Corporation Tax

Rates

The rates for the three financial years from 1 April Â 2021 are as follows:

Year beginning 1 April:	2021	2022	2023	2024
Corporate Tax main rateÂ	19%	19%	25%	25%
Corporate Tax small profits rate	N/A	N/A	19%	19%
Marginal relief lower profit limit	N/A	N/A	Â£50,000	Â£50,000
Marginal reliefÂ upper profit limit	N/A	N/A	Â£250,000	Â£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 Â£250,000, and the small profits rate applies to profits of up to Â£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. Â Â Companies with profits between Â£50,000 and Â£250,000 pay tax at the main rate reduced by a marginal relief determined by the standard fraction and this formula:

formula

Where:

F = standard fraction

U = upper limit

A = amount of the augmented profits

N =amount of the taxable total profitsÂ

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%.Â 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%. Â Â

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

For staff working directly on the R&D project, you can claim for the following costs, as long as they relate to R&D:

Bonuses
Salaries
Wages
Pension fund contributions
Secondary Class 1 National Insurance contributions paid by the company

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.