Corporation tax

The following types of organisations are liable for corporation tax:

• limited companies
• foreign companies with a UK branch or office
• clubs, co-operatives and other unincorporated associations (eg sports clubs and community groups)

Sole traders, partnerships and LLPs are not required to pay corporation tax.

In the tax year 2022/23, the standardised corporation tax rate is 19%. This applies to all businesses which are liable to pay corporation tax (apart from unit trusts and open-ended investment companies which must pay 20%).

Different rates are applicable to ring fence companies (which make profits from oil extraction or oil rights in the UK or UK continental shelf). For more information, see the Government’s guidance.

Once a company has registered with Companies House and started doing business (which includes buying, selling, advertising, renting a property and employing people), it must register for corporation tax within 3 months. Late registration may incur a penalty.

Companies can register for corporation tax online using their Unique Taxpayer Reference (UTR). They will also need the company registration number, the date on which they commenced business and the date to which their annual accounts are made up.

Unincorporated associations must write to HMRC to register for corporation tax.

Companies liable for corporation tax must ensure that they keep adequate company, financial and accounting records, including:

• details of directors, shareholders and company secretaries
• register of 'people with significant control' (PSC)
• records of all money received and spent by the company

Records must be kept for at least 6 years from the end of the last company financial year to which they relate. The Corporation Tax department of HMRC must be notified if any of these records are lost, stolen or destroyed.

For further information about records that must be kept, see the Government’s guidance.

Companies must pay corporation tax on any profits including:

• trading profits (ie money made from the core business)
• investment or rental income
• capital gains (ie selling assets at a profit - including land, property, equipment and machinery)

Trading losses can be offset against profits but capital losses can only be offset against capital gains.

A Company Tax Return is used to work out a company’s profits and losses and corporation tax bill. For more information, see the Government’s guidance.

The deadlines for paying corporation tax depend on the company’s taxable profits:

• for taxable profits of up to £1.5 million, the deadline is 9 months and 1 day from the end of the company’s accounting period

• for taxable profits above £1.5 million, corporation tax must be paid in instalments (the deadlines vary depending on if profits are between £1.5 and £20 million or above £20 million) 

If there are no profits, a Company Tax Return is still required, however, a 'nil to pay' form must also be submitted to HMRC.

The costs of running a business can be deducted from profits when preparing company accounts. However, some expenses are not allowed for purposes of corporation tax (eg entertaining clients).

Capital allowances (ie assets that are purchased for use in business) can be deducted from profits. These include equipment, machinery and business vehicles.

Other reliefs include:

• research and development (for companies that work on innovative projects in science and technology)
• profits from patented inventions - known as the 'Patent Box' (for companies that make a profit from patented inventions)
• creative industry reliefs or 'CITR' (for companies that make a profit from theatre, film, television, animation or video games)
• relief on disincorporation (if a company is being closed and turning into a sole tradership or partnership)
• relief for companies that make capital or trading losses
• marginal relief (for companies with profits between £300,000 and £1.5 million up to 1 April 2015)

For further information on allowances and reliefs, see the Government’s guidance.