Corporation Tax is a tax on the taxable profits of companies (and a number of other organisations such as clubs and societies). Companies must “self assess” their Corporation Tax liability by submitting a Company Tax Return (CT600) to HM Revenue & Customs (HMRC).
A company pays Corporation Tax on the taxable profits arising in an accounting period.
Who is liable to Corporation Tax?
Limited companies and some organisations including clubs, associations, societies and other unincorporated bodies are liable to Corporation Tax.
A company or organisation based in the UK will have to pay Corporation Tax on all of its taxable profits - wherever in the world those profits come from. Whereas a company which isn’t based in the UK but operates here through an office or branch (known to HMRC as a ‘permanent establishment’) will only have to pay Corporation Tax on any taxable profits arising from its UK activities.
What is an accounting period?
An accounting period for Corporation Tax purposes is normally 12 months long (and matches the company’s 12 month financial year). But in some instances, the Corporation Tax accounting period won’t be the same as the company’s financial year (or the longer or shorter financial period for which is prepares its accounts). So if, for example, the company’s accounts cover a period of 18 months then the company must file two Company Tax Returns covering two Corporation Tax accounting periods of 12 months and 6 months respectively.