Category: Corporation Tax

How to pay corporation tax online

Paying Corporation Tax? Always use the correct reference or risk delays and penalties.

To pay Corporation Tax via online or telephone bank transfer, you can use either a UK or overseas bank account.

UK Bank Accounts

You can transfer funds using Faster Payments, CHAPS, or Bacs, either online or by calling your bank. Faster Payments usually reach HMRC on the same or next day (including weekends), CHAPS payments arrive the same working day if made within your bank’s cut-off time, and Bacs payments typically take up to 3 working days.

Use the account details provided in your HMRC ‘notice to deliver your tax return’ or reminder. If unsure, use one of the following:

• HMRC Cumbernauld
  • Sort code: 08 32 10
  • Account number: 12001039
• HMRC Shipley
  • Sort code: 08 32 10
  • Account number: 12001020

Overseas Bank Accounts

You can also pay from an overseas account using:

• HMRC Cumbernauld
  • IBAN: GB62 BARC 2011 4770 2976 90
  • BIC: BARCGB22
• HMRC Shipley
  • IBAN: GB03 BARC 2011 4783 9776 92
  • BIC: BARCGB22

You must ensure to include your 17-character Corporation Tax payment reference number for the correct accounting period. This reference changes each year so it is important to use the up-to-date reference number. Using the wrong one can delay your payment. You can find it in your company’s HMRC online account or on your ‘notice to deliver your tax return’ or on any reminders from HMRC.

Corporation tax roadmap

With a £50bn shortfall looming, the Chancellor may need to revisit last year’s Corporation Tax roadmap commitments.

As this year’s Autumn Budget approaches, it is an interesting time to revisit the Corporation Tax Roadmap published alongside last year’s Budget on 30 October 2024.

The roadmap sets out the government’s plans for Corporation Tax and a small number of other business taxes over the course of the parliament.

These commitments included:

• Capping the headline rate of Corporation Tax at 25% for the duration of parliament, the lowest rate in the G7.
• Retaining the small profits rate and marginal relief at current rates and thresholds.
• Maintaining the capital allowances system, including permanent full expensing and the £1 million annual investment allowance.
• Maintaining the generosity of R&D reliefs.
• Collaborating with companies on simplification and improving user experience, including HMRC’s path forward on digitisation.
• Developing a new process for increasing the tax certainty available in advance for major investments.

Almost a year later, the Chancellor is facing a significant budget shortfall that could be as high as £50 billion, driven by multiple issues including weak growth, persistent inflation, high debt interest costs and widening deficits.

The government has also committed not to raise income tax, National Insurance or VAT for working people, and to restore frozen tax thresholds in line with inflation from 2028–29.

It remains to be seen whether any of the major commitments outlined in the roadmap and in previous promises to the voting public will be rolled back.

Transfer pricing consultation

New UK transfer pricing rules could mean more reporting and fewer exemptions for mid-sized businesses. The government is consulting on proposals to tighten compliance and align with global standards. One key change would remove the transfer pricing exemption for medium-sized enterprises, keeping it only for small businesses. Another would introduce a new reporting requirement, the International Controlled Transactions Schedule (ICTS), to give HMRC more visibility over cross-border related-party transactions. These reforms aim to curb profit shifting, protect the UK tax base and simplify the rules for those who follow them.

Transfer pricing refers to how prices are set for transactions between companies that are part of the same group, especially when these transactions cross international borders. These prices must follow the “arm’s length principle,” meaning they should reflect what unrelated companies would charge under similar circumstances. This helps ensure that profits are taxed fairly where economic activity actually takes place.

The UK government is seeking feedback on two proposed changes to its transfer pricing rules. These proposals aim to protect the UK’s tax base from multinational enterprises (MNEs) shifting profits overseas, and to bring the UK in line with global best practices.

The first proposal suggests changing the current exemption from transfer pricing rules for small and medium-sized businesses (SMEs). In particular, it proposes removing the exemption for medium-sized enterprises but keeping it for small ones. The government also wants to update definitions and thresholds to make the rules clearer and easier to follow.

The second proposal would introduce a new reporting requirement called the International Controlled Transactions Schedule (ICTS). This would require MNEs to report cross-border related-party transactions to HMRC. The information would help HMRC better assess risk, reduce audit times, and support fairer, more efficient tax compliance whilst at the same time limiting extra burdens on businesses.

