Corporation Tax Act 2010 section 18A

Profits charged at the standard small profits rate

Section 18A sets out the conditions under which a company's taxable total profits are charged to corporation tax at the standard small profits rate rather than the main rate.

• A UK-resident company whose augmented profits do not exceed the lower limit pays corporation tax at the standard small profits rate instead of the main rate, provided it is not a close investment-holding company.
• The standard small profits rate is a rate set by Parliament for each financial year and is always lower than the main rate of corporation tax.
• Ring fence profits (broadly, profits from oil extraction activities in the UK and UK continental shelf) are excluded from the standard small profits rate and are dealt with under separate rules.
• A close investment-holding company — essentially a closely controlled company whose business consists mainly of holding investments — cannot benefit from the small profits rate, regardless of the level of its profits.