Impact assessment

Reintroduction of Corporation Tax Small Profits Rate and Marginal Relief - screening equality impact assessment

Published 29 June 2023

Project objectives

The Small Profits Rate (SPR) has been reintroduced to mitigate the impact of the increase in the Corporation Tax main rate such that most of the Corporation Tax population (60%) will not be impacted by the increase.

The increase in the main rate is driven by the need to raise revenues to pay for the various government support measures that were put in place in response to the COVID-19 pandemic.

From 1 April 2023, the Corporation Tax main rate increased to 25% for profits of over £250,000. A SPR has been reintroduced for companies with profits of £50,000 or less and these will continue to pay Corporation Tax at 19%. Companies with profits of between £50,000 and £250,000 will pay tax at the main rate of 25% which will be reduced by an amount of Marginal Relief (MR), providing for a gradual increase in the effective rate of Corporation Tax.

The lower and upper limits are proportionately reduced for short accounting periods and where there are associated companies.

Phase 1

A new online Marginal Relief calculator has been created that meets HMRC accessibility standards. This is available on GOV.UK along with guidance to support customers.

Phase 2

PDF CT600 – The PDF form has been changed to cater for the new SPR and the Marginal Relief. This means the addition of 5 new boxes to reflect the rate as follows:

• MR box for non-ring fence companies
• the number of associated companies in the period
• associated companies in the first financial year
• associated companies in the second financial year
• tick box to indicate where a company claims to be charged at the small companies’ rate on its profits, or is entitled to MR

The amended CT600 and supplementary guidance has been published on GOV.UK to support customers.

What customers need to do

What customers need to do as a result of the change

The calculator element in Phase 1 will improve the customer experience as it calculates the company’s liability, enabling them to correctly apply the legislation.

In Phase 2, there are additional boxes which the customer may need to complete.

How customers will access this service

Customers will submit this information to HMRC using the amended CT600 form.

Customers will submit the CT600 as part of their Company Tax Return (CTR). The majority of customers will do this either by using third party software, or HMRC’s Corporation Tax online filing services (found on GOV.UK). Some customers are exempt from filling their claims online. These customers will complete paper copies of the CTR form and/or supplementary pages, either by downloading them or by HMRC issuing copies to them.

Customers will already submit a CT600 as part of their Corporation Tax obligations therefore the impact in terms of annual filing requirements is expected to be minimal

When customers need to do this

The new MR Calculator has been available from December 2022. The new rates apply from 1 April 2023 with IT system changes having been implemented on 6 April 2023. Business changes were put in place to support customers throughout these changes.

Assessing the impact

Before the changes were implemented, we assessed the equality impacts on all the protected characteristic groups in line with the Equality Act and Public Sector Equality Duty and section 75 of the Northern Ireland Act:

Disabled and not disabled

Impact on customers

With regards to the operational delivery, there’s a potential slight impact for those digitally excluded. Although not representative to all, some disabilities can lead to a customer being digitally excluded.

Phase 1 of the project created an online calculator to assist in calculating MR. There’s a potential slight impact for those digitally excluded as they will not be able to use this resource to assist them in calculating MR.

The Phase 2 introduction of additional boxes to CT600 should have little to no impact as process for customers completing a CTR will remain the same.

Proposed mitigation

The new online MR calculator has been created to meet HMRC current accessibility standards, along with guidance to help assist with calculating MR.

Manual guidance, including a manual calculation if needed, can be provided when requested. This will be through existing business as usual (BAU) processes such as contacting the Extra Support Team.

Manual guidance on how to calculate MR will also need to be provided for the digitally excluded who are unable to use the new online calculator.

Extra Support Team (EST) is in place for customers requiring additional support due to individual needs.

Upskill advisors to complete calculations using the calculator and issue copies to customers when requested.

Communications will advise customers of the new CT600 boxes and the requirement for customers to submit either a manual or digital CTR with the most up-to-date version of the CT600.

The vast majority of customers (93%) use Third Party Software to file their CT Returns. HMRC online filing service (CATO) also allows customers to file CT600 online.

For those customers that cannot use an online filing service, downloadable versions of form CT600 in English and Welsh Languages are available via GOV.UK. We also give customers the option to contact us if they require the form in an alternative format, such as in large print or Braille.

HMRC will also produce and make the RIM Rules governing HMRC software specifications available online so that Developers can check the accessibility and the compatibility of the forms they produce for HMRC.

Age

Impact on customers

Potential for a slight impact for those digitally excluded. Although not representative to all, there is a link to digital exclusion and increase in age.

Phase 1 of the project created an online calculator to assist in calculating MR. There’s a potential slight impact for those digitally excluded as they will not be able to use this resource to assist them in calculating MR.

Phase 2 introduction of additional boxes to CT600 should have little to no impact as process for customers completing a CTR will remain the same.

Proposed mitigation

EST referrals for customers requiring additional support due to individual needs.

Build in call manuals where advisor can complete calculations using the calculator and issue copies to customers.

Communications will advise customers of the new CT600 boxes and the requirement for customers to submit either a manual or digital CTR with the most up-to-date version of the CT600.

Religion or belief

Impact on customers

Companies that are run entirely by individuals who are practising members of a religious society or order whose beliefs are incompatible with the use of electronic communications are not required to file Company Tax Returns online.

Phase 1 of the project created an online calculator to assist in calculating MR. There’s a potential for a slight impact for those digitally excluded as they will not be able to use this resource to assist them in calculating MR.

Phase 2 introduction of additional boxes to CT600 should have little to no impact as the process for customers completing a CTR will remain the same. There is evidence to suggest specific impacts on those customers within this protected characteristic group. The intrinsic values of some religions, such as Judaism (Sabbath) and Islam (Ramadan) limit the times of day or week when customers in this group can interact with HMRC Services.

Some religious groups, such as the Plymouth Brethren, follow rules related to computer use that may affect access to digital services.

Proposed mitigation

EST is available for customers requiring additional support due to individual needs.

Build into call manuals where advisor can complete calculations using the calculator and issue copies to customers.

Communications will advise customers of the new CT600 boxes and the requirement for customers to submit either a manual or digital CTR with the most up-to-date version of the CT600.

People who use different languages (Including Welsh Language and British Sign Language)

Impact on customers

It is not anticipated that this measure will impact on groups sharing protected characteristics.

There’s a potential for a slight impact for customers who use different languages or where English is a second language as they may find it harder to understand communications of changes to the process.

Updates to the CT600 PDF and RIM Rules for software developers will also be available in Welsh Language formats.

Proposed mitigation

Business as usual (BAU) process will be in place.

For written output this is provided by K-international Translation Services.

The contract for spoken interpretation is with ‘Big Word’ service – this translates queries from external customers and responses from HMRC call handlers on helplines.

Customers are able to have a friend or family member act as an interpreter when calling HMRC as long as they are over 16 and are in the same room as the customer.

EST is available for customers requiring additional support due to individual needs.

Opportunities to promote equalities

We have considered opportunities to promote equalities and good relations between people in each of the protected characteristic groups and those outside of that group.

None have been identified.

A full equality impact assessment is not recommended.