For limited companies, paying corporation tax on profits annually is essential. Sole traders and partnerships, however, fulfill their tax obligations through self-assessment for income tax, excluding them from corporation tax payments. This guide offers comprehensive insights into how to pay corporation tax, including the process of pay corporation tax online and the associated deadlines through Certified Accountants.
Who Has To Pay Corporation Tax To HMRC?
Paying corporation tax to HM Revenue & Customs (HMRC) is mandatory for UK-based limited companies engaged in trade. Payment becomes necessary once the company starts generating profits.
Upon establishment as a limited company, registering for corporation tax is obligatory. This can be completed through the gov.uk platform within three months of commencing trade activities. Trading encompasses various activities such as buying, selling, advertising, property rental, and employment.
To register, access your business tax account and provide your company’s Government Gateway user ID and password. If not already available, these credentials can be created during the sign-in process. Additionally, you’ll need the company’s 10-digit Unique Taxpayer Reference (UTR), which is typically dispatched within 14 days of registration with Companies House.
Inform HMRC of your company’s registration number, the business start date (which initiates the first accounting period), and the annual accounts’ period ending date.
Subsequently, when submitting your annual accounts to HMRC, corporation tax payment is required for the financial year’s profits. This encompasses earnings from business operations, investments, or asset sales exceeding their purchase cost. Online payment options are available for convenient way to pay corporation tax.
What Is The Criteria For Paying Corporation Tax?
If your business falls into the category of an overseas company with a UK subsidiary, corporation tax payment is necessary. For instance, if your overseas company operates a UK subsidiary, the UK subsidiary is obligated to pay corporation tax on its global profits. This requirement arises due to the distinct legal identity of the UK subsidiary from its parent company.
1.Overseas Company
Conversely, if an overseas company establishes a UK branch instead of a subsidiary, corporation tax is levied solely on profits generated within the UK. This distinction arises because a branch does not possess legal separation from its parent company.
Pay corporation tax online options are available for convenient settlement of corporation tax dues for both scenarios.
2.Accountants In UK
For Accountants In Romford, Accounting Firms In Liverpool Street, and Accountants Middlesbrough, it is crucial to understand that if you’re a club, co-operative, or other incorporated association such as a community group, you will be required to pay corporation tax.
3.Obligations for Limited Companies
For all UK limited companies, including those in Romford, Liverpool Street, and Middlesbrough, paying corporation tax is mandatory. The responsibility lies with the company director to ensure the timely submission of the corporation tax return and payment of the associated bill.
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Mandatory Requirements For A Business Paying Corporation Tax
If you need to pay corporation tax, you must calculate this yourself. This differs to individuals where HMRC will calculate your tax bill based on the details you’ve provided. Use our handy corporation tax calculator to help get you started. Accountants Canary Wharf, Accountants In Ilford, and Practical Accounting Training resources can also assist in understanding and managing your tax obligations.
Each year you’ll be required to complete a company tax return, or form CT600. The deadline for submitting your tax return is 12 months after the end of the accounting period it covers, and you will need to work out your:
- Profit or loss for corporation tax which will be different to the profit or loss shown in your annual accounts
- Corporation tax bill
Profit or loss for corporation tax may differ from the figures shown in your annual accounts. It’s important to calculate your corporation tax bill accurately. You can either manage this process independently or enlist the help of accountants in London to prepare and submit your tax return on your behalf. Your accounts must be filed online to both HMRC and Companies House, unless you have a valid reason to file them on paper.
Even if your company doesn’t owe any corporation tax, you’re still required to file a tax return. If you’ve closed your accounts for the financial year and determined that no corporation tax is due, you must inform HMRC accordingly. This can be done by completing a ‘nil to pay’ form or indicating ‘NIL due’ on the payslip reminder from HMRC.
From April 1, 2023, changes to the way businesses pay corporation tax will take effect. While the main rate increases from 19% to 25%, smaller businesses with profits of £50,000 or less will continue to pay at 19%. The full 25% rate applies to businesses with profits exceeding £250,000. Businesses with profits falling between £50,000 and £250,000 will be subject to rates ranging from 19% to 25%, depending on eligible marginal relief.
