When should you register a new company for CT?

You formed a company several months ago, but it hasn’t begun to trade and may never do so. HMRC has sent you a form asking you to register for corporation tax (CT). But are you required to do this, and what are the implications if you don’t? Partner Joanne Gibson discusses in this article.

When you form a company there will nearly always be a period of time before it becomes active for corporation tax (CT) purposes. HMRC can ask you to complete a CT return for this period even if it only lasts a few days. But contrary to common belief, there is no requirement to register your company for CT and if you choose not to there’s no penalty.

However, while you don’t have to register your company with HMRC for merely existing, it is necessary for it to submit CT returns for periods in which it is active. Because CT returns can only be filed online using commercial (or HMRC’s software), you have no choice but to register your company for HMRC’s online CT services.

As explained, there’s no fine for not registering your company with HMRC but there is for not submitting a CT tax return on time.

Active or dormant?
Companies can be either active or dormant for CT purposes. Companies House also refers to companies being dormant, but this doesn’t quite mean the same thing as it does for CT purposes. The most common circumstances where a company is active for CT purposes are where it has at least one trade, e.g. selling goods or services, or it holds investments or savings which can produce income, e.g. a bank deposit account. Essentially, a company is active for CT purposes if it is doing anything that could generate income.

As soon as your company is active the clock for completing and submitting CT returns starts running and it’s advisable to register the company for HMRC’s online services, especially if you intend to use its free software to file your first CT return.

CT return periods
The end date for the period covered by your first CT return depends on whether you registered your company for HMRC’s online services by the date its first accounting period ends.

CT return deadline
The deadline for filing all CT returns is twelve months following the end of your company’s accounting period. The date when any CT payable is due is nine months and one day following the end of the accounting period.

IN SUMMARY
You don’t need to register your company’s existence with HMRC and there’s no fine for not doing so. But you must submit a CT return within twelve months of the end of the first CT accounting period. This date will be sooner if you don’t register with HMRC. It’s therefore advisable to do so as soon as possible.

Contact the JRW Hogg & Thorburn team to discuss this further and any other related questions you may have.