Smaller companies

Deferral of rate increase a much welcomed reprieve

The small companies’ rate of corporation tax was due to increase from 21 per cent to 22 per cent with effect from 1 April 2009. This increase has now been deferred until 1 April 2010.

This will relate to companies with profits chargeable to corporation tax below the lower relevant maximum amount (‘LRMA’), currently £300,000. Also companies with profits chargeable to corporation tax between the LRMA and the upper relevant maximum amount (‘URMA’), currently £1,500,000. And companies with profits from oil extraction and oil rights in the UK and the UK Continental Shelf which are subject to the small companies’ rate.

The fraction used to smooth the differences between the main rate of corporation tax and the small companies’ rate (marginal relief fraction) will remain at 7/400. The profit limits for which companies are subject to the small companies’ rate are also unchanged.

The small companies’ rate for companies with profits from oil extraction and oil rights in the UK and the UK Continental Shelf (‘ring fence profits’) remains at 19 per cent and the marginal relief fraction will remain at 11/400.

The financial thresholds are reduced where the company in question has one or more associated companies.

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