Present rates of Corporation Tax

Corporation Tax rises with profit levels. Marginal relief bridges the gap, easing businesses from the 19% small profits rate to the 25% main rate.

The Corporation Tax Main Rate applies to companies with profits exceeding £250,000 and is currently set at 25%. For companies with profits up to £50,000, a Small Profit Rate (SPR) of 19% is applicable.

For profits between £50,000 and £250,000, a marginal rate of Corporation Tax is used to smooth the transition between the lower and upper limits. The lower and upper thresholds are also adjusted proportionately for short accounting periods of less than 12 months and for companies with associated entities.

Marginal relief gradually increases the effective Corporation Tax rate from 19% at profits of £50,000 to 25% at profits over £250,000. To calculate the Corporation Tax due, you multiply your profits by the main rate of 25% and subtract the marginal relief. For the current 2025 fiscal year, the marginal relief fraction is 3/200.

Definition of R&D for tax purposes

When claiming tax relief or capital allowances on R&D, it’s crucial to ensure activities meet strict statutory definitions. Understanding Section 437 ITA and DTI guidelines is key to securing legitimate tax benefits and avoiding costly mistakes.

An activity is generally considered as R&D if it meets two key criteria:

1. It is recognised as R&D under standard accounting practice; and
2. It satisfies the specific conditions set out in the Department of Trade and Industry (DTI) guidelines.

In addition, the definition of R&D for Capital Allowances purposes includes oil and gas exploration and appraisal activities. These are defined as operations conducted with the objective of:

• Searching for petroleum within a defined area; or
• ascertaining the characteristics, extent, or reserves of a petroleum-bearing area in order to assess the commercial viability of extraction.

The legislation also allows for the definition of R&D to be further clarified or restricted by secondary regulations made under ITA/S1006. These regulations may either designate certain activities as qualifying R&D or exclude specific activities from being treated as such.

For the purposes of Research and Development Allowances (RDA), any activity defined as R&D under ITA/S1006 regulations must be treated accordingly. Conversely, if an activity is specifically excluded by regulation, it must not be considered R&D for RDA claims.

Tax refunds for dissolved companies

Dissolving a company ends its legal existence — but unresolved assets become property of the Crown under bona vacantia. Directors must act carefully to settle assets and liabilities before dissolution, avoiding costly mistakes and lost opportunities.

Dissolving a company is a formal legal process that marks the end of its existence. While this process may seem straightforward, it is essential for directors and company officers to understand the legal and financial consequences that arise once a company is dissolved. In particular, in relation to outstanding assets, liabilities, and the principles of bona vacantia.

A company legally ceases to exist upon dissolution. From that point forward, it can neither undertake activities nor receive assets, including tax refunds. It is therefore the responsibility of the company's directors to ensure that all assets and liabilities are appropriately resolved prior to the dissolution taking effect.

Any assets or rights (excluding liabilities) that remain within the company at the date of dissolution automatically pass to the Crown as bona vacantia, a legal doctrine meaning “ownerless goods.” The management of bona vacantia assets is delegated to different bodies across the United Kingdom depending on the company's location, but all act on behalf of the Crown.

Importantly, only companies that have been formally dissolved fall under bona vacantia. Companies that are in the process of liquidation or being wound up are not yet subject to these rules, as they are still legally in existence. Until dissolution is complete, the company retains ownership of its assets and rights.

In certain circumstances, it may be possible to restore a dissolved company to the Companies Register if the dissolution occurred within the last six years. Restoration would reverse the effects of bona vacantia, reinstating the company’s rights to its previously held assets. However, this process can be complex, time-consuming, and should not be relied upon as a remedy for poor planning.

R & D clearance consultation

Following the Spring Statement, HMRC is inviting feedback on the idea of expanding the use of advance clearances for R&D tax reliefs, aiming to reduce errors and fraud, provide businesses with more certainty, and make the overall process smoother for taxpayers.

This R & D clearance consultation will explore whether an advance clearance system could achieve these objectives and how it might be structured. The consultation is open for comments until 26 May 2025, and responses are welcomed from businesses that currently claim or plan to claim Research and Development reliefs, as well as industry groups and agents.

