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Effective Tax Strategies

Tax Consultants: Dealing with Corporate and Corporation Tax

What is Corporation Tax?

Corporation Tax was introduced in 1965 to avoid individuals and companies from paying the same rates, which is unfair. Companies and some organisations are required to pay what is known as Corporation Tax on their Taxable profits. This does not include sole traders, traditional or limited liability partnerships as well as local authorities and associations. Organisations or companies whose profits are used for charitable purposes are exempt from paying Corporation Tax. Unincorporated organisations liable for Corporation Tax but have an amount of less than £100, payable for their accounting period will be considered dormant, meaning that it is then not liable to pay any Corporation Tax. Such organisations are required to notify HMRC that they do not have Corporation Tax to pay and this is quite a simple process whereby the company files their returns early or completes an online form.

Fiscal Year and Rates for Corporation Tax

Corporation Tax is a corporate Tax and is payable on an annual basis which is called the fiscal or financial year at a rate of 30% for companies and organisations whose net profit exceeds £1.5 million and 19% for  those which have a net profit of below £300,000. As far as Corporation Tax is concerned, the fiscal year begins on 1st April and ends on the 31 and all organisations that are liable for Corporation Tax are required to split their Taxable profits into two separate financial years should their accounting period not coincide with the fiscal year of Corporation Tax. It is the duty of the organisation to inform HMRC that they are liable for Corporation Tax and pay the correct amount on time which must be 9 months after the organisations Corporation Tax accounting period. Larger companies and organisations are required to pay their Corporation Tax in quarterly instalments.

Hiring a Consultant to Take Care of your Corporation Tax

Due to the complexity of Corporation Tax, many organisations hire accountants and Tax advisers or consultants to handle their Corporation Tax. This is particularly true for companies and organisations that have accounting and Corporation Tax fiscal years that differ and obviously larger organisations that have complex Tax requirements. HMRC now require that this be submitted in Inline eXtensible Business Reporting Language (iXBRL), which has resulted in an increased number of companies and organisations outsourcing their Tax matters to avoid the administrative burden this brings.


If too much Corporation Tax has been paid, this additional amount can be used to pay the Corporation Tax due for the next fiscal year by carrying this repayment forward. This is a situation that can be avoided altogether and rectified accurately by hiring a professional to take care of the matter. The appointed service provider or consultant will then be responsible for filing the organisations Tax return and Corporation Tax documents as required in an accurate and timely manner. To legally appoint an individual to represent your organisation you are required to inform HMRC of their appointment by completing the Corporation Tax online authorisation process.

The Self-Assessment – who is liable?

In order to be able to submit a Tax return you must first register for Self Assessment with HMRC. Self-employed individuals, business partners, directors, those who are liable for high amounts of Tax and individuals who earn income from property in the UK must register for the self-assessment. After registrations a Unique Taxpayer Reference (UTR) number will be issued. The financial Tax year in this case runs from 6th April and ends on 5th April of the following year.

What is Inheritance Tax?

If an inherited estate is over the threshold amount of £325,000 then the beneficiary is liable to pay inheritance Tax.  Any amount in excess of this threshold is Taxable at a rate of 40%.  A charitable donation will qualify the estate for a reduced rate and therefore will reduce your Inheritance Tax bill by bringing the Tax rate to 36%. Married couples are liable to pay inheritance Tax only if the total value exceeds £650,000 collectively. Although David Cameron backs raising of inheritance tax threshold, the current rates still stands and will remain as is until the next elections are over. Inheritance Tax must be paid within 7 years of death.

Annual Property Tax

Also known as mansion tax, high value property Tax is a proposed Tax that would’ve been payable on homes that are valued at over £2 million. This was the initial proposal however, it has neither been finalised nor implemented due to wide spread criticism by the public.

Capital Gains Tax

Capital Gains Tax is payable on the selling price of a capital asset such as stocks or a real asset such as property and for individuals Tax is only due on amounts exceeding £8,800 of net profit.

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Effective Tax Strategies, 28 High Street, Cullompton, Devon, EX15 1AA.

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