A starting rate of corporation tax of 0% was
introduced in 2002 and applies to companies
with taxable profits of £10,000 or less.
Companies with profits between £10,000
and £50,000 enjoy a marginal relief from
the small companies rate of 19%. This was followed
by the introduction of the non corporate distribution
rate of 19% on profits which were distributed
by way of dividends back to the shareholders.
The resulting has been a complex system
and the government has concluded that many
self employed people are still incorporating
their businesses to reduce their tax and
national insurance liabilities. The government
has therefore decided to replace the non
corporate distribution rules and 0% of corporation
tax with the 19% small companies rate of
tax. This will apply to companies with profits
up to £300,000 with effect from 1 April
2006.
Internet link:
Budget notice on corporation
tax rates
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