The consultation focuses on three main goals:

• Reducing errors and fraud
• Improving the customer experience
• Providing certainty to businesses

HMRC is clear that R&D tax reliefs should be simple to access, predictable, and provide clear assurance to legitimate claimants. This clarity is crucial for businesses to plan effectively and increase their R&D investments. While these goals are separate, they are closely connected.

HMRC acknowledges that the current voluntary R&D 'advance assurance' process hasn’t been as widely adopted as anticipated. The consultation will also look into whether voluntary or mandatory assurances would be more beneficial and outlines the various options under consideration.

In addition, a separate consultation has been launched to explore a new process that would offer increased tax certainty upfront for large-scale projects. This consultation will close on 17 June 2025.

Group relief for trading losses

Group relief helps reduce the overall Corporation Tax of a group of companies by allowing them to share losses. For example, if a parent company has profits of £1,000 and its subsidiary has losses of £100, the group is treated as making £900 in total profits for tax purposes, instead of paying tax on the full £1,000. The group would then pay tax on the £900.

Group relief lets one company transfer its losses to another company within the same group, but it doesn’t treat the group as a single entity for tax purposes. Each company remains a separate legal entity. The surrendering company must actively consent to the claimant company utilising its losses.

Key points of group relief:

• Losses and certain other amounts can be transferred between companies in the same group.
• The amount that can be claimed is the lower of the surrendering company’s available losses and the claimant company’s total profits.

There are special rules that apply:

• to UK permanent establishments of companies resident outside the UK and overseas permanent establishments of UK resident companies, if there is the possibility of relief being given in a jurisdiction other than the UK,
• if there are arrangements that could affect the group relationship, or
• if the loss arises to a 75% subsidiary resident in an European Economic Area territory.

Tax relief for structures and buildings expenditure

Maximise your tax relief with the Structures and Buildings Allowances (SBA). If you have invested in new or renovated commercial structures, you could claim 3% relief annually—saving you money for the next 33 years!

The Structures and Buildings Allowances (SBA) allows for tax relief on qualifying capital expenditure on new non-residential, commercial structures and buildings. The relief applies to the qualifying costs of building and renovating commercial structures.

The relief was introduced in October 2018 at an annual capital allowance rate of 2% on a straight-line basis. The annual rate was increased to 3% from April 2020, and the corresponding period reduced to 33 and one third years. The rate has remained fixed since then and will remain at the same rate for the 2025-26 tax year.

HMRC’s guidance sets out the process for making a claim. In order to make a valid claim a written allowance statement is required. 

The allowance statement must include:

• information to identify the structure, such as address and description;
• the date of the earliest written contract for construction;
• the total qualifying costs; and
• the date that you started using the structure for a non-residential activity.

The claimant must also meet the necessary requirements in respect of the building itself and the chargeable period for the claim. 

The start date of the claim is the later of the following two dates:

• the date when you started using the structure for a qualifying activity; and
• the date that you’re due to pay for the structure or construction.

No relief is available where parts of the structure qualify for other allowances, such as plant & machinery allowances.

Tax relief for zero emission cars and electric charge points

Great news for businesses! Tax relief on zero-emission cars and EV charge points has been extended until 2026. This move aligns with the UK’s ambitious Zero Emission Vehicle mandate, driving the shift to sustainable transport.

It was announced as part of the recent Autumn Budget measures that the tax relief for businesses acquiring zero-emission cars or installing electric vehicle charge points is to be extended. The reliefs were set to expire on 31 March 2025 for Corporation Tax purposes and 5 April 2025 for Income Tax purposes.

This measure extends the availability of the 100% first-year allowance for qualifying expenditure on zero-emission cars and the 100% first-year allowance for qualifying expenditure on plant or machinery for electric vehicle charge-points to:

• 31 March 2026 for Corporation Tax purposes
• 5 April 2026 for Income Tax purposes

The extension to the scheme highlights the government’s commitment to continue to support the growth in the electric vehicles market in line with the zero emission vehicle (ZEV ) mandate.

The ZEV mandate sets out the percentage of new zero emission cars and vans that manufacturers will be required to produce each year up to 2030. 80% of new cars and 70% of new vans sold in Great Britain will now be zero emission by 2030, increasing to 100% by 2035.