Computation of corporation tax

Produced by Tolley

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

  • Computation of corporation tax
  • Chargeable accounting periods
  • Short accounting periods
  • Long periods of account
  • Calculation of corporation tax
  • Rates of corporation tax
  • Rates for periods pre-1 April 2023
  • Rates for periods post-1 April 2023
  • Northern Ireland ― devolved rate of corporation tax
  • Close investment-holding companies
  • More...

Computation of corporation tax

Companies pay corporation tax on the taxable total profits (TTP) generated in a chargeable accounting period (CAP).

To ascertain whether the entity is within the charge to corporation tax, see the Charge to corporation tax guidance note.

For more information on the type of profits which are subject to corporation tax, see the Taxable Total Profits (TTP) 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 statutory financial statements. However, the accounting period for tax purposes can sometimes 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, on a time apportionment basis. 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, and a separate tax return will also need to be submitted for each CAP.

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

The income and gains are then split between the two CAPs as follows:

Adjusted trading profitUsually time apportionment on a daily basis as set out in CTA 2009, s 52
Capital allowancesTwo computations required ― one for each CAP
Scale down WDA by n/12 in short CAP
Time apportion AIA limit by n/12
Do not time apportion FYA
UK property business

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