Corporation Tax Returns
filling in a HM customs form

Corporation Tax Returns

Corporation tax returns; what are tax returns for a business, corporation or limited company?

There are several types of businesses

  • Sole traders
  • Partnerships
  • Limited companies

Sole traders and partners within partnerships are assessed to income tax through self-assessment and personal tax returns.

The net profits from their businesses are net profits of the individuals.

If something goes wrong in the business the liability rests with the individual owner and all his personal assets are at risk.

Limited companies are a separate legal entity from the individual owners and file their company tax return here.

Any small business the owner is typically a director and shareholder.

Typically, the shareholder gets paid dividends out of the company from net profit.

So the shareholders are the last people to be paid.

And that’s the risk with a limited company.

“Leo and his team have always been a great help over the years. I’ve often found that Leo has a keen recall of the past history of my business and has always provided an excellent service.

I can heartily recommend the team at Wagner.”

Stewart Lawrie

Software Developer, SWIP

However if the limited company makes a million pounds in a year the individual doesn’t need to pay higher rate tax 45%.

On the million pounds, like you would as a sole trader and partnership, you pay tax on the million pounds at 45%.

You can leave the million pounds in the business to grow the business and just take out what you want from a business and that’s what you’ll pay income tax but only on the bit you take out as a shareholder.

Limited companies are currently taxed at 19% corporation tax.

So if you have a net profit of a million pounds, you’d be paying tax of £190,000 in a limited company versus £450,000 in a sole trader.

This is a very basic example and illustration of the difference between personal tax and corporation tax.

There’s more detail calculations involved with a real company but the fundamentals are the same.

Types of companies/business we do tax compliance and planning for

Wagner work with a wide variety of companies/businesses in different industries including:

  • Management consultants
  • Sales organisations
  • Property developers
  • Software developers
  • Painting contractors
  • Restaurants
  • Cafes
  • Electricians
  • Property rental property companies
  • Construction companies
  • Lawyers
  • IT companies
  • commercial real estate businesses
  • Film, lighting and production companies

For corporation/business tax enquiries, get in touch.

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