What are augmented profits under Corporation Tax Act 2010 section 18L?

Augmented profits are a company's taxable total profits for an accounting period plus any qualifying exempt distributions it has received that are not excluded. They determine which rate of corporation tax applies to the company. Distributions from 51% subsidiaries and quasi-subsidiaries are excluded from the calculation to prevent intra-group dividends inflating the total.

What counts as a qualifying exempt distribution for augmented profits purposes?

A qualifying exempt distribution must fall within paragraphs A, B, G or H of section 1000(1) of CTA 2010, covering dividends, certain other distributions, stock dividends and bonus issues of redeemable shares. The distribution must also be exempt from corporation tax under Part 9A of CTA 2009, which exempts distributions received by corporate shareholders.

Which distributions are excluded from augmented profits under section 18L?

Distributions are excluded if received from a 51% subsidiary of the recipient company or from a company of which the recipient is itself a 51% subsidiary. Distributions from trading companies or relevant holding companies that are quasi-subsidiaries of the recipient are also excluded. This ensures intra-group dividends do not push a company into a higher corporation tax rate band.

How are augmented profits calculated in practice?

Take the company's taxable total profits and add qualifying exempt distributions from unconnected companies. For example, if taxable profits are £200,000 and the company receives a £30,000 dividend from an unconnected company and a £50,000 dividend from a wholly-owned subsidiary, the subsidiary dividend is excluded and augmented profits are £230,000.

Corporation Tax Act 2010 section 18L

Meaning of "augmented profits"

Section 18L defines "augmented profits" for the purposes of determining which rate of corporation tax applies to a company, and explains which distributions received by a company must be added to its taxable total profits and which are excluded from the calculation.

Augmented profits equal a company's taxable total profits plus certain exempt distributions it receives that are not excluded.
Only distributions falling within specific categories (paragraphs A, B, G or H of section 1000(1)) and exempt under Part 9A of CTA 2009 count as qualifying exempt distributions.
Distributions received from 51% subsidiaries within the same group, or from trading companies or relevant holding companies that are quasi-subsidiaries of the recipient, are excluded from augmented profits.
Section 18M provides further rules for determining 51% subsidiary status and defines terms used in the exclusion rules.

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