Details of the Schedule
Part 1
2.Part 1 makes changes to the Corporation Tax Act (CTA) 2010. Paragraph 1 introduces the changes.
3.Paragraph 2 makes minor changes to section 1 CTA 2010, (overview of the Act).
4.Paragraph 3 amends section 3 CTA 2010 to remove the reference to the small profits rate of CT.
5.Paragraph 4 repeals Part 3 CTA 2010, (companies with small profits.) Part 3 previously contained the rules for computing marginal relief.
6.Paragraph 5 inserts Chapter 3A in Part 8 CTA 2010 (oil activities). Chapter 3A includes new sections 279A to 279H CTA 2010 and makes provision for the rates of CT chargeable on ring fence profits and marginal relief.
7.New section 279A provides for the rates of tax charged on ring fence profits. Where the augmented profits of the company exceed a lower limit of £300,000, CT on ring fence profits is charged at the main ring fence profits rate of 30 per cent. Where the augmented profits do not exceed this limit, CT on ring fence profits is charged at the small ring fence profits rate of 19 per cent.
8.New sections 279B to 279H provide for the calculation of marginal relief where the augmented profits of a company with ring fence profits exceed the lower limit of £300,000 but do not exceed an upper limit of £1,500,000.
9.New section 279B states how relief is calculated for companies with only ring fence profits and sets the marginal relief fraction at 11/400.
10.New sections 279C and 279D set out how relief is calculated where a company has ring fence and other profits.
11.New section 279E sets the lower limit at £300,000 and the upper limit at £1,500,000. Where the company has one or more “related 51% group companies”, the upper and lower limits are divided by the number of “related 51% group companies” plus 1.
12.New section 279F defines a “related 51% group company” for the purposes of determining the amount by which the upper and lower limits are divided. This replaces the associated companies rules previously in Part 3 CTA 2010. Subsection (1) defines a “related 51% group company” by reference to a “51% subsidiary” which is itself defined for corporation tax purposes by section 1119 CTA 2010. Subsections (2) and (3) retain some of the rules from the associated companies legislation in Part 3 CTA 2010. Subsection (2) covers a situation where 2 or more companies are “related 51% group companies” for different parts of the accounting period, and subsection (3) excludes dormant companies from the definition. Subsections (4) to (9) expand on the types of company that are excluded under subsection 3.
13.New sections 279G and 279H define “augmented profits” for the purposes of determining whether the upper or lower limits have been exceeded.
Part 2
14.Part 2 makes changes to legislation consequential on Part 1 of the Schedule. Most of the changes are minor, ensuring that references to marginal relief and rates of CT are omitted or amended to apply only to ring fence profits where appropriate. For example:
Paragraph 6 amends paragraph 8 subsection (1) Schedule 18 FA 1998 (company tax returns, assessments and related matters) so that references to sections 19, 20 and 21 CTA 2010 (marginal relief for companies with small profits) are replaced by Chapter 3A Part 8 CTA 2010 (rates at which CT is charged on ring fence profits.)
Paragraph 15 subparagraphs (1) to (3) amend sections 614 and 618 CTA 2010 (authorised investment funds) so that the references to sections 18 and 19 CTA 2010 (marginal relief for companies with small profits) are omitted. Authorised investment funds cannot have ring fence profits and marginal relief will no longer be due.
15.Paragraphs 8 and 13 contain more significant amendments arising through replacement of the previous associated companies rules with the “related 51% group company” legislation in new section 279F. Paragraph 8 amends section 99 Capital Allowances Act (CAA) 2001 so that the “related 51% group company” rules are used to determine the amount of the monetary limit in computing capital allowances on long life assets. Paragraph 13 amends sections 357CL and 357CM CTA 2010 so that the “related 51% group company” rules are used to determine the profit limit for companies electing for small claims treatment under the Patent Box legislation.
Part 3
16.Part 3 makes commencement and transitional provisions.
17.Paragraph 21 provides that changes relating to the Capital Allowances Act and the Patent Box legislation will apply for accounting periods beginning on or after 1 April 2015.
18.Paragraph 22 provides that all other changes will apply with effect from the financial year 2015 onwards.
