The introduction of the Corporation Tax self-assessment system (CTSA) in 1999 made companies responsible for calculating their tax, preparing and lodging a Corporation tax Return (CT600) and paying over any tax to HMRC for an accounting period. The tax is generally chargeable on UK company’s total profits , a UK company e.g. A Limited Company will self-assess its tax and pay that tax for a specific period.
Companies must notify HMRC of its existence within three months of either its first accounting period or when it actually began to trade. This is usually done by completing and sending a form CT41G to HMRC.
A penalty may be issued if it’s not done within those first three months.
A CT600 Tax Return must be lodged by twelve months after the end of the accounting date to which it relates. Penalties apply for late returns.
The tax on the CT600 is payable nine months and one day after the end of the accounting period.
Large companies will have to pay tax by instalments; a company is seen as large if its profits exceed £1.5 Million for any given year.
Penalties and interest will also be imposed on companies who pay their tax late.
The rate of tax charged depends on the level of profits, below is a brief summary of the tax rates for companies.
Small Companies – With profits up to £300,000 (lower limit) 21%
Large Companies – With Profits above £1,500,000 (Upper limit) 28%
What is called a “marginal rate” is applied to companies with profits in-between the lower and upper limits.
These limits are halved where two or more companies are under common control.
For example if two companies are seen as under common control then the lower limit will become £150,000,00 and the upper limit will become £750,000.00.