As the 2023/24 tax year begins, businesses need to start planning their corporation tax obligations to ensure compliance and optimise their tax liabilities. Understanding key dates, deadlines, and compliance requirements is essential for effective corporation tax planning.
In this article, we explore the most important aspects of corporation tax planning for the upcoming tax year.
Key dates for corporation tax planning
The 2023/24 tax year brings several key dates that businesses must be aware of to meet their corporation tax obligations.
These dates include:
- Start of the tax year: The tax year begins on April 1, 2023. It is important for businesses to update their accounting systems and processes to reflect the new tax year.
- End of the accounting period: The accounting period is typically 12 months long, but it can be shorter or longer in certain circumstances. Businesses must determine the end date of their accounting period, which will determine the deadline for filing their corporation tax return.
- Filing deadline for a corporation tax return: The deadline for filing the corporation tax return is 12 months after the end of the accounting period. For example, if a company’s accounting period ends on March 31, 2024, the deadline for filing the tax return will be March 31, 2025.
Compliance requirements for corporation tax
Compliance with corporation tax regulations is crucial to avoid penalties and maintain good standing with HMRC.
Here are some key compliance requirements to keep in mind:
- Accurate record-keeping: Businesses must maintain accurate records of their income, expenses, and other relevant financial information. This includes keeping track of sales invoices, purchase receipts, bank statements, and payroll records. Accurate record-keeping is essential for completing the corporation tax return correctly.
- Completing the corporation tax return: The corporation tax return is used to report the company’s taxable profits and calculate the amount of tax due. It is important to complete the return accurately, including providing all necessary details and supporting documentation. Inaccurate or incomplete returns can result in penalties.
- Calculating taxable profits: Businesses need to calculate their taxable profits by deducting allowable expenses from their total income. It is essential to understand which expenses are allowable for tax purposes and to keep proper documentation to support these deductions. Seek professional advice if needed to ensure accurate calculations.
- Making tax payments: Corporation tax payments are typically due in instalments. The deadline for paying the tax depends on the size of the company. Large companies usually have four quarterly instalments, while smaller companies pay their corporation tax in one annual payment. It is important to make timely payments to avoid interest charges and penalties.
Tax planning strategies for the 2023/24 tax year
Effective tax planning can help businesses reduce their tax liabilities and optimise their financial position.
Here are some tax planning strategies for the 2023/24 tax year:
- Capital allowances: Consider taking advantage of capital allowances to claim tax relief on qualifying capital expenditure, such as investments in machinery, equipment, and vehicles. Review the available allowances and ensure that all eligible assets are properly included in your tax calculations.
- Research and development (R&D) tax credits: If your company invests in qualifying R&D activities, you may be eligible for R&D tax credits, which can provide valuable tax relief. Explore the criteria for R&D tax credits and consult with tax professionals to maximise your claim.
- Group relief: If your business operates as part of a group structure, it may be possible to transfer losses and other tax reliefs between group companies. Group relief provisions can help offset losses against profits within the group, reducing the overall tax liability. Ensure you meet the necessary requirements to take advantage of this opportunity.
- Pension contributions: Consider making pension contributions on behalf of employees, as these contributions are deductible for corporation tax purposes. This can provide both tax advantages and valuable employee benefits.
- Capital gains planning: If your company is considering selling assets, careful planning can help minimise capital gains tax. Review the available reliefs, exemptions, and allowances to ensure you structure any asset disposals in the most tax-efficient manner.
Planning corporation taxes makes the job easier
Proper corporation tax planning is essential for businesses to meet their tax obligations and optimise their tax liabilities.
By implementing effective tax planning strategies, businesses can reduce their tax liabilities and improve their financial position for the 2023/24 tax year and beyond. Seek professional advice to ensure compliance and maximise the benefits of tax planning.
Frequently asked questions
If you want to learn more about corporation tax planning, check out our FAQs below or contact us today:
What will happen if I don’t pay all of my corporation tax?
If you don’t pay off all of your corporation tax, then you run the risk of going into arrears with HMRC. If this happens, they might be forced to undertake debt recovery actions. To avoid this, speak with a specialist tax advisor like WIS Accountancy.
Can I avoid paying corporation tax?
Corporation tax might seem like a burdensome task, but if you run a limited company, then it falls on you (or your director) to make sure it’s paid accurately and on time. Failing to do this could cause HMRC to penalise you and in the worst case, the company could be forced into compulsory liquidation and closure.
Do you pay corporation tax on profits made or total turnover?
Your corporation tax bill focuses on any profits that your limited company has made. That means it will only factor in the money brought into the business after deducting things like expenses and overheads.
Why don’t sole traders have to pay corporation tax?
Sole traders pay their taxes in a different way from limited companies, so they don’t pay corporation tax. Instead, they pay their taxes via self-assessment tax returns.