Resident versus Non-Resident Companies
Companies incorporated in the UK are considered resident unless treated solely as resident of another country under the terms of a tax treaty. Companies incorporated outside of the UK whose management and control occurs inside the UK are considered resident for UK corporate tax purposes. Management and control does not include decisions related to the day-to-day running of a business.
For non-resident companies, corporate tax liability generally requires the existence of a PE through which a trade is carried on in the UK. Profits from dealing in or developing UK land, gains that arise on disposals of UK immovable property and UK property rental profits are taxable in the UK even if there is no UK trading PE of a non-resident.
Corporate Tax Rates
The following general corporation tax rates apply:
| Profit | Rate |
| < £50,000 | 19% |
| £50,000 – £ 250,000 | Sliding Scale |
| > £250,000 | 25% |
Note that the above rates apply in totality; for example, a company with £300,000 in profit does not pay 19% on the first £50,000, a sliding scale to £250,000 and 25% above that but a flat rate of 25% on the total taxable profit of £300,000.
Special tax regimes apply to certain types of entity such as REITs and Qualifying Asset Holding Companies (QAHCs).
Assessed Losses
The UK has detailed and complex anti-avoidance rules for the utilisation of assessed losses. Carryback and sideways utilisations are allowed within limits; carryforward is generally allowed with no expiry of losses. The maximum offset for a carried forward loss is generally limited to £5m plus 50% of the current year profits in excess of that amount.
Specific rules apply to trading losses, non-trading deficits (‘NTDs’, referring to interest/financing losses) and non-capital management expenses for non-trading companies. Income losses can generally be offset against capital gains but capital losses are never available for offset against any type of income.
Deductibility if Expenditure
A trading company is – in the first instance – permitted to deduct expenses incurred wholly and exclusively for the purposes of trade other than costs that are capital in nature.
A number of specific provisions, rules and guidelines apply to certain expenditure such as depreciation and amortisation, management expenses, bad debts, provisions etc
Tax Administration
Companies must file their corporation tax return (CT600) within one year of the end of the accounting period (normally the accounting period is the same as the financial year). The maximum length of the accounting period permitted is 18 months and certain non-resident companies subject to corporation tax may have a one-day accounting period for which special rules apply.
The corporation tax return must include a self-assessment of tax payable. HMRC may override the self-assessment. The return must be filed online and accompanied by accounts that are in iXBRL format.
Corporation tax is payable depending on the size of the taxpayer:
| Company Type | Corporation Tax Payment Deadline |
| Small
(taxable profits <£1.5m) |
9 months and 1 day after the end of the accounting period |
| Large
(taxable profits between £1.5m and £20m) |
Quarterly provisional payments due based on estimated profits with first payment in the 7th month of the accounting period concerned |
| Very Large
(taxable profit >£20m) |
Quarterly provisional payments due based on estimated profits with tax due in 3rd, 6th, 9th and 12th months of period concerned. |
HMRC has a wide range of penalties it can – and does – impose for failing to comply with the requirements of the self-assessment framework, including for infractions such as late filing of returns, failure to maintain appropriate records, submitting an incorrect return, making errors, unreasonably failing to report errors and unreasonably failing to respond to formal notices for the request of information from HMRC.
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