If you are setting up a company, you will need to find out if you are liable for corporation tax as soon as possible. Starting up any business and dealing with the practicalities makes for an understandably busy time, but neglecting the basics can be costly and time consuming for your business. By ensuring you are aware of business tax rules from the start, you could save time and money.
What does this mean?
Corporation tax is tax that is paid on any profitable income which a company makes. Profitable income is classed as any capital gains, trading profits or profits made from company fund investment.
Who pays?
All limited companies and other organisations operating within the UK are subject to pay corporation tax, whether or not they are based there. For example, if your new company is going to be operating in the UK, but based in another country, you must pay tax on profits made through UK activity. Companies based, and operating in, the UK must pay tax on all profits.
What you need to do
When setting up a company that you know is liable for corporation tax, you must inform HM Revenue & Customs (HMRC) within three months of becoming ‘active’ (this means you have started trading for profit). When you register as a limited company at Companies House, you will have the option to register yourself through their system, otherwise you can do this online with HMRC.
Corporation tax is paid after self-assessment: this means that you must work out how much tax you owe by keeping a record of any profitable transactions which your company makes. It is important to pay this on time according to the guidelines set out for you by HMRC, as you could face penalty charges for late or insufficient payment.
Once you have paid, you will need to file a Company Tax Return and provide any supporting documents which go alongside it. This can usually be done a few months after the payment is made, however you should check with HMRC as it could depend on your company’s individual circumstances. As with many other financial processes, you can now manage your account and pay corporation tax online.
Whatever kind of business you are setting up, getting to grips early on with your corporation tax can ensure that your first year goes as smoothly as possible. For more information on paying corporation tax, visit http://www.hmrc.gov.uk/.
John T Hughes writes for Juniper Accountancy, a Bristol Accountancy firm. As chartered Bristol Accountants we can provide your business with a complete end to end service to take care of all your accounting and tax needs.
Article Source: Setting Up a Business: A Quick Guide to Corporation Tax
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