Managing corporate income tax is a key responsibility for businesses operating in the UK. Known as corporation tax, it applies to the profits generated by companies and certain other organizations. Understanding its rules, rates, and compliance requirements is critical for avoiding penalties and optimizing your tax position.

In this article, we provide an overview of corporation tax, its applicability, rates, filing requirements, and available reliefs, along with how a partner like Accace Adept can streamline tax compliance for your business.

Applicability

Corporation Tax applies to:

• UK-resident companies on their worldwide profits.
• Non-UK resident companies with a UK branch or permanent establishment, but only on profits generated in the UK.
• Other entities, such as clubs, societies, and associations conducting business activities.

Understanding where and how Corporation Tax applies ensures businesses comply with HM Revenue & Customs (HMRC) requirements.

Taxable profits

Corporation Tax is charged on:

• Trading profits: Income from regular business activities.
• Capital gains: Profits made from the sale of assets, such as property or shares.
• Non-trading income: Examples include rental income, investment income, and chargeable gains.

Corporation tax rates

The Corporation Tax rate varies depending on the financial year and the size of the company’s profits:

• As of April 2023, the main rate is 25% for companies with profits above £250,000.
• A small profits rate of 19% applies to companies with profits of £50,000 or less.
• Companies with profits between £50,001 and £250,000 are subject to a marginal relief, which provides a tapered rate between 19% and 25%.

This tiered structure allows smaller businesses to pay a reduced tax rate, while larger firms are subject to the higher main rate.

Filing and payment

To remain compliant with HMRC, businesses must meet the following requirements:

• Filing deadline: Companies must file a Corporation Tax return (CT600) online within 12 months of the end of their accounting period.
• Payment deadline: Corporation Tax must be paid within 9 months and 1 day after the end of the accounting period. Large companies may need to pay their tax in quarterly installments.

Missing deadlines can result in interest charges and penalties, making timely submissions critical for financial compliance.

Deductions and reliefs: Optimizing your corporate tax

Businesses can reduce their Corporation Tax liabilities through various deductions and reliefs:

• Capital allowances: Claim deductions for investments in assets such as machinery, vehicles, or equipment.
• Research and development (R&D) relief: Receive enhanced deductions or tax credits for qualifying R&D activities, encouraging innovation.
• Patent box: Benefit from a reduced tax rate of 10% on profits derived from patented inventions.
• Loss relief: Offset losses against profits from previous or future accounting periods to lower your tax bill.

Group relief

Groups of companies can also share losses and other reliefs across the group, reducing the overall Corporation Tax liability. This is particularly beneficial for corporate structures with multiple entities.

Administration

HM Revenue & Customs (HMRC) is responsible for administering Corporation Tax in the UK. Businesses are required to register with HMRC, calculate their own tax, and make timely filings and payments.

Simplifying corporate tax compliance with Accace Adept

Managing CIT can be challenging, especially as businesses grow or operate across borders. At Accace Adept, we provide expert corporation tax services to help you remain compliant and optimize your tax position.

Our services include:

• Corporate tax registration and communication with HMRC.
• Accurate calculation and filing of CT600 returns.
• Identifying and applying eligible reliefs and deductions to minimize liabilities.
• Advisory services for group tax planning and international operations.

With our proactive approach and advanced technology, we ensure timely submissions and full compliance, helping you avoid penalties while maximizing tax savings.

Michelle Martin

Managing Director | Accace Adept

Book a meeting with Michelle