The corporation tax rates for small and large companies will be aligned at 20% from April 2015. This will remove the need for the associated companies rule and the marginal rate of corporation tax will disappear. The rates for the three financial to 31 March 2016 have been announced as:
Year beginning 1 April:
Small profits rate
(profits up to £300,000)
(profits in band £300,000 to £1.5 million)
Main rate for companies
(profits above £1.5 million)
Different rates apply to profits from North Sea oil and gas.
Banks pay a special bank levy in addition to these rates of corporation tax.
Research and Development (R&D)
Companies can claim enhanced deductions for expenditure on R&D projects at rates broadly dependent on the size of the company as follows:
Small and medium(SME): 225% of qualifying expenditure
Large: 130% of qualifying expenditure
Where the SME deduction for R&D is claimed and the company makes a loss, it can claim a cash credit from HMRC of 11% of that loss. This rate is increased to 14.5% where the R&D expenditure is incurred from 1 April 2014.
Around 46 enterprise zones have been formed around the country to encourage investment and job formation. Businesses in some of those zones can claim 100% capital allowances on the equipment they use within the zone. The period for which those 100% allowance are available has been extended by three years to 31 March 2020.