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Finance Act 2014

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.

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