Computation of corporation tax

By Tolley
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The following Owner-Managed Businesses guidance note by Tolley provides comprehensive and up to date tax information covering:

  • Computation of corporation tax
  • Chargeable accounting periods
  • Rates of tax
  • Calculation of corporation tax

Companies pay corporation tax on their Taxable Total Profits (TTP) for a Chargeable Accounting Period (CAP).

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

For more information on what type of profits are subject to corporation tax, see the Taxable Total Profits guidance note.

Chargeable accounting periods

Companies are liable to corporation tax for each CAP. The CAP is usually the period for which the company makes up a set of accounts. However, the accounting period for tax purposes may be different.

Short accounting periods

Where a company makes up its accounts for less than 12 months, the accounting period for the company will cover the same short period. Various limits and allowances, eg the capital allowance WDA will be scaled down accordingly. For most practitioners, no additional action will be necessary as the required adjustments will be carried out by tax compliance software.

See Example 1.

Long periods of account

For a company with a period of account that exceeds 12 months, the period of account must be split into two CAPs ― the first CAP will be the first 12 months and the second CAP will be the balance (in months).

A separate tax computation must be performed for each CAP.

The adjustment of profits before capital allowances is done for the period of account as a whole.

More on Corporation tax computations: