Corporation Tax definition

Corporation tax is a tax charged on the worldwide profits of UK resident companies and of unincorporated bodies that are not partnerships, for example members’ clubs. The term profits includes all sources of income and capital gains. It also includes dividends (UK and overseas), although most will not be taxable. 

 

A company’s taxable profits are calculated for a chargeable accounting period, which normally means the period for which the company’s accounts are made up, no matter how short it is. If, however, a company makes up accounts for a period greater than 12 months, it is split into one or more chargeable accounting periods of 12 months plus a chargeable accounting period covering the remainder of the period of account. In arriving at the split of profits for an account exceeding 12 months, the trading profit is usually split on a time basis. 

 

Capital allowances are calculated for each chargeable accounting period.