Corporate Tax Filing Deadlines and Requirements in the UK

Tax savings are important for both individuals and businesses especially due to the complex taxation system in the UK. With the acquisition of tax compliance services, businesses can develop strategies to minimize tax liabilities effectively. While operating a business, understanding the right corporate structure is crucial to ensure tax efficiency. But are you informed about corporate tax filing deadlines and requirements in the UK? Are you aware of penalties? Do you know your corporate tax compliance requirements? Most of you wouldn’t.

In this blog we will explore the corporate tax roadmap in the UK.

Corporate tax in UK

Corporation Tax in the UK is the tax payable on profits from doing business as a limited company, foreign company with a UK branch or office (also known as an ‘overseas company’) club, co-operative or other unincorporated association. Profits subject to corporation tax include trading profits, capital gains, any other income, such as rental income. All company profits are taxable unlike individuals. The corporation tax accounting period of a company is usually based on 12 months with some exceptions, and it normally aligns the financial year of the company.  The corporate tax rate in the UK is generally 25% on profits of more than GBP 250,000. For the UK resident companies with profits below GBP 50,000 a lower tax rate of 19% is applicable.

Who Pays Corporation Tax?

Corporation tax is due from all UK limited companies.

In addition to limited companies, several other types of organizations may also be required to pay corporation tax, even if they aren’t incorporated. These include:

• Members’ clubs, societies, and associations
• Trade associations
• Housing associations
• Groups of individuals running a business, such as co-operatives

However, if you’re a sole trader or part of a partnership, you won’t be subject to corporation tax. Instead, you’ll pay income tax on your earnings through a self-assessment tax return. You can find more information on this in our guide to self-employed income tax.

Corporation Tax Deadlines

You must submit your corporation tax return between the end of your company’s financial year and the statutory filing deadline.

The statutory filing date is the later of:

• 12 months after the end of your company’s financial year, or
• Three months after receiving a notice from HMRC requesting the return.

However, you may need to pay your corporation tax bill before the return is due.

If your company’s taxable profit is £1.5 million or less, the corporation tax payment is due within nine months and one day after the end of your accounting period.

For example, if your accounting year ends on 31 March, your corporation tax payment will be due on 1 January of the following year, with the tax return due three months later.

For companies with a turnover exceeding £1.5 million, corporation tax may be paid in installments.

Corporation Tax: Late Penalties

If you’re late in submitting your corporation tax return, paying your tax bill, or providing inaccurate information, HMRC has the authority to impose fines.

The company director is personally responsible for ensuring timely and accurate submissions. This means that even if an accountant handled the filing, the director will be liable for any penalties.

HMRC imposes the following penalties for late filings:

• One day after the deadline: £100 fine.
• Three months after the deadline: An additional £100 fine.
• Six months after the deadline: HMRC will estimate your unpaid tax and add a 10% penalty to the estimated amount.
• 12 months after the deadline: Another 10% penalty is added to the estimated tax bill. You cannot appeal the estimated amount.

If your tax return is late three times in a row, the £100 fine will increase to £500 each time.

Late Corporation Tax Payments

If you fail to pay your corporation tax on time, you will incur interest on the outstanding amount and could face additional penalties or surcharges.

HMRC has the authority to take enforcement actions to recover any unpaid tax, which may include:

• Collecting payments directly from your earnings or pension
• Engaging debt collection agencies to recover the debt
• Seizing assets (in England, Wales, or Northern Ireland)
• Withdrawing money from your bank or building society accounts (in England, Wales, or Northern Ireland)
• Taking legal action, including court proceedings
• Pursuing bankruptcy or even closing your business

If you’re unable to pay, HMRC recommends contacting them as soon as possible, as you may be able to set up a Time to Pay arrangement, allowing you to settle the debt in installments.

HMRC will ask for a plan detailing how you intend to pay the debt quickly. They will review your proposal to ensure its affordable and may require you to clear as much of the debt as possible before agreeing to a payment plan—such as liquidating assets.

HMRC may also ask company directors to:

• Contribute personal funds to the business
• Secure lending
• Extend credit

Marginal Relief for Corporation Tax

Companies with profits under £250,000 may be eligible for Marginal Relief, which can reduce their Corporation Tax liability.

• Lower limit: £50,000
• Upper limit: £250,000

Marginal Relief provides a tax rate that gradually increases from the lower small business rate to the main Corporation Tax rate. This means qualifying businesses can pay a lower rate than the standard 25% Corporation Tax.

Challenges in corporate tax compliance

The taxation system of the United Kingdom is intricate. Staying updated on the latest tax reforms and understanding their implications may be a complicated procedure for many.

With the rise of the digital economy, new tax rules such as Digital Service Tax have been introduced making tax compliance complicated. To ensure tax compliance, businesses are required to file tax returns on time which again could be resource straining for many. HMRC, the UK tax authority, has its eye on corporate tax practices leading to audits. Business may be required to provide evidential documents and justifications for their tax positions. Some companies in the UK often struggle with balancing tax planning and compliance. The economic fluctuations especially after BREXIT have largely impacted the tax planning and compliance strategies. In addition, the rise in adoption of new technologies has increased the complexity of taxation processes fueling the need for skilled tax professionals and accountants. The smooth integration of tax compliance systems with financial systems may also be a logistic challenge for businesses in the UK. For multinational enterprises compliance with UK and other international tax laws adds to the complexity of tax landscapes.

How SS&Co. Can Help?

For all companies, navigating the rough tides of taxation is critical. The worst part about handling tax is the ever-changing tax compliance rules.

This is where the expertise of our professional accountants comes in. As a top consultancy in London, we, at SS&CO Global offer comprehensive tax compliance services in the UK. With us, managing your company taxes will never be a problem.