The rate of tax depends on the total profits of the company, but marginal relief is available where the profits fall within particular bands. The effective rate of tax within the band is shown in the table.
Marginal relief applies to profits between £300,000 and £1.5m giving an effective marginal rate of 27.5% (2010/11 : 29.75%) in this band.
The limits are adjusted for associated companies and for accounting periods of less than 12 months.
Payment and filing
Companies which do not pay at the full rate (i.e. profits below £1.5m) settle their CT liability 9 months and a day after the end of the accounting period.
Companies with large profits generally make payments on account of CT 6.5 months, 9.5 months, 12.5 months and 15.5 months after the start of a 12 month accounting period, with interest running on any balance due until final settlement of the period’s liability.
All companies file returns 12 months after the end of the period.
Taxation of dividends
Companies are not usually charged to CT on dividends received from other companies. Individuals and trusts receive dividends with a 10% ‘tax credit’. The dividend plus the tax credit (100/90 of the amount received) is treated as taxable income, and the 10% tax credit settles some or all of the tax liability. But a taxpayer with no liability cannot obtain a repayment of the tax credit from HMRC – it can only be used to offset liabilities.
Trading companies do not pay tax on disposals of ‘substantial shareholdings’, which are 10% holdings in other trading companies which have been held for at least 12 months
Corporate venturing scheme
Companies can receive a 20% tax credit for investment in new shares in qualifying ‘corporate ventures’. Such companies must be owned at least 20% by individuals, and the corporate investor must own not more than 30% to qualify.