A 25% rate of corporation tax will apply to all of a company’s profits if they exceed £250,000 from 1 April 2023. The 19% rate will continue to apply where profits are below £50,000. The marginal rate that applies between those limits will be 26.5%.
Those upper and lower limits are divided by the number of “associated companies” in the accounting period. This is not merely companies in the same 51% group but also includes companies under common control, for example where the same individual controls two standalone companies.
So, if Fred controls Bloggs Trading Ltd and also Bloggs Lettings Ltd the limits become £125,000 and £25,000. If Bloggs Trading Ltd has profits of £200,000 in year ended 31 March 2024 then the 25% rate will apply to all of that company’s profits.
In a group situation you may wish to consider restructuring the businesses by the transfer of trades to a single operating company, leaving the other companies dormant as those companies would not normally be counted as associates.
Our briefing note ‘Tax Planning for Higher UK Corporation Tax Rates’ considers planning opportunities ahead of any rate rise that may occur. However, every company will have its own unique tax position, especially if there are tax losses available, so early advice should be taken before implementing any planning ideas.
How can Beavis Morgan help?
We can conduct a Corporation tax review to assist planning for a UK corporation tax rise.