Corporation Tax Act 2010 section 18B

Marginal relief for companies without ring fence profits

Section 18B provides a mechanism for reducing the corporation tax bill of UK-resident companies whose augmented profits fall between the lower and upper limits, provided they have no ring fence profits.

• The relief applies to UK-resident companies that are not close investment-holding companies, whose augmented profits sit between the lower and upper limits and include no ring fence profits.
• The tax reduction is calculated using a formula: the standard marginal relief fraction multiplied by the difference between the upper limit and augmented profits, with the result then multiplied by the ratio of taxable total profits to augmented profits.
• The standard marginal relief fraction is set by Parliament for each financial year and is currently 3/200.
• This relief smooths the transition between the small profits rate and the main rate, so companies just above the lower limit are not suddenly faced with the full main rate of corporation tax.