Accounting services
Corporation tax for motor trade companies
Motor Trade Accounting connects limited company garages, dealers and motor businesses across the UK with specialist corporation tax support. Returns filed on time, allowances claimed on the equipment you buy, and a plan for paying the bill.
How corporation tax works for a motor business
A limited company pays corporation tax on its taxable profits. Those profits start from the figure in the accounts and are then adjusted: depreciation is added back and replaced with capital allowances, some costs such as client entertaining are disallowed, and losses from earlier years may be set against them. The result is reported to HMRC on a CT600 return.
Companies with lower profits pay the small profits rate of 19%, those with higher profits pay the main rate of 25%, and companies in between pay the main rate reduced by marginal relief. The profit limits are shared between associated companies, so a director who owns a garage company and a separate sales company may find both pay more than expected.
Motor businesses tend to buy expensive equipment, from ramps and diagnostic kit to recovery vehicles and vans, and how that spending is treated for tax has a large effect on the bill. Specialist support makes sure allowances are claimed in the right way and at the right time, and that the director's own pay and dividends are planned alongside the company's tax.
What corporation tax support covers
The work runs from the year-end figures to the payment date.
- Tax computationAdjusting the accounts profit for disallowable costs, depreciation and capital allowances to arrive at the taxable profit.
- CT600 returnPreparing and filing the company tax return with HMRC, with the accounts and computations attached in the required format.
- Capital allowancesClaiming the Annual Investment Allowance or full expensing on qualifying plant such as ramps, tyre machines and diagnostic equipment, and writing down allowances on cars.
- Vehicle purchasesWorking out how vans, recovery trucks and company cars are treated, since cars do not qualify for the Annual Investment Allowance and their allowances depend on CO2 emissions.
- LossesUsing trading losses in the most useful way, whether carried back against earlier profits or forward against future ones.
- Director's pay and dividendsPlanning the mix of salary and dividends for the director, and checking the director's loan account to avoid an unexpected tax charge.
- Payment planningEstimating the bill early so you can set money aside, and dealing with quarterly instalment payments if the company's profits are large.
What to plan during the year
Corporation tax is easier to manage when it is thought about before the year end, not after.
Timing of equipment purchases
Buying a new ramp or diagnostic system just before or just after the year end changes which year gets the allowance. Talk it through before you commit.
Company vehicle choices
Electric cars, vans and double-cab pick-ups are all treated differently for allowances and for benefit in kind. Compare the options before choosing.
Associated companies
If you control more than one company, the profit limits for the lower rate are divided between them. Group structures need planning.
Setting money aside
Put a percentage of profit into a separate account through the year, so the payment due nine months and one day after the year end is not a shock.
Good to know
Two different deadlines
Corporation tax is usually due for payment nine months and one day after the end of the accounting period, while the CT600 return is due twelve months after it.
Director's loan accounts
If a director owes the company money at the year end and it is not repaid in time, the company may face an additional temporary tax charge on the balance.
Zero-emission cars
New zero-emission cars have qualified for enhanced first-year allowances. Check whether the relief still applies at the date of purchase before relying on it.
HMRC enquiries
HMRC can open an enquiry into a return for a period after it is filed. Good records and clear computations make any enquiry quicker to deal with.
How it works
- 1
Tell us about the company
Send an enquiry with the company's year end, what it does and any deadlines coming up.
- 2
An initial conversation
A specialist discusses your profits, equipment purchases and how you take money out of the company.
- 3
Computation and return
Once the accounts are ready, the tax computation and CT600 are prepared and explained before anything is filed.
- 4
Planning ahead
You get the amount due and the payment date, along with ideas to consider before the next year end.
Corporation tax questions
What rate of corporation tax will my company pay?
It depends on profit. Lower profits are taxed at the small profits rate of 19%, higher profits at the main rate of 25%, with marginal relief in between. The limits are shared with any associated companies.
Can I claim tax relief on a new ramp or diagnostic equipment?
Usually, yes. Plant and machinery like this normally qualifies for the Annual Investment Allowance or, for companies buying new main-rate plant, full expensing.
Do company cars qualify for the Annual Investment Allowance?
No. Cars receive writing down allowances based on their CO2 emissions instead. Vans and other commercial vehicles can usually qualify for the Annual Investment Allowance.
When is corporation tax paid?
For most companies, nine months and one day after the end of the accounting period. Companies with large profits pay in quarterly instalments instead.
Should I take salary or dividends as a director?
Most directors take a mix, but the right balance depends on your other income, the company's profits and current tax rates. It is worth reviewing each year.
Who will work on my corporation tax?
A qualified accountant who works with motor trade businesses will be in touch to discuss your company's position.
Talk through your company's tax
Send an enquiry with your company's year end and what it does, and a specialist will be in touch.