New Forest


Marginal relief for Corporation Tax is back – but what does that mean for you and your group companies?

Announced in the Budget in March, Corporation Tax will increase to 25% from 1 April 2023 but for companies with profits of up to £50,000 the rate will remain at 19%, and a tapered rate of 26.5% will apply to profits up to £250,000.

The reintroduction of the marginal relief will apply to companies where their profits fall between £50,000 and £250,000 with the thresholds being allocated for the number of ‘associated companies’ or group companies. Disappointingly the current simplification that only treats companies as associated where they are 51% subsidiaries is being reversed and the thresholds will be shared by all companies that are associated by virtue of common control, even when not in a formal group.  The thresholds will also apply to short accounting periods.

For group and associated companies, the return of the ‘small profits rate corporation tax’ regime is unwelcome.

Geoff Rhodes, MD of HWB said: “The added complexity of the quarterly payments on account (QIPs), which is already an administrative burden, should have businesses asking whether they are set up correctly to deal with the changes, and the potential damage to their cash flow.”

“Group companies have a number of options to consider and should look at whether a restructure of the group, consolidating into 1 or 2 companies, would be beneficial.”

For further information on group company structures, please contact Geoff Rhodes on 023 8046 1239.

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