
Corporation tax is levied on the profits of a company. Taxable profits include trading profits,
capital gains, income from letting property, interest on deposits, and other income.
Key Components
1. Taxable Profits:
- Profits are calculated separately for different sources due to varying rules.
- Taxable profits can be reduced by reliefs like capital allowances and deductible expenses
(e.g., for plant and machinery).
2. Tax Rates:
- From April 2017, the standard corporation tax rate is 19%.
- Companies with profits from patented inventions may pay a reduced rate of 10% under
the Patent Box scheme.
3. Payment Timelines:
- Small and medium companies: Tax is due 9 months and 1 day after the accounting period
ends.
- Larger companies: Tax is paid in quarterly instalments.
4. Losses:
- Trading losses can be offset against profits from the same or previous accounting periods
or carried forward.
- Capital losses are offset against capital gains only.
5. Minimizing Tax Bills:
- Use loans instead of shares for financing (interest is tax-deductible).
- Take advantage of capital allowances, R&D tax relief (230% for SMEs), and reinvest
proceeds from asset sales to claim reliefs.
- Dividends and benefits in kind can be tax-efficient ways to withdraw profits.
6. Filing Requirements:
- Corporation tax returns must be filed online within 12 months of the end of the accounting
period.
- Penalties apply for late filings or payments.
7. International Activities:
- UK-resident companies are taxed on worldwide profits.
- Non-residents pay tax only on profits from UK branches.
