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How is my Corporation Tax Calculated?

How is my Corporation Tax Calculated?

How is my Corporation Tax Calculated?

Corporation Tax is that tax payable by a company on its taxable profit in the company’s accounting year. Currently the corporation tax rate is 19%.

The calculation of the amount of corporation tax due is quite complex. You first need to work out the ‘taxable profit’. In basic terms – this is how it works.

You start with your company’s pre-tax profit figure (sometimes known as ‘profit before tax’) in your company’s financial accounts for a financial year.

Sales – Expenses = Pre-tax Profit.

You then:

  • add back any depreciation charges you’ve included in your accounts
  • deduct your capital allowances
  • add any other relevant income or chargeable gains
  • deduct any other relevant deductions, reliefs, allowances or losses

You then:

  • apply the relevant tax rate(s) to calculate your gross Corporation Tax payable
  • deduct any relevant tax credits and any Income Tax already deducted from interest income your company received (for example the tax deducted by your bank before it paid you interest)

The above can get quite complex – the good thing is that it’s your accountant’s job to calculate this for you.

To arrive at the amount of Corporation tax due you apply the corporation tax rate to the Taxable Profit.

Taxable Profit x 19% = Corporation Tax charge.

In theory then – the higher your expense figure, the lower the taxable profit, therefore, the lower your corporation tax.

When is Corporation Tax due?

The deadline to pay your Corporation Tax is :-

  • 9 months and 1 day after your company’s Year end.

For example, if your company’s year end runs from 1 April 2017 to 31 March 2018,

  • pay your Corporation Tax for that period by 1 January 2019
  • file your Company Tax Return for that period by 31st March 2019

Your accountant will complete the corporation tax return (CT600) accompanies by your corporation tax computation. The tax return has to be filed (online) with HMRC along with your company’s financial accounts. Most accountants nowadays use special software to complete and file the CT600 and file the accounts online.

By diptesh on June 14, 2011

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