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Home > > Limited companies > The tax system for companies
The tax system for companies
There are two rates of corporation tax and one effective marginal rate, as follows:
Year commencing 1 April 2010 Taxable profits First £300,000 21% Next £1,200,000 29.75% Over £1,500,000 28% Changes in corporation tax rates
The 2010 emergency Budget announced corporation tax rates as follows:
Main rate Small companies rate From 1 April 2010 28% 21% From 1 April 2011 27% 20% From 1 April 2012 26% N/A From 1 April 2013 25% N/A From 1 April 2014 24% N/A N/A = Not yet announced
The rate bands are scaled down where a company has associated companies (members of the same group or companies controlled by the same persons).
Corporation tax self assessment requires companies to work out their own tax bills as part of their return, and accounting for the 'self-assessed' liability to corporation tax.
The company tax return
The corporation tax return (CT600) has to be accompanied by accounts and computations, which form part of the return. The return has certain supplementary pages, and some companies have to include extra information such as international interests and loans to shareholders.
Failure to file on time
An automatic penalty of £100 will be imposed if you file your return more than twelve months after the end of the accounting period. This rises to £200 if the failure to file continues beyond a further three months. The third consecutive late return attracts penalties of £500 and £1,000 respectively.
In the absence of a return, HM Revenue & Customs may make a determination of the tax to the best of its information and belief. No appeal can be made and the tax must be paid. The determination can be displaced only by filing a completed return and self assessment.
Note that the penalties apply even where no tax is payable by the company.
Amending returns
Tax-geared penalties are payable for incorrect returns, and a company has up to twelve months from the statutory filing date to amend its return. HM Revenue & Customs can correct obvious errors or omissions no more than nine months after the filing date.
Enquiries
Enquiries are subject to rules similar to those applying to income tax. If HM Revenue & Customs does not start an enquiry within the prescribed time (normally one year from the date of filing the return), the company´s self assessment will become final.
Keeping records
The Companies Act already requires registered companies to keep accounting records. For most companies in most situations, this is enough to satisfy HM Revenue & Customs record keeping requirements, so long as they are kept for six years from the end of the accounting period.
Corporation tax payments
There are arrangements under which a company with taxable profits over £1.5 million will pay its corporation tax by instalments. Most companies are too small to be affected, so will carry on paying their tax in one sum nine months and one day after the end of the accounting period.
Interest
Interest will automatically be payable on late paid tax and penalties, or receivable on overpayments of tax.
Do call us if you would like further help or advice on this subject.
Tax - the company and directors
- The tax system for companies
- Tax and the company car
- Company bonus or dividend?
- Entrepreneurs' relief
- Tax saving strategies
- Claiming expenses - it's all or nothing
- Benefits in kind and expenses payments
Company tax insights
- Corporation tax rates
- Penalties for late returns
- Main capital allowances
- Industrial buildings allowance
- Interest and tax payments
- Business deductions
The Companies Act 2006
- An introduction to the Companies Act 2006
- An overview of the key changes
- A more in-depth look at the Act
- Other sections of the Act
- Filing of accounts and late filing penalties
Limited company formation basics
- Should you form a limited company?
- Forming a limited company
- Buying a company 'off the shelf'
- The law and directors' responsibilities
- Statutory records
- The company secretary
A selection of our other business guides
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