After having company registration in the UK from India, you will need to follow compliances and pay taxes in the UK.
Let’s understand the Corporate Taxes in UK for Company Registered in India.
What does Corporate Tax in UK mean?
Corporation Tax is a type of corporate tax that is imposed on the annual profits of UK resident companies and branches of foreign companies.
It is one of the many taxes in the UK that companies have to comply with.
Who is required to pay Corporation Tax in the UK?
All UK limited companies that are taxable must pay Corporation Tax on their annual profits.
However, this tax can also apply to unincorporated organisations like housing associations, trade and housing cooperatives, members, clubs, or associations.
Who is responsible for settling Corporation Tax liabilities?
The company director or directors are responsible for ensuring that the company’s Corporation Tax returns are submitted to HMRC.
Furthermore, they are also responsible that all tax obligations are met by the applicable deadline.
Although many businesses hire tax experts or chartered accountants to prepare Corporation Tax returns.
The ultimate legal responsibility rests with the company directors.
What are the methods of paying Corporation Tax in the UK?
Corporation Tax can be settled electronically, at a bank or post office.
If immediate payment is required, the Corporation Tax bill can be paid through CHAPS, online or over the telephone.
BACS transfers, direct debits, and credit or debit card payments typically take around three business days to process.
Corporate Tax Rates in UK
The amount of Corporation Tax that your business is required to pay is determined by the level of profit that it generates.
Here is a table that illustrates the Corporation Tax rates for various years:
Important Information for Taxes in UK on Non-Resident Companies
- Non-resident companies are subject to UK corporation tax on their trading profits from a UK Permanent Establishment (PE).
- UK corporation tax is also applicable on:
- Trading profits related to the business of developing or dealing in UK land
- Profits arising from UK property rental, irrespective of whether the non-resident company has a UK PE.
- Gains made from the direct or certain indirect disposals of UK property by non-UK residents are also subject to UK corporation tax.
- Detailed guidelines on the taxation of gains from the disposal of UK immovable property by non-UK residents can be found in the ‘Capital gains on disposal of UK immovable property by non-UK residents’ section of the Income determination guidelines.
- Non-resident companies receiving UK-source income are subject to UK income tax at the current basic rate of 20% without any allowances.
- Relief from this tax may be available under a double tax treaty (DTT) if applicable.
- Corporate non-resident landlords (NRLs) earning UK rental income were previously subject to UK income tax until 5 April 2020.
- The NRL scheme in the United Kingdom requires the NRL’s tenants or letting agents to withhold income tax at 20% at source, unless they have been notified that the NRL has received permission to receive gross rents.
- The NRL scheme continues, despite corporate NRLs being now subject to corporation tax for their property rental business profits.
- When you sell or dispose of a business asset, any profits or “chargeable gains” will be subject to Corporation Tax.
When is the Corporation Tax deadline?
In the UK, the deadline for filing a Corporation Tax return is typically 12 months after the end of the accounting period that the return covers.
Separate from the filing deadline, companies must pay their Corporation Tax bill, which is typically due 9 months and one day after the end of the accounting period.
Large companies may be required to make instalment payments during the accounting year.
What are the penalties for missing the Corporation Tax return filing deadline?
Failing to file Corporation Tax returns on time can result in penalties, including:
- £100 penalty for being one day late
- Additional £100 penalty for being more than three months late
- 10% penalty on top of unpaid Corporation Tax for being more than six months late
- Another 10% of unpaid Corporation Tax after more than 12 months late
- If a company is late filing three times in a row, the £100 penalties are increased to £500
More information on Corporation Tax penalties, you can talk to an expert.
What are the penalties if you do not pay Corporation Tax on time?
If a company fails to pay their Corporation Tax bill on time, they will be charged interest on the outstanding balance.
HMRC may also take action to recover the unpaid tax, which could include contacting debt collection agencies, recovering the money directly from bank accounts, selling assets, initiating court proceedings, or liquidating the company.
Large companies that are required to make instalment payments can also face penalties if payments are not made on time.
It is critical to pay outstanding Corporation Tax on time, as failing to do so can have serious consequences for a business.
Companies that are unable to pay their taxes in UK may be able to set up a payment plan with HMRC, but it is essential to do so as soon as possible, and not after deadlines have passed.
What is Ring Fence Corporation Tax?
In the UK, Ring Fence Corporation Tax (RFCT) is a type of tax that is only applicable to companies involved in oil and gas production on the UK Continental Shelf, including areas of the North Sea, the North Atlantic Ocean, Irish Sea, and English Channel. RFCT is similar to Corporation Tax, but with different rates.
The main rate of RFCT is 30%, and there is also a small profits rate of 19%.
This tax is designed to ensure that companies operating in the UK’s oil and gas sector contribute their fair share of taxes to the UK government.
How to save and pay taxes in UK?
E-StartupIndia can assist you in minimising your Corporation Tax in the UK through careful tax planning, so that you pay only what is due.
Here are some tax efficiency opportunities that you can explore:
- Claiming tax relief on property and equipment through capital allowances
- Applying for tax relief for innovative companies through R&D tax credits
- Taking advantage of the patent box tax relief scheme
- Exploring other tax-efficient options that can help you to reduce your Corporation Tax bills
By working with the team of highly qualified and experienced professionals at E-StartupIndia, you can ensure that you are paying only your fair share of Corporation Tax while taking advantage of available tax efficiency opportunities.
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