Can Property Investment Companies Claim The 19% Corporation Tax Small Profits Threshold?

Can Property Investment Companies Claim The 19% Corporation Tax Small Profits Threshold?

15:22 PM, 3rd January 2023, About A year ago 6

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In our view, the answer is YES, property investment companies can claim the 19% Corporation Tax ‘Small Profits Threshold’.

This is a matter which has recently sparked significant debate among Chartered Accountants and Chartered Tax Advisers.

Our view is explained by Property118 Tax Consultant Alex Norian ACCA, who is also the Managing Director of IWN Accountancy based in Bournemouth.

 

Statutory Provisions

https://www.gov.uk/government/publications/corporation-tax-charge-and-rates-from-1-april-2022-and-small-profits-rate-and-marginal-relief-from-1-april-2023/corporation-tax-charge-and-rates-from-1-april-2022-and-small-profits-rate-and-marginal-relief-from-1-april-2023

Definition of Close Investment Companies

https://www.gov.uk/hmrc-internal-manuals/company-taxation-manual/ctm60710

To contact Alex directly please CLICK HERE


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Comments

JB

15:54 PM, 4th January 2023, About A year ago

What rate will you pay if your profit is over £50,000 but less than £250,000?

Mark Alexander - Founder of Property118

0:34 AM, 5th January 2023, About A year ago

Reply to the comment left by JB at 04/01/2023 - 15:54
I’m very happy to answer your question, but it’s not straight forward.

The first point to bear in mind is that the £50,000 ‘small profits threshold’ is not per company, so if you have two or more companies it’s split equally between them.

Let’s assume just one company for the sake of ease and let’s assume that company makes £100,000 of profit.

On the first £50,000 of profit the corporation tax will be 19%, so that’s £9,500.

On the remaining £50,000 of profit the tax rate is 26.5%, so that’s a further £13,250.

Therefore, the total corporation tax payable would be £22,750, thus giving a net overall effective tax rate of 22.75% in this example.

There are, of course, many ways for a company to reduce its taxable profit. For this reason it is important for all businesses to engage a combination of tax consultants such as Property118 and a qualified Accountant, preferably one that specializes in property.

I hope that helps.

JB

10:02 AM, 5th January 2023, About A year ago

Reply to the comment left by Mark Alexander - Founder of Property118 at 05/01/2023 - 00:34
Hi Mark. Thank you for your reply.

I was looking forward to coporation tax going down - but instead its increased along with dividend tax. Let's hope it goes down again!

Pension contributions seems the best way to reduce ones tax bill.

Mark Alexander - Founder of Property118

14:10 PM, 5th January 2023, About A year ago

Reply to the comment left by JB at 05/01/2023 - 10:02
I feel your pain, acknowledge your sentiments and agree with you in regard to pensions.

Amjed Khan

2:28 AM, 8th January 2023, About A year ago

So if you have 2 companies 1 doing property and another let’s say providing medical services; once you reach 50k profit across both companies then you go to the higher rate.

Mark Alexander - Founder of Property118

3:32 AM, 8th January 2023, About A year ago

Reply to the comment left by Amjed Khan at 08/01/2023 - 02:28
Not quite, you would pay 19% corporation tax on the first £25,000 of profit from each company in that scenario.

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