The tax system for companies
The current rate of corporation tax is 19%.
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. These must generally be filed online, and tagged using iXBRL.
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, this rises to £1,000 if the failure to file continues beyond a further three months. Your first accounting period may give rise to two return periods if your period of trading exceeds 12 months, so it is very easy to accrue double the amount of penalty in the first year without realising it.
In the absence of a return, HMRC 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.
If the return is submitted 18 months after the end of the accounting period, there is a 10% tax geared penalty on any unpaid corporation tax. If the return is submitted 24 months after the end of the accounting period, there is a further 10% tax geared penalty on any unpaid corporation tax.
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. HMRC can correct obvious errors or omissions no more than nine months after the filing date.
Enquiries, which are frequently now referred to as "checks", are subject to rules similar to those applying to income tax. If HMRC 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. HMRC are able to go back further if the conditions for a Discovery Assessment are met.
The Companies Act already requires registered companies to keep accounting records. For most companies in most situations, this is enough to satisfy HMRC record keeping requirements, so long as they are kept for six years from the end of the accounting period.
As of April 2020, VAT-registered businesses with taxable supplies of more than £85,000 are required to keep digital records, using either software or spreadsheets.
Corporation tax payments
There are arrangements under which a large company will pay its corporation tax by quarterly instalments starting at 6 months and 14 days after the start of the period. This will normally be the case where the annual taxable profit is £1.5 million in the current year and it did not exceed £20 million.
Most companies are too small to be affected, so will pay their tax in one sum nine months and one day after the end of the accounting period.
For accounting periods beginning on or after 1 April 2019, the tax payment dates for companies with large taxable profits (more than £20 million) are to be paid in quarterly instalments in the third, sixth, ninth and twelfth months of their accounting period.
Where a company is a member of a group, the £20 million threshold will be divided by the number of companies in the group. The first instalment will be due 2 months and 13 days after the start of the accounting period, with the remaining payments due 3 months after the previous due date.
Interest will automatically be payable on late paid tax and penalties, or receivable on overpayments of tax.