ATXMarginal Relief

First you need to establish whether the company is subject to MR this is based on the number of associated companies in the relevant cap if the augmented profits(ttp plus franked investment income including income received from overseas grossed up by any overseas tax) fall between the lower limits and higher limits then you should tax total taxable profits at the main rate and use the marginal relief formula to make a deduction to the tax. Overseas subsidaries will form part of the associates if under control by the parent or under common control of the same individual.Profits falling in this marginal level are taxed at 23.75 percent as a effective rate which is something to consider if the company is part of a group and is surrendering or receiving losses from group members

Hi mate, If there is no FII and the company is eligible for marginal relief, then you can calculate the CT due in two ways. 1) using the marginal relief formula i.e. TTP x Main rate of CT, minus Marginal Relief, or 2) multiply the profits which are within the small co limit (£300,000) by the Small Co rate (20%) and multiply the remainder of the profit using the marginal rate. Add the two figures.

From what I have studied so far you never use the marginal rate to calculate corp tax liability - you only use the marginal relief formula i.e. providing the company is neither small nor large and is eligible for marginal relief. The only time you use the marginal rate (21.25% F2014) is to show tax savings where the company gets a relief (perhaps group loss relief etc.) where they otherwise would have been taxed at the marginal rate.

The first step for corporation tax should always be calculating the limits by dividing the upper and lower limit ( by adding the parent and the subsidiaries). Once you arrive at the AP(TTP + FII{they are the dividends from non-associated companies only}), you need to check that it falls under/between which limits. If its falls in between of upper and lower limit, then you can give company marginal relief.