During the last 12 months, the level of corporation tax collected from companies in the UK has increased from £3.2bn to £4bn – a 25 per cent rise in the overall tax yield. Research carried out by legal specialists at Pinsent Masons indicates that the reason for this increase could be a more aggressive stance by HMRC and lower rates of corporation tax.
Rates of corporation tax have been cut by the Government in a bid to make the UK a more attractive proposition for large businesses. The rate of corporation tax is currently 21 per cent but, at the start of the new tax year, it will be reduced to 20 per cent.
Previously, a Customer Relationship Manager would meet with the heads of tax from companies, so that a working relationship could be maintained. However, inspectors from HMRC now meet with the Chief Financial Officer of a company and sometimes non-executive directors.
Eloise Walker, who is a partner of Pinsent Masons, explained that HMRC is working hard to dispel the myth that large companies are getting away with not paying their fair share of corporation tax, and is keen to demonstrate that it is tackling the situation.
What is Corporation Tax?
A limited company is required to pay up on its taxable profits, and this is called corporation tax. Companies abroad that have an office or branch in the UK are liable to pay corporation tax, as are unincorporated clubs and associations here.
Corporation tax is paid on trading profits, chargeable gains and income from investments. If the company is UK based, it will pay corporation tax on all profits gained abroad or in the UK. If the company is based overseas but has a branch in this country, the profits gained from UK activities will be liable to corporation tax.
The year for corporation tax runs from 1st April to 31st March. If a company has profits of £300,000 or less during a year, it will be charged the small profits rate of corporation tax, which from 1st April 2014 was 20 per cent. Profits above this level will be charged the main rate, which is 21 per cent at present.
What’s your experience with corporation tax? Let us know in the comments section below. Have you found it to be overly complex? It can be a tough area to grasp, so if you need advice, please contact us here at The Accountancy Partnership.
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