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HMRC internal manual

Company Taxation Manual

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HM Revenue & Customs
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Corporation Tax: small profits relief: example 1

This example involves the small companies’ rate for the financial year 2007 (i.e. the year beginning 1 April 2007) when the small companies’ rate of CT was changed from 19 per cent to 20 per cent.

A company provides the following information concerning its accounting period for the year ended 30 September 2007.
 

Chargeable profits £150,000.

Franked investment income received £0.

The company had no associated companies in the accounting period.

 

The ICTA88/S13 profits are chargeable profits (£150,000) + non-group franked investment income received (£0) = £150,000.

The accounting period straddles 1 April 2007 when the CT small companies’ rate was changed and so the profits will need to be apportioned up to and from this date in order to apply the correct rate for the financial year.

As the profit of £150,000 falls below the lower relevant maximum amount (£300,000), the small companies’ rate would apply.

1 October 2006 - 31 March 2007 Chargeable profit £150,000 x 19% x 182 / 365 = £14,210.95.
   
1 April 2007 - 30 September 2007 Chargeable profit £150,000 x 20% x 183 / 365 = £15,041.09.

CT due £29,252.04.