Corporation Tax Explained
This guide explains when a company or an organisation must pay Corporation Tax in the United Kingdom. Check the processes for paying, reporting to HMRC, and for 'dormant' companies.
Corporation Tax is a levy placed on company or corporate profits realised by doing business in the United Kingdom.
As a rule, you would need to pay this type of corporate tax if you are doing business as:
- A UK-resident limited company.
- A club, a co-operative, or unincorporated association. Typical examples include community groups or sports clubs.
- A foreign entity or company that has a permanent branch or office located in the United Kingdom.
UK Corporation Tax rate varies depending on how much profit the company makes. But, you would pay the rates that applied to the company accounting period.
In some cases, you may get deductions or be able to claim tax credits against your Corporation Tax bill. Check a different section for a detailed explanation on how Corporation Tax rates and reliefs work.
HM Revenue and Customs will not send a bill for Corporation Tax to your company. So, you need to follow a set procedure for working out how much to pay, paying the tax bill, and then filing a report of your taxes.
- You should have already registered your business with Companies House. If so, the next part of the process is to set up for Corporation Tax as well. This is important before starting business or restarting a non-trading or dormant company. You need to write to HM Revenue and Customs (HMRC) if you have an unincorporated association (see below).
- You must keep company and accounting records and prepare a Company Tax Return. This is how you work out how much Corporation Tax you need to pay.
- The next step is to pay your Corporation Tax bill before the deadline. As a rule, the deadline is 9 months and 1 day after the end of your 'accounting period'. You must also Tell HMRC no payment is due if you have no taxes to pay.
- The final step is to file your accounts and Company Tax Return before the deadline (usually 12 months after the end of your accounting period).
Follow UK Rules for 2019 Updates!
Note: As a rule, the accounting periods for Corporation Tax would be the same 12 months as the financial year covered by the annual accounts.
Taxable Profits for Corporation Tax
The profits that you pay Corporation Tax on includes the money that your company or association makes as a result of:
- Doing business (called the 'trading profits')
- Investments
- Selling assets for a higher value than they cost (called 'chargeable gains'). Read more on the rules about Corporation Tax when selling business assets in a separate section.
Any company based in the United Kingdom would pay Corporation Tax on all the profits made in the UK as well as abroad.
A company based outside the United Kingdom with an office or a branch in the UK would only pay Corporation Tax on the profits made from its UK activities.
Stopping or Restarting a Business
Corporate tax rules differ somewhat on the different trading circumstances. It would depend on whether you are not doing business at all or restarting a company. You can check further regulations on:
Get Help with Corporation Tax UK
There are several ways to get help with Corporation Tax. You can either appoint someone to help you (e.g. a tax adviser or an accountant) or you can contact the enquiry helpline.
Corporation Tax Services: General Enquiries
Telephone: 0300 200 3410
Outside UK: +44 151 268 0571
Fax: 03000 543 889
Monday to Friday: 8am to 6pm (closed weekends)
HM Revenue and Customs
BX9 1AX
United Kingdom
ALSO IN THIS SECTION
Accounting Procedures
Understanding accounting periods for Corporation Tax purposes is part of running the business. You will need the knowledge to make sense of Company Tax returns.
Corporation Tax Rates and Reliefs
Review how to work out Corporation Tax rates and reliefs that applied to your company accounting period. Check if you qualify for allowances, reliefs, and other tax deductions.
Corporation Tax Repayment
Some companies choose to pay Corporation Tax early and receive interest for doing so. There are several ways to get a Corporation Tax refund paid if your company pays too much.
Pay Your Corporation Tax Bill
Companies with large profits must pay Corporation Tax 'electronically' in instalments. You can also pay online, by telephone banking, or other methods (e.g. Bacs, CHAPS, cheque, Direct Debit).
When You Sell Business Assets
As a rule, you need to pay Corporation Tax when you sell business assets and make a 'chargeable gain'. Find out how limited companies work out chargeable gains and get taxed on intangible assets.
How Corporation Tax Works in the United Kingdom