Form CT600 is the statutory company tax return prescribed by HM Revenue & Customs under Schedule 18 to the Finance Act 1998. Every UK incorporated company, limited liability partnership electing corporate status, and unincorporated association must file a CT600 covering each statutory accounting period.
Following the major statutory rate changes enacted in the Finance Act 2021, the UK returned to a multi-rate corporate tax regime. Calculating corporate tax liability requires mastering the two-tier rates, statutory Marginal Relief formulas, and the strict rules governing Associated Companies.
The Dual-Rate Corporation Tax System
UK corporate taxation operates on two statutory benchmark rates alongside a tapered transitional band:
| Profit Band (Augmented Profits) | Applicable Statutory Rate | Effective Tax Impact |
|---|---|---|
| Up to £50,000 (Lower Limit) | 19% (Small Profits Rate) | Flat 19% on all taxable trading and non-trading profits |
| £50,001 to £250,000 | 25% minus Marginal Relief | Effective marginal tax rate of 26.5% on profits within this band |
| Over £250,000 (Upper Limit) | 25% (Main Rate) | Flat 25% on all taxable corporate profits |
Note: Close Investment Holding Companies (CIHCs) — such as non-trading family money box companies or property holding SPVs without active commercial letting trades — do not qualify for the 19% small profits rate and pay 25% from pound one.
How Marginal Relief Works (The 3/200 Fraction)
To prevent an abrupt jump from 19% to 25% at £50,001, Parliament provided statutory Marginal Relief under Section 18A of the Corporation Tax Act 2010 (CTA 2010).
The statutory formula for Marginal Relief is:
Marginal Relief = Fraction × (Upper Limit − Augmented Profits) × (Taxable Profits / Augmented Profits)
Where:
- Fraction = The statutory standard fraction: 3/200 (or 0.015)
- Upper Limit = Upper threshold (£250,000, scaled for accounting period length and associated companies)
- Augmented Profits = Taxable total profits plus franked investment income
- Taxable Profits = Profits subject to Corporation Tax
The 26.5% Marginal Rate Trap
Because every additional pound of profit between £50,000 and £250,000 loses relief at the rate of 3/200, the effective tax rate on profits inside this £200,000 band is 26.5% (25% + 1.5%). This makes pension contributions, capital investment (via Full Expensing or Annual Investment Allowance), and bonus planning particularly tax-efficient for companies in this profit corridor.
The Associated Companies Rules (Section 18E CTA 2010)
Under Section 18E CTA 2010, the statutory £50,000 and £250,000 thresholds are not granted per company in isolation. They are divided equally among all associated companies:
Company Threshold = Statutory Threshold / (1 + N)
Where N is the number of other active companies associated with your company during the accounting period.
When is a Company "Associated"?
Under Section 450 and 451 CTA 2010, a company is associated with another if:
- One company has control of the other, OR
- Both companies are under the control of the same person or persons (including associates such as spouses, parents, children, and business partners if there is substantial commercial interdependence).
Example: If an entrepreneur controls two active limited companies (e.g. an IT consultancy and an e-commerce store), each company's lower threshold drops from £50,000 to £25,000, and the upper threshold drops from £250,000 to £125,000. Dormant companies are excluded from the count.
Mandatory Accompanying Schedules & iXBRL
Under statutory directions, Form CT600 cannot be delivered as a standalone paper document. It must be submitted electronically alongside:
- Statutory Annual Accounts formatted in iXBRL (Inline eXtensible Business Reporting Language).
- Detailed Tax Computations tagged with HMRC's approved Corporation Tax taxonomy.
- Supplementary pages for specific activities:
- CT600A: Loans to participators (directors' loan account tax under s455 CTA 2010 at 33.75%).
- CT600L: Research & Development (R&D) expenditure credits.
- CT600M: Freeports and Investment Zones relief.
How ac-co Automates Form CT600 Compliance
ac-co generates statutory corporate returns directly from core general ledger data:
- Automatically detects associated company relationships to adjust profit threshold bands correctly.
- Calculates statutory Marginal Relief with mathematical precision down to the penny.
- Generates fully tagged iXBRL financial accounts and computations conforming to FRS 102 Section 1A and FRS 105.
- Files seamlessly with HMRC and Companies House in a synchronized dual submission.