Corporate Tax

Corporate tax planning

Knowing the corporation tax cost to your business is a key part of running your business as it represents a substantial part of your trading costs. Therefore, consulting a corporate tax accountant to understand the taxation cost to your business is key to its commercial success. Effective planning and compliance are crucial to minimising tax liabilities.

Moreover, the increased reporting obligations, robust investigation policies on the part of the tax authorities, and harsher penalties for non-compliance mean that an undue amount of your time and resources can be taken up collecting revenue for the Government.

Corporate tax services

As a corporate tax accountant we offer a range of services to help you minimise your corporate tax exposure and relieve you of the administrative burden of complying with tax legislation.

These include:

  • Determining the most tax effective structure for your business
  • Taking full advantage of tax opportunities and reliefs
  • Achieving the optimum capital or revenue tax treatment
  • Reducing tax on disposals and maximising relief on acquisitions
  • Making the most of tax opportunities specific to your industry
  • Meeting the rigorous demands of compliance including corporation tax self assessment
  • Acting on your behalf in discussions with the tax authorities
  • Efficient corporate tax planning can result in potentially significant improvements in your bottom line.

Contact Mark Mitchell on 01383 628800 or email mmitchell@thomsoncooper.com to arrange a free initial consultation.

Frequently Asked Questions About Corporation Tax Services

What is Corporation Tax and who needs to pay it?
Corporation tax is a tax that applies to UK-registered limited companies, clubs, associations and some charities on their taxable profits. If your company is incorporated, you must register with HMRC and calculate tax on your profits after deducting allowable expenses. Sole traders and partnerships do not pay corporation tax; instead, they pay Income Tax on their profits.
What is the Corporation Tax rate in the UK?

The corporation tax rate varies based on company profits:

· 19% for companies with profits up to £50,000 (small profits rate)

· 25% for companies with profits over £250,000 (main rate)

· Marginal Relief applies to companies with profits between £50,000 and £250,000, resulting in a gradual increase in tax rate rather than jumping straight to 25%.

This means that smaller businesses pay a lower rate, while larger businesses are subject to the higher rate.

When is Corporation Tax due?
Corporation tax must be paid before your tax return is filed. The payment deadline is 9 months and 1 day after the end of your company’s financial year.

For example, if your company’s accounting period ends on 31st March, your corporation tax payment is due by 1st January the following year. Late payments may incur penalties and interest charges, so it’s crucial to pay on time.

What expenses can a company deduct before calculating Corporation Tax?

A business can deduct costs that are wholly and exclusively for business purposes to reduce taxable profits. Common allowable expenses include:

· Salaries and National Insurance contributions for employees and directors

· Office rent, utilities and business insurance

· Marketing, advertising and website costs

· Professional services (e.g., accountants, legal fees)

· Travel costs for business purposes (excluding commuting)

However, expenses like client entertainment or personal costs cannot be deducted. Keeping accurate records of all business transactions is essential to ensure correct deductions.

What is the difference between Capital Allowances and Expenses?
· Business expenses refer to everyday operational costs, such as rent, salaries and utilities.

· Capital Allowances apply to larger investments like machinery, equipment or company vehicles.

Instead of deducting these costs as regular expenses, businesses can spread out the cost over time through Capital Allowances, reducing taxable profits. The Annual Investment Allowance (AIA) allows businesses to deduct 100% of qualifying capital expenditure up to a certain limit in the same tax year.

What happens if my company makes a loss?
If your company makes a trading loss, you don’t necessarily lose out, you may be able to offset the loss against other taxable income. Options include:

· Carrying losses forward to offset against future taxable profits

· Claiming back tax paid in previous years (if eligible)

· Using group relief if your company is part of a corporate group

If your business is struggling financially, proper tax planning can help manage cash flow and reduce future tax liabilities

What happens if my company misses the Corporation Tax deadline?

Missing the corporation tax payment or filing deadline results in HMRC penalties:

· £100 fine if your tax return is up to 1 day late

· £200 fine if your return is 3 months late

· Up to £1,500 in fines for continued delays

· Daily interest charges on late Corporation Tax payments

In serious cases, HMRC may investigate and impose additional penalties for non-compliance. To avoid issues, ensure your company files and pays on time or consults an accountant for assistance.

Who to talk to

Mark Mitchell

Partner

01383 628800 Email me
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