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Businesses are reminded that from 1 April 2015, one single unified rate of corporation tax of 20 per cent applies.
The rate applies to all companies other than those with oil and gas ring fenced profits.
Under the old regime, if a company had profits of more than £1.5 million it paid corporation tax at 21 per cent, with the tax payable at 20 per cent on profits of less than £300,000, with marginal relief applied between the two limits. Where associated companies were in place, the profits were divided between these.
Following unification of the corporation tax rates, the associated companies rules have been simplified by replacing them with a simpler 51 per cent group test, which will be used in relation to Patent Box, capital allowances long life assets, quarterly instalment payments, where there is an upper limit for profits above which a company must pay tax by instalments, and ring fenced profits of oil and gas companies, where there will continue to be more than one rate of corporation tax.
From 1 April 2015, a company will be defined as an associated company if one is a 51 per cent subsidiary of another or both are 51 per cent subsidiaries of the same company.