How to Register For Corporation Tax

Wondering how to register for corporation tax? Resident companies as well as branches of overseas businesses operating in the UK have to pay corporation tax on their annual profits. There’s no set billing system, which means you have to file a Corporation Tax Return – which can be tricky!

Don’t worry though – our expert guide can help you make sense of it all.

What is Corporation Tax?

Corporation Tax, is a levy imposed on the profits of a company whether it’s a limited company or any other corporate entity. It’s calculated based on the company’s taxable income, which includes trading profits, investments, and selling assets for more than they cost.

In the UK, Corporation Tax is managed and collected by HM Revenue and Customs (HMRC). The rate is set by the government and can change from year to year. As of April 2024, the standard rate is 19% for profits of £50,000 or less and 25% for profits exceeding £250,000.

Corporation Tax is not deducted at source like Income Tax. Instead, companies are responsible for calculating how much they owe, reporting it to HMRC, and paying it. This process is known as ‘self-assessment‘.

Why is Registering for Corporation Tax Essential?

Registering for corporation tax is a legal requirement for all limited companies in the UK. It’s not just about fulfilling your obligations to the government, but also about ensuring the smooth running of your business.

Failure to register can lead to penalties and fines, which can be a significant financial burden for a new business. Moreover, it can also tarnish your company’s reputation, making it harder to attract investors or secure loans.

When Should I Register for Corporation Tax?

The UK government stipulates that you must register for corporation tax within 3 months of starting your business. This commencement is not necessarily when you first had the idea for your business or when you started drafting your business plan. Instead, it is counted from when your company began trading activities, such as making the first sale, advertising, or renting a property.

Certain activities do not count as the start of your trading period. Writing a business plan or setting up your business infrastructure are not considered as trading activities, for example. The clock starts ticking when you engage in commercial transactions that generate income.

While three months might seem like ample time, it’s advisable to start the registration process as soon as possible. This is because you might need to wait for additional mail, such as an access code, to complete your registration. Delaying the process could lead to penalties from HMRC; so it’s best to register your limited company for corporation tax promptly after you start trading.

How to Register for Corporation Tax

The first step is to ensure that you have all the necessary information at hand. This includes your company’s unique taxpayer reference number, which is issued by HM Revenue and Customs (HMRC).

Next, you’ll need to access the Government Gateway, which is the online service provided by HMRC. If you don’t already have a user ID for this service, you’ll need to create one. After you’ve created your user ID, sign in to your business tax account using this ID and your password.

Once you’re signed in, you’ll need to request an access code. This will be sent to you in the post and is necessary to complete your Corporation Tax registration. The code is only valid for a short period, so make sure to activate your HMRC online services as soon as you receive it.

Navigate to the section for Corporation Tax and click on the option to ‘Start Register for Corporation’. You’ll be asked to input your company’s details, including the registration number and SIC code.

After filling in the required fields, review your information carefully before submitting. HMRC will then process your application and send you a unique tax reference number via post. Keep this safe, as it’s crucial for all future tax dealings.

What Happens After Registering for Corporation Tax?

After successfully registering for corporation tax, your journey doesn’t end there. The next phase involves receiving your Unique Taxpayer Reference (UTR), reporting your financial activities to HMRC, and ensuring timely payment of your corporation tax.

Once you’ve completed the process to register for corporation tax, you’ll receive a Unique Taxpayer Reference (UTR). This is a unique 10-digit number assigned to your limited company by HMRC. It’s crucial to keep this reference number safe as it’s required for all your tax affairs.

Your UTR is confidential. It’s akin to a personal ID for your business, so don’t share it unnecessarily. It’s your key to accessing the HMRC online service and managing your corporation tax.

Reporting to HMRC

Once you’ve registered for corporation tax, it’s crucial to keep HMRC in the loop about your company’s financial activities. This involves reporting your taxable profit, typically done through the HMRC online service. Remember, HMRC needs to know about any changes in your business. This includes changes in your company’s structure, business model, or if you start to make a profit.

Once you’ve registered for corporation tax and received your unique reference number, the next step is to calculate and pay your corporation tax.

Even if your business makes a loss or has no corporation tax to pay, you still need to report to HMRC. This involves preparing and submitting a Company Tax Return, usually within 12 months after your accounting period ends. By staying on top of these responsibilities, you can ensure your business remains compliant and avoids any unnecessary penalties.

What Accounting Records Do I Need to Keep?

You need to maintain a record of all income and expenditure. This includes sales and purchases, receipts and expenses, and any other financial transactions related to your business. Keep track of all assets and liabilities. These include any property, equipment, or other assets owned by your company, as well as any debts or obligations.

You should also maintain a record of all stock at the end of the accounting period. This should include the value of the stock, how much was bought and sold, and any stocktaking you do.

Keep a record of all debts, both those owed to your company and those your company owes. This includes details of all creditors and debtors.

Finally, maintain a record of all employees and their wages. This includes their names, addresses, National Insurance numbers, and details of their wages and deductions.

Corporation Tax Payment Deadline

The deadline for corporation tax payment is a crucial date that every business owner should have marked on their calendar. It’s typically nine months and one day after the end of your accounting period.

However, it’s worth noting that this deadline applies to businesses with taxable profits less than £1.5 million. For businesses with higher taxable profits, the corporation tax payment is usually due in instalments.

Do I need to register for Corporation Tax if my company is dormant?

Yes, registering for and/or paying corporation tax is mandatory, even if your company is dormant. The HMRC needs to be informed about your company’s status. This is done through the government gateway, using your business account.

What if I am late filing my company tax return?

The HMRC online service is strict about deadlines. If you miss the deadline, you’ll face a fine starting from £100. It’s crucial to register for corporation tax and file your return on time. It’s not just about the financial penalties; it can also impact your business reputation.

Being late with your corporation tax can signal to Companies House and other businesses that you’re not reliable, which could affect future opportunities. It’s crucial to understand the importance of timely filing and the potential repercussions of missing the deadline.

Wrapping Up: How to Register for Corporation Tax

Registering for corporation tax is a crucial step for every limited company in the UK. It’s not just about complying with the law, but also about establishing your firm’s financial credibility. The process might seem daunting, but with the right information and understanding, it becomes manageable.

Remember, if you need a hand with registering or paying corporation tax, speak to Mazuma Money today. Our accountants have helped hundreds of businesses – just like yours – maximise their profits and minimise their tax obligations through simple, smart accounting on subscription. Get your obligation-free quote today!