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Corporation Tax
Rates
The rates for the three financial years from 1 April 2021 are as follows:
| Year beginning 1 April: | 2021 | 2022 | 2023 | 2024 |
| Corporate Tax main rate | 19% | 19% | 25% | 25% |
| Corporate Tax small profits rate | N/A | N/A | 19% | 19% |
| Marginal relief lower profit limit | N/A | N/A | £50,000 | £50,000 |
| Marginal relief upper profit limit | N/A | N/A | £250,000 | £250,000 |
| Standard fraction | N/A | N/A | 3/200 | 3/200 |
| Main rate (all profits except ring fence profits) | 19% | 19% | N/A | N/A |
From 1 April 2023, the Corporation Tax main rate applies to profits over £250,000, and the small profits rate applies to profits of up to £50,000. Those thresholds are divided by the number of associated companies carrying on a trade or business for all or part of the accounting period. Companies with profits between £50,000 and £250,000 pay tax at the main rate reduced by a marginal relief determined by the standard fraction and this formula:
Where:
F = standard fraction
U = upper limit
A = amount of the augmented profits
N =amount of the taxable total profits
For companies with ring fence profits from oil or gas related activities, the main rate is 30%, and the small profits rate is 19%, with a ring fence fraction of 11/400, for all financial years from 2008.
Research and Development (R&D)
Small and medium (SME) companies can claim enhanced deductions for expenditure on R&D projects at 186% (230% before April 2023) of qualifying expenditure. Where the deduction is claimed and the company makes a loss, it can claim a cash credit from HMRC of 10% of that loss from 1 April 2023, previously 14.5%. Where the SME spends at least 40% of their total expenditure on qualifying R&D from 1 April 2023, it can claim the higher payable tax credit of 14.5%.
Each R&D project must be carried on in a field of science or technology and be undertaken with an aim of extending knowledge in a field of science or technology.
Research and Development Expenditure Credit (RDEC) scheme
Large companies can claim an extra 20% deduction from 1 April 2023 on the following qualifying expenditure:
- Staffing costs
- Expenditure on externally provided workers
- Software and materials consumed or transformed
- Utilities but not rent
- Payments to clinical volunteers
- Subcontractors of qualifying bodies and individuals/partnerships
- Bonuses
- Salaries
- Wages
- Pension fund contributions
- Secondary Class 1 National Insurance contributions paid by the company
For staff working directly on the R&D project, you can claim for the following costs, as long as they relate to R&D:
RDEC differs from the previous R&D scheme for large companies as it is an 'above the line' tax credit and can be accounted for in the profit/loss statement.