Corporation tax

Corporation tax is paid by limited companies on their profits. It is also paid by:

• members' clubs, societies and associations
• trade associations
• housing associations
• groups of individuals carrying on a business but not as a partnership, e.g. co-operatives, even if they are not limited companies.

Corporation tax is paid (2011-2012 rates) at the small companies’ rate of 20 per cent for profits of up to £300,000 and a main rate of 26 per cent for profits of over £1.5 million. There will be further cuts in the main rate for the next three years to 25 per cent in 2012-13, 24 per cent in 2013-14, and 23 per cent in 2014-15.

Companies making profits between £300,001 and £1.5 million receive marginal rate relief, which eases the transition between the lower and higher rates.

If your company is liable to pay corporation tax, you must:

• tell HM Revenue & Customs (HMRC) that your company exists and that it is liable for tax
• file a company tax return, on which you calculate your own corporation tax liability and pay it without prior assessment by HMRC
• keep records of all company expenditure and income in order to work out your tax liability accurately.

How to pay:
Corporation tax is normally due by nine months and one day after the end of your company’s accounting period. So if your company tax return covers an accounting period 1 January 2011 to 31 December 2011, corporation tax must be paid no later than 1 October 2012.

If you don't let HMRC know that you are liable for corporation tax, file your company tax return incorrectly, or pay your corporation tax late, you may incur a financial penalty. If you don't pay your corporation tax on time, HMRC will charge interest from the day it is due until you pay it.

From 1 April 2011, companies and organisations must submit company tax returns online and pay all corporation tax and related payments – such as interest charges on overdue corporation tax or penalties for not filing company tax returns on time – electronically.

Also from 1 April 2011, accounts and computations must be in the Inline eXtensible Business Reporting Language (iXBRL) format, which is designed specifically for business financial reporting. Some companies and organisations that have previously prepared these submissions in Word or Excel may find more convenient and cost-effective to outsource this work to an iXBRL-compliant accountant.

For more information, visit www.hmrc.gov.uk/ct

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