Search Legislation

Finance Act 2012

Section 7: Corporation Tax: Small Profits Rate and Fractions for Financial Year 2012

Summary

1.Section 7 sets the small profits rate of corporation tax (CT) for the financial year beginning 1 April 2012 at 20 per cent for all profits apart from “ring fence profits” of North Sea oil companies, where the rate is set at 19 per cent. Additionally, it sets the fraction used in calculating marginal relief from the main rate at 1/100 for all profits apart from “ring fence profits”, where the fraction is set at 11/400.

Details of the Section

2.Subsection (1) sets the small profits rate of CT for the financial year 2012.

3.Subsection (2) sets the marginal relief standard and ring fence fractions.

Background Note

4.Companies with profits up to £300,000 pay CT at the small profits rate.

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

6.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.

7.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 @ 24 per cent£120,000
minus 1/100 of £1,000,000*£10,000
Tax payable:£110,000

8.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

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

Back to top

Options/Help

Print Options

Close

Explanatory Notes

Text created by the government department responsible for the subject matter of the Act to explain what the Act sets out to achieve and to make the Act accessible to readers who are not legally qualified. Explanatory Notes were introduced in 1999 and accompany all Public Acts except Appropriation, Consolidated Fund, Finance and Consolidation Acts.

Close

More Resources

Access essential accompanying documents and information for this legislation item from this tab. Dependent on the legislation item being viewed this may include:

  • the original print PDF of the as enacted version that was used for the print copy
  • lists of changes made by and/or affecting this legislation item
  • confers power and blanket amendment details
  • all formats of all associated documents
  • correction slips
  • links to related legislation and further information resources