What is Corporation Tax?
Corporation Tax is a tax paid on profits made by limited companies. It is paid directly to HMRC.
Corporation Tax may also apply to certain clubs, associations, charities and other organisations. Every company based in the UK must pay Corporation Tax on all their profits, including profits made overseas. Companies based outside the UK only pay Corporation Tax on income received in the UK.
It is the company that is legally required to pay Corporation Tax. In practice this means that the owner or director of the company must ensure that it is paid.
The rate of Corporation Tax payable on taxable income varies according to the amount of profit a company makes. In 2012 a company recording less than £300,000 taxable profit will be taxed at 20%, profits over £1,500,000 are taxed at 25%, and there is a sliding scale for profits in between.
Companies in certain industries, such as oil extraction, may have ‘ring-fenced profits’, which are taxed at different rates.