Corporation Tax Records
All companies are required by law to maintain records of that company’s transactions in a manner that must be adequate to enable the company to produce an accurate Company Tax Return. Company tax records must be kept for a minimum of six years from the end of the accounting period and longer if the accounts are submitted late or being enquired into by the Inland Revenue. Company tax records must include all original sales receipts and purchase expenses. Under the Companies Act legislation registered companies must also keep accounting records.
Companies are responsible for calculating their own corporation tax liability and paying the corporation tax without prior assessment by the Inland Revenue. Companies which fail to deliver their tax return by the statutory fling date which is normally 12 months after the accounting period are liable to penalties. An accounting period normally being 12 months - can be shorter but never longer. Should a company submit the CT600 UK Corporation Tax return form without the accounts then it is treated as not having submitted a tax return form.
Current Company Tax Return Forms
The latest version of the UK corporation tax return CT600 form for 2007 has been available for download from the Inland Revenue website since 31 August 2007. The UK Corporation Tax Return Form CT600 Version 2 contains two small changes from the previous 2006 version. CT600 (short) for small companies has an additional box on Page 1 so that a company which is a member of a group other than a small group can identify itself. The same additional box is on CT600 plus a new box on page 3 of the 8-page form so that a company with ring fence profits can show the ring fence profits included in its figure of total profits. There are no changes to other forms in the CT600 series at present and all the CT600 Supplementary Pages published in 2006 remain valid and will probably remain so until at least after the 2008 Chancellor’s Budget.
Small Corporation Tax Rates
While the main rate of Corporation Tax remained at 30% in 2006 and 2007 which will be reducing to 28% in 2008. The small corporation tax rate applicable to companies with annual profits under £300,000 was increased from 19% in 2006 to 20% effective on profits earned after 1 April 2007 and is set to increase further on 1 April 2008 to 21% and to 22% from 1 April 2009. Corporation Tax on ring fenced profits being income and gains from oil extraction activities or oil rights in the UK and UK Continental Shelf remain at 19% for small companies and 30% for larger companies. Interest is charged on late payments and at a lower rate on instalment repayments of Corporation Tax as is the practice on all late tax payments.
Accounting Periods straddling 1 April
The effective date for changes in the Corporation Tax rate applicable in recent years has been 1 April each year as opposed to the 5 April for unincorporated businesses. For companies with accounting periods that straddle the 1 April separate calculations are required for the period before 1 April and after 1 April based upon the number of days in each accounting period. As a proportion of 365 (366 in leap years such as 2008)
No Corporation Tax Due
Companies are required to advise HMCE by either submitting a company tax return or informing them by completing the HMCE form for this purpose or at the very least returning the payment slip marked “NIL due”. All communications should state the corporation tax payment reference which can be found on the payment slip. This reference number is specific to each accounting period and must be quoted accurately.
Filing Corporation Tax Return Online
Most companies and their agents can file company tax returns online. The tax computations, financial accounts and other supporting documentation must be sent in PDF format with some approved software products being sent in XBRL format. Filing the company tax return online has the advantages of speed, can be done 24 hours a day and the software calculates the tax liability. Using the CT Online service also allows the company’s tax position to be viewed including any interest or penalties that have been charged. Company details such as telephone, fax, addresses and email addresses can be changed and agent details can be added or changed. Authorised agents can also view client company corporation tax positions and liabilities.
Inland Revenue Enquiries into Company Tax Returns
Enquiries into Company Tax returns are governed by rules and codes of practice. HMCE have at least 12 months from the statutory filing date to commence an enquiry when the company tax return has been submitted on time and longer if the return is submitted late. Companies are advised in writing when an enquiry starts and ends. If no adjustments are required HMCE advise the enquiry has finished. Any adjustments are also advised in writing and the company then has 30 days to file an amended Company Tax Return failing which HMRC will amend the return. At any time during an enquiry a company can apply to the Inland Revenue Commissioners for an enquiry to be closed. Separate codes of practice exist for local offices and specialist compliance offices.
Corporation Tax Software
DIY Accounting company accounts packages contain corporation tax software that automates the production of the CT600 UK corporation tax return. From the net taxable profit the financial accounts file contains a worksheet that collects the taxable profit and the capital allowances from the automated trial balance and using the current corporation tax rate applicable calculates the corporation tax. The UK corporation tax software then completes an excel copy of the CT600 which is the small corporation tax return which is in the same format as the official HMRC short version To complete the submission to HMRC clients simply print out the UK corporation tax return produced by the software and copy the figures.