Example Computation
This is an example computation involving a company that has one associate from which it receives £50,000 group relief.
| Example Company Ltd | ||
|---|---|---|
| £ | £ | |
| Schedule A (UK land) | 100,000 | |
| Schedule D | ||
| — Case I (UK trade) | 200,000 | |
| — Case I losses brought forward 1 | (100,000) | 100,000 |
| — Case III (loan relationships, derivatives, financial instruments) | 100,000 | |
| — Case V (overseas) | 300,000 | |
| — Case VI (other annual profits) | 10,000 | |
| Chargeable gains (capital gains) | 150,000 | |
| Allowable (capital) losses brought forward | (50,000) | 100,000 |
| Less: Non-trading debits brought forward ² | (50,000) | |
| Less: Management expense deduction ³ | (20,000) | |
| Less: Charges (donations to UK charities) | (10,000) | |
| Less: Group relief accepted | (50,000) | |
| Profits chargeable to corporation tax | 580,000 | |
| Tax @ 30% | 174,000 | |
| Less: Marginal relief 4 | (46,750) | |
| Less: Double tax relief 5 | (30,000) | |
| Tax liability for the period | 97,250 | |
Notes:
- 1 UK trading losses brought forward from previous accounting periods must be relieved as fully as possible against any trading profits in the current accounting period. They cannot be relieved against non-trading profits.
- ² Brought forward non-trading debits can be utilised against non-trading profits; they cannot reduce the trading profits
- ³ The management expense deduction is in relation to expenses incurred on managing the company's investments.
- 4 The marginal relief computation is as follows:
- Marginal relief fraction x (Upper limit/ (Number of associates plus one) – Profit)
- 1/40 x (1,500,000/2 – 580,000)
- 5 The £30,000 overseas tax has been included in the taxable Schedule D Case V figure. Double tax relief is available on the lower of overseas tax suffered and UK corporation tax suffered on the overseas income.
Read more about this topic: United Kingdom Corporation Tax
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