Step-by-step guide to register for Corporation Tax for new businesses
To successfully register for Corporation Tax, new business owners must follow a clear set of steps within a critical time frame. This guide concisely leads you through the process, detailing what information to prepare, when to file, and how to avoid penalties. By the end, you’ll have a thorough understanding of the requirements to secure your company’s compliance with HMRC.
Overview:
- Essential primer on corporation tax
- Understanding corporation tax obligations
- Initiating the registration process
- Navigating HMRC’s online services
- Understanding your Unique Taxpayer Reference (UTR)
- Preparing for your company ta return
- Addressing special cases in Corporation Tax
- Financial year alignment and accounting periods
- Why professional advice matters
Essential primer on Corporation Tax
Corporation Tax, also known as corporate tax, is the mandatory tax contribution a business makes, based on its profits.
This tax includes not only trade profits but also interest on investments and any gains from selling or disposing of assets.
All business must register for Corporation Tax within three months of commencing their business activity.
This activity is not limited to the selling of goods or services; it encompasses any act that plants the seeds for future commerce, such as buying stock, advertising, or renting a property for operations.
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Understanding Corporation Tax obligations
Whether it be selling wares or services, advertising to the masses, renting property for operations, or employing staff, profit from these activities make businesses responsible for registering for and subsequently paying Corporation Tax.
Initiating the registration process
Registering for Corporation Tax is an essential step that involves securing a Unique Taxpayer Reference (UTR) from HMRC.
This process sets the stage for your business to engage with tax obligations and aligns with the registration for other taxes like Value Added Tax (VAT) and PAYE for employers, should they be requisite.
To embark on this journey online, you must first create a Government Gateway user ID and password, followed by submitting your company details to HMRC.
The timeline for registration
The clock for registering for Corporation Tax starts ticking from the moment business activities commence, be it trading, advertising, or hiring employees. Within three months of these business activities, your business must register. Failing to do so can lead to penalties that escalate with each passing day, starting from a seemingly minor £100 for a single day’s delay.
Necessary documentation
To register for Corporation Tax you will need all necessary documentation, including your company’s registration number, a distinct identifier issued by Companies House. Other essential information includes:
- The date when the business began any commercial activity
- The company’s financial year-end date
- The CT41G form, showing that your company is a UK tax resident and bearing the UTR number.
Navigating HMRC’s online services
The Government Gateway online portal is the entry point into HMRC’s online services, a portal where businesses can fulfil their tax obligations. To access these services, you will need a user ID and a secure password.
Accessing your Government Gateway user ID
The Government Gateway user ID is typically received via email during the initial HMRC service registration. Should you lose your username or password, the ‘Problems signing in’ web page should help you recover them
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Understanding your Unique Taxpayer Reference (UTR)
The Unique Taxpayer Reference (UTR) is the distinguished identifier that HMRC uses to recognise individuals and companies within the UK tax system.
The UTR can be found in your HMRC online services account, or on any official correspondence, such as letters from HMRC.
Preparing for your Company Tax Return
As the fiscal year ends, attention turns to the preparation of your Company Tax Return. According to the timeline set by HMRC, Corporation Tax payments are due nine months and one day after the close of the accounting period, while the filing of the Company Tax Return must occur within 12 months of the same period’s end.
Record-keeping requirements
For new companies, the management of PAYE as part of their payroll is an essential step after registering as employers with HMRC. This task involves calculating taxes due for payroll using each employee’s tax code and reporting and paying any deductions to HMRC every month.
Additionally, registered VAT businesses must submit VAT returns, usually every quarter, and settle VAT bills online. Corporation Tax calculations require maintaining comprehensive documentation such as receipts and invoices to track a business’s income and expenses.
Meeting deadlines and avoiding penalties
The consequences of late or incorrectly filed tax returns begin at £100 for being just one day late, and escalate with each passing day, including accruing interest on overdue amounts.
Companies must file a Company Tax Return regardless of whether the business has Corporation Tax to pay.
Even after the initial filing, adjustments can be made within 12 months of the statutory filing date, but errors uncovered beyond this time must be corrected following HMRC’s specific procedures.
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Addressing special cases in Corporation Tax
Dormant companies, recognized by HMRC as inactive, are exempt from the regular filing of tax returns and the payment of Corporation Tax provided they have ceased trading and do not partake in other income-generating activities. Dormancy is a status granted to companies that:
- are not trading
- have not begun to trade
- owe less than £100 as an unincorporated association
- are flat management companies.
However, certain income-generating activities will remove a company’s dormating state, such as:
- trading, which can result in trading profits
- renting
- selling assets
- holding assets that can produce profits
Once your company is no longer dormant, you will need, once more, to file a Corporation Tax return and pay Corporation Tax
Financial year alignment and accounting periods
For Corporation Tax purposes, a company’s financial year typically mirrors its accounting period, the 12-month duration that annual accounts cover..
However, should a company’s business activities commence or cease partway through the year, or if other significant events occur, an adjustment to the accounting period may be required to maintain compliance with tax regulations.
This can sometimes lead to the necessity of filing two tax returns if a company’s first financial year surpasses the 12-month mark due to its immediate commencement of trade.
The information provided during Corporation Tax registration assists HMRC in determining the company’s tax accounting period, thereby establishing the critical dates for filing and payment.
Why professional advice matters
When it comes to Corporation Tax, the guidance of a seasoned tax accountant can help you streamline the process of Corporation Tax registration, ensuring compliance with myriad regulations and optimising tax positions following HMRC’s guidelines. Seeking the expertise of tax advisors allows business owners to:
- Focus on your company’s growth and profitability
- Have tax minimisation strategies
- Achieve significant savings through efficient tax planning.
Tax advisors or accountants, once authorised, can officially manage a business’s tax affairs with HMRC, holding the necessary competencies for effective tax handling. Companies like Sleek offer comprehensive tax management, encompassing Corporation Tax, bookkeeping, Self Assessment and much more.
FAQs
Sign in to your business tax account to register for Corporation Tax, requiring your company’s Government Gateway user ID and password. Follow the guidance in your account to complete the online registration or submit form IN01 to Companies House.
Once you have notified HMRC that your company is dormant, you will not be required to pay Corporation Tax or file a Company Tax Return unless you receive a further notice from HMRC. Thus, registering for Corporation Tax is not necessary if your company is dormant.
Corporation Tax must be paid by all limited companies regardless of whether or not they make a profit. Therefore, Corporation Tax must still be paid even if there are no profits made.
Failure to register for Corporation Tax within the required timeframe can lead to penalties, depending on how much is owed and how late the registration is.
To find your company’s Unique Taxpayer Reference (UTR), you can locate it in HMRC online services or letters.
