Companies in Scotland pay one of the lowest rates of corporation tax in the world.

The 2019/20 main rate remains at 19% throughout the UK, aside from the Isle of Man and Guernsey,

At 19%, Scotland – and the UK as a whole – have the lowest corporation tax rate of any G7 or G20 nation.

In nine months’ time, that position will be further cemented when the UK’s main rate falls to 17% for 2020/21.

When does corporation tax apply?

All incorporated companies in the UK currently pay corporation tax at 19% on taxable profits.

When a limited company pays it depends on when it registered for corporation tax and when its accounting period commenced.

Company tax returns are usually filed every 12 months after the end of the accounting period.

Corporation tax rates

The rates for 2019/20 and 2020/21 are as follows:

  1 April 2019 1 April 2020
Taxable profits (main rate) 19% 17%
Tax on outstanding loans to participators 32.5% 32.5%
Diverted profits 25% 25%

When is tax due to be paid?

Small and medium-sized companies have nine months and one day from when the accounting period commenced to pay corporation tax.

Larger companies pay in instalments, due on day 14 of the seventh, tenth, thirteenth, and sixteenth months after the start of an accounting period.

Large companies with taxable profits of more than £20 million pay in quarterly instalments three, six, nine and 12 months after the start of their accounting period.

Where a large company is part of a group, this £20m threshold reduces in line with the number of companies in that group.

Capital allowances and reliefs

All 1.9m limited companies in the UK pay corporation tax on profits from the sale or disposal of a business asset.

It is, however, possible for companies to claim certain capital allowances to protect these assets from being liable.

These assets go into one of three pools – main, special rate, or single asset – and are calculated at pool level.

Up until 31 December 2020, companies can buy certain assets worth up to £1m and not pay corporation tax through the annual investment allowance.

Once this allowance is used up, other purchases qualify for writing-down allowances at the appropriate rate.

The tax rate depends on which pool the asset falls into, with the main pool is taxed at 18% in 2019/20 and the special rate pool rate at 8%.

Of course, there is much more detail to these allowances than meets the eye. Speak to our experts to learn more about our corporate tax planning service.