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Corporation Tax explained

What is Corporation Tax?

Corporation Tax is the tax that a company pays on the profits that it makes.

It should not be forgotten that a corporate structure is tax-efficient. For instance, profits retained within the company are only taxed at 19% (2017/18)

Our top tips

1. Claim for all business expenses

It is not uncommon for a director ( or employee, for that matter ) to spend money on behalf of the business, and to forget or not get around to claiming it back from the company.

2. Timing is everything

If you are planning to invest in capital items for your company, ensure that you get your timing right and that you claim your full capital allowance entitlement.

3. Owner Manager Remuneration

If you are an owner-manager of the company, you can take a combination of salary and dividends out of your business. Your personal circumstances and business performance will dictate the optimum split between salary and dividends that will minimise corporation and personal taxes.

4. Research and Development

A company can claim R&D tax relief on qualifying research and development costs.

The R&D tax relief scheme allows you both to deduct these costs from your trading income and to claim up to an additional 130% (230% in total, 2017/18), as a corporation tax relief to be deducted from trading profits. Loss-making companies can use the corporation tax relief to increase their carried-forward losses or claim a cash tax credit.

5. Claim your business-related mileage

If you use your private car for trips that are 100% business-related, you can claim the cost of your fuel consumed either from your company or against your end-of-year income tax liability using HMRC's advisory mileage rates.

Corporation Tax is complex. For more information regarding this and for other ways to mitigate your tax liability, contact us before making any decision.

Keep a look out for #TaxTipTuesday across our social media for more tax tips.


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