Despite the publication (in August 2002) of a consultative document on corporation tax reform – including such issues as the taxation of unrealised capital gains and the removal of capital allowances (in the interest of aligning accounting and tax practice) no changes to corporation tax were announced so the rates we are working with for the financial year starting 1st April 2003 are as follows:
- The small companies' rate of corporation tax is 19%, and applies where a company has profits of between £50,001 and £300,000.
- Where a company's profits do not exceed £10,000 the starting zero rate will apply. Any profit between £10,001 and £50,000 will continue to be assessable at the marginal rate of 23.75%.
- The main rate of corporation tax will continue to be at 30% and will apply to profits of a company of more than £1,500,000.
In between the £300,000 and £1,500,000 figures, marginal rate relief applies. This operates to increase the overall rate of tax to somewhere between the small companies' rate of 19% and the main rate of 30%. Profits in excess of £300,000 will effectively bear tax at the marginal rate of 32.75%.