Indie Dev’ Guide 6: Corporation Tax

Introduction

A UK Limited company pays corporation tax on its taxable profits for the accounting period. Corporation tax is due 9 months and 1 day after the accounting period end. For example, a company with a 31 March year end, would be required to pay any tax due by the following 1 January. However, the company tax return is due 12 months after the accounting period end.

The main corporation tax rate for 2024/25 is 25%. The rate for small businesses with profits of up to £50,000 remains at 19%. Profits above £50,000 are taxed at 25% less marginal rate relief until profits exceed £250,000 where the full 25% tax rate applies.

Important points to consider

Accounting profits vs taxable profits:

Profits taxable for corporation tax are often different to profits appearing in the company accounts and this can be for a number of reasons such as:

• Not all business expenses are allowable for tax purposes e.g. client entertaining or depreciation; and must be added back into the profits for tax purposes.
• Capital additions, which are depreciated in the accounts, attract different rates of allowances for tax purposes. For example, if you buy a computer, the cost might be written off in the accounts over 3 years, but for tax purposes, you are likely to obtain full relief in the year of purchase
• Taxable profits can be reduced by way of Patent Box Relief, Research & Development (R&D) Tax Relief, Video Games Tax Relief and Video Games Expenditure claims.

Tax losses:

• If a company has made a taxable loss for the accounting period, these losses can be carried forward and offset against future profits of the same trade.
• If the company had a corporation tax liability in the previous period, the losses for the current accounting period can be carried back, enabling you to claim a corporation tax refund.
• Losses created by R&D or Video Games Tax Relief claims, can be surrendered for repayable tax credits.

Tax planning:

The corporation tax liability can be manipulated through effective, legitimate pre year-end planning including bringing forward planned expenditure or extra pension contributions.

Full list of Guides

• Guide 9: Understanding your Accounts
• Guide 10: British Film Institute (BFI) certification
• Guide 11: Business Expenses
• Guide 12: Withholding Tax on overseas income
• Guide 13: Benefits of an Audit
• Guide 14: Video Games Expenditure Credit
• Guide 15: Taxation of Non-Cash Benefits for Employees and Directors in the Gaming Sector
• Guide 16: Management Accounts and Forecasting in the Gaming Sector
• Guide 17: Bookkeeping Software for the Gaming Sector 

Want to learn more?

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