If you’re facing with a corporate tax for the first time and want to know what is the tax rate in the UK or how is corporation tax calculated, look at this handy overview corporation tax rules for UK companies.
All UK limited companies are subject to Corporation Tax. The tax is charged as a percentage of the annual profits made by a company.
Companies that are not resident in the UK but which have UK source profits are charged to corporation tax on their UK source profits only if the company trades in the UK through a permanent establishment and the UK source profits are derived through that permanent establishment.
A company must be registered with HMRC as ‘active’ for Corporation Tax purposes. This must be done no later than 3 months after carrying on any type of business activity, which includes:
• Buying and selling goods and services
• Renting or buying property or land
• Paying directors and employees
• Managing investments and receiving dividend income
• Issuing dividends to shareholders
• Paying company formation and accountancy fees through the business bank account
• Receiving any other form or income, including bank account interest
A company pays corporation tax by reference to each accounting period. The rates of corporation tax are fixed for financial years which run from 1 April to 31 March.
Dealing with your corporation tax issues is one of your accountant’s key tasks. Therefore, you should be picky while choosing an accountant.
Corporation Tax is not paid by businesses operating as sole traders or partnerships. The individuals running such businesses are classed as self-employed and will pay tax on their business profits through the annual self-assessment system.
Corporation Tax does not apply to the following organizations, even if they are not incorporated:
• Members’ clubs, societies, and associations
• Trade associations
• Housing associations
New business registration
You are legally obliged to inform HMRC that your new limited company has been formed as soon as you have completed the incorporation process.
Once you appoint an accountant to company in the UK, you will need to authorize them to deal with your tax affairs on behalf of your new company
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By: Allys W
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