A Brief Guide to Corporation Tax for Struggling SMEs

As a small business owner, navigating the financial and legal minefields relating to tax can be incredibly confusing. There are so many pieces of legislation to consider, so many loopholes and exceptions to the rules, that it’s all too easy to become bogged down by it all and at a loss as to where you should start.

That’s why we decided to create this brief guide to help clarify matters of corporation tax for you. Although it’s only one part of the tax legislation you’ll need to deal with, it should help to make matters a whole lot simpler for those who are struggling.

Need a head start? Then here it is…  

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What is Corporation Tax?

There have been plenty of headlines surrounding corporation tax over the last couple of years, most of them suitably outraged. We’ve all heard about how Facebook paid just £4,327 despite rewarding their staff with over £35.4 million in bonuses, and how other enterprises have learned to work around the laws.  

But we’re not here to confuse you with any of that; all that we want to do is make things easier, so let’s start by taking a look at what corporation tax actually is. In fact, the concept itself is an incredibly simple one: it’s nothing more than a charge on the profits that you make.

By profits, we mean the money left over once your business expenses have been deducted from your overall turnover. Thus, if your company brought in £600,000 for the year, but had £200,000 in expenses to set against this, it would only have earned £400,000 for the purposes of being taxed.    

How Much Is It?

Corporation tax is applied in accordance with the rate that exists during the relevant accounting period. At the current time, it is set at 19 percent of your profits. This means that in the example above, the company in question would pay £76,000 for the year.  

When is Corporation Tax Due?

Corporation tax is payable to HMRC, and payments must be made by your company within nine months and one day of its year end. Put more simply, if your business’ accounting period finished on the 30th September 2016, your tax would need to be paid by 1st June 2017.

You’ll also be required to complete a CT600 tax return for this time, due 12 months after the accounting period ends.   

Who Can Help Me with My Tax Return?

Should you feel that you’re not able to complete your return by yourself, there are lots of places and people to turn to for help. The government helpline is probably the simplest place to start, although if you feel that professional assistance is what’s really required, then an accountant, tax advisor, or legal specialist like Withers Worldwide should be able to offer you the expertise you need.