Background Note
19.This schedule makes changes to legislation to unify the rate of corporation tax chargeable on a company’s profits (other than oil and gas ring fence profits) from the Financial Year 2015. The rate of tax is to be known as “the main rate”.
20.Corporation tax will continue to be charged at two rates on ring fence profits (to be renamed “the main ring fence profits rate” and “the small ring fence profits rate”). The legislation relating to these rates and marginal relief has been moved to new Chapter 3A within Part 8 CTA 2010 that contains the Oil Activities legislation.
21.The new legislation changes the way in which the marginal relief fraction and ring fence rates of tax are set. Currently, the rates are set by Parliament for each financial year through a provision in the Finance Bill. From Financial Year 2015, the ring fence rates and fraction will be fixed in Chapter 3A of Part 8 CTA 2010. “The main rate” of corporation tax will continue to be set by Parliament for each financial year.
22.The anti-fragmentation rules within the legislation for computing marginal relief (now applicable only to ring fence profits) have been simplified by replacing the associated companies rules (previously in Part 3 CTA 2010) with a “related 51% group companies test”. The upper limit of £1,500,000 and lower limit of £300,000 will now be divided amongst the claimant company and its “related 51% group companies”, the latter being based on the definition of a 51% subsidiary in section 1119 CTA 2010.
23.The associated companies anti-fragmentation rules were also used in the long life assets legislation (section 99 of the Capital Allowances Act (CAA) 2001) and the legislation covering the small claims treatment in the Patent Box regime (sections 357CL and 357CM CTA 2010). These rules have also been replaced by the “related 51% group companies” test.
