CTM03958 | Small profits rate: financial year 2023 onwards: examples - change in number of associated companies and a change in the marginal relief thresholds

Company C has an accounting period of 1 July 2030 to 30 June 2031, profits of £85,000 and two associated companies for the period to 31 March 2031 and one associated company for the three months to 30 June 2031. The CT main rate and small profits are unchanged at 25% and 19% respectively but the upper limit has been raised to £300,000.

Marginal relief fraction

The differential between the lower and upper limits has changed so the marginal relief fraction for Financial Year 2031 therefore becomes:

£50,000 x 19% = £9,500

£300,000 x 25% = £75,000

£250,000 x fraction = £65,500

£65,500/£250,000 = 26.2% marginal rate fraction

Difference between the main rate and the marginal rate expressed as a fraction is

26.2% - 25% = 1.2% = 3/250

As there is a change in the limits, the profits of the period are apportioned on a time basis by reference to the financial years as follows:

FY 30 = £85,000 x (274/365) = £63,808.22

FY 31 = £85,000 x (91/365) = £21,191.78

These apportioned profits are then compared with the relevant fractions of the lower and upper limits as follows:

FY30 – 3 associated companies in total

Lower limit £50,000/ 3 = £16,667 x (274/365) = £12,511.42

Upper limit £250,000/ 3 = £83,333 x (274/365) = £62,557.08

FY31 – 2 associated companies in total

Lower limit £50,000/2 = £25,000, apportioned £25,000 x (91/365) = £6,232.88

Upper limit £300,000/2 = £150,000, apportioned £150,000 x (91/365) = £37,397.26

The profits for FY30 exceed the thresholds so they are chargeable at the main rate without marginal relief.

£63,808.22 x 25% = £15,952.06

The profits fall between the thresholds for FY 31 so marginal relief applies as follows:

£21,192 x 25% = £5,298

Total = £21,250.06

Less marginal relief

FY 31 (£37,397 - £21,192) x 3/250 = 16,205 x 3/250 = (£194.46)

Total CT due = £21,055.56