What goes in a Corporation Tax computation?

Every Company Tax Return needs a computation: the working that turns the profit in the accounts into the taxable profit on the CT600. It starts from the accounts profit, adds back costs tax doesn’t allow, takes off allowances and losses, and applies the rate.

Last checked against GOV.UK on 12 October 2026.

A4O Accounts prepares the CT600 from your books and files it with HMRC. See the CT600 software, or get started free.

Why you need one

GOV.UK says a Company Tax Return must include computations that show how the figures in the return were calculated from the figures in the accounts. The computation is that bridge. It goes with the accounts and the CT600 itself. See what needs to go with a CT600.

The steps, in order

What gets added back

Some costs are fair in the accounts but aren’t allowed for tax. The common ones for a small company:

• Depreciation. The accounts spread the cost of equipment over its life. Tax ignores that and gives capital allowances instead, so depreciation is added back.
• Client entertaining and gifts. HMRC’s manual says business entertainment isn’t allowable, even when it’s a genuine business cost. Entertaining your own staff, such as a staff party, is usually allowed.
• Fines and penalties. A parking fine or a late-filing penalty isn’t allowable.
• General bad debt provisions. A provision for debts that might go bad isn’t allowed. A specific debt you’ve written off usually is.
• Private or non-business costs paid by the company.

What gets taken off

Capital allowances are the tax relief for buying equipment, vans and machinery. Most plant and machinery qualifies for the Annual Investment Allowance, which is currently £1 million a year. That means most small companies can deduct the full cost in the year they buy. Cars don’t qualify for it and get writing down allowances instead.

Losses. GOV.UK says a trading loss can be set against other profits in the same period, carried back against the previous 12 months, or carried forward against future profits. The computation shows the loss used and what’s left.

Qualifying charitable donations made by the company are deducted from total profits.

Working out the tax

GOV.UK sets the rates:

• 19%, the small profits rate, if profits are £50,000 or less
• 25%, the main rate, if they are over £250,000
• in between, the main rate reduced by Marginal Relief. HMRC has a Marginal Relief calculator.

The £50,000 and £250,000 limits are reduced for an accounting period shorter than 12 months. They’re also divided by the number of associated companies, so if you control two companies, each one’s limits are halved. See accounting periods for Corporation Tax.

A worked example

A company with no associated companies has a 12-month year with these figures:

The taxable profit is under £50,000, so the whole of it is taxed at the small profits rate. The tax is paid 9 months and 1 day after the year end. The return is due 12 months after it. See Corporation Tax deadlines.

Mistakes that come up

• Starting from the wrong profit. The computation must start from the profit in the accounts you send with the return, for the same period.
• Deducting depreciation and claiming allowances. Depreciation has to be added back, or the same cost gets relief twice.
• Forgetting associated companies. They lower both limits, so some profit can end up taxed above 19%.
• Losses left out. A loss carried forward from last year only reduces this year’s tax if the computation uses it.

Doing it in A4O Accounts

A4O Accounts starts the computation from the profit in your books for the period. It lists the add-backs (depreciation, entertaining, fines, general provisions and others), capital allowances, losses brought forward or carried back, and charitable donations. It works out the rate, including Marginal Relief and associated companies. The computation is tagged in iXBRL and sent with the CT600. See how to file a CT600 and CT600 software.

More in this series: all the CT600 guides.