As a UK company, you are required to pay corporation tax on your taxable profits. However, it is important to note that not all profits are subject to corporation tax. It is also important to note that you do not pay tax on your total profit but rather your ‘taxable profit’. Find out which expenses can be deducted from total profit here.
Here are some examples of profits that are and are not subject to corporation tax:
Profits subject to corporation tax
- Trading profits: This includes profits from the sale of goods or services.
- Investment profits: This includes profits from investments, such as interest, dividends, and rental income.
- Chargeable gains: This includes profits from the disposal of assets, such as property or shares.
Profits not subject to corporation tax
- Dividends received: This includes profits received from shares in other companies, which are not subject to corporation tax but may be subject to other taxes such as income tax.
- Statutory exemptions and reliefs: There are certain exemptions and reliefs, such as those for charities and small businesses, which may reduce or eliminate a company’s liability to corporation tax.
When is corporation tax due?
The timeline for UK corporation tax returns and payments is determined by the company’s accounting period, which is the duration that the tax return covers. Usually, companies must submit their tax returns within a year of the end of their accounting period.
Crucially, the deadline for paying the corporation tax bill is much earlier, usually nine months and one day from the end of the accounting period.
It is important to note that the rules surrounding corporation tax can be complex, and the above examples are not exhaustive. If you are unsure about whether or not your profits are subject to corporation tax, it is recommended that you seek professional advice from a qualified accountant.
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