Corporation tax is charged on the taxable profits of an accounting period. An accounting period cannot be more than 12 months. The profits in company accounts prepared for a period of more than 12 months are apportioned between the first 12 months and the remainder.
Companies qualify for some special tax reliefs in calculating profits.
- Small and medium size companies can deduct 175%, and large companies 130%, of qualifying expenditure on research and development.
- Tax relief is given on the cost of intangible assets acquired after 31 March 2002 at the rate of depreciation in the accounts, or 4% a year, whichever is the greater.
- The corporate venturing scheme gives companies tax relief of 20% on the cost of subscribing for shares in a qualifying unquoted company.
- The costs of managing investments are deductible.
- A company’s trading losses can be set against any profits of the same period or the previous year. However, for loss-making accounting periods ending between 24 November 2008 and 23 November 2010, the carry back has been extended to 36 months. This extended loss relief is restricted to a maximum of £50,000, but the restriction only applies to losses carried back outside the normal 12-month carry back period. Alternatively they can be carried forward against future profits of the same trade.
