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Companies with a 31 December year end

For companies with taxable profits of up to £1.5 million the payment of any Corporation Tax is due 9 months and 1 day after the end of your accounting period. The accounting period is usually the financial year of your business but can be different especially in the first year of business.

This deadline means that companies with the popular year end date of 31 December 2019 should have paid any liabilities for that year at the beginning on or before 1 October 2020. Interest is charged from the day after the tax should have been paid until payment has been made. 

HMRC have not extended the date for Corporation Tax Payments and payment remains due 9 months and 1 day after your accounting year end. However, you can apply to HMRC to pay on an instalment basis or defer payment if your finances have been badly affected by coronavirus. If you have missed your payment date, we would recommend contacting HMRC as soon as possible. We can assist you with this process if required. 

There are special rules for companies with taxable profits over £1.5m. These companies are defined as ‘large’ for Corporation Tax purposes and are required to pay tax due in instalments. 

Corporation Tax and related payments must be made electronically. You cannot pay Corporation Tax by post.

Source: HM Revenue & Customs Sun, 13 Sep 2020 00:00:00 +0100

Carry Corporation Tax losses back

Corporation Tax relief may be available where your company or organisation makes a trading loss. The loss may be used to claim relief from Corporation Tax by offsetting the loss against other gains or profits of the business in the same accounting period.

Where the amount of a trading loss exceeds the profits of the same accounting period, the company may claim to carry back the excess against the profits of preceding accounting periods. The preceding accounting periods are those falling wholly or partly within the preceding period.

Losses may only be carried back against profits of a preceding accounting period if the company was carrying on the trade (in which the loss was incurred) at some time in that accounting period.

Any claim for trading losses forms part of the Company Tax Return. The trading profit or loss for Corporation Tax purposes is worked out by making the usual tax adjustments to the figure of profit or loss shown in the company’s or organisation’s financial accounts.

If a company ceases to carry on a trade, the preceding period is three years preceding the accounting period in which the loss is incurred. Accounting periods must be taken in order, most recent first.

Source: HM Revenue & Customs Sun, 13 Sep 2020 00:00:00 +0100

Taxation of grants

A wide variety of grants or subsidies are available to businesses and can be received in addition to the ordinary business income. It is important to identify these and to establish whether they are capital or revenue in nature so that they are dealt with correctly for tax purposes.

Amounts received towards revenue expenditure, such as staff costs, are normally trading receipts and should be included as income or netted off against the relevant expense. Funding which meets capital expenditure is normally treated as a capital receipt. Grants that may be capital in nature include those paid to acquire capital assets, machinery or to facilitate the cessation of a trade or part of a trade.

Some grants may not be for a specific purpose. These are termed undifferentiated receipts. An undifferentiated receipt should be regarded as revenue; however, there is an exception for specific grants paid by Highlands and Islands Enterprise.

Source: HM Revenue & Customs Wed, 09 Sep 2020 00:00:00 +0100

Corporation Tax – carrying back losses

Corporation Tax relief may be available where a company or organisation makes a trading loss. The loss may be used to claim relief from Corporation Tax by offsetting the loss against other gains or profits of the business in the same or accounting period.

Where the amount of a trading loss exceeds the profits of the same accounting period, the company may claim to carry back the excess against the profits of preceding accounting periods. The preceding accounting periods are those falling wholly or partly within the preceding period.

Losses may only be carried back against profits of a preceding accounting period if the company was carrying on the trade (in which the loss was incurred) at some time in that accounting period.

Any claim for trading losses forms part of the Company Tax Return. The trading profit or loss for Corporation Tax purposes is calculated by making the usual tax adjustments to the figure of profit or loss shown in the company’s or organisation’s financial accounts.

If a company ceases to carry on a trade, the preceding period is three years preceding the accounting period in which the loss is incurred. Accounting periods must be taken in order, most recent first.

Source: HM Revenue & Customs Wed, 17 Jun 2020 05:00:00 +0100

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