Corporation Tax Guide for Limited Company Contractors

Limited Company Contractors have to pay Corporation Tax on all company profits at the Small Business Rate of 20%. Once Corporation Tax has been paid (or provided for) a dividend can be distributed which, when considered versus PAYE, saves significant amounts in Employers National Insurance.

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At Commonwealth Contractors we work with Chartered Accountant Partners who can help you to go into business with your own Contractor Limited Company and maximise contract earnings.

To discuss your situation with an experienced advisor call Commonwealth Contractors now on 0800 294 4388 or Submit your Details and we will get right back to you!

Corporation Tax Rates

The table shown below sets out current and historical Corporation Tax rates;

RATES & BANDS

2010/11

2011/12

2012/13

2013/14

2014/15

2015/16

SMALL PROFITS TAX RATE

21% 20% 20% 20% 20% 20% 20%

SMALL PROFITS TAX BAND

£0 – £300,000 £0 – £300,000 £0 – £300,000 £0 – £300,000 £0 – £300,000 £0 – £300,000

MAIN CORPORATION TAX RATE

28% 26% 24% 23% 21% 20%

MAIN CORPORATION TAX BAND

£1.5+ million £1.5+ million £1.5+ million £1.5+ million £1.5+ million £1.5+ million

Please note that ‘marginal relief’ is used between £300,000 and £1,500,000 to ease the transition from the Small Profits Tax Band to the Main Corporation Tax Band.

Registering for Corporation Tax

When you form a new limited company you must contact the HM Revenue and Customs (HMRC) to notify them of the registration.

If you use a professional contractor accountant this will normally be part of the service. If you are an individual you should see the following link (http://www.hmrc.gov.uk/ct/getting-started/new-company/start-up.htm).

The HMRC will send you a letter to confirm your accounting period and Corporation Tax Reference Number which you must detail on all official correspondence.

Paying Corporation Tax

Corporation Tax payments are normally due nine months and one day after the end of your accounting period, so if your company tax return runs from 1st January 2014 to 31st December 2014 your Corporation Tax must be paid no later than the 1st October 2015.

In order to file a Corporation Tax return you (or your accountant) will need to complete Form CT600 which you can get from the HM Revenue & Customs website. Copies are also sent out by the HMRC to the company’s registered address.

Corporation Tax payments should be made direct to the HM Revenue and Customs by electronic bank transfer.

Limited Company Profits and IR35

You can ONLY take profits from your Contractor Limited Company if income was generated further to a contract which was outside the scope of IR35. If the contracts you have been working on are considered to be Inside IR35 you will have to deduct employed levels of tax and Class 1 National Insurance using the PAYE scheme.

Find out More

To find out more about Commonwealth Contractors call now on 0800 294 4388 or Submit your Details and we will get right back to you!

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