PBR Part 1 - Corporation Tax
Corporation tax for companies with ’small’ profits was set to rise on 1 April 2010 to 22%, a rise originally planned to apply from 1 April 2009. However, the Chancellor has decided to postpone this increase for a second time. The corporate tax rate for companies with ’small’ profits will now remain at 21% until at least 1 April 2011.
‘Small’ profits are those that fall below the single company threshold of £300,000. Companies with profits of £1.5 million or more pay corporation tax at 28%. Profits that fall in the range £300,000 to £1.5 million are taxed at a marginal rate of 29.75%
These profit thresholds are proportionately reduced by the total number of companies associated with the main company. An associated company is any company that is under the common control of an individual, group of related individuals or another company. Thus if you control two companies those companies are associated and only the first £150,000 (£300,000/2) of the annual profits of each company will be taxed at 21%.
Currently any companies controlled by your spouse or civil partner are also associated with your own company, even if your spouse’s company has no commercial links to your own company. This associated rule is under review by the Taxman so it may be relaxed from April 2010 where the companies have no commercial links.
