Corporation Tax Act 2010 section 18

Profits charged at the small profits rate

Section 18 sets out the three conditions that must be met for a company's profits to be charged at the small profits rate of corporation tax.

• The company must be UK resident throughout the accounting period, though some non-resident companies trading through a UK permanent establishment may also qualify under a double taxation agreement.
• The company must not be a close investment-holding company (as defined elsewhere in the Act).
• The company's augmented profits must not exceed the lower profit limit; if profits fall between the lower and upper limits, marginal relief may apply instead.
• No formal claim is required — the small profits rate applies automatically when the three conditions are satisfied.