Exploring various corporation tax reliefs and claiming allowable expenses can help reduce your corporation tax bill. All companies can deduct expenses incurred solely for business purposes, such as office equipment and business-related travel and accommodation, from their profits before tax during the accounts preparation process.
Paying your tax bill early can result in interest repayment by HMRC at a rate of 0.5%. Conversely, failing to file your tax return on time incurs penalties, starting from £100 for a day late and increasing to £500 each for late submissions three times in a row.
HMRC Corporation Tax Payment Deadline
For businesses with up to £1.5 million taxable profit
If your taxable profits are less than £1.5 million, your business has nine months and one day after the end of the accounting period to pay corporation tax due. The accounting period is usually the financial year of your business, but you might have two accounting periods in the year you set up your company.
For businesses with more than £1.5 million taxable profit
If your business has taxable profits of more than £1.5 million, you will need to pay corporation tax in instalments, which means the process is different.
Be aware that the deadline for paying corporation tax is before the deadline for filing your company tax return. This means you will need to prepare your tax return well ahead of the deadline to be able to work out how much corporation tax to pay.
Payment details for your corporation tax bill
There are a number of different ways to pay your corporation tax bill. Some payment methods are quicker than others such as Accounting Firms For Small Business so make sure you will still meet the deadline.
Bacs & CHAPS bank details
The quickest way to pay your tax bill is through pay corporation tax online or telephone banking by Faster Payments or CHAPS. This will go through the same day or next day. You can also pay by Bacs but this will take up to three working days.
For all of the above payment options
Your notice to deliver your tax return or any reminder from HMRC will tell you which account to pay into. If you’re not sure, use HMRC Cumbernauld. The account details are below:
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- Sort code Account number
- HMRC Cumbernauld 083210 12001039
- HMRC Shipley 083210 12001020
Always use your 17-character corporation tax reference payment number for the accounting period you’re paying.
Corporation tax payment methods
Corporation tax can also be paid by direct debit, debit or corporate credit card (not a personal credit card) or at your bank or building society. All of these payment options take three working days, although if you’re setting up a direct debit for the first time, it can take up to five working days.
If issuing multiple payments
If you want to make a single payment to cover more than one company for the same accounting period, you can send an online CHAPS enquiry form. You will need to include your name, contact number and the type of tax you wish to pay corporation tax.
HMRC’s banking address
Should you need it, HMRC’s banking address is as follows:
- Barclays Bank PLC
- 1 Churchill Place
- London
- UK
Online Corporation Tax Service
Utilizing the gov.uk online service is advisable for most businesses to submit their company’s tax return to HMRC and their accounts in London to Companies House. If the tax return and accounts cover the same accounting period, you can file them simultaneously. The pay corporation tax online will conveniently convert your accounts to the necessary format.
To proceed, ensure you have your company’s annual accounts, Government Gateway user ID and password, and Companies House password and authentication code if filing your accounts concurrently.
Final Thoughts
In conclusion, managing corporation tax obligations is a critical aspect of running a business in the UK. From understanding tax payment deadlines to utilizing various payment methods and online services, ensuring compliance with HMRC regulations and Companies House requirements is essential. By staying informed, utilizing available resources, and adhering to deadlines, businesses can navigate the complexities of corporation tax efficiently and effectively, contributing to their long-term success and financial stability.
FAQs
How To Pay Corporation Tax?
Corporation tax can be paid through various methods, including online or telephone banking, direct debit, debit or corporate credit card, or payment at your bank or building society. You can also utilize the gov.uk online service to file your company’s tax return and accounts simultaneously.
Pay Corporation Tax Bank Details?
The bank details for paying corporation tax vary depending on your circumstances. Typically, HMRC provides specific account details, including sort code and account number, which are indicated in your tax return notice or reminder. Always include your corporation tax reference payment number when making payments.
Do You Need To Pay Corporation Tax?
Whether you need to pay corporation tax depends on various factors, such as the legal structure of your business and its profits. Limited companies, cooperatives, clubs, and community groups are generally required to pay corporation tax on their profits, while sole traders and partnerships pay income tax through self-assessment.
Who Is Responsible For Paying Corporation Tax?
The responsibility for paying corporation tax typically falls on the company director or authorized individuals within the organization. It’s essential to ensure timely submission of corporation tax returns and settlement of associated bills to comply with HMRC regulations.