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Corporation Tax - An Overview for UK Businesses

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Corporation Tax is a tax on limited companies' taxable income or profits. Corporation Tax is not paid by the self-employed, but will apply to the following organisations (even if they are not operating via limited companies):

• members' clubs, societies and associations
• trade associations
• housing associations
• groups of individuals carrying on a business but not as a partnership, (for example, co-operatives.)

For Corporation Tax, companies have to calculate their own tax liabilities, and are liable to pay the calculated tax to the Inland Revenue without prior assessment.

Penalties apply if returns are delivered late (usually 12 months after the end of the company's accounting period). Although accounting periods are usually 12 months long, on occasion these periods may be shorter.

Payment of Corporation Tax itself is due 9 months and one day after the company's "normal due date" - usually the last day of your annual accounting period.

In Budget 2007, Gordon Brown announced a new stepped increase in the Corporation Tax rates for small companies.

The Small Companies Tax Rate will increase in three stages from 20p during the 2007/8 tax year to 22p in 2009. The main Corporation Tax rate will decrease from 30p to 28p from April 2008.

If you have just set up a limited company, you will need to inform the Inland Revenue by completing Form CT41G (PDF). Most likely, your accountant will facilitate this process, but as a company director, you are ultimately liable for ensuring you keep up with your financial (and statutory) requirements.

Further Corporation Tax Resources

• Inland Revenue Corporation Tax Pages
• A general guide to Corporation Tax Self Assessment (PDF)
• Current Tax Rates and Allowances

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Posted May 23, 2007