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In the United Kingdom, companies are subject to corporate tax based on their tax accounting periods, which usually coincide with the period covered by their statutory accounts. However, a fiscal accounting period cannot exceed 12 months, so if the accounts are prepared for a longer period (up to a legal maximum of 18 months), it will be necessary to file more than one tax return corresponding to that year.
In the case of non-resident companies subject to corporate tax for capital gains derived from the disposal of immovable property located in the United Kingdom, specific rules may apply. In particular, if the company is not subject to British tax in relation to other activities, a single-day tax accounting period may be established, and special rules may apply, including specific provisions on the tax settlement date.
In the United Kingdom, companies are required to file their corporate tax return within 12 months from the end of their tax year. This declaration includes a self-assessment of the corresponding tax, which implies that it is the company itself that calculates and declares the amount to be paid, thus eliminating the need for HMRC (the Tax and Customs Agency) to issue an initial assessment. However, HMRC maintains the right to review or correct the declaration if it detects inconsistencies, if it is not satisfied with the information provided or if the company does not submit the declaration within the established deadline.
Required electronic filing
All returns must be submitted online, using the digital format required by HMRC. In addition, the accounts attached to the return must be prepared in iXBRL (Inline eXtensible Business Reporting Language) format, a standard that allows financial information to be readable both for individuals and for automated tax review systems.
In the United Kingdom, the timing of corporate tax payment varies depending on the size of the company.
For smaller companies, the tax must be paid nine months and one day after the end of the corresponding fiscal year. That is, the payment is made before the formal tax return is filed.
On the other hand, larger companies or groups are subject to a system of quarterly on-account payments, based on estimated profits for the year. In these cases, the first payment is due during the seventh month of the tax period. In general, a company is considered large if its taxable profits exceed 1.5 million British pounds, although this threshold is adjusted if there are other companies under common control.
As of April 1, 2019, companies with profits exceeding 20 million pounds (also adjusted according to the number of related companies) must meet even earlier payment dates, and must pay the tax in four installments: in the third, sixth, ninth and twelfth month of the fiscal year.
The British tax regime provides for various penalties when companies fail to comply with their tax obligations. These penalties can be applied for:
Additionally, the Finance Act of 2022 introduced new measures against electronic sales suppression, a mechanism through which some companies manipulate digital sales records before or after the transaction occurred to hide revenues and artificially reduce their tax obligations. Specific sanctions have been established for the possession, development or promotion of tools that facilitate this type of fraud, as well as new inspection powers for HMRC in this area.
Companies that are subject to the Global Minimum Tax or Benefit Reassignment Tax have specific obligations to UK tax authorities. First, the member of the group designated as a taxpayer must register with HMRC within six months after the close of the first accounting year in which the Global Minimum Tax or the Benefit Reassignment Tax is applicable. Subsequently, you must submit an annual self-evaluation statement and a GLObe Information Statement (GIR), provided that the group is within the scope of application of these standards. In cases where an information return has already been filed with another foreign tax administration, the GIR may be replaced by a foreign return notification.
The general deadline for filing these returns is 15 months from the close of the corresponding fiscal year, although it is extended to 18 months when it comes to the first year subject to these provisions. In the same way, the payment of the tax due must be made within those same deadlines, and interest will accrue if the payment is made out of time. It is important to note that the obligation to declare is maintained even in cases where there is no amount to pay.
For their part, large companies or groups, understood as such those entities with an annual turnover of more than 200 million British pounds in the United Kingdom or with accounting assets exceeding 2 billion pounds, are subject to a series of additional requirements. Among them, they must appoint a Senior Accounting Officer to HMRC, who must annually certify that the company's accounting systems are adequate to ensure proper tax management. Failure to notify the Senior Accounting Officer, as well as a negligent or deliberate breach of their obligations, may result in sanctions for both the company and the designated person.
In addition, these entities must publish, on an annual basis, a tax strategy applicable in the United Kingdom. Failure to comply with this obligation also entails possible economic sanctions.
In terms of tax planning, certain schemes and transactions must be reported to HMRC under different disclosure regimes. These include the DOTAS (Disclosure of Tax Avoidance Schemes) regime and the DASVOIT (Disclosure of VAT and Other Indirect Tax Avoidance Schemes) regime, which cover most taxes and are designed as notification mechanisms, not authorization. In other words, the mere declaration of a transaction does not in any way imply its validation by HMRC, and, in fact, new legislation has sometimes been introduced to counteract certain types of schemes already disclosed.
