# CTM03655 - Corporation Tax: small profits relief: example 3

This example demonstrates the effect of changes in the number of associated companies during the accounting period.

A company has three associated companies during its accounting year ending 30 June 2007. One associated company has carried on business throughout, one commenced on 1 February 2007 and one on 1 May 2007. As there were no changes in relevant maximum amount, the period 1 July 2007 to 30 June 2007 will be treated as one accounting period and there will be no apportionment because the number of associates changed during the year. However, in calculating any marginal small companies’ relief, the change to the standard fraction (CTM03520) from 1 April 2007 must be addressed.

Assuming that both the profits and the basic profits are £350,000, CT will be due at the CT main rate which has been 30 per cent throughout

£350,000 x 30% = £105,000.

The calculation of marginal small profits relief (on a daily basis) will be as follows below.

Upper relevant maximum amount:

£1,500,000 x 1 / (1 + 3) = £375,000.

Less marginal relief.

(M - P) x I / P x ( 11 / 400 or 1 / 400).

Where:

M = upper relevant maximum amount.

P = the chargeable profits + non-group franked investment income (see CTM03600).

I = the chargeable profits.

11 / 400 and 1 / 40 are the appropriate fractions for the financial years in question.

 11 / 400 x (£375,000 - £350,000) x 274 / 365 = £469.18 1 / 40 x (£375,000 - £350,000) x 91 / 365 = £171.40 Total marginal small companies relief due £640.58

CT due = £104,328.09.