Corporation tax
Rather than paying income tax, limited companies are liable for corporation tax on their profits.
What you need to do:
• Tell HMRC that your company exists and is liable to corporation tax. You can do so by contacting your local HMRC office.
• File a self-assessment company tax return (CT600) for your company on which you calculate your own corporation tax liability and pay it without prior assessment by HMRC.
• Keep records of all company expenditure and income in order to work out your tax liability accurately.
If you don't let HMRC know that you are liable for corporation tax, file your company tax return incorrectly or pay your corporation tax late, you may incur a financial penalty. To avoid penalties and interest charges you should know your:
• statutory filing date - date by which your company tax return must be received by the Inland Revenue (normally 12 months after the company year end).
• normal due date - date by which you must pay your corporation tax (normally 9 months and 1 day after the company year end).
Capital allowances
Capital allowances represent the expenditure claimable on purchases of capital equipment which qualifies as plant & machinery. They can be thought of as the tax allowable equivalent of depreciation.
The rates for capital allowances vary depending on the type of capital expenditure incurred.
The standard rate for Capital Allowances is 25% on a reducing balance basis. There are however exceptions to the rule:
• Cars which are more than £12,000 are limited to a maximum claim of £3,000 in any one tax year.
• Any additions you make may be subject to a First Year Allowance claim instead of the the standard 25% allowance.
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