Definition of corporation tax
Companies are subject to corporation tax, which is levied on business profits and other forms of income, as well as on chargeable gains accruing to companies.
Corporation tax is charged on the profits of 'financial years' which run from 1 April. The profits of a company are calculated by reference to its accounting periods and are then, where necessary, apportioned on a time basis between the financial years in which the accounting period falls.
For financial year 2013 and financial year 2014, companies with taxable profits of up to £300,000 pay tax at a 20 per cent small profits rate, with marginal relief up to £1.5m. Companies with profits of £1.5m or more pay tax at the full rate (23 per cent for financial year 2013 and 21 per cent for financial year 2014). All these limits are reduced where there are associated companies.
The main rate and small profits rate will be unified in FY 2015 at 20 per cent.
corporation tax in the news
UK finance minister George Osborne used his annual budget on 20 March 2013 to announce he would cut the main rate of corporation tax by 1 percentage point to 20 per cent by April 2015, down from 28 per cent when the government came to power.