Corporation Tax Compliance UK | HMRC Rules Explained

Reviewed: 17 June 2026

Corporation Tax is charged on the taxable profits of UK companies and certain other organisations. Compliance normally involves registering with HM Revenue & Customs (HMRC), keeping accounting and tax records, preparing a tax computation, paying the tax due and filing a Company Tax Return.

Current Corporation Tax rates

The main Corporation Tax rate is 25%.
A 19% small-profits rate can apply where qualifying profits do not exceed £50,000.
Marginal relief can apply where qualifying profits fall between £50,000 and £250,000.

The profit limits can be reduced for short accounting periods and divided between associated companies. The rate used in a forecast should therefore reflect the company’s full circumstances rather than profit alone.

Check the current Corporation Tax rates and marginal-relief rules.

Registering for Corporation Tax

A company normally needs to tell HMRC when it becomes active for Corporation Tax purposes. This is separate from incorporating the company at Companies House. The company should establish its accounting period, keep records from the start of activity and confirm the filing and payment dates that follow.

Use the official company and accounting records guidance and Company Tax Return guidance.

Payment and filing deadlines

For many companies, Corporation Tax is due nine months and one day after the end of the accounting period. The Company Tax Return is normally due 12 months after the end of the accounting period. Larger companies can have different payment arrangements, including instalment payments.

The payment deadline comes before the return deadline, so the tax computation often needs to be substantially complete before the return itself is filed.

Confirm the date using HMRC Corporation Tax payment guidance.

Records and tax adjustments

The taxable profit is not always the same as the accounting profit. A tax computation may adjust for items such as depreciation, capital allowances, disallowable expenses, losses, loan relationships, related-party transactions and reliefs.

Maintain reconciled accounting records and supporting documents.
Keep a schedule of fixed assets and capital expenditure.
Identify expenses requiring tax review.
Document loans, dividends and transactions with directors or connected parties.
Keep evidence supporting reliefs, losses and elections.
Reconcile the final tax charge and liability to the accounts.

Company accounts and the tax return

Statutory accounts are normally filed with Companies House, while the Company Tax Return and tax computation are filed with HMRC. The deadlines and detailed formats are not identical, even though the same accounting records support both processes.

Check annual accounts requirements and the Company Tax Return process.

Common Corporation Tax mistakes

Assuming the accounting profit is automatically the taxable profit.
Missing the earlier payment deadline while focusing on the filing deadline.
Using the £50,000 and £250,000 limits without considering associated companies.
Failing to document dividends, director transactions or related-party balances.
Claiming expenses or capital allowances without adequate evidence.
Not reconciling the tax computation to the final accounts.

Practical year-end workflow

Complete bookkeeping and reconcile all balance-sheet accounts.
Prepare the statutory accounts and supporting schedules.
Review transactions requiring tax adjustments.
Calculate the estimated Corporation Tax before the payment deadline.
Obtain director approval for the accounts and return.
Pay the tax and retain confirmation.
File the accounts and Company Tax Return by their separate deadlines.

Related guidance

For the wider compliance framework, visit the UK Tax Compliance hub. Limited companies may also find Limited Company Accountants UK and Bookkeeping Services in the UK useful.

This page provides general educational information, not personalised tax or legal advice.

How the Corporation Tax compliance cycle works

Corporation Tax is not calculated by applying a rate directly to the profit shown in statutory accounts. The Company Tax Return starts with the accounts and then applies tax adjustments, allowances, reliefs and rules about the accounting period. A reliable process therefore connects bookkeeping, year-end accounts, the tax computation, the return and the payment forecast.

Identify the accounting period and deadlines

A company’s accounting period for Corporation Tax is normally linked to its period of account, but the two are not always identical. A Corporation Tax accounting period cannot normally exceed 12 months, so long statutory accounts may require more than one Company Tax Return. The return is generally due 12 months after the end of the accounting period. Corporation Tax is usually payable earlier—9 months and one day after the end of the accounting period. Larger companies can have different payment arrangements.

Companies House accounts have a separate filing deadline. Treat the accounts, tax return and tax payment as connected but distinct obligations.

Build the calculation bridge

The tax computation should explain how the accounting result becomes taxable profit. Common adjustment areas include depreciation, capital allowances, entertaining, provisions, accruals, benefits, director or related-party transactions, non-trading income, losses and chargeable gains. The correct treatment depends on the facts and may differ from the accounting entry.

Starting point	Typical review
Profit before tax	Agree to the final accounts and trial balance.
Expenses	Identify items that may not be deductible or need separate rules.
Fixed assets	Separate accounting depreciation from capital-allowance claims.
Income and gains	Check non-trading income, disposals and timing.
Losses and reliefs	Confirm availability, claim conditions and supporting evidence.
Tax rate	Apply the rates and thresholds for the relevant accounting period.

Rates and associated companies

The main Corporation Tax rate is 25%. A 19% small-profits rate applies when profits are £50,000 or less, and Marginal Relief may apply between £50,000 and £250,000. Those thresholds are reduced for short accounting periods and by the number of associated companies. Businesses under common control should therefore identify associated companies before assuming which rate applies.

Do not use turnover as a substitute for taxable profit, and do not apply the small-profits thresholds without checking associated-company and accounting-period adjustments.

Areas that often need separate tax review

Some transactions are routine in the accounts but require a separate tax decision. The following list is not exhaustive; it is a prompt for review rather than a claim that an adjustment is always required.

