The Business Bulletin
Are you tax aware? The Government introduced various schemes that have supported some businesses and individuals through the COVID 19 pandemic. The big question on many people’s minds has been “How will this be paid back?”. Some of this became clear in the budget announcements on 3rd March.
One of the biggest announcements
The draft finance bill published on
company with augmented profits of
was the news that the main rate of
11 March provided us with some key
£100,000. As this is in between the
corporation tax will increase from
detail on what is proposed. When
£50,000 and £250,000 rates, marginal
19% to 25% from 1 April 2023.
the rates apply will depend on the
relief will apply
Alongside this announcement was
“augmented profits” of a company
the introduction of a small profits rate
for the relevant accounting period.
of 19% to provide protection to the
Broadly speaking, augmented profits
smallest businesses. This is a return
are taxable profits plus any exempt
to the days of pre-2015 where we
distributions such as dividends.
had two rates of corporation tax and marginal relief to worry about.
The small profits rate of 19% will apply where such profits for the accounting period do not exceed the lower limit of £50,000, with
Accountancy practice, specialising in Xero Cloud-Based Software and have been a Xero certified practice since 2014. Whether your business is new or old it
relief fraction (3/200) ■ U is the upper limit ■ A is the augmented profits
where augmented profits for the
■ In this example the tax liability
So, what about the companies
Bean Counters is a forward thinking
■ F is the standard marginal
■ N is the total taxable profits
limit of £250,000.
Bean Counters
x (U-A) x N/A, where:
the main rate of 25% applying accounting period exceed the upper
Wendy Tate
The marginal relief is calculated as F
whose profits fall between £50,000
would be as follows: ■ 100,000 x 25% = 25,000 ■ Less marginal relief 3/200
and £250,000? For these companies’
x (250,000-100,000) x
tax is calculated at the main rate
100,000/100,000 = (2,250)
then marginal relief applies to reduce the liability. Marginal relief bridges the gap between the lower and upper limits providing a gradual
■ Corporation tax liability = 22,750 The reintroduction of a two-rate
needs efficient accounting services for
increase in the corporation tax rate.
system also means the reintroduction
growth and sustainability, we offer an
There will be an updated calculator
of the concept of associated
on www.gov.uk to enable you to work
companies. Where a company has
out the marginal relief.
one or more associated companies,
outsourced accounting solution tailored to your needs. So speak to us about your bookkeeping, payroll, VAT and compliance needs. 07810 562295 wendy@bean-counters.co.uk bean-counters.co.uk
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If you did want to take the time to work this out manually, I have included a sample calculation below to show how this will work. In this example the company is a standalone
the upper limit of £250,000 and lower limit of £50,000 are divided by the number of companies. Broadly, speaking two companies are associated where one has control