The EU's Mandatory Disclosure Regime (EU DDI) is also applicable, which imposes an obligation to report on certain cross-border mechanisms. After Brexit, the United Kingdom limited this obligation only to mechanisms that fall within category D, that is, those that may undermine international information exchange standards, such as the Common Information Standard (CRS), or that involve opaque structures in which real beneficiaries are not clearly identified. Failure to comply with these reporting obligations can result in penalties ranging from 5,000 to 1 million British pounds, or even more in certain cases.
Following a consultation initiated in November 2021, the United Kingdom has decided to replace the EU's disclosure regime with a new framework based on the OECD's MDR (Mandatory Disclosure Rules). According to the HMRC announcement, this new regime will apply to cross-border agreements concluded as of June 25, 2018, and those already reported under the previous system should not be reported again. All reports must be made online, with no possibility of manual submission.
Finally, since April 2022, large companies (whether corporations or corporations) are required to inform HMRC about any uncertain tax treatment that has been applied to their tax returns, including corporate tax, VAT and the PAYE withholding system. These rules seek to reduce the gap between taxes that the State considers due and those actually collected, especially in relation to controversial legal interpretations. Tax treatment is considered uncertain when the company has recognized a related accounting provision or when the treatment applied does not conform to HMRC's known interpretation. This obligation is activated only if the amount of tax potentially affected exceeds five million British pounds, although there are some exceptions.
In the United Kingdom, corporate tax is based on a self-assessment system. Once the declaration is submitted, HMRC has 12 months to open a formal investigation. These can range from simple requests for information to complex technical reviews. In most cases, they are resolved through correspondence, although if no agreement is reached, the matter can be escalated to arbitration or litigation.
HMRC has legal authority to request information or inspect facilities, although these measures are rare. Unlike other jurisdictions, there are no routine inspection visits.
Since 2017, companies can be criminally liable if they don't prevent their employees or associates from facilitating tax evasion. This responsibility lies exclusively with legal persons (companies or partnerships), and may entail unlimited economic sanctions, confiscation of assets and reputational damage. The standard applies to entities in the United Kingdom and also to foreign entities with a presence in the country.
Large companies (more than 200 million GBP in revenues or 2 billion in assets) must appoint a Senior Accounting Officer (SAO), who must certify annually to HMRC that accounting systems are adequate to meet tax obligations. Failure to comply may result in penalties of GBP 5,000 for both the manager and the company.
These companies must also publish their UK tax strategy annually. This obligation extends to multinational groups with global revenues exceeding 750 million euros, in accordance with OECD standards on country-by-country reporting.
Since April 2022, large companies must notify HMRC of tax treatments that may be interpreted as uncertain, provided that the amount in dispute exceeds 5 million GBP. Penalties for non-compliance vary depending on the recidivism: from 5,000 to 50,000 GBP. This measure seeks to reduce the fiscal gap generated by dubious legal interpretations, especially in the environment of large corporations.
The Finance Act of 2022 reinforced HMRC's tools against the promotion of tax avoidance schemes. Among other measures, it is allowed to freeze the assets of developers, impose sanctions on UK entities that collaborate with offshore developers, close involved companies and disclose information to alert taxpayers. The objective is to reduce the use of artificial structures to minimize the tax burden and protect the national tax base.
The General Rule against Tax Abuse is a rule that seeks to curb abusive tax planning. It applies to a wide range of taxes, including corporate tax, personal income tax, capital gains, inheritance tax... However, it does not apply to VAT.
Its main purpose is to modify the behavior of taxpayers who engage in artificial structures or tax strategies considered abusive. To this end, a process of quasi-judicial review of the schemes used is established, the result of which serves as evidence in potential litigation.
The British government has stressed that this rule should only be applied in clear cases of tax abuse, evaluated according to a series of criteria that are, in part, subjective.
In the United Kingdom, HMRC has a fixed deadline to initiate an investigation into a corporate tax return. For companies that are part of medium or large groups, this deadline is usually one year from the legal filing deadline. In the case of other companies, the deadline is 12 months from the date the return was actually filed.
This deadline may be extended if the return is filed late, is later amended, or if HMRC detects a matter that was not properly disclosed in the initial period. In addition, when it comes to inappropriate concealment or deliberate fraud, much longer time frames apply, allowing HMRC to investigate for a significantly longer period.
On November 30, 2021, the UK government published its response to a review of how large companies experience tax administration in the country. The objective was to assess whether the system provides early certainty when appropriate, resolves disputes efficiently in accordance with the law, and encourages a collaborative approach to tax compliance.
The review focused on current challenges related to tax risk, certainty, compliance, investigations, litigation and the cooperative compliance model, especially the role of the client's compliance manager.
As a result, the government identified three key areas to improve the fiscal environment for large companies:
During 2022, HMRC launched specific lines of work to advance these areas.
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