CTM03957 - Small profits rate: financial year 2023 onwards: examples - change in number of associated companies and a change in the CT rates

Company B with an accounting period 1/1/2028 to 31/12/2028 has profits of £45,000. It has 2 associated companies in the period to 31/03/2028 and 4 in the period to 31/12/2028. Assume that the CT main rate increases from 25% to 26% for FY 2028 and the Small Profits Rate increases to 20%. There is no change in the marginal relief thresholds.

Once again, the accounting period straddles the financial year but, even though there is a change in the rate, the lower and upper limits have not changed, so there is no need to treat the period as two separate accounting periods for marginal relief purposes simply because the number of associated companies has changed throughout the year. However, the profits will be apportioned up to and from the rate changes.

There are 4 associated companies throughout the accounting period so the marginal relief thresholds will need to be proportionately reduced to see if marginal relief is available.

Lower limit £50,000/ 5 = £10,000

Upper limit £250,000/5 = £50,000

The £45,000 profits fall between the thresholds so marginal relief applies and is calculated as follows:

The profits are apportioned between the financial years (2028 is a leap year so the denominator is 366):

FY 2027 £45,000 x 91/366 = £11,189 x 25% = £2,797.25

FY 2028 £45,000 x 275/366 = £33,811 x 26% = £8,790.86

Total £11,588.11

Less marginal relief

(£50,000 - £45,000) x 3/200 = (£75)

Total CT due = £11,513.11