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Corporation tax rate

Year by year reductions have been announced in the corporation tax rates as follows:

Year from 1 April Standard rate Small companies rate Marginal rate
2010 (current rates) 28% 21% 29.75%
2011 27% 20% 28.75%
2012 26% 20% 27.5%
2013 25% 20% 26.25%
2014 24% 20% 25%

The reduction in the tax rate will have various practical effects. It will:

  • reduce the attraction of earning profits outside of the UK;
  • mean if the tax deduction for a charge in the accounts is deferred for tax purposes then the eventual tax relief will be less than the tax rate for the year from which the deduction is deferred; and
  • attract relief at a lower rate for the deduction of carried forward tax losses from the recession.

There will be implications for companies’ financial statements. The change to the tax rate will impact the accounting value of deferred tax assets and liabilities, and the amount of the deferred tax will have to be revised every time a reduction in the tax rate is substantively enacted.

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