Paying Corporation Tax To HMRC
In this guide we’ll take a look at everything you need to make Corporation Tax payments in the UK – including how to pay them and what to keep an eye on when completing your company tax return for the current accounting period.
Who pays HMRC Corporation Tax?
Corporation Tax is the primary tax paid by any limited company based in the UK as well as any company that is based internationally but has offices or branches in the UK.
Some types of businesses, including unincorporated associations co operative associations like a community group or sports club, will also have a Corporate Tax liability.
In short, if the company makes taxable profits from UK activities, you’ll hold Corporation Tax liability and have to make a payment.
Corporation Tax on Profits
Your company’s Corporation Tax liability will be based on all profit made from corporate activities. This isn’t just limited to trading profits from doing business – you’ll also have to keep in mind profits from investments as well as money generated from selling assets for more than they initially cost (‘Chargeable gains’). If you’re curious about the tax on selling a business. You should read our article about “Paying corporation tax when selling a business asset“.
Mandatory steps for a business for paying Corporation Tax
Unlike Income Tax, Corporation Tax isn’t calculated automatically and your company has a duty to put the necessary infrastructure in place for making Corporation Tax payments. You can complete these steps yourself or hire a corporate accounting specialist.
There is also third party software, like Xero and Quickbooks, available to help keep track of everything and make submitting tax returns easier and smooth out the process of completing your tax return for the year’s accounting period.
Whichever route you chose to go down the steps are as follows:
- Register for corporation tax when you set up a company or restart a dormant company through Companies House. You must write to HMRC within 3 months of starting business activity if you are an unincorporated association.
- Maintain accurate accounting records for the company and complete a business tax return to calculate how much Corporation Tax to pay.
- Pay Corporation Tax or inform HMRC if there is nothing to pay by the deadline—this is normally nine months and one day after the end of the year’s accounting period.
- File your Company Tax Return by your deadline—normally the deadline date will be twelve months after the accounting period ends.
HMRC Corporation Tax payment deadline
Once you file a company tax return for a given Corporation Tax accounting period, you need to be aware of the time frame rules when attempting to actually pay tax from the Corporation Tax bill.
The ‘normal due date’ is generally nine months after the end of the current accounting period. So a company with an accounting period ending 20/04/2022 must have paid for the Corporation Tax by the following 1st of February.
Taxable profits of up to £1.5 million
If your company’s profits for a Corporation Tax accounting period does not exceed £1.5 million, you will pay your calculated corporation tax liability in one lump sum.
There are late payment fees issued by HMRC for a company that misses the deadline so it’s worth sorting tax early and making sure financial planning has accounted for this lump sum.
Taxable profits of more than £1.5 million
If a limited company holds corporation tax liability on profits that exceed £1.5 million then it must pay the Corporation Tax bill in four quarterly instalments. This is also subject to late fees if these instalments are missed.
Taxable profits are between £1.5 million and £20 million
As for the company’s corporation tax liability if they generate between £1.5 million and £20 million it is also paid in quarterly instalments. There are, however, exceptions made for certain circumstances that would still make it necessary to pay a lump sum. These normally cover companies that have not had a long enough accounting period due to being new. A full list of exemptions can be found here.
Taxable profits are more than £20 million
HMRC defines a ‘very large’ limited company as one that makes profits in excess of £20 million and these companies will also have to pay in four quarterly instalments. This threshold is reduced in certain scenarios as can be read here. You must pay this at intervals of three, six, nine and twelve months after the end of the previous year’s accounting period.
Pay Your Corporation Tax Bill
You can fulfil the company’s liability to pay Corporation Tax in a number of ways. Since 2011, these methods all rely on electronic banking methods and are generally straightforward, so you should have no issues completing payment within nine months after the end of the tax return.
Not sure about the corporation tax for a non trading company? Click that link to our article to find out more!
Paying through CHAPS or Bacs (add a table bank details for paying through CHAPS or Bacs)
You can make payments to HMRC through CHAPS, Faster payments or BACS.
These normally take different amounts of time, so if you’re rushing to get a last-minute payment in before the final months after the end of the window, be aware of processing times and if there is a bank holiday when paying.
‘Faster payments’ and BACS will generally take around a day and are often received the same day they are made. This is the quickest way to pay your corporation tax bill.
BACS, however, can take around three working days and you need to check on your banking company or building society’s transaction limits. You’ll need to get in touch with your bank and pass on the reference number found on your tax bill along with the following information:
- Accounts Office: Cumbernauld
- Sort Code: 12 23 34
- Account Number: 1234 5678
- Account Name: HMRC Cumbernauld
Multiple payments by CHAPS
If your company is large or has complex accounting needs you may wish to pay in multiple payments via CHAPS as opposed to a lump sum.
To do this, you’ll have to send HMRC a CHAPS enquiry form along with all payment reference forms you wish to make multiple payments for.
HMRC’s banking address
If your company is wishing to pay via BACS you will require the banking address for HMRC.
As of the time of writing this is:
Barclays Bank PLC
1 Churchill Place
London
United Kingdom
E14 5HP
Paying corporation tax
Keeping on top of your corporation tax payments is key to making sure everything runs smoothly in your business. Since there are a number of ways for you to pay, why not get it in early to save yourself the stress?
If you’re unsure about any aspect of your taxes or need assistance with financial tax planning, consulting our tax advisors for corporate tax advice will save you time, money, and potential headaches. To provide you with an efficient and seamless tax process, Sleek has the right set of solutions for you!
FAQ
Corporation Tax can be paid via cheque or cash payment at the bank but will require you to have a ‘paying-in’ slip from HMRC. This is a piece of paper that shows how much money you are paying into an account.
No, as of 2022 you can no longer pay at the post office, nor can youpay by credit card. Instead, Corporation Tax can must paid electronically or at your bank.
You can pay via personal debit card accounts but not with a personal credit card. You can also use your company card, which will make admin a lot easier.
If you haven’t paid by the due date ,you will be eligible for fines and potentially other sanctions from HMRC for multiple late payments. Contact HMRC directly if you have issues with paying your bill.
No, payments are to be made in a single sum or split across four quarterly payments for larger limited companies. If you need more time to make your payment, you may wish to enquire about the possibility of paying in installments.
