What is corporate tax?

The proper name for corporate tax is corporation tax. Corporation tax is a tax in the UK payable on the taxable profits of limited companies and other organisations including clubs, societies, associations and other unincorporated bodies.

For the purposes of calculating corporation tax, the following types of profits of a company are taxable:

• Profits from taxable income. This includes trading profits and investment profits but excludes dividend income
• Capital gains. This is known as 'chargeable gains' under the tax legislation

Companies based in the UK must pay corporation tax on all of the taxable profits of the company, regardless of where in the world the profits come from. If you have a company that operates in more than one country, including the UK, it is essential to get commercial tax advice from a taxation lawyer.

Rates of Corporation tax

Corporation tax is currently levied at two different rates, depending on various factors. These two rates are known as the lower rate (the 'small profits' rate) and the upper rate (the 'full' rate or 'main' rate). There is also a sliding scale between the lower and upper rates known as 'Marginal Relief'. In this way, the effective rate of corporation tax payable rises gradually from the lower rate to the higher rate dependent on the company’s taxable profit.

Companies have an obligation to inform HMRC that they are liable for Corporation Tax. They also have an obligation to file a Company Tax Return and supporting documents and to pay the correct amount of corporation tax owing on time. Interest and/or penalties can be charged on later payments of corporate tax.

A taxation lawyer can complete on behalf of the company a 'Corporation Tax Self Assessment'. It is important to keep in mind the anomaly of corporation tax that the deadline to pay corporation tax is before the deadline to file Company Tax Returns. Be sure to get legal advice from a taxation lawyer about the accounting periods and filing periods, etc. Most companies elect to keep a commercial lawyer and/or taxation lawyer on the books to ensure that such things are taken care of and that the company complies with the law without penalty.

If you think you may require the services of a tax lawyer to help you with corporation tax, call Contact Law on 0800 1777 162 or fill in the web-form opposite. We work with firms throughout the UK, and can help you speak to the right solicitor for your needs.

Last Updated on 10/03/2011