Companies First Time Tax Guide

If you have a new company, there are a few things you need to know about your corporation tax.

When to pay

The first payment date for your corporation tax is due 9 months following the end of your first accounting period. This will probably be due 21 months after your registration date, but there are some reasons why it may be earlier or later. When you originally registered with Companies House you will have been assigned a year end date. Because of the way Companies House do this, it will be the end of the month of the day 12 months after registration. This means your first period of account will be 12 months and a bit. That is your accounting 'year' as far as Companies House are concerned, but HMRC are slighly different.

Your accounting period for tax follows the following rules.

  • It starts when trading starts
  • It ends when either 12 months is up, or your companies house accounting period ends or trading ceases.
  • Then if you are still trading a new period begins

Therefore because the period of account at companies house is a year 'and a bit', there are often two tax periods. You can avoid this in a number of ways. Firstly if you dont start trading immediately after registation, let HMRC know this and the accounting period will be from the start of trading until the end of the Companies House period of account (assuming this is less than 12 months). If you do start trading immediately you may wish to consider bringing your period end date forward by a month, which you can find out about here. Be mindful that you need to sort this out before the accounts are due. You will need to consider which is less hassle, changing the date (and paying HMRC slighltly earlier) or making two returns, and two payments to HMRC.

How much to pay

You will be expected to make a return which details your own calculations of how much tax to pay. This is based on a percentage of profits, though there are adjustments for some expenses. There is too much involved for this page but some elements will be included in my tax guide (coming soon).

What do you need to file

You need to submit your return by 12 months after the end of the accounting period (Yes thats right 3 months after you have to pay over the money). You will probably submit it earlier. You can amend it as often as you like up to 24 months after the end of the accounting period it relates to. HMRC will then change the amount of taxation on your account.

The return consists of the following elements

  • A form, called the CT600, which shows the various sources of income earned by the company, as well as reliefs and credits and the calculation of the tax and other information that HMRC are interested in. This used to be a paper form but can now only be submitted digitally over the internet. It is this form that BC Easyfiler produces.
  • Your accounts - Companies have a duty to provide accounts to their shareholders, and it is these accounts that HMRC will want to see. These accounts include the profit and loss account for the company, unlike accounts that go to Companies House, which only include the balance sheet. You supply less information to Companies House as the accounts you send there are publicly available. The accounts will probably need to be in a format called iXBRL. This has nothing to do with the physical layout of the information, it is a format which 'tags' the information in the accounts saying This is the current year turnover, or whatever. Some unincorporated organisations, charities, and foreign companies, do not need to use iXBRL. More detailed information can be seen here
  • A computation - This document shows how the figures in the CT600 were derived from the figures in the accounts, and also shows the calculation of tax. It may also include a detailed profit and loss account if this is not included with the accounts. This document is also required to use the iXBRL format. This document is particularly useful when there is a long period of account, as described above as in this case you need to pro-rate the accounts in terms of the number of days in each period. HMRC do not expect you do to anything more complicated than this, and you should explain if you deviate from this approach.

There are also a number of supplementary sheets. The only one a new small company is likely to need is CT600A, which is used when the company an outstanding loan with a participant (ie. where an owner owes money to the company).

BC Easyfiler can help you file the return. The system can create the form (see the step by step instructions, and we can create the iXBRL accounts and computations if you do not have these already.

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