CTM03915 | Small profits rate: financial year 2023 onwards: definition of augmented profits
From HM Revenue & Customs · Company Taxation Manual
For the purpose of identifying whether or not a company is chargeable at the standard small profits rate in , the augmented profits of a company for any accounting period are defined by as:
the company’s taxable total profits of that period, as defined in and (3), plus
any exempt distributions of a qualifying kind received by the company that are not excluded.
Exempt distributions of a qualifying kind include:
dividends,
distributions of assets,
amounts treated as a distribution on the transfer of assets or liabilities, and
bonus issues following a repayment of share capital.
For this purpose, exempt distributions of a qualifying kind are not excluded if the income is from companies that are not in the same group.
An excluded distribution is a distribution that the recipient receives from a company if that company is:
a 51 per cent subsidiary of the recipient
a company of which the recipient is a 51 per cent subsidiary, or
a trading company or relevant holding company that is a quasi-subsidiary of the recipient.
provides further definitions of 51 per cent subsidiary for the purposes of .
In addition to the requirements at (meaning of "51 per cent subsidiary") the relationship will only qualify at any time if the parent would be beneficially entitled to more than 50 per cent of:
profits available for distribution to equity holders of the 51 per cent subsidiary; and
assets of the 51 per cent subsidiary available for distribution to equity holders on a winding up.
Indirect ownership and ownership on trading account is ignored. A trading company has the usual meaning of one whose business consists of carrying on one or more trades.
A relevant holding company means a company whose business consists of holding shares in or securities of its 90 per cent trading subsidiaries.
A company is a quasi-subsidiary of the recipient company if:
it is owned by a consortium of which the recipient is a member,
it is not a 75 per cent subsidiary of any company, and
no arrangements of any kind (whether in writing or not) exist as a result of which it could become a 75 per cent subsidiary of any company.
A company is owned by a consortium if at least 75 per cent of its ordinary share capital is beneficially owned by two or more companies each of which has at least 5 per cent of the ordinary share capital and has at least a 5 per cent beneficial entitlement to profits and assets available to equity holders as above.
The group relief provisions set out in apply for the purpose of identifying equity holders and profits and assets available for distribution.