Companies from April 2015

If you are a company, you may be looking forward to a reduction in your corporation tax rate shortly. For profits earned after 1 April 2015, the 2013 Budget decided well in advance that there would be a flat rate of 20% corporation tax from that date. Many companies currently pay corporation tax above the current small companies rate of 20%.

If you are self-employed or in partnership, you should consider whether the advantages of using a company could save you tax as well as protecting your personal assets from trade creditors. If you are a higher rate taxpayer you may be paying tax of up to 47% on profits, whereas using a company could trim sizeable amounts from your tax liability.

Companies shouldn’t let the anticipation of the tax reduction take their eyes off the ball in one other tax area – Quarterly Instalments. Regardless of whether you already pay only 20% only, or more, then Quarterly Instalment Payments (QIPs) will still be relevant for some companies from April 2015, despite the single 20% rate. If profits are above £1.5m – or the threshold could be much lower than that if you have “associated” companies– then you may still be required to make QIPs to HMRC rather than paying your corporation tax nine months after the year end as a lump sum. You should make sure that you know how many “associated” companies you have, and what your threshold for QIPs will be. Depending on the circumstances, you may be able to avoid QIPs in the first year that they are due.

For further information please contact Rob Durrant-Walker at rdwalker@garbutt-elliott.co.uk or on 01904 464119.