How to register for Corporation Tax with HMRC

Corporation Tax is a tax return your company or association pays to HM Revenue and Customs (HMRC) on the profits earned during the set accounting period. If you have a limited company and started trading, it is mandatory to register for Corporation Tax with HMRC. This is completely different from registering your company with Companies House. Failing to register for Corporation Tax within three months of commencing trade will attract penalties from HMRC. Once registered for Corporation Tax, you are obligated to file tax even if you owe no tax or incurred losses.

This guide will address who should register for Corporation Tax, when you should register with HMRC, what is required for registration, step-by-step guidance, and what is expected after registration.

Who should pay Corporation Tax?

Knowing if you should pay Corporation Tax is crucial to understanding your tax liabilities with HMRC. You will pay Corporation Tax on the company's profits if the company is:

• A limited company

• A foreign company with a UK branch or office

• A club, co-operative or other unincorporated association

It is important to know that Corporation Tax is paid proactively by the company and HMRC does not send any bills to the company.

When to register for Corporation Tax

You are required to register for Corporation Tax with HMRC within three months of starting to trade, even if your company hasn't made profits. It is not three months from registering your company with Companies House but it is three months from "starting to trade."

According to HMRC, "starting to trade" refers to when your company is actively earning money or managing transactions. It includes income from investments, buying goods or services, issuing invoices, advertising, renting property, and hiring staff.  

If your company is not trading, not making transactions, or receiving money, it is usually considered "dormant" for Corporation Tax by HMRC. Please note that the definition of dormancy by HMRC is different from Companies House. It is important to register for Corporation Tax again when a dormant company becomes active.

What happens when you fail to notify liability to Corporation Tax?

Your company will be charged a penalty if your company has Corporation Tax to pay even if you didn't receive the "Notice to deliver a Company Tax Return." In that case, you must still tell HMRC that your company is liable for Corporation Tax. This should be done within 12 months of the end of your Corporation Tax accounting period.

The penalty is calculated as a percentage of the amount of potential lost revenue (PLR). PLR is based on the unpaid tax amount since it was not disclosed to HMRC.

HMRC calculates the percentage of the penalty based on the nature of the failure: non-deliberate, deliberate, or deliberate and concealed.

If you took reasonable care but still made a mistake, HMRC might not charge a penalty. HMRC might also reduce the penalty if the failure or error was raised by you before HMRC writes to you.

What do you need before registering?

Before registering for Corporation Tax, here are a list of things needed to help ease the process with HMRC.

• Your company's Unique Taxpayer Reference (UTR), a 10-digit number which will be sent by post to your registered company address. This generally takes 15 days from incorporating into Companies House.

• The date your company started trading (start of your accounting period).

• The date your first accounts are made up to (end of accounting period).

• Your Company Registration Number from Companies House.

• Your registered company address.

• Your Government Gateway user ID.

Communications are sent to the company addressed reported while registering the company, so it is important to check if the address is correct. If the address needs to be updated, you must inform Companies House.

How to register online for Corporation Tax

Registering for corporation tax can be done online since it is definitely more convenient and faster. You will have the option to set up Corporation Tax simultaneously when you're registering your company with Companies House. If you have not done it then, you can follow the below steps to add Corporation Tax to your business tax account.

1. Use your Government Gateway user ID and password to log in to your business tax account. If you do not have a Government Gateway for your company, you can register for it on https://www.gov.uk/log-in-register-hmrc-online-services.

2. Once logged in, from the left-hand side menu, select Services you can add.

3. Select Corporation Tax service and enrol for it.

4. Enter your 10-digit UTR number, accounting start, and end date.

When registering for Corporation Tax, it is recommended that you verify the company address displayed. Important communications such as the activation code and letters related to filing deadlines will be sent to this address.

Within 10 days from registering for Corporation Tax, you will receive an activation code to the registered company address with instructions for activation. You are required to log back into your business tax account using the Government Gateway ID and input the activation code when prompted. Once completed, you have successfully registered your company for Corporation Tax and can file tax returns online.

You can also request a new activation code if you have not received it or if it has expired.

What happens after registering?

After registration, you now have the obligation to file a Corporation Tax return even if your company owes no amount. You are expected to maintain financial records, work out annual accounts, file a Corporation Tax return (CT600), and pay Corporation Tax before the deadline.

Using an HMRC-recognised accounting software, like Zoho Books, to ensure accurate financial records, submit final accounts to Companies House, and submit CT600 to HMRC directly can ease compliance. You can also invite your accountant to review records, prepare statements, and file for Corporation Tax on your behalf through Zoho Books.

Registering your company for Corporation Tax is quite straightforward. If you have doubts regarding the accounting period, or the definitions of dormancy, "starting to trade", or anything else, asking an accountant for help is the right move.