Fixed Tax Rates

• The lower Corporation Tax rate is 21 percent of taxable income and applies to corporations with no more than £300,000 in taxable profits during the tax year. The main Corporation Tax rate is 28 percent and applies to corporations with at least £1,500,000 in taxable profits during the tax year.
  
  

Marginal Tax Rates

• A company with annual taxable profits of more than £300,000 but no more than £1,500,000 pays a variable tax rate that is based on a more graduated measure of its taxable profits. Associated companies are treated as one entity for the purpose of calculating the profit cutoffs, in order to prevent companies from forming subsidiaries for the purpose of lowering applicable tax rates.
  
  

Basic Calculation Method

• Companies with profits between £300,000 and £1,500,000 pay Corporation Tax in accordance with 400 graduated increments in which profits are matched with tax relief rates. Tax is initially calculated at the main rate of 28 percent; then the amount of tax relief is calculated according to the 400 graduated increments, and the relief is subtracted from the main rate. The numbers are somewhat different for companies conducting oil exploration, oil extraction or oil-related related activities in the waters surrounding the U.K.
  
  

Associated Companies

• The term "associated companies" means companies under common control, or companies that control or are controlled by another company. These relationships can be defined not only by shareholding, but also by voting power or any other type of effective control. If your company is associated with one or more companies, then the profit cutoffs used to determine marginal tax relief eligibility must be lowered by dividing them by the total number of companies that are associated with each other.
  
  

Claiming Marginal Tax Relief

• In order to claim corporate marginal tax relief, you must calculate the amount of your relief and enter the amount on your Company Tax Return. You will be expected to file an explanation of the basis of your calculation together with your tax return, and you must keep documents evidencing this calculation (such as financial statements or expense receipts) with your records in case of a tax audit.