In line with the HMRC regulations, corporation tax is a compulsory business tax paid by a limited company on its taxable profits within an accounting period. Hence, every UK-based or overseas limited company (whose office or branch is in the UK ) is subject to corporation tax payment to HMRC. A limited company becomes crucially liable to pay corporation tax once its annual profits reach the minimum figure of £50,000 or remain below it. Therefore, this blog will list all the steps in understanding how to file corporation tax for limited companies in the UK.
If you intend to learn more about corporation tax for a limited company, visit our guide, What is corporation tax and how it works for limited companies?
So, let’s get started!
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How to file corporation tax for limited companies?
The following are the elaborate and thorough steps to learn how to file corporation tax for limited companies? including:
How to register for corporation tax?
First and foremost, a limited company must register with HMRC to pay its corporation tax. You must register your limited company for corporation tax within three months of commencing any business activity. After your limited company starts to conduct business transactions, its status will be trading or active.
Surprisingly enough, there is not a separate process to register your limited company for corporation tax. Instead, when you register (incorporate) your limited company with Companies House, you’ll automatically be registered for corporation tax too.
For greater clarity, Companies House will notify HMRC of your company’s incorporation. Consequently, you will receive a letter from HMRC, outlining reporting and filing obligations for a limited company.
Thereafter, you will have to fulfill the following steps:
Create a Government Gateway Account:
Although the corporation tax registration occurs directly when you incorporate your limited company with Companies House, it does not automatically get connected to your Government Gateway account.
By contrast, to view your corporation tax details, you will have to manually connect it to your account.
Thus, you can sign up for HMRC’s online services by setting up a Government Gateway user ID and password to register your company as active for corporation tax.
After creating the Government Gateway account, log into your account and choose the ‘enrol for service’ option.
Provide necessary company details:
After the creation of the gateway account, you will provide the relevant company details to complete the registration for corporation tax, such as:
- Name: Limited company legal name;
- Company registration number: A CRN is a unique identifier or registration number issued by Companies House immediately upon incorporating a limited company;
- Unique Taxpayer Reference (UTR) number: A UTR is a 10-digit number the HMRC issues to any business in the UK that has tax obligations, including a limited company. In addition, HMRC sends your UTR to your registered office address shortly after you have created it.
- Starting date of business: It is the date your company started trading or doing business. This date is important since it will determine the accounting period of your company;
- Address and contact: Provide your limited company address and contact information;
- SIC code: The sort of activities the limited company is carrying out or the nature of the business. Usually, a Standard Industrial Classification (SIC) code is used to identify the nature of your company’s business.
- Accounting reference date (ARD): For a new limited company, its financial year begins the day it is incorporated, and you can determine the financial year by the Accounting reference date. If your company is newly incorporated, its first Accounting Reference Date will be the last day of the month in which its first anniversary (one year completion) will occur. It means that the ARD marks the end of the company’s financial year.
Similarly, the following or next ARDs will be on the same date each year. It is crucial for a company to prepare its accounts no later than seven days before or after its ARD.
Once you have completed your registration process, HMRC will send all the details to your registered office address. It will include the deadlines for paying Corporation Tax and filing company tax returns.
What is an accounting period for corporation tax?
The accounting period is another key aspect of understanding how to file corporation tax for limited companies. An accounting period for corporation tax starts on the date your limited company starts carrying out its business activities. Usually, it is the date of your company’s incorporation.
Similarly, an accounting period concludes or ends on your company’s accounting reference date (ARD).
It is worth pointing out that the duration of an accounting period is 12 months long. Although it can be shorter than 12 months, it never exceeds a 12-month period.
For instance, if a limited company starts trading as soon as it is incorporated, it is possible that its financial year will be longer than 12 months.
However, in this scenario, there will be two accounting periods for the first year of its trading. Accordingly, you will have to prepare two company tax returns:
- For the first 12 months. It is included in the annual accounts.
- For the additional period covered in the annual accounts.
Lastly, all the trading your company carries out during each accounting period is subject to corporation tax payment. Therefore, it is compulsory to document all financial activities and transactions in your company’s accounting records. Moreover, these records are also important to calculate the corporation tax amount and prepare your company’s tax returns.
How to pay corporation tax?
You can pay corporation tax after knowing how much you need to pay and when you need to pay it. Different payment methods take different times for processing the tax. Hence, below is the table that shows how much time it needs to process if you pay via the following payment methods:
| Payment method | Time needed |
|---|---|
| Online and telephone banking | Same day/next day |
| CHAPS | Same day/next day |
| Bacs | 3 working days |
| Direct Debit | 3 working days |
| Online by debit or corporate credit card | 3 working days |
| At your bank or building society | 3 working days |
| Direct Debit (if you haven’t set one up before) | 5 working days |
What are the tax filing deadlines for limited companies?
The tax filing deadline for a limited company depends on its taxable profits. For example, you must pay your corporation tax nine months and one day after your accounting period ends if your company’s taxable profits are up to £1.5 million. Notably, this deadline is three months before the tax return is to be submitted.
Furthermore, if your company generates taxable profits that exceed £1.5 million, you can pay the corporation tax in installments.
For your convenience and understanding, you can visit the government website to check the rules for profits of £1.5 million to £20 million and above £20 million. Apart from that, you cannot pay corporation tax via post.
What happens if you file corporation tax late?
It is particularly important to know that if you miss your tax deadline, it can lead to an interest payment on your bill. As a result, you will end up increasing your corporation tax bill. On the contrary, if you pay your corporation tax earlier than the deadline, HMRC will pay you an interest of 0.5%. Hence, you can reduce your corporation tax bill by being an early taxpayer.
Also, to learn the most tax-efficient ways to cut down your corporation tax, read our detailed guide: How to reduce the corporation tax bill for a limited company?
Conclusion:
To sum up, being a director, it is essential for you to learn how to file corporation tax for limited companies correctly. Filing and paying corporation tax becomes easier by understanding how it works, what information is required, and what steps are crucial to follow.
Moreover, with the help of an accountant, the entire process becomes smooth sailing since they know all the nuts and bolts of a limited company, including its corporation tax payment.
With the professional and certified accountants listed on Accountingfirms, you can eliminate the worries of ensuring timely registration and maintaining accurate records. So, contact us today to make your limited company journey a seamless one.
Disclaimer: The information provided on AccountingFirms.co.uk is for informational purposes only and should not be considered as financial advice. Always consult with a professional accountant to ensure compliance with UK laws and regulations.