CTM03505 | Corporation Tax: small profits relief: financial years up to and including 2014: introduction
From HM Revenue & Customs · Company Taxation Manual
For financial years up to and including 2014, contains a scheme for charging companies with smaller profits to a lower rate of CT. The scheme was abolished from 2015 onwards other than for oil and gas companies with ring fence profits, and repealed. The legislation relating to oil and gas companies has moved to .
The scheme distinguishes between:
total taxable profits, and
augmented profits - defined at as the total taxable profits plus certain franked investment income.
More details of what is meant by profits in this context are at . The previous rules in ICTA88 used different terminology: ‘profits on which CT falls finally to be borne’, and did not refer to ‘augmented profits’. But the substance is unchanged.
Where the profits do not exceed a set lower limit (previously known as the lower relevant maximum amount) the total taxable profits are charged at a lower rate of CT, known as the small profits rate (previously the ‘small companies’ rate’).
Where the profits exceed a set upper limit (previously the upper relevant maximum amount) the total taxable profits are all charged at the full CT rate.
Where profits fall between the two limits the total taxable profits are charged at the full rate of CT but the resulting tax is reduced by a sum (commonly known as marginal relief) computed by applying a ‘standard fraction’ to an amount as calculated at . More details of the circumstances in which the small profits rate of tax or marginal relief applies are at onwards.
See for details of the separate starting rate of CT which applied to financial years 2000 to 2005.
Scope
The legislation applies to all companies as defined at , including unincorporated associations, other than:
| - Close investment-holding companies | For financial years up to and including 2014, a company which is a close investment holding company, as defined at at the end of the accounting period.. | see |
|---|---|---|
| - Non-residents | Companies not resident in the UK (which are nevertheless chargeable to CT if they are trading through a UK branch or agency), unless a treaty non-discrimination article applies. | gives details |
Rates, limits and fractions
For a table of rates, limits and fractions for small companies’ relief/small profits rate relief from onwards see .
The small companies’ rate, and marginal small companies’ relief (pre ), were available on a claim. A claim is no longer required - see onwards.