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Implications of associated companies

From 1 April 2023, the rate of corporation tax that a company is subject to depends on the level of its augmented profits. The rate of tax is based on a comparison of the company’s augmented profits against the corporation tax thresholds of £50,000 (the lower limit) and £250,000 (the upper limit). In summary:

1. •

   where augmented profits are £50,000 or less, a rate of 19% applies (known as the ‘small profits rate’)

2. •

   where augmented profits are between £50,001 and £250,000, a rate of 25% applies but marginal relief is available

3. •

   where augmented profits are more than £250,000, a rate of 25% applies (known as the ‘main rate’)

FA 2021, Sch 1; CTA 2010, ss 18A, 18D

Broadly, augmented profits means taxable total profits plus certain types of distribution income. Only distributions received from non-group companies are included when establishing augmented profits, so group dividends are ignored. For more information on the meaning of augmented profits, see the Computation of corporation tax guidance note.

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