Statement of Practice 1 (1991)
Published 6 March 1991
© Crown copyright 1991
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1. Income and Corporation Taxes Act (ICTA) 1988 section 13 contains the rules for the small companies’ rate of Corporation Tax and marginal relief. If a company’s profits for an accounting period do not exceed the lower relevant maximum amount, the company may claim to be taxed at the small companies’ rate. If the profits exceed the lower relevant maximum amount but do not exceed the upper relevant maximum amount, the company may make a claim for the marginal relief to apply.
2. ICTA 1988 section 13AA contains the rules for Corporation Tax starting rate and marginal relief. If a company’s profits for an accounting period do not exceed the first relevant amount, the company may claim to be taxed at the Corporation Tax starting rate. If the profits exceed the first relevant amount but do not exceed the second relevant amount, the company may make a claim for the marginal relief to apply.
3. The lower and upper relevant maximum amounts (for section 13) and the first and second relevant amounts (for section 13AA) are restricted where the company has one or more associated companies. Two companies are associated if one controls the other or both are under the control of the same person or persons.
4. If a company wishes to take advantage of section 13 or section 13AA, it is necessary for it to make a claim. HM Revenue and Customs (HMRC) practice is to accept as a valid claim under ICTA 1988 section 13 or section 13AA a clear indication in a company’s return (or Corporation Tax computation or accompanying correspondence) for the relevant accounting period that the profits should be charged at the small companies’ rate, the Corporation Tax starting rate or that the marginal relief should be applied. Except in the case of an unincorporated association or other members’ club or society, the claim should include a statement of the number of associated companies which the company had in the relevant accounting period. Where the company had no associated companies in the accounting period, the claim should state this.
Note: this statement is as it appears in HMRC’s statements of practice (March 2009).