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Under Corporation Tax Self Assessment
the responsibility for assessing a company's tax liabilities rests with
the company itself (and not with HM Revenue & Customs).
A legal charge to corporation tax is created by filing a return and
there will usually be no need for assessment by HMRC. Unlike Income Tax
Self Assessment for individuals, companies cannot opt for HMRC to
calculate the tax due. The filing date for the return is usually the
first anniversary of the last day of the period to which the return
relates.
Payment System
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Around 20,000 large companies (i.e. those that pay their corporation tax at the main rate without small companies relief)
pay by instalments.
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The remainder of the 700,000 companies that are subject to corporation tax
do not pay by instalments but in one sum, nine months after the end
of their accounting period.
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Groups of companies are able to pay Corporation Tax on a group-wide basis, rather than company by company.
Quarterly Instalments
Large companies must pay their tax in four equal instalments,
on the basis of their anticipated liability for the current accounting period.
After submission of company tax return,
showing the liability of the accounting period in question, interest
will be charged on any instalment which turns out to have been underpaid
(and similarly repayment supplement will be due on any instalment
overpaid).
Such interest on overpayments and
underpayments of corporation tax are taxable and tax deductible
respectively.
Companies are normally able to reclaim any instalment payments made if they later conclude the payments ought not to have been paid.
Group Companies
Broadly, a company is associated with
another company if they are both under the same control.
The number of
associates affects the calculation of the 'Upper Relevant Maximum
Amount' above which the main rate of Corporation Tax is charged.
Some companies with associated companies therefore count as large, even though their own Corporation Tax liabilities may be relatively small.
Lower Limit
If a company's net tax liability does not exceed £10,000 then the company does not need to pay by instalments.
Accordingly, companies in large groups do not have to
make instalment payments if their own individual liability is small.
Growing Companies
Growing companies do not have to pay their Corporation Tax by instalments in an accounting period in which they become large if:
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Their taxable profits for that accounting period do not exceed £10 million, and
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they were small or medium sized companies in the previous year.
Where there are associated companies, the threshold shown above will be reduced by dividing the threshold by one plus the number of associated companies at the end of the preceding accounting period.
Penalties and Interest
Penalties will be imposed by HMRC if the corporation
tax self assessment return is not filed on time and interest will be
charged if the corporation tax due is not paid by the due date.
Please note:
This guide is intended to
provide basic information only. Where specific advice is required, we
recommend that you seek proper professional help; either from this firm
or other suitably qualified person or practice.
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