The rate of tax depends on the total profits of the company, but marginal relief is available where the profits fall between a lower and upper limit.
|£0 – £300,000||20%||20%|
Marginal relief applies to profits between £300,000 and £1.5m giving an effective marginal rate of 21.25% (2013/14: 23.75%) in this band.
The limits are adjusted for associated companies and for accounting periods of less than 12 months. For example, a company with one associate will pay at the full rate if its profits are above £750,000.
Companies which do not pay at the full rate settle their CT liability 9 months and a day after the end of the accounting period.
Companies paying the full rate 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.
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.
Certain categories of capital expenditure by companies are treated differently. Expenditure on ‘intangible assets’, including goodwill, know-how and patent rights, is in general relieved for tax according to the accounting treatment (i.e. depreciation or amortisation).
There are increased allowances for companies which clean up contaminated land or carry out R&D work – the expenditure is uplifted for tax purposes, effectively creating a grant for doing the work. The uplift is 50% for land remediation, 125% for small/medium company R&D, and 30% for large company R&D.
Alternatively, a large company can claim a credit equivalent to 10% of qualifying expenditure which is offset against CT liability. This increases profits before tax in the published accounts.