CT600 for Retail Shops
If you run a retail shop through a limited company, you will need to file a company tax return — the CT600 — every year with HMRC. Whether you operate a single high street store, a chain of outlets, or a retail business with both a physical shop and an online presence, the same corporation tax rules apply.
This guide covers what your retail company pays tax on, the allowable expenses that reduce your bill, capital allowances for shopfitting and equipment, and the most common mistakes retail directors make when filing.
What Does a Retail Company Pay Tax On?
Your limited company pays corporation tax on its taxable profits. For a retail shop, this means:
- Turnover: the total sales your shop makes (including card and cash sales)
- Minus cost of goods sold: the wholesale cost of the stock you sell
- Minus allowable business expenses: running costs of the shop
- Equals taxable profit, on which you pay corporation tax
- 19% — small profits rate, for taxable profits of £50,000 or less
- 25% — main rate, for taxable profits of more than £250,000
- Marginal relief — for profits between £50,000 and £250,000, your effective rate tapers between 19% and 25%
See our guide on Marginal Relief for Corporation Tax if your profits fall in this band.
Allowable Expenses for Retail Shops
Retail companies can deduct a wide range of business expenses from their profits before calculating tax. Expenses must be "wholly and exclusively" incurred for business purposes.
Premises and occupancy costs
- Rent — monthly or quarterly rent payments for your shop premises
- Business rates — local authority rates (a separate charge, not the same as corporation tax)
- Service charges — common in shopping centres and high street units
- Buildings insurance — where you are responsible under your lease
- Cleaning and maintenance — commercial cleaning contracts, minor repairs
Staff costs
- Wages and salaries — for all employees, including part-time and seasonal staff
- Employer National Insurance contributions
- Pension contributions — if you contribute to employee pensions
- Director salary — if you pay yourself through PAYE
Stock and trading costs
- Cost of goods sold — your purchase price for all stock sold during the year
- Stock shrinkage — theft and unexplained losses (must be reasonable and documented)
- Packaging materials — bags, boxes, tissue paper
- Delivery and freight — costs of receiving stock from suppliers
Other trading expenses
- Card processing fees — merchant account charges, POS terminal rental
- Advertising and marketing — local advertising, social media campaigns, window display costs
- Accountancy and professional fees
- Bank charges
- Subscriptions — trade journals, industry associations
- Staff uniforms — where they carry a company logo or are required for the role
Capital Allowances for Shop Fittings and Equipment
Retail shops often invest heavily in their premises and equipment. These capital purchases are not deducted as normal expenses — instead, you claim capital allowances to deduct the cost, often in full in the year of purchase using the Annual Investment Allowance (AIA).
Common capital allowance claims for retail shops include:
| Asset | Typical treatment |
|---|---|
| Shop fittings (shelving, counters, display units) | AIA — 100% in year of purchase |
| Point of sale (POS) systems | AIA — 100% in year of purchase |
| CCTV and security systems | AIA — 100% in year of purchase |
| Refrigeration units (food retail) | AIA — 100% in year of purchase |
| Computers and tablets | AIA — 100% in year of purchase |
| Air conditioning systems | AIA — 100% in year of purchase |
| Company vehicles (delivery van) | AIA or writing down allowance |
Stock Valuation at the Year End
One of the trickiest aspects of retail accounting — and one that directly affects your CT600 — is year-end stock valuation.
Your profit for the year is partly determined by the value you place on closing stock (unsold inventory at your year end). The standard approach is to value stock at the lower of:
- Cost — what you paid for the stock
- Net realisable value (NRV) — the price you expect to sell it for, minus any selling costs
Accurate stock counts at the year end are essential for getting this right.
Seasonal Trading and Loss Relief
Many retail businesses experience significant seasonal swings in profit — particularly those in gifts, fashion, food, or gardening. Corporation tax is calculated on the full accounting period's profit, so seasonal fluctuations within the year do not directly affect your tax calculation.
However, if your company has made a loss in a previous year, you may be able to carry those losses forward to reduce profits in a profitable year. Read our guide to corporation tax losses for more detail on how loss relief works and which boxes on your CT600 to complete.
Retail Shops with Online Sales
If your shop also sells online — through your own website, Amazon, or eBay — all of that income belongs to the same limited company and is reported on the same CT600. There is no separation between online and physical shop income for corporation tax purposes.
Your turnover figure in your accounts should capture all sales channels. See our related guides on CT600 for e-commerce businesses and CT600 for Amazon sellers for more on how online revenue is treated.
Common Mistakes Retail Directors Make
1. Not separating personal and business expenses
Retail directors sometimes pay personal expenses through the company account. These are not allowable and must be excluded from business expenses, or treated as a directors' loan or benefit in kind — which creates its own tax complications.
2. Treating all sales as profit
Your CT600 is based on profit, not turnover. Ensure your accounts correctly deduct cost of goods sold and all operating expenses before arriving at taxable profit.
3. Forgetting employer National Insurance
Many first-time company directors forget that employer NIC is a deductible expense. Do not just include the gross salary — include the employer NIC paid on top of it.
4. Missing the deadline
Your company tax return must be filed within 12 months of your accounting period end, and the tax itself paid within 9 months and 1 day of the period end. Late filing incurs automatic penalties — see our guide to CT600 penalties for the penalty tiers.
5. Misclassifying capital expenditure as running costs
Shop fittings, display units, and equipment are capital assets, not day-to-day expenses. Claiming them as expenses rather than capital allowances can lead to errors in your accounts and an incorrect tax calculation.
How to File Your Retail Company's CT600
You will need to file your CT600 along with your company accounts in iXBRL format. Options include:
- Corporation tax filing software — suitable for most small retail companies filing independently
- An accountant — useful for more complex situations (multiple premises, significant capital expenditure, complex stock issues)
- HMRC's online service — note that HMRC's free filing service is being withdrawn; see our guide to the HMRC CT600 alternative for what to use instead
Summary
Retail shops pay corporation tax on profits after deducting stock costs, premises costs, wages, and capital allowances. For most small retail companies, the 19% small profits rate applies. Accurate stock records and year-end stock counts are particularly important for retail businesses, as they directly affect taxable profit. File your CT600 within 12 months of your accounting period end to avoid penalties.