Corporation Tax is a fundamental aspect of running a business in the UK. It’s a form of tax levied on the profits of limited companies and certain other organisations. These profits can come from doing business (‘trading profits’), investments, or selling assets for more than they cost (chargeable gains). This article explains paying HMRC Corporation Tax.
Paying Corporation Tax is not just a legal obligation but also a corporate responsibility. It contributes to the national revenue, which is used to fund essential public services. Understanding how to calculate and pay your Corporation Tax correctly is crucial for maintaining your company’s compliance with HM Revenue and Customs (HMRC) and for the overall financial health of your business.
In the following sections, we will delve into the process of paying Corporation Tax, offering guidance on how to navigate this important aspect of your business operations successfully.
Quick Links
- What is Corporation Tax?
- Who Needs to Pay Corporation Tax?
- The Process and Requirements for Paying Corporation Tax
- Relevant Legislation and Statements of Insolvency Practice in England & Wales
- How to Successfully Pay Corporation Tax
- Paying Your Corporation Tax Bill
- What to Do If You Cannot Pay Your Corporation Tax Bill
- FAQs
- HMRC Corporation Tax Helpline
- Conclusion
- References
What is Corporation Tax?
Corporation Tax is a tax imposed on the taxable profits of limited companies and other organisations, including clubs, societies, associations, and other unincorporated entities. Taxable profits for Corporation Tax include profits from taxable income such as trading profits and investing gains, and capital gains or chargeable gains.
Who Needs to Pay Corporation Tax?
If your organisation is based in the UK or has a branch or office in the UK, and it is a limited company or an unincorporated association, then it is liable to pay Corporation Tax. This includes all private limited companies and public limited companies, irrespective of the size or nature of the business.
The Process and Requirements for Paying Corporation Tax
Paying Corporation Tax involves several steps:
- Register for Corporation Tax: When you start a new company, you need to register it with HMRC for Corporation Tax within three months of starting to do business.
- Keep Accounting Records: You must keep accounting records and prepare a Company Tax Return to work out how much Corporation Tax to pay.
- Pay Corporation Tax: You must pay Corporation Tax or report that you have nothing to pay by your deadline, which is usually before you file your Company Tax Return.
- File a Company Tax Return: You must file a Company Tax Return, even if you make a loss or have no Corporation Tax to pay.
Relevant Legislation and Statements of Insolvency Practice in England & Wales
The Corporation Tax is governed by the Corporation Tax Act 2010 and the Corporation Tax Act 2009 in England & Wales. These acts provide the legal basis for Corporation Tax, outlining who is liable to pay, how the tax is calculated, and when and how it must be paid.
In addition, the Statements of Insolvency Practice (SIPs) provide best practice guidelines to licensed insolvency practitioners on various aspects of insolvency practice. They are issued by insolvency regulatory authorities, including the Insolvency Practitioners Association and the Association of Chartered Certified Accountants. While SIPs do not specifically address Corporation Tax, they do provide guidance on how insolvency practitioners should conduct themselves, which could be relevant if a company is unable to pay its Corporation Tax due to insolvency.
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How to Successfully Pay Corporation Tax
Paying Corporation Tax involves a series of steps that need to be followed in a specific order. Here’s a detailed guide to help you prepare and successfully pay your Corporation Tax:
Preparing for Corporation Tax Payment
- Register for Corporation Tax: As soon as you start your business, register it with HMRC for Corporation Tax. This should be done within three months of starting to do business.
- Keep Accounting Records: Maintain accurate and up-to-date accounting records. These records will be used to calculate your Corporation Tax.
- Calculate Corporation Tax: Use your accounting records to calculate how much Corporation Tax you owe. You may need an accountant to help with this.
Ensuring a Smooth Payment Process
- Pay Corporation Tax: Pay your Corporation Tax to HMRC. This is usually done online. Make sure you pay by your deadline, which is typically nine months and one day after the end of your accounting period.
- File a Company Tax Return: After paying your Corporation Tax, file your Company Tax Return. This should be done even if you make a loss or have no Corporation Tax to pay.
Potential Pitfalls to Avoid
- Late Registration: Failing to register your company with HMRC for Corporation Tax within the stipulated time can result in penalties.
- Inaccurate Records: Keeping inaccurate or incomplete accounting records can lead to incorrect Corporation Tax calculations and potential legal issues.
- Missed Deadlines: Not paying your Corporation Tax or filing your Company Tax Return by the deadline can result in fines and penalties.
By following these steps and being aware of potential pitfalls, you can ensure a successful and stress-free Corporation Tax payment process.
Paying Your Corporation Tax Bill
Once you have calculated your Corporation Tax, the next step is to make the payment to HMRC. Here’s a step-by-step guide on how to do this:
Step-by-Step Guide
- Calculate Corporation Tax: Use your accounting records to calculate your Corporation Tax.
- Choose Payment Method: Decide on the most convenient method of payment for you. HMRC accepts payments through:
- Online Bank Transfer
- Debit or Corporate Credit Card Online
- At your Bank or Building Society
- Direct Debit
- Make Payment: Follow the specific instructions for your chosen payment method to make the payment.
