The following Corporation Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:
From 1 April 2023, the rate of corporation tax depends on the level of augmented profits of a company and is based on a comparison of the company’s augmented profits against the corporation tax thresholds of £50,000 (the lower limit) and £250,000 (the upper limit). The rate of corporation tax is 19% if profits do not exceed the lower limit and 25% where profits are greater than the upper limit. Where a company’s profits fall between the lower and upper limits, it will pay tax at 25% but be entitled to marginal relief.
The upper and lower limits are reduced where there are ‘associated companies’ ― in such cases, the profit limits are divided equally among all of the associated companies. It is also these revised limits that are used in any marginal relief calculation. See Example 1 for an illustration.
For more information on the meaning of augmented profits, see the Computation of corporation tax guidance note.
As well as affecting the corporation tax rates that apply, there are other instances that are impacted by the associated companies test. These include small claims treatment under the patent box regime, the capital allowances long life assets rules and the quarterly instalments payment regime.
Prior to 1 April 2023, different rules applied. There was only one rate of corporation tax regardless of the level of profits of the company or the number of associated companies. In addition, a simpler 51% group company test applied to the other corporation tax areas (such as the quarterly instalment payments regime) instead of the associated companies test. A company that has a period of account that straddles 1 April 2023 is deemed to have two separate accounting periods ― one ending 31 March 2023, where the related 51% group companies rules apply and a second period, from 1 April 2023 to the company’s accounting period end, which will use the associated companies
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