How does the CT600 calculate tax for a period that straddles 1 April 2023 with the 25% main rate change?

From 01/04/2023, HMRC have increased the main rate of corporation tax from 19% to 25%. The small profit rate of 19% remains for *companies with profits under £50,000.

*Small profit rate is not available from 1 April 2023 for 

• Close investment-holding companies
• Non-UK resident companies

For most companies this means if your corporation tax (CT) returns run to the 31/03 and the profits exceed £50,000, you will see the 01/04/2022 - 31/03/2023 profits will be charged at 19% and the following period profits for 01/04/2023 - 31/03/2024 will be charged at 25%, with the possibility of marginal relief if profits fall within £50,000 to £250,000.

If however, your corporation tax return falls on any other period end date, therefore straddling 1 April 2023, you will encounter a scenario where both rates may be applied in the same return period.

For example, if you have a return with CT period of 01/05/2022 - 30/04/2023, with profits exceeding £50,000, this will mean 335 days of profit will fall within the 2022 financial year (01/04/2022 - 31/03/2023) and 30 days of profit will fall within the 2023 financial year (01/04/2023 - 31/03/2024). Therefore, 335 days will be charged at 19% and the remaining 30 days will be charged at 25%. The lower and upper profits limit which apply from 1 April 2023 are also apportioned for 30 days worth to determine whether the profit falls within the marginal rate. Because the financial year 2023/24 is a leap year, the fraction in this case will be 30/366 to determine 30 days worth of lower and upper limits. To further complicate the calculation, the lower and upper profit limits are shared between associated companies, so will also be apportioned if one or more associated companies exist.

As per  HMRC's CT manual, you will see that the rules stipulate that the total profits must be apportioned evenly on a time basis. Therefore it is not possible to split profits based on when they actually arose in the year. We recommend reviewing the example in the above HMRC link if you need to see exactly how the calculations work through.

Corporation tax rates