Our tax preparation specialists tell you all how much Corporation Tax your company might have to pay
At DSR Tax Refunds Ltd, we know that working out your company’s finances is hard work, and that’s before you have to deal with your Corporate Tax bill. That’s why our experts want to help make life as easy as possible for you by sharing our specialist knowledge with you. So, whether you are wanting more information about VAT or need to know about charitable tax relief, our handy guides are here to help. All our information is based on HMRC sources, so you can rest assured that these guides are filled with helpful and accurate information.
What are the Corporation Tax rates?
The current rate for Corporation Tax on company profits is 19%. You pay Corporation Tax at the rates which were in force during your company’s accounting period for Corporation Tax.
There are certain ‘reliefs’, which may entitle your company to claim a Corporation Tax deduction or tax credits on your Corporation Tax.
Companies which are involved in oil rights or oil extraction, in the UK or UK continental shelf, have different rates for ‘ring fence’ profits which allows them to claim Marginal Relief on profits between £300,000 and £1.5 million.
What were the previous Corporation Tax Rates?
Because you have to pay at the rate which was applicable during your company’s accounting period, you might need to know what the previous rates were. Before 1st April 2016, the rate you pay on profits depends on the size of your profits. If you had profits between £300,000 and £1.5 million before 1st April 2015, you might be eligible to claim Marginal Relief to reduce the size of your Corporation Tax Bill.
The previous rates were as follows:
|Your company’s profits||From 1st April 2016||From 1st April 2015||From 1st April 2014|
|£300,000 or less||20%||20%||20%|
If your accounting period was less than 12 months, you would need to reduce the small profits rate and the main rate accordingly. So for example, if your accounting period was 6 months, you would also halve the small profits threshold from £300,000 to £150,000.
If you have more than one company but they are associated with each other, they have a shared tax threshold. They would be classed as associated if one company controls another, or both companies are controlled by the same companies or people. This shared tax threshold means that if one company owned another, their shared tax threshold would be £150,000 for each company. If one company owned 3 others, each company would have a small profits threshold of £75,000.
What happens if more than one rate applies in your company’s accounting period?
If there is a rate change during your company’s accounting period, you need to work out how many days each rate applied to. So, for example, if your accounting period was 5th March 2015 to 4th March 2016, you would use the 2014 rate for 20 days (5th March 2015 to 31st March 2015) and then the 2015 rate for 345 days (1st April 2015 to 4th March 2016).
What are the allowances and reliefs available to companies?
You are allowed to deduct the cost of running your business from your company’s profits before you apply Corporation Tax rates in your company’s accounts. However, if your company has paid for anything that you or your employees get personal use from, it must be treated as a company benefit.
There are other expenses which can’t be deducted for Corporation Tax purposes – one of these is entertaining clients. These expenses need to be added to your profits before you work out your Corporation Tax bill.
You can claim capital allowances if you have bought assets for use in your business. Examples of assets include machinery and equipment, as well as business vehicles. These must be for business use though.
There are a number of other reliefs which may apply to your business.
- Research and Development (R&D) Relief: if your company has worked on an innovative project within the fields of science and technology.
- The Patent Box: this allows you to apply a lower rate of Corporation Tax to profits your company has earned from patented inventions and certain other innovations.
- Reliefs for creative industries: these are a group of 8 Corporation Tax reliefs which increase the amount of allowable expenditure allowed to companies within certain creative fields, such as theatrical productions or video game development.
- Disincorporation Relief: this allows a company to claim relief on asset transfers when a company changes from a private limited company to a sole trader or partnership owned business.
- Terminal, capital and property income losses: this is a relief a company is allowed to use if they have made a loss in its final 12 months of trading, from asset disposal or on property income.
- Trading loss relief: this allows a company which has made a trading loss to offset that loss against other gains or profits which are subject for Corporation Tax.
- Marginal Relief: you can only claim this if your company had profits between £300,000 and £1.5 million which were either from before 1st April 2015 or are from oil rights or extraction within the UK or UK continental shelf.
How can DSR Tax Refunds Ltd help?
We know that setting up a business can be hard work – there’s so much to think about and that’s before you start thinking about Corporation Tax. Our friendly team of tax specialists at DSR Tax Refunds Ltd are on hand to help make life easier for you. We’re the experts at identifying your maximum allowable expenses so call us on 0330 122 9972 – we’re the tax experts you can trust.