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HMRC internal manual

Company Taxation Manual

Corporation Tax: small profits relief: financial years up to and including 2014: introduction

For financial years up to and including 2014, CTA10/PART3 contains a scheme for charging companies with smaller profits to a lower rate of CT. The scheme was abolished from 2015 onwards other than for oil and gas companies with ring fence profits, and CTA10/PART3 repealed. The legislation relating to oil and gas companies has moved to CTA10/S279A.

The scheme distinguishes between:

  • total taxable profits, and
  • augmented profits - defined at CTA10/S32 as the total taxable profits plus certain franked investment income.

More details of what is meant by profits in this context are at CTM03600. The previous rules in ICTA88 used different terminology: ‘profits on which CT falls finally to be borne’, and did not refer to ‘augmented profits’. But the substance is unchanged.

Where the profits do not exceed a set lower limit (previously known as the lower relevant maximum amount) the total taxable profits are charged at a lower rate of CT, known as the small profits rate (previously the ‘small companies’ rate’).

Where the profits exceed a set upper limit (previously the upper relevant maximum amount) the total taxable profits are all charged at the full CT rate.

Where profits fall between the two limits the total taxable profits are charged at the full rate of CT but the resulting tax is reduced by a sum (commonly known as marginal relief) computed by applying a ‘standard fraction’ to an amount as calculated at CTM03540. More details of the circumstances in which the small profits rate of tax or marginal relief applies are at CTM03530 onwards.

See CTM03520 for details of the separate starting rate of CT which applied to financial years 2000 to 2005.


The legislation applies to all companies as defined at CTA10/S1121, including unincorporated associations, other than:

* Close investment-holding companies For financial years up to and including 2014, a company which is a close investment holding company, as defined at CTA10/S34 at the end of the accounting period.. see CTM60710 
* Non-residents Companies not resident in the UK (which are nevertheless chargeable to CT if they are trading through a UK branch or agency), unless a treaty non-discrimination article applies. DT1954 gives details

Rates, limits and fractions

For a table of rates, limits and fractions for small companies’ relief/small profits rate relief from FA89 onwards see CTM03510.

The small companies’ rate, and marginal small companies’ relief (pre CTA10), were available on a claim. A claim is no longer required - see CTM03670 onwards.