Corporation tax is the tax on the profits of a limited company. The tax is determined at the end of each company's financial year and is due for payment to the Inland Revenue within 9 months of the year end.

For Corporation Tax, companies have to work out their own tax liability, pay their tax without prior assessment by the Inland Revenue and are liable to penalties if they do not deliver a return by the statutory filing date, normally 12 months after the end of the accounting period.

The 2004/5 corporation tax rates remain the same for 2005/6

Current Corporation Tax rates are as follows:

Financial year 2004-05 (£) Financial year 2005-06 (£) Starting rate zero 0 - 10 000 Starting rate zero 0 - 10 000 Marginal relief 10 001 - 50 000 Marginal relief 10 001 - 50 000 Small companies’ rate 19% 50 001 - 300 000 Small companies’ rate 19% 50 001 - 300 000 Marginal relief 300 001 - 1 500 000 Marginal relief 300 001 - 1 500 000 Main rate 30% 1 500 001 or more Main rate 30% 1 500 001 or more

The corporation tax main rate is 30%.

The small companies' rate is 19 per cent for companies with taxable profits between £50,000 and £300,000 and the starting rate is zero for companies with taxable profits of £10,000 or below.

Marginal relief eases the transition from the starting rate to the small companies' rate for companies with profits between £10,000 and £50,000. The fraction used in the calculation of this marginal relief will be 19/400. Marginal relief also