Who is liable for Corporation Tax

Limited companies and some organisations are liable for Corporation Tax.

If your company or organisation is liable for Corporation Tax, you have to do more than just pay the correct amount of Corporation Tax each year. What you need to do depends on whether your company or organisation is ‘active’ – for example, carrying on business, trading, or receiving income – or ‘dormant’ – for example, not active, not carrying on business, or not trading.

This guide will help you decide if your company or organisation is liable for Corporation Tax and therefore subject to Corporation Tax deadlines and requirements.

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Who is subject to Corporation Tax requirements?

The following limited companies and unincorporated organisations are subject to Corporation Tax requirements:

• limited companies incorporated in the UK
• foreign-based companies with a permanent place of business in the UK
• members’ clubs, such as social clubs, sports clubs and holiday clubs
• societies, such as friendly societies and provident societies
• associations, such as housing associations and trade associations
• co-operatives
• other unincorporated associations
• groups of individuals carrying on a business that is not a partnership
• charities, or companies that are subsidiaries of – or wholly owned by – a charity
• NHS foundation trusts if they are carrying out significant commercial activities that are not part of core health care delivery – such as running a commercial laundry

The taxable profits or surpluses of these businesses and organisations are subject to Corporation Tax requirements.

A company or organisation subject to Corporation Tax requirements is known to HM Revenue & Customs for Corporation Tax purposes as being ‘within the charge to Corporation Tax’, ‘chargeable to tax’ or in ‘the charge to tax’.

Deadlines and requirements for Corporation Tax

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Who is not subject to Corporation Tax requirements?

Businesses and organisations that are not subject to Corporation Tax requirements include:

• sole traders – one-person businesses that are not operating through a limited company
• traditional partnerships
• limited liability partnerships
• local authorities
• local authority associations
• investment clubs
• allotment and garden societies
• health service bodies
• London Organising Committee of the Olympic Games Ltd and the International Olympic Committee

If your business or organisation is not subject to Corporation Tax, you don’t need to meet Corporation Tax deadlines and requirements.

This doesn’t mean your business is exempt from all taxes as you may have to complete a Self Assessment return.

Tax returns if you’re self-employed or in a partnership

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What activities are exempt from Corporation Tax?

HM Revenue & Customs (HMRC) uses the term ‘exempt’ to refer to certain activities carried out by organisations that are otherwise subject to Corporation Tax requirements.

These include:

• trading profits generated by charities where those profits arise from – and are applied to – charitable purposes
• profits from any fundraising events run by charities or voluntary organisations provided that those profits are applied to charitable purposes

HMRC defines charitable purposes as carrying out the primary purpose of the charity and/or directly serving the beneficiaries of the charity.

Other activities exempt from Corporation Tax include:

• agricultural exhibitions or shows if the agricultural society that’s running them uses any profits solely for the purposes of the society
• the sale of permanent health insurance or sickness insurance by a friendly society
• non-commercial activities connected with core health care delivery undertaken by NHS foundation trusts

Charities and Corporation Tax 

Unincorporated organisations and Corporation Tax

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What you must do if your company or organisation is liable for Corporation Tax

If your company or organisation is liable for Corporation Tax, it is subject to Corporation Tax deadlines and requirements. This means you have to do more than just pay the correct amount of Corporation Tax each year.

You must also tell HM Revenue & Customs (HMRC) you’re liable for Corporation Tax and file a Company Tax Return on time.

There are different requirements depending on whether or not your company or organisation is active – eg carrying on business, trading or receiving income – or dormant – eg not active, not carrying on business or not trading.

What active companies or organisations must do

If your company or organisation is liable for Corporation Tax, and is active – eg trading or receiving income – you must:

• tell HMRC that they are active
• pay Corporation Tax on any profits that are taxable within nine months and one day of the end of your Corporation Tax accounting period – usually the end of your financial year
• file a Company Tax Return within 12 months of the end of your company or organisation’s Corporation Tax ‘accounting period’ – usually the end of your financial year

If your company or organisation is liable for Corporation Tax, but is dormant or is not active, you must still submit a Company Tax Return within 12 months of the end of your Corporation Tax accounting period (usually the end of your company or organisation’s financial year) if HMRC sends your company or organisation a ‘Notice to deliver a Company Tax Return’. You don’t need to file a return if HMRC does not send you this notice.

Find out how to tell HMRC your company or organisation is active in our guide on starting a company or organisation and Corporation Tax.

Trading and non-trading for Corporation Tax explained

Deadlines and requirements for Corporation Tax

Submitting your Company Tax Return and how to pay

Virtually all companies and organisations must submit their Company Tax Returns online. You must also pay any Corporation Tax that’s due electronically.

Additionally your tax computations and, with very few exceptions, the accounts that form part of your Company Tax Return, must be submitted in Inline eXtensible Business Reporting Language (iXBRL) format.

Switching from paper to online Company Tax Returns and electronic payment

Corporation Tax Online: setting up and managing your online account

How to pay Corporation Tax

See a demonstration of filing returns and managing your Corporation Tax account online on the HMRC website