Corporation Tax for Small Companies

How Corporation Tax applies to Small Companies in UK


Introduction to Corporation Tax

Companies based in the United Kingdom pay corporation tax (CT) on the profit earned during a financial year. Corporation Tax is payable by all United Kingdom organisations, irrespective of their size. HM Revenue and Customs (HMRC) is automatically informed about the registration of a new entity. For a new organisation/business in the United Kingdom, a CT registration form – CT41G is sent to the registered address or registered office of the business, alongside details about how to get started, along with Unique Taxpayer Reference (UTR) of the organisation/business. Inside three months of inception, the business or the company’s accountant must make available further information, to the HMRC, about the company – the information encompasses the nature of business, trading date of the business, and the date of preparation of annual accounts. For the tax year 2018/19, companies in the United Kingdom charge CT at the rate of 19% - this rate has been reduced by 1% starting Apr-17, and is expected to further reduce to 17% by 2020. It must be noted that the Corporation Tax year runs from 1st April to 31st March of the following year. The present government is working towards keeping the CT at low levels

A business is required to pay Corporation Tax on revenue from doing business as:

• Any foreign company having a United Kingdom office or branch
• A limited company
• A co-operative or other stand-alone association, club such as sports club or a community group

Small businesses in the United Kingdom do not get a CT bill. They can use an accountant or corporation tax software to compute the payable tax.

Corporation tax for Small Companies in UK

CT rates by year

Year Profit below £300,000 Profit in excess of £300,000
2013-2014 20% 23%
2014-2015 20% 21%
2015-2016 20% 20%
2016-2017 20% 20%
2017-2018 19% 19%
2018-2019 19% 19%

There are dissimilar CT rates for businesses which earn profits from oil rights or oil extraction in the United Kingdom. These are usually referred to as ‘ring fence’ companies. Such companies have the right to claim Marginal Relief on income between £0.3 million and £1.5 million

Tax rate Tax year 2014 Tax year 2015 Tax year 2016 Tax year 2017 Tax year 2018
Businesses with revenues less than £300,000 19% 19% 19% 19% 19%
Businesses with revenues greater than £300,000 30% 30% 30% 30% 30%
Ring fence portion 11/400 11/400 11/400 11/400 11/400

CT return deadline

CT filing closing date is different for other taxes. Business owners are required to pay Corporation Tax prior to filing the company’s tax return and this date is dependent on the business’ Corporation Tax accounting period – for most of the organisations the accounting period closes on 31st March. The cut-off date to pay CT is nine months and one day post the closing of the accounting period for the prior financial year. Hence, if the accounting period of an organisation ends on 31st March, CT deadline will be 1 January of the following year

How Nomisma Solution can assist in Corporation Tax filing

Nomisma is a cloud-based solution and the application was first launched in 2013. Since launch, the application has been supporting numerous small businesses in the United Kingdom with corporation tax filing. Apart from assisting small businesses with corporation tax filing, the software is capable for performing numerous other tasks as accounting and bookkeeping, company secretarial, self-assessment, and payroll. Key benefits of the software encompass:

• Provision to attach additional supporting document
• Provision to import balances from third party applications
• Provision to keep a record of CT filing and other accounting entries
• Provision to keep track of completed and pending accounts and filing deadlines
• Provision to automatically generated reports
• Ability to assist with corporation tax reliefs
• Provision to compute and pay corporation tax due. Payment schedule is as follows:

Payment method Time required
At bank or building society Three working days
Bankers' Automated Clearing Services (BACS) Three working days
Clearing House Automated Payment System (CHAPS) Same day/next day
Direct Debit or Credit card Three working days
If a Direct Debit has not been set up before Five working days
Telephone banking and online banking Same day/next day
Availing a Free Trial version of Nomisma Corporation Tax Software

Nomisma can assist small businesses with their corporation tax queries. To avail a free pilot version of the application.

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