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Finance Act 2009

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5.Companies with profits up to £300,000 pay corporation tax at the small companies’ rate.

6.Companies with profits between £300,000 and £1,500,000 (the lower and upper limits) benefit from small companies’ marginal relief from the main rate.

7.Marginal relief has the effect of gradually increasing the rate of tax for a company as its profits move from the lower to the upper profits limit.

8.The example below illustrates the effect of marginal relief for a company with taxable non-ring fence profits of £500,000. Its tax liability is calculated as follows:

* £1,000,000 is the difference between the upper limit and the profit.
£500,000 @ 28 per cent £140,000
minus 7/400 of £1,000,000*£17,500
Tax payable:£122,500

9.The example below illustrates the effect of marginal relief for a company with taxable ring fence profits of £500,000. Its tax liability is calculated as follows:

* £1,000,000 is the difference between the upper limit and the profit.
£500,000 @ 30 per cent£150,000
minus 11/400 of £1,000,000*£27,500
Tax payable:£122,500

10.Where two or more companies are associated with one another, the profits limits are divided by the number of associated companies.

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