Corporation Tax Services at Ward Goodman
Corporation tax is a charge levied on UK limited companies and is calculated as a percentage of the annual adjusted profits made by a company, so partnerships or sole traders do not pay Corporation Tax. However, some organisations, even if they are not incorporated, for example members’ clubs, societies, associations and co-operatives can be liable to corporation tax.
If you are a director of a limited company, you are responsible for ensuring that a company’s tax affairs are managed. The primary issue is that you need to make sure that your corporation tax return (form CT600) is filed with HMRC on time, and that you pay the corporation tax to HMRC when it falls due.
The current rate for UK Corporation Tax is 19% (2017/18) which is 1% lower than the Corporation Tax rate for the 2015/16 tax year, which was 20%. If your company has made a taxable profit of up to £1.5 million, the corporation tax must be paid by 9 months and 1 day after the end of your accounting year. You must pay your company’s corporation tax liability to HMRC electronically and if you pay late, then you will be charged interest.
Your Corporation tax return or CT600 return can be submitted any time between the date of your company year-end and by the latest of 12 months after the end of your year-end, or 3 months after you get a notice to deliver a return. If you submit your corporation tax return late, or it is inaccurate, you will be charged a penalty.
For example, if your accounting year-end is 31st December, then your corporation tax payment will be due by 1st October and your Corporation tax return will be due by 30 September, of the following year.
There are many types of expenses that you can set against the business turnover to reduce taxable profits but there are also costs that are specifically disallowed by HMRC. Business expenses can be claimed as costs against your business if they are incurred wholly, exclusively and necessarily for the running of the company, so you can’t claim for expenses that are for both personal and business use. To help you decide whether an expense should be included in your company records we have listed generally accepted costs for you to consider:
- Wages and salaries paid to employees and directors.
- Pensions contributions via an approved scheme.
- Employers national insurance contributions.
- Accommodation, travel and subsistence (needs link to detailed guidance HMRC https://www.gov.uk/expenses-and-benefits-a-to-z)
- Training costs
- Printing, postage and stationery
- Business insurance
- Telephone and internet
- Advertising and marketing
- Professional fees
- Bank charges and interest
It’s important to keep your receipts and invoices to prove that these are genuine business expenses and not private expenses. By law, you must keep all company records for at least 6 years, and it is probably sensible to maintain your records for longer if you have room. These predominantly bookkeeping records include all receipts, workings, invoices, but also include tax-related paperwork. According to HMRC, it is acceptable to keep records in a legible alternative where documents are scanned into storage media and can be reproduced.
Making Tax Digital (MTD) will fundamentally change the administration of the UK tax system with HMRC’s vision to digitalise the UK tax system. Businesses and landlords will be required to use commercial software to maintain their records and to update HMRC quarterly, starting with VAT. In 2017 the government announced a new timetable and changes to the implementation with MTD and so now corporation tax will not be mandated until April 2020 at the earliest, but we are expecting a formal consultation in the Spring of 2018.
Reducing corporation tax
There here are also reliefs that are available that will reduce your Corporation Tax bill and most of these require professional help to enable you to really benefit from them.
You can claim capital allowances when you buy assets that you keep to use in your business and help to generate profits. Items of equipment, machinery and business vehicles are all classed as plant & machinery and you can deduct some or all of the value of the item from your profits before you pay tax. There are specific costs relating to building expenditure that are allowable and may be applicable to your business. The tax legislation around what is plant, property or other category can often require interpretation and so we would strongly recommend that you talk to a tax adviser about this valuable relief.
If you are thinking of investing or need a large item of equipment, you can take advantage of the Government’s Annual Investment Allowance. This allowance currently lets businesses set off up to £200,000 of the cost of new “Plant and Machinery” against corporation tax.
There are first year allowances that apply if you buy an asset that qualifies for example some low CO2 emission cars and energy saving equipment. You can deduct the full cost from your profits before tax and you can claim first year allowances in addition to the annual investment allowance, as they don’t count towards your AIA limit.
Research and Development “R&D” reliefs are available to companies that work on innovative projects in science and technology. Available to all sizes of companies that seek to research or develop an advance in their field if your project meets our definition of R&D. Whatever your project is, our tax consultancy team is available to review your project to see if you can make a claim.
In order to maximise your capital allowance and other business reliefs, Ward Goodman tax consultants are ready to help you save Corporation Tax.
Proposed tax rates for 2018/19
In a change to the long established budget timetable the Chancellor delivered the first Autumn Budget for 20 years. However the Government reserves the right to make changes to fiscal policy at the Spring Statement if the economic circumstances require it.
These changes could include amendments to tax rates and allowances for 2018/19 that have been published to date and those that may be published over the coming months. Consequently your tax rates will be printed following the Spring statement.