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.