Corporation tax - What is corporation tax?

Corporation tax is a tax placed on the taxable profits of limited companies and other organisations such as clubs, societies, associations, and unincorporated entities

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A corporation tax is placed on the taxable profits of a company or organisation. Taxable profits include profits from taxable income (such as trading or investment profits) and capital gains (also known as chargeable gains).

Who must pay this tax?

Companies and organisations based in the United Kingdom must pay a corporation tax on all taxable profits, no matter where (in the world) the profits come from.

If a company operates in the UK but isn’t based there (e.g. operates through an office or branch) then the corporation tax only needs to be paid on taxable profits that arise in the UK.

How to pay and what is taxed

In order to ensure your business is paying necessary tax, a corporation must register for corporation tax as part of setting up a private limited company within three months of beginning to trade (make sales and receive payments).

It’s the responsibility of the corporation to keep accurate accounting records that can be used in preparing the company’s annual tax return.

Corporation tax is paid on all profits earned by the business. This includes: trading profits - the income from everyday business practices of sales, investments, and money made from selling assets (chargeable gains).

When is the tax charged?

Corporation tax is levied on all relevant entities at the end of each accounting year and is charged for the profits accrued during the accounting periods of the particular business.

Corporation tax must be paid by a particular deadline. However, this is commonly nine months and a day from the date your accounting period ends. Filing the tax return must be completed 12 months after the end of the accounting period.

Learn more on the HM Revenue and Customs website.

Corporation tax and Debitoor

Debitoor accounting software allows easy recording and tracking of a company’s financial activities, making filing a tax return a smoother process. Generate a balance sheet, VAT, and profit & loss report whenever needed to gain a better idea of your company’s financial health.