The corporate rates of taxation for 2016/17 and and thereafter are as follows:
|Financial Year to||% rate|
|31 March 2017||20%|
|31 March 2018, 31 March 2019, 31 March 2020||19%|
|3 March 2021||18%|
Corporation Tax is a tax on the taxable profits of limited companies and some organisations including clubs, societies, associations, co-operatives, charities and other unincorporated bodies.
Taxable profits for Corporation Tax include:
- profits from taxable income such as trading profits and investment profits (except dividend income which is taxed differently).
- capital gains – known as ‘chargeable gains’ for Corporation Tax purposes.
Corporation tax is payable 9 months after the end of your accounting period end, unless your taxable profit are more than £1.5m. If taxable profits are greater than £1.5m and if your company has a 12-month accounting period, you’ll have to pay in four equal instalments due as follows:
- six months and 13 days after the first day of the accounting period.
- three months after the first instalment.
- three months after the second instalment (14 days after the last day of the accounting period).
- three months and 14 days after the last day of the accounting period.
If your company has an accounting period shorter than 12 months, your last instalment will be due three months and 14 days after the last day of your accounting period. Also, depending on the length of your accounting period, the first payment will be due six months and 13 days after the first day of the accounting period, and other payments at three-monthly intervals thereafter. The minimum number of instalments will be one, and the maximum number will be four.
A Corporation Tax accounting period can’t be longer than 12 months. If your company accounts cover a period longer than 12 months and your company is active throughout, you must file two Company Tax Returns because you’ll have two Corporation Tax accounting periods. This is the case even though you only need to file one set of accounts at Companies House. The first accounting period covers the first 12 months. The second accounting period covers the rest of the time.
Accounting Periods Spanning Two Corporation Tax Years
If your accounting period doesn’t run from 1 April to 31 March it spans two Corporation Tax financial years. You’ll need to apportion your company’s taxable profits between the two financial years on a time basis.
For example, if your company’s Corporation Tax accounting period runs from 1 July 2017 to 30 June 2018, the first nine months (274 days) fall into the 2017-18 Corporation Tax financial year. So you’ll pay tax on 274/365ths of your taxable profit at the 2017-18 rates. The remaining three months (91 days) fall into the 2018-19 financial year. So you’ll pay tax on 91/365ths of your taxable profit at the 2018-19 rates.
Losses can be generated from trading, the sale or disposal of a capital asset, or from property income.
If you make a trading loss and it can’t be used in the same year, you may be able to choose to carry it back to earlier accounting periods, or it will be carried forward to be set off against the profit for future periods.
You can claim for the loss to be offset against profits for the preceding 12-month period (not accounting period). But you can only do this if your company was carrying on the same trade at some point in the accounting period or periods that fall in the preceding 12-month period.
For example, if your company has a loss of £10,000 in the accounting period 1 January 2017 to 31 December 2017 and profits of £30,000 in the preceding 12 months, you can carry back the £10,000 loss to be set off against the profits for the previous accounting year, reducing them from £30,000 to £20,000. However, if an accounting period straddles that 12-month period, the profit for that period is apportioned and the loss can only be offset against that portion of the profit falling within the 12-month period. For example, if your company or organisation has a loss of £12,000 in the accounting period 1 January 2017 to 31 December 2017 and it has recently changed its accounting date, so that the accounting periods and profits of the preceding periods were 1 July 2016 to 31 December 2016 £4,000 and 1 July 2015 to 30 June 2016 £12,000, you can carry back £4,000 of the loss to cover the whole of the profit in the period ended 31 December 2016. The balance of the loss of £6,000 can’t be entirely carried back as only six months of the profits of £12,000 fall into the preceding 12 months of the loss making period. Therefore only a loss of £6,000 (6/12 x £12,000) can be used leaving a balance of £2,000 to be carried forward against future profits.