A company tax return delineates the corporation tax payable to the HMRC and is filed using Form CT600. It broadly consists of data related to accounts, computations, reports, and statements provided by the entity paying corporation tax. While these entities come in many shapes and sizes, the focus of our piece is on microenterprises.
Microenterprises are typically small businesses with just more than 10 people and started with a small amount of capital (or microcredit) provided by a bank or other financial institution. Tax compliance can be a challenge for microenterprises that often do not have dedicated finance or financial reporting team. Our aim is to provide an overview of CT600 filings with the HMRC in order to make the process easier to understand.
We will briefly touch on Corporation Tax and Company Tax Return in the UK to better understand the CT600 form that is submitted to the HMRC.
CT600 Filings – Corporation Tax And Its Implications
In the UK, corporation tax is tax paid by companies on a percentage of their profits, which is the total turnover for a given financial year minus operating expenses. It currently sits at 19% for small businesses but is liable to change from time to time.
This tax regime is applicable to companies in the UK that are incorporated and other entities such as clubs and associations. It does not apply to individuals, partnerships, and trusts.
The taxpayer is responsible for calculating taxable profits as it is a self-assessment system that includes checking if any tax adjustments are needed and if any tax reliefs or other rules apply.
While paying corporation tax late does not attract any penalties by itself, the implications of not filing the CT600 on time can cause significant detriment to the business. Filing accounts late will attract significant penalties with exponential increases in fines the later you file. Repeated delinquency will only compound matters.
Accounts should be filed on time irrespective of the ability to pay taxes at the time. The HMRC can be contacted in such a case and arrangements can be made. Late tax payments typically only attract a 3% rate of interest on outstanding due but if you’re a company that pays in monthly installments or deliberately pays the wrong amount, penalties may be incurred. Inability to keep acceptable records with respect to accounting periods may even make a company liable for a £3000 penalty.
As these penalties cannot be challenged in any court of law, timely filing of accounts is critical to ensure the smooth functioning of any organization. Therefore, in the next section, we will briefly outline how best to prepare for these without disrupting critical functions within the firm.
CT600 Filings – How To Prepare And When To File
Companies filing the CT600 with the HMRC need to ask the following questions before proceeding with a tagging or conversion solution:
- Are there any constraints on the business preventing it from filing on time?
- Are there dedicated resources in place to handle the reporting process?
- Is the process going to be conducted in-house or will it be outsourced?
- Is the solution precisely addressing a specific problem being faced?
- Is the solution viable to implement without an impediment to other processes?
At which point in the reporting cycle a company plans to start preparing its CT600 report depends to a large extent on internal process flows. With extremely competitive TATs, Fin-X Solutions’ IRIS CARBON(R) is prepared to tackle any scenario a company may find itself in. Therefore, it is essential to have a reliable vendor that can cater to any contingency that may arise and guide on the best course of action.
CT600 filings – How Can Fin-X Help
Since the entire filing process can be complicated, involving the conversion of financial statements to iXBRL, a lot of companies outsource this activity to a certified vendor. This becomes all the more critical for microenterprises that often can’t dedicate resources to this activity.
Fin-X Solutions® is an HMRC-recognised iXBRL managed tagging services vendor and application provider offering a compelling choice for UK companies to outsource their iXBRL tagging and conversion process. We have been involved with XBRL filings in the UK for over a decade and provide our product and services in many other jurisdictions including the US, Ireland, the EU, South Africa, the Middle East, Malaysia, and many more.