There were no changes to the rates of Corporation Tax for the
year to 31 March 2004, which therefore remain:
* 0% on profits up to £10,000
* 19% on profits up to £300,000
* 30% on profits over £1.5m
Different marginal rates apply to profits between £10,000 and
£50,000, and between £300,000 and £1.5m. These amounts
are reduced for periods of less than 12 months, and are shared between
Research and development
Since 1 April 2000, small and medium-sized companies have enjoyed
an enhanced deduction (effectively a subsidy) for qualifying revenue
expenditure on research and development. A similar scheme was extended
to large companies in 2002.
The rules are to be simplified and extended, subject to agreement
from the European Commission. Some of the more important changes
for SMEs are:
* lowering the minimum annual expenditure for a claim from £25,000
* extending claimable "staff costs" to cover agency
workers as well as employees
* simplifying the apportionment of costs where staff spend some
time on R&D and some on other matters.
Employee benefit trusts (EBTs)
An EBT could be used by a company to shelter profits while deferring
the time at which employees pay tax - the employer treated a payment
into the trust as an expense, but the employee paid tax only when
the trust provided a benefit.
This advantage has been closed down from November 2002 by denying
the employer a deduction if the employee does not receive taxable
income within 9 months of the payment in.