The headline corporation tax rate increased with effect from 1 April to 25% for accounting periods ending post 31 March 2023. It affects companies with taxable profits in excess of £250,000. The legislation provides that companies with profits up to £50,000 will continue to pay tax at 19%, with profits between these two figures being subject to a marginal rate of 26.5%.
In theory this appears simplistic but the rate of tax payable can be impacted by, what are referred to as, the “associated company rules”. These look at companies that have common control. The rules are complex, but if you have shares in more than one company, or you have blood relatives or spouses that personally own shares in companies, which are not independent from yours, for example due to loans between them, an `association’ may arise which will apportion the Corporation Tax rate bands. The more associates there are, the more the rate bands become diluted, potentially pushing up the effective rate of tax your company pays. These rules will need to be considered as soon as possible, particularly if your company is already within the Corporation Tax Payment on Account regime.
If you have any questions, please get in touch with our tax team.
Martin Tomes is HSKSG’s Director of Tax. He specialises in assisting and advising individuals and their businesses in all areas of taxation with an emphasis on tax planning, mitigation and compliance and also heads up the firm’s specialist property sector group.