Corporation Tax
There are two types of taxes which will affect you as a limited company contractor trading through your psc: Corporation Tax and Income Tax.
What is Corporation Tax?
Corporation Tax (CT) is tax paid on the profit and gains of your psc. The rate is variable, based on a tiered structure according to profit levels, how the company is owned and whether the profits are paid out as dividends or not. Most companies operated by contractors that pay out profits as dividends are taxed at 19%. The second type of tax is monthly PAYE for you and any employees of the company.
When is CT to be paid?
The payment of CT is due 9 months and 1 day after the end of your psc accounting period. HMRC will charge you interest on CT, however if your psc pays the CT early you will benefit by the HMRC paying your psc interest – they’re not that bad after all!
How is CT Calculated?
CT is payable on a company’s profit, which is chargeable to corporation tax within each accounting period. If this figure varies from the profits in the company accounts there are 2 possible reasons
i) Only allowable expenses can be deducted from your psc’s company’s profit chargeable to corporation tax
ii) There may be a number of tax reliefs in place which further reduce the CT liability for your psc
Your expert account manager will be able to advise you on legitimate allowable business expenses and tax reliefs that you can use to reduce your CT. We will also prepare the company’s CT return for your psc.
When forming your limited company, it is the director’s responsibility to inform the HMRC that your psc exists and then inform them of its CT Liability. All directors are equally responsible for ensuring that detailed records of income and expenditure are completed and kept up to date, the cps group will do this for you through your psc 4most – call us on 0844 854 5235 for an informal chat to see how we can help your psc.
