.
14.
3.6. Corporation tax.
Corporation tax is charged on profits made by UK resident companies, public.
corporations and unincorporated associations. The profit on which corporation tax is.
charged is comprised of income from trading and/or investments and capital gains. If.
a company makes a trading loss, then the loss can be carried back for one year to be.
set against profits in that period or it may be carried forward indefinitely. The.
standard rate of corporation tax is currently 30%, and there is a reduced rate of 20%.
for companies with profits of less than £300,000. For firms with profits between.
£300,000 and £1,500,000, a system of relief operates, such that an effective marginal.
rate of 32.5% is levied on profits in excess of £300,000. This acts to increase the.
average tax rate gradually until it reaches 30%. On 1 April 2000, a new rate of 10%.
on profits up to £10,000 and an effective marginal rate of 22.5% on profits between.
£10,000 and £50,000 were introduced. Table 11 presents marginal and average.
corporation tax rates.
Prior to April 1999, a firm had to make a payment of advance corporation tax (ACT).
when it distributed profits to its shareholders in the form of dividends. This could.
usually then be deducted from the total corporation tax payment. The March 1998.
Budget announced the abolition of ACT from April 1999 and the introduction of a.
new payment system for larger companies.4 Under the new scheme, large companies.
pay their corporation tax in four equal quarterly instalments on the basis of their.
anticipated liabilities for the accounting period, making the first payment six months.
into the accounting period. Small and medium-sized companies follow a different.
payment schedule, paying all of their tax nine months after the end of the accounting.
period.
Table 11: Rates of corporation tax, 2000-01.
Profits ( £ p.a.) Marginal tax rate (%) Average tax rate (%).
