Running a small business is a challenge; in fact, according to a survey by UK insurer RSA, more than half of British small businesses (55%) go under within their first five years. Of all the threats to the survival of these firms, the tax system is one of the greatest, with 44% citing it as a barrier to success.
Most businesses handle their tax liabilities using cash flow, but there are other approaches which can be more efficient. Covering Corporation Tax bills with a loan that can be paid back over a 12-month period is a way to spread the cost of the tax owed, leaving funds free to be funnelled back into the most profitable areas of the business.
Far from being a facility to be used only in times of financial distress, a small business loan accessed at the right time to cover a tax demand can be a stepping stone to success.
New to paying tax as a business? Our handy tips below, covers all you need to know about Corporation Tax – and how to arrange your payments more efficiently.
Four top tips to paying Corporation Tax
Your company is required to complete a Corporation Tax return each year, which is filed with HMRC. You won’t receive a bill for Corporation Tax, but there are specific things you must do to work out, pay and report your tax.
- Register for Corporation Tax when you start your business (after you’ve registered your company with Companies House). You’ll need to do this within three months of starting to do business. You will need your company’s 10-digit Unique Taxpayer Reference (UTR), which will be posted to you within a few days of registering with Companies House. Once you have the UTR, you can register for Corporation Tax on the HMRC website
- Keep accounting records and prepare a Company Tax Return to work out how much Corporation Tax to pay
- Pay Corporation Tax or report if you have nothing to pay by your deadline - this is usually nine months and one day after the end of your accounting period (your accounting period is normally the same 12 months as the financial year covered by your annual accounts)
- File your Company Tax Return by your deadline - this is usually 12 months after the end of your accounting period
Things to consider:
- Taxable profits for Corporation Tax include the money your company or association makes from:
- Doing business (‘trading profits’)
- Selling assets for more than they cost (‘chargeable gains’)
- If your company is based in the UK, it pays Corporation Tax on all its profits from the UK and abroad.
- If your company isn’t based in the UK, but has an office or branch here, it only pays Corporation Tax on profits from its UK activities.
Will there be a reduction in Corporation Tax?
In the Summer Budget 2015, the government announced legislation setting the Corporation Tax main rate (for all profits except ring fenced profits) at 19% for the years starting the 1 April 2017, 2018 and 2019. In the last Autumn Statement (November 2016), the Chancellor announced that Corporation Tax would be lowered to 17% for the Financial Year beginning 1 April 2020, giving Britain the lowest rate in the G20 nations.
This is an excerpt from our ‘Corporation Tax and VAT guide’. Download the guide to learn everything you need to know about the tax system, and more.