HMRC have published updated guidance for companies who need to submit their company tax return form (CT 600) before 1 June 2008 for a period that ends after 31 March 2008, where the return includes calculations based on the new rates announced in the Chancellor's Budget in March 2008.
Announcements in the Chancellor's Budget in March 2008 mean that the company tax return form (CT600) needs updating. The CT600 Budget REPLACE (April 2008) gives advice and lists the main changes including those that affect the return form CT600.
For financial year (FY) 2008 starting on 1 April 2008 there are changes to the main and small companies’ rates of corporation tax and also the marginal small company relief fractions used in calculating marginal small companies’ relief. Companies can use the rates announced in the Budget before Royal Assent (likely to be given in July 2008). The updated CT600 Guide showing these figures will be published by the end of August 2008.
Most companies with profits pay a minimum rate of corporation tax of 20% on profits from 1 April 2007 and 21% from 1 April 2008.
| Rates, limits and fractions for financial years starting on 1 April | 2007 | 2008 |
| Main rate of corporation tax on profits other than ring fence | 30% | 28% |
| Main rate of corporation tax on ring fence* profits of companies | 30% | 30% |
| Small companies’ rate on profits other than ring fence | 20% | 21% |
| Small companies’ rate on ring fence* profits | 19% | 19% |
| Small companies’ rate can be claimed by qualifying companies with profits at a rate not exceeding | £300,000 | £300,000 |
| Marginal small companies’ relief (MSCR) lower limit | £300,000 | £300,000 |
| MSCR upper limit £1,500,000 £1,500,000 | £1,500,000 | £1,500,000 |
| MSCR Fraction (other than ring fence* profits) | 1/40 | 7/400 |
| MSCR Fraction (ring fence* profits) | 11/400 | 11/400 |
| Special rate for unit trusts and open-ended investment companies | 20% | 20% |
| *Ring fence profits mean the income and gains from oil extraction activities or oil rights in the UK and UK Continental Shelf. |
The main rate of corporation tax applies when profits (including ring fence profits) are at a rate exceeding £1,500,000, or where there is no claim to another rate, or where another rate does not apply.
HMRC have planned for their corporation tax online services to handle returns using the new rates from 1 June 2008. HMRC are now advising companies affected by these rate changes not to use corporation tax online services before then. If a company needs to deliver a return before then for a period that ends after 31 March 2008 and that return includes calculations based on the new rates it can still deliver a paper return direct to its HM Revenue & Customs office, provided it follows the advice given in the CT600 Budget REPLACE April 2008.
There are also changes to capital allowances for expenditure after 31 March 2008, including a new annual investment allowance (AIA) and the introduction of a first-year tax credit. Claims cannot be made until after the Finance Bill has received Royal Assent and HMRC have planned for both corporation tax online services and paper returns to handle these new capital allowances from October 2008.
FY 2009 rates
For FY 2009 beginning 1 April 2009 the main rate for most profits will remain at 28% and for ring fence profits 30%. These are the rates that large companies need to use in calculating their instalment payments of tax. HMRC will confirm all the rates, limits and fractions for FY 2009 in the table in next year’s Budget REPLACE for companies to use in completing company tax returns for periods ending after 31 March 2009.
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