Corporation Tax Return

Corporation Tax Return
Corporation Tax Records

All companies are required by law to maintain records of
that company's transactions in a manner that must be
adequate to enable the company to produce an accurate
Company Tax Return. Company tax records must be kept for a
minimum of six years from the end of the accounting period
and longer if the accounts are submitted late or being
enquired into by the Inland Revenue. Company tax records
must include all original sales receipts and purchase
expenses. Under the Companies Act legislation registered
companies must also keep accounting records.

Companies are responsible for calculating their own
corporation tax liability and paying the corporation tax
without prior assessment by the Inland Revenue. Companies
which fail to deliver their tax return by the statutory
fling date which is normally 12 months after the accounting
period are liable to penalties. An accounting period
normally being 12 months - can be shorter but never longer.
Should a company submit the CT600 Corporation Tax return
form without the accounts then it is treated as not having
submitted a tax return form.

Current Company Tax Return Forms

The latest version of the CT600 form for 2007 has been
available for download from the Inland Revenue website
since 31 August 2007. The Corporation Tax Return Form CT600
Version 2 contains two small changes from the previous 2006
version. CT600 (short) for small companies has an
additional box on Page 1 so that a company which is a
member of a group other than a small group can identify
itself. The same additional box is on CT600 plus a new box
on page 3 of the 8-page form so that a company with ring
fence profits can show the ring fence profits included in
its figure of total profits. There are no changes to other
forms in the CT600 series at present and all the CT600
Supplementary Pages published in 2006 remain valid and will
probably remain so until at least after the 2008
Chancellor's Budget.

Corporation Tax Rates

While the main rate of Corporation Tax remained at 30% in
2006 and 2007 which will be reducing to 28% in 2008. The
small company corporation tax rate applicable to companies
with annual profits under £300,000 was increased from 19%
in 2006 to 20% effective on profits earned after 1 April
2007 and is set to increase further on 1 April 2008 to 21%
and to 22% from 1 April 2009. Corporation Tax on ring
fenced profits being income and gains from oil extraction
activities or oil rights in the UK and UK Continental Shelf
remain at 19% for small companies and 30% for larger
companies. Interest is charged on late payments and at a
lower rate on instalment repayments of Corporation Tax as
is the practice on all late tax payments.

Accounting Periods straddling 1 April

The effective date for changes in the Corporation Tax rate
applicable in recent years has been 1 April each year as
opposed to the 5 April for unincorporated businesses. For
companies with accounting periods that straddle the 1 April
separate calculations are required for the period before 1
April and after 1 April based upon the number of days in
each accounting period. As a proportion of 365 (366 in leap
years such as 2008)

No Corporation Tax Due

Companies are required to advise HMCE by either submitting
a company tax return or informing them by completing the
HMCE form for this purpose or at the very least returning
the payment slip marked "NIL due". All communications
should state the corporation tax payment reference which
can be found on the payment slip. This reference number is
specific to each accounting period and must be quoted
accurately.

Filing Corporation Tax Return Online

Most companies and their agents can file company tax
returns online. The computations, financial accounts and
other supporting documentation must be sent in PDF format
with some approved software products being sent in XBRL
format. Filing the company tax return online has the
advantages of speed, can be done 24 hours a day and the
software calculates the tax liability. Using the CT Online
service also allows the company's tax position to be viewed
including any interest or penalties that have been charged.
Company details such as telephone, fax, addresses and email
addresses can be changed and agent details can be added or
changed. Authorised agents can also view client company
corporation tax positions and liabilities.

Inland Revenue Enquiries into Company Tax Returns

Enquiries into Company Tax returns are governed by rules
and codes of practice. HMCE have at least 12 months from
the statutory filing date to commence an enquiry when the
company tax return has been submitted on time and longer if
the return is submitted late. Companies are advised in
writing when an enquiry starts and ends. If no adjustments
are required HMCE advise the enquiry has finished. Any
adjustments are also advised in writing and the company
then has 30 days to file an amended Company Tax Return
failing which HMCE will amend the return. At any time
during an enquiry a company can apply to the Inland Revenue
Commissioners for an enquiry to be closed. Separate codes
of practice exist for local offices and specialist
compliance offices.

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Terry Cartwright provides Accounting Software and Payroll
Software packages at
http://www.diyaccounting.co.uk/index.htm

and limited
companies at
http://www.diyaccounting.co.uk/companyaccounts.htm