Capital expenditure: buying equipment, vehicles, fixtures, software or property can require a capital-allowance analysis rather than an immediate deduction of the accounting cost.
Business entertainment: the accounting expense may be visible in the profit and loss account even where the tax deduction is restricted.
Staff costs and benefits: confirm the payroll, benefit-reporting and Corporation Tax treatment and check that records agree.
Director and shareholder transactions: review loans, dividends, personal expenditure and amounts owed to or by participators separately.
Provisions and estimates: identify what the amount represents, how it was calculated and whether the tax rules follow the accounting recognition.
Professional costs: distinguish recurring trading costs from costs connected with capital transactions, restructuring or ownership.
Bad and doubtful debts: retain evidence of the debt, recovery action and accounting treatment.
Interest and finance costs: understand the source, purpose, connected parties and any restrictions that may apply.
Non-trading income: identify bank interest, rental income and other amounts that may be reported separately from trading profit.
Asset disposals: retain purchase, improvement and disposal evidence so chargeable gains and capital allowances can be reviewed.

Losses, allowances and reliefs

A loss in the accounts does not automatically equal a tax loss, and a tax loss is not automatically used in the same way for every company. Record the type of loss, the period in which it arose, claims already made and the remaining balance. A claim can affect another period or another company, so approval should consider the wider group and cash consequences.

Capital allowances and other reliefs may change the timing of deductions. The best claim is not always the largest immediate claim; commercial plans, future profits, ownership changes and claim deadlines may matter. Material claims should have a schedule showing the legal entity, qualifying expenditure or activity, calculation, evidence, approval and filing position.

Records that support the return

Final accounts, trial balance and nominal-ledger detail.
Bank, loan and credit-card reconciliations.
Sales, purchase and expense evidence.
Fixed-asset register and disposal information.
Payroll, benefits and pension records.
Director’s loan account and related-party information.
Schedules for losses, reliefs, provisions and estimates.
Contracts or correspondence supporting material tax treatments.

The business should be able to reproduce the computation from the records and explain material adjustments. Saving only the filed return is not enough.

Do not leave every decision to year-end

A quarterly tax review can identify issues while the evidence is available. Compare management accounts with the prior forecast, review capital purchases and disposals, examine director or shareholder balances, update the associated-company list and estimate the Corporation Tax liability. The estimate does not need to reproduce the final return, but it should be reconciled when the final computation is prepared.

Where the business expects a large change in profit, a transaction, disposal or relief claim, involve the tax reviewer before the accounting treatment and documentation are fixed. Early review can also reveal whether the normal payment timetable applies or whether specialist rules need consideration.

Practical year-end workflow

Close the bookkeeping period and complete bank, VAT, payroll and control-account reconciliations.
Record year-end accruals, prepayments, stock, fixed assets and provisions.
Prepare and approve the statutory accounts.
Create a tax-adjustment schedule that links each adjustment to evidence.
Review losses, allowances, reliefs and associated companies.
Calculate the liability and compare it with the cash forecast.
Approve and file the Company Tax Return by the correct deadline.
Make sure cleared funds reach HMRC by the payment deadline.
Store the accounts, computation, return, receipt and payment evidence together.

Illustrative timeline

Assume a company has an accounting period ending 31 December. Its Corporation Tax payment would usually be due 1 October of the following year, while the Company Tax Return would generally be due by 31 December of that following year. This illustrates why waiting until the filing deadline to calculate the tax can create a late-payment problem. Always confirm the dates for the company’s actual accounting period.

Dormant, loss-making and ceased companies

A company can have no tax to pay and still need to file a return if HMRC has issued a notice to deliver one. A loss does not remove the filing requirement. Dormant-company treatment also depends on the facts and on HMRC’s status for the period; Companies House dormancy and Corporation Tax dormancy are related but not identical concepts. When a company starts or stops trading, check the accounting periods and notices rather than assuming the normal annual cycle continues unchanged.

Using an accountant or tax agent

An agent can prepare accounts, calculations and returns, but the company and its directors still need an information and approval process. Agree who will provide the bookkeeping close, payroll reports, asset changes, loan details, legal documents and related-party information. Set an internal delivery date well before the statutory deadline and identify who can answer queries.

Before approval, ask for a clear bridge from the accounts to taxable profit, an explanation of material claims and a payment date. Directors should not approve a return solely because software produced it or because it is consistent with the previous year.

Corrections, late filing and HMRC enquiries

If the company discovers that a return may be wrong, record when the issue was found, preserve the evidence and assess whether an amendment or disclosure is needed. Do not overwrite the original working papers. Keep a version history showing the filed figures, corrected figures and reason for the change.

Late filing and late payment are separate risks. Filing a return does not settle the tax, and paying an estimate does not satisfy the return requirement. If HMRC opens an enquiry, a well-organised computation, reconciliation and evidence pack can reduce the time spent reconstructing the position.

Common errors

Using the accounts profit without a documented tax reconciliation.
Missing the earlier payment deadline.
Ignoring associated companies when applying profit thresholds.
Claiming relief without evidence or within the wrong period.
Leaving director’s loan or related-party balances unexplained.
Filing figures that do not agree to the approved accounts.
Assuming HMRC will issue a bill before payment is due.

Questions for the reviewer

Do the return, computation and accounts reconcile?
Have all unusual or non-recurring transactions been identified?
Are estimates and provisions supported and revisited?
Have losses, capital allowances and relief claims been documented?
Were associated companies and short periods considered?
Is the payment amount included in the cash-flow forecast?

Official guidance

Related ASH guides

Important: This page is educational. Corporation Tax treatment can depend on detailed legislation, ownership, accounting periods and transaction facts.