What is a Company Tax Return

A company tax return is a completed CT600 form which is submitted to HMRC alongside a financial report and calculations in order to declare how much a company is due to pay in tax from profits. The company tax return will cover a single accounting period for the company, which is determined when a company is first incorporated. Usually the accounting periods spans 12 months, but it is possible to change this if needed. You can shorten the accounting period as many times as you like by a minimum of one day, however if you wish to extend the accounting period to over 12 months then there is a maximum allowance of up to 18 months (unless the company is in administration) and you are only allowed to do so once every 5 years. Where a company extends their accounting period, they are still obliged to complete a company tax return covering 12 months and so must therefore file 2 company tax returns in total, where the second covers the remaining period.

Who needs to complete a company tax return?

Only limited companies are required to file a company tax return. If you run a business as a sole trader or partnership, then you will need to complete a self-assessment tax return instead. It is the directors of limited companies which are responsible for completing the company tax return. Actively trading companies will usually file annually, however dormant companies can be requested to complete a company tax return by HMRC also. If your company receives a ‘Notice to deliver a Company Tax Return’ (form CT603) then you are legally obliged to complete one by the deadline.

What to include in a company tax return

The company tax return is not simply made up of the completed CT600 form. You need to include additional information which consist of your full statutory accounts and your computations (calculations showing how you have arrived at the amount of corporation tax that needs to be paid) which has to be submitted in the Inline eXtensible Business Reporting Language (iXBRL) format. Bear in mind that the profit and loss statement from your full statutory accounts may be slightly different to the profit and loss statement from your annual accounts as it should include year-end adjustments which will remove non-allowable tax deductions from expenses.

Since 1 April 2011, all companies which are required to file a company tax return must do so electronically online. However, if you wish to submit in paper format, you are permitted to do so only if you are filing in Welsh or fall under one of the HMRC given exemptions. If you send in a company tax return in paper format, then you will also need to fill in a WT1 form to explain why you have used the paper form.

When to file a company tax return

Unlike sole trader and partnership businesses that have a fixed annual deadline of 31 January, the deadline for filing a company tax return is different for every business and is dependent on their chosen financial year-end.

Companies have until 12 months after the end of their accounting period to file and submit the company tax return which is the CT600 form, the full statutory accounts and computation. The tax that has to be paid for the period has a different deadline of 9 months and one day after the end of the accounting period. In practice, they are often completed together. Even where the company makes a loss or does not have any corporation tax to pay, they must still file the tax return.

Where a company misses their year end deadline, HMRC imposes an automatic penalty of a £100 fine from the first day after the deadline. If it has not been filed within 3 months after the deadline, a further £100 fine will be issued. After 6 months, HMRC adds 10% on top of what they estimate your corporation tax to be and if even after 12 months the company tax return has not been filed then an additional 10% is added again.

How to file a return a company tax return

To open a new limited company, you must register with Companies House. You will also be required to register with HMRC, within 3 months of your company starting to do business (activities include hiring your first employee, marketing, selling/providing services, applying for loans etc). Once you have registered you will receive a Government Gateway ID and password which you’ll need to use to log into your account to file your company tax return.

To complete the CT600 form, follow our instructions on How to File a Company Tax Return. 

How much to pay

By creating the computations for the company tax return, you will be able to calculate how much tax needs to be paid. From April 2023, corporation tax is charged on a sliding scale between 19% and 25% depending on our company’s profits. Small companies with profits of under £50,000 will be charged at the 19% rate and companies with profits of over £250,000 will be charged at the 25% rate. For companies with profits in between the marginal relief will apply. Unlike personal income tax, there is no equivalent to the personal income allowance. Instead, where applicable, limited companies will be able to claim for some allowable expenses and deductions that will help reduce the tax bill.

How to pay

There are several options on how to pay for your corporation tax, however, make sure that whichever method you use will mean payment has been received by HMRC within the deadline:

• CHAPS, online or telephone banking (Faster Payments) will complete either the same day or next day depending on time of day you make the transfer
• Bacs, direct debit (if it has already been set up), online payment by debit or corporate credit card, paying in slip at your bank or building society will take approximately 3 working days to clear
• A new direct debit which is being set up for the first time will take approximately 5 working days to clear

Remember, paying your corporation tax and filing your company tax return have different deadlines. If you do not make your corporation tax payment in time by deadline, HMRC will charge you interest on the amount owed and can also discretionally issue a further penalty on top. HMRC also have the authority to take further measures to collection payment, ranging from, but not limited to taking control of goods owned by the company and closing down the company.

On the other hand, HMRC also rewards those who pay their corporation tax early. HMRC will pay some of your tax back to you as interest at a rate of 0.5% if you complete your payment early, but the earliest they will pay from is 6 months and 13 days before your deadline is due.

If you’re looking for help with completing your company tax return then please visit our Company Tax Return service page.