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What Is Corporation Tax?
Corporation Tax is charged on all profits (income and gains), wherever arising, of companies resident in the State, with some exceptions, and non-resident companies who trade in the State through a branch or agency.
How is a Company Taxed?
Companies pay Corporation Tax. This tax is charged on the company’s profits which include both income and chargeable gains. A company’s income for tax purposes is calculated in accordance with Income Tax rules. Chargeable gains are calculated in accordance with Capital Gains Tax rules.
What is the rate of Corporation Tax?
There are two rates of Corporation Tax:
- 12.5% for trading income unless the income is from an excepted trade* in which case the rate is 25%
- 25% for non-trading income (e.g. investment income, rental income)
Excepted trades include certain land dealing activities, income from working minerals and petroleum activities
Who must pay this tax?Companies and organizations based in the United Kingdom must pay a corporation tax on all taxable profits, no matter where (in the world) the profits came from.
If a company operates in the UK but isn’t based there (e.g. operates through an office or branch) then the corporation tax only needs to be paid on taxable profits that arise in the UK.
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