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Corporation tax: reducing your tax bill

7th June 2017

If you’re running a limited company, you’re liable to pay corporation tax on any profits you make from either doing business, investments or selling assets (chargeable gains). 

The current rate of corporation tax is 19%, which is paid depending on your company’s accounting period.

So you might be thinking ‘great, more tax to be paid’ but it’s not all doom and gloom – you can deduct some costs from your profits, which may result in a reduced tax bill.

The thing here is to claim back on your expenses, but what counts as a ‘business expense’ and how can it help reduce your tax bill? 

Expenses 

Expenses range from company cars to health insurance; childcare costs to travel or entertainment expenditure. 

Expenses often deducted from company profits can only be claimed if they’re “wholly, exclusively or necessarily” in the company’s duties. Any expenses for personal use must be treated as a benefit.

Capital allowances

Some assets bought, such as equipment, machinery and business vehicles, can’t be counted as expenses and are claimed as a capital allowance, which can be offset against company profits.  

Tax reliefs

There are tax reliefs available to help you deduct the costs of running your company from your profits before tax.

Some relief are specific, such as R&D tax relief or The Patent Box for companies making a profit from patented inventions.

Marginal relief is available if your company has made profits between £300,000 and £1.5 million before 1 April 2015.

Planning

It is important to work out your corporation tax correctly and file through a company tax return to HMRC by the following deadlines:

  • filing annual accounts – 9 months after the accounting period ends
  • filing a company tax return – 12 months after your accounting period ends.

Contact us

It is important to plan ahead so don’t hesitate to consult us if you need to clarify how to claim your expenses or ensure your paperwork is in order.

Alternatively you can call us on 020 8977 0905 (Hampton Wick Office) or 01932 855644 (Weybridge Office) to speak to an adviser.