Corporation Tax

Charge to corporation tax

Produced by Tolley
  • 02 Nov 2021 09:21

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

  • Charge to corporation tax
  • Which types of entity are within the charge to corporation tax?
  • Residence and the charge to corporation tax
  • The residence tests
  • ‘Tie-breaker’ rule
  • Chargeable accounting periods
  • Change in accounting period
  • Duty to give notice of chargeability to corporation tax
  • Corporation tax returns and computations

Charge to corporation tax

Whether an entity is within the charge to corporation tax or not depends on the type of entity and its territory of residence.

Which types of entity are within the charge to corporation tax?

UK corporation tax is charged on ‘profits’ generated worldwide by any corporate body or unincorporated association.

This includes the following types of entity:

  1. limited companies (including companies limited by guarantee)

  2. unlimited liability companies

  3. members’ clubs

  4. political associations

  5. trade associations

  6. authorised unit trusts

The following types of entity are not within the charge to corporation tax:

  1. partnerships

  2. limited liability partnerships

  3. local authority associations

  4. local authorities

  5. a co-ownership scheme

CTA 2009, s 1121

There are different ways in which a company can be incorporated, but the method does not matter for corporation tax purposes. Usually, a company will be registered at Companies House.

As announced at Autumn Budget 2021, the Government is consulting on allowing companies to change their place of incorporation from one jurisdiction to the UK while maintaining the same legal identity. The consultation document can be found at ‘Corporate re-domiciliation’.

EU regulations permit the formation of a Societas Europaea (SE), a European company. The SE will be subject to the tax rules of the country in which it is resident. See below for further details on company residence.

It should be noted that regulations have been made under the European (Withdrawal) Act 2018 such that from the end of the Brexit implementation period (IP), SEs that are registered in the UK immediately before that day are to be converted into 'UK Societas’. No new UK Societas will be capable of registration from IP completion day.

The term ‘unincorporated association’ is not defined in the tax legislation. It has been held that an unincorporated association is an organisation which has rules that identify in whom the control of it and its funds vest, and in which two or more persons are bound together for some common purpose or purposes (not being business purposes)

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