What’s Corporation Tax?

Finance BY Arnab Feb 02, 2022
Corporation Tax

Corporation tax is a fee that companies must pay and is calculated using annual profits. This is similar to income tax for individuals; however, unlike individuals, companies aren’t provided with any tax-free allowances, meaning that all profits are taxable. In order to pay tax, a company must submit a company tax return form to its governing body.

Who Pays Corporation Tax?

Corporate tax is to be paid by all limited companies, as well as housing associations, trade associations, members clubs and societies, and groups of individuals executing a business. As a sole trader or partnership, it isn’t required to pay corporation tax. Alternatively, you’ll be expected to complete a self-assessment tax return and pay your tax in this way.

However, in terms of companies, the business director must ensure that the tax bill has been paid and submitted on time. This still applies even if the company has hired an accountant to handle finances.

How Do You File a Company Tax Return?

How Do You File a Company Tax Return?

Unlike income tax for individuals, businesses must calculate their own corporation tax, rather than the governing body doing it for them based on provided details. A company tax return will need to be filed every year and will need to be submitted to the governing body and companies house alike. Usually, you’ll be required to file your return online, unless you provide a reason as to why you need to file a paper form.

Typically speaking, your tax return will include your business name, business registration number, registered office, tax reference number, turnover and profit, tax calculation, and any reliefs or allowances. There will be a number of pages to sift through, but not every page will be relevant to your business.

How Do You Pay Corporation Tax?

There is a multitude of methods when it comes to paying your corporation tax; it doesn’t matter which method you choose, as long as your governing body receives the payment on time.

If it isn’t received by the deadline, you may be required to pay a fine. Similarly, if the payment deadline falls on a weekend and/or bank holiday, you must ensure that your payment is received by your governing body on the last working day before.

If you do find yourself on a tight deadline, you can pay via online or telephone banking for same/next day payments. However, if you have three working days available, an existing direct debit, online payment by debit or corporate credit card, or payment at your bank or building society can be made.

Finally, if you have five working days available, you can set up a direct debit at this time. It’s not permitted to pay with a personal credit card, so you’ll need to have the funds available.

Late Penalties

Corporation Tax

Your governing body has the power to fine you in instances where you submit a late tax return. This falls on the head of the business director, regardless of whether they filled out the form or not. The longer that the tax bill isn’t paid, the greater the cost of the fine will be, so it’s important to keep on top of your finances as quickly as possible.

If you fail to pay on time, the amount that you owe will incur interest, whilst it’s also likely that you’ll have to pay a surcharge or penalty. If you don’t pay what you owe, your governing body is permitted to collect what’s owed to them via your pension or earnings, get debt collectors involved, sell things that you own, take money from your bank accounts, take you to court, or even close down your business.

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Arnab is the Emblem Wealth publisher. He shares sentient blogs on topics like current affairs, business, lifestyle, health, etc. If you want to read refulgent blogs so please follow Emblem Wealth.

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