Computation of corporation tax

By Tolley

The following Corporation Tax guidance note by Tolley provides comprehensive and up to date tax information covering:

  • Computation of corporation tax
  • Accounting periods
  • Calculating corporation tax
  • CIHCs
  • Augmented profits
  • Marginal relief
  • Rates of tax
  • FY straddle

This guidance note outlines how the computation of corporation tax is performed. Most tax practitioners will not have to carry out corporation tax calculations manually as this will be done automatically by the tax compliance software. However, it is important to understand the mechanics of the calculation so that the computation supporting the corporation tax return can be checked and explained if necessary.

Companies pay corporation tax on their Taxable Total Profits (TTP) for each accounting period. Up until 1 April 2015, the rate of tax applied to TTP was dependent upon the number of 'associates' the company has, the level of its augmented profits and the length of the chargeable accounting period. However, from 1 April 2015, the main rate and small companies rate of corporation tax have been unified such that a single rate of tax is now in force. Subject to a few exceptions applicable to companies with ring fenced profits (ie those in the oil and gas industry), this rate will apply to all companies irrespective of size, the number of associates, the level of augmented profits or the length of the accounting period, etc. These factors are considered further below.

For more information on determining whether an entity is within the charge to corporation tax, see the Charge to corporation tax guidance note.

To determine what type of profits are subject to corporation tax, see the Taxable Total Profits (TTP) guidance note.

Accounting periods

Companies are liable to corporation tax for each accounting period. Thecorporation tax accounting period is usually the same as the period of account for which the company makes up a set of statutory financial statements. For more information and examples of the computation of corporation tax for companies with long or short accounting periods, see the Long and short periods of account guidance note.

CTA 2009, s 8

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