- Receive Confirmation: After making the payment, you should receive a confirmation from HMRC.
What to Do If You Cannot Pay Your Corporation Tax Bill
If you’re unable to pay your Corporation Tax bill, it’s important to contact HMRC as soon as possible. They may be able to help you set up a payment plan or give you more time to pay.
Remember, not paying your Corporation Tax can lead to penalties and legal issues. If you’re struggling to pay your Corporation Tax, consider seeking advice from licensed insolvency practitioners like Company Doctor. We offer advice and solutions to directors with insolvent companies and can help with Creditor’ Voluntary Liquidations. Call us on 0800 169 1536 or leave an enquiry on our website.
FAQs
Here are some frequently asked questions about paying Corporation Tax:
When do I need to pay Corporation Tax?
Corporation Tax is typically due for payment 9 months and 1 day after the end of your accounting period. Your accounting period is usually the same as your financial year but may be different in some cases.
How do I know how much Corporation Tax to pay?
The amount of Corporation Tax you need to pay is based on your company’s taxable profits. You’ll need to calculate this yourself or hire an accountant to do it for you. HMRC does not calculate it for you.
What happens if I pay my Corporation Tax late?
If you pay your Corporation Tax late, HMRC may charge you interest from the day the tax was due until the day it’s paid. They may also impose penalties for late payment.
Can I pay my Corporation Tax in instalments?
In some cases, HMRC may allow you to pay your Corporation Tax in instalments. If you’re unable to pay your Corporation Tax bill in full by the due date, contact HMRC as soon as possible to discuss your options.
What if I can’t afford to pay my Corporation Tax?
If you’re unable to pay your Corporation Tax, it’s important to contact HMRC as soon as possible. They may be able to help you set up a payment plan or give you more time to pay. You can also seek advice from licensed insolvency practitioners like Company Doctor.
HMRC Corporation Tax Helpline
General Enquiries
HMRC offers a specialised helpline for general inquiries regarding Corporation Tax. When contacting them, it is important to provide your 10-digit Unique Tax Reference.
Telephone:
- 0300 200 3410 (Outside the UK: +44 151 268 0571)
Lines are open 8am-6pm Monday-Friday
Post:
- Corporation Tax Services
HM Revenue and Customs
BX9 1AX
United Kingdom
How to pay your Corporation Tax
If your profits subject to taxation exceed £1.5 million, you are required to make your Corporation Tax payments in installments. However, if your total taxable profits are below £1.5 million, you must settle your Corporation Tax bill within 9 months and 1 day after the conclusion of your accounting period. In such cases, you have the option to make your Corporation Tax payment using any of the methods listed below, but please be aware that direct phone payments are not accepted.
Ways to pay your Corporation Tax bill are as follows:
Pay online:
You can pay online, via telephone banking or BACS using the following account details for the office from which you received your Corporation Tax payslip, you will need your 17-character Corporation Tax payslip reference for the accounting period you’re paying:
- Account Name: HMRC Cumbernauld
- Sort Code: 083210
- Account Number: 12001039
- Account Name: HMRC Shipley
- Sort Code: 083210
- Account Number: 12001020
To pay from an overseas account you should use the following details:
- Account Name: HMRC Cumbernauld
- Account Number: (IBAN): GB62BARC20114770297690
- Bank Identifier Code: (BIC): BARCGB22
- Account Name: HMRC Shipley
- Account Number: (IBAN): GB03BARC20114783977692
- Bank Identifier Code: (BIC): BARCGB22
Pay via the CHAPS system
Pay using the account details above to either the Cumbernauld office or the Shipley office.
Pay online via a debit card or corporate credit card
Note that you cannot pay using a personal credit card; you will need your 17-character Corporation Tax payslip reference for the accounting period you’re paying.
Directly at your bank or building society
You will need the payslip that HMRC sent you. Make cheques payable to ‘HM Revenue and Customs only’ followed by your 17-character Corporation Tax payslip reference for the accounting period you’re paying.
Conclusion
Paying Corporation Tax is a crucial part of running a business in the UK. It’s important to understand who needs to pay it, how to calculate it, and how to make the payment to HMRC. Remember, the deadline for payment is typically 9 months and 1 day after the end of your accounting period.
If you’re unable to pay your Corporation Tax bill, don’t ignore it. HMRC may be able to help you set up a payment plan or give you more time to pay. However, it’s also wise to seek professional advice.
At Company Doctor, we are licensed insolvency practitioners based in Leeds. We offer advice and solutions to directors with insolvent companies. We can help you understand your options if you’re struggling to pay your Corporation Tax, and we provide services such as Creditor’ Voluntary Liquidations.
Don’t struggle alone with Corporation Tax issues. Call us on 0800 169 1536 or leave an enquiry on our website. We’re here to help.
References
The primary sources for this article are listed below.
Corporation Tax: Overview – GOV.UK (www.gov.uk)
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