Finance Act 1999

28 Corporation tax starting rate. U.K.

(1) After section 13 of the Taxes Act 1988 there shall be inserted the following section—

“13AA Corporation tax starting rate.

(1) Where in any accounting period the profits of a qualifying company do not exceed the first relevant amount, the company may, instead of making a claim under section 13(1), claim that the corporation tax charged on its basic profits for that period shall be calculated as if the rate of corporation tax were such rate (to be known as the “corporation tax starting rate”), lower than the small companies’ rate, as Parliament may from time to time determine.

(2) Where in any accounting period the profits of a qualifying company exceed the first relevant amount but do not exceed the second relevant amount, the company may, instead of making a claim under section 13(1), claim that the corporation tax charged on its basic profits for that period shall be—

(a) calculated as if the rate of corporation tax were the small companies’ rate; and

(b) then reduced by the sum specified in subsection (3) below.

(3) That sum is the sum equal to such fraction as Parliament may from time to time determine of the following amount—

where—

• R2 is the second relevant amount;

• P is the amount of the profits; and

• I is the amount of the basic profits.

(4) The first and second relevant amounts mentioned above shall be determined as follows—

(a) where the company has no associated company in the accounting period, those amounts are £10,000 and £50,000 respectively;

(b) where the company has one or more associated companies in the accounting period—

(i) the first relevant amount is £10,000 divided by one plus the number of those associated companies, and

(ii) the second relevant amount is £50,000 divided by one plus the number of those associated companies.

(5) Subsections (4) and (5) of section 13 shall apply for the purposes of subsection (4) above as they apply for the purposes of subsection (3) of that section.

(6) For an accounting period of less than 12 months the relevant amounts determined in accordance with subsection (4) above shall be proportionately reduced.

(7) The profits and the basic profits of a company for an accounting period shall be determined for the purposes of this section as they are for the purposes of section 13.

(8) In this section “qualifying company”, in relation to an accounting period, means a company which—

(a) is resident in the United Kingdom;

(b) is not a close investment-holding company (as defined in section 13A) at the end of that period; and

(c) is not an investment trust which for that period has any eligible rental income (within the meaning of section 508A).”

(2) In section 13A(1) of the Taxes Act 1988 (close investment-holding companies), after “section 13(1)” there shall be inserted “ or 13AA(8) ”.

(3) In section 468(1A) of that Act (taxation of authorised unit trusts), at the end there shall be inserted “ and sections 13 and 13AA shall not apply ”.

(4) In paragraph 1(a) of Schedule 12 to the M1 Finance Act 1989 (provision of information for the purposes of close companies provisions), for “13A” there shall be substituted “ 13 to 13A ”.

(5) In paragraph 8(1) of Schedule 18 to the M2 Finance Act 1998 (tax calculation in company tax return), after “section 13(2)” there shall be inserted “ or 13AA(2) ”.

(6) Subsections (1) to (5) above have effect, subject to subsection (7) below, in relation to corporation tax for the financial year 2000 or any subsequent financial year.

(7) In the case of an accounting period beginning before 1st April 2000 and ending on or after that date—

(a) section 13AA of the Taxes Act 1988 shall apply as if the different parts of that accounting period falling in the different financial years were separate accounting periods;

(b) where a claim is made under section 13AA in relation to the part of that period beginning with 1st April 2000, section 13 of that Act shall also so apply; and

(c) for the purposes of treating different parts of an accounting period as separate accounting periods in accordance with paragraphs (a) and (b) above, the profits and basic profits of the company for that period shall be attributed to the different parts of it according to the financial year in which, for the purposes of section 8 of that Act, they are taken to arise.

Marginal Citations

M1 1989 c.26.

M2 1998 c.36.