H.M. TREASURY Notes on Clauses

RESOLUTION 22 CLAUSE 26

RESOLUTION: PROCEDURE

(FUTURE TAXATION) (c)

EXPLANATORY NOTE

CLAUSE 26: RATE AND FRACTION FOR CORPORATION TAX STARTING RATE

SUMMARY AND DETAILS

1 This clause provides for the starting rate of corporation tax for the financial year beginning 1 April 2000 to be 10 per cent and for the fraction used in calculating starting rate marginal relief to be one fortieth (subject to any change in the small companies’ rate when it is set for that financial year).

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BACKGROUND

2. Clause 25 introduces a new starting rate of corporation tax with effect from the financial year beginning 1 April 2000. The explanatory note on that Clause gives details of the starting rate.

3. Companies with profits of up to Ł10,000 can claim to be taxed at the starting rate. Companies with taxable profits between Ł10,000 and Ł50,000 can claim marginal relief, which is designed to ease the transition from the starting rate to the small companies’ rate of corporation (20 per cent from 1 April 1999). The formula for calculating this relief is set out in Clause 25 .The fraction to be used in the calculation is one fortieth (subject to any change in the small companies’ rate when it is set for the financial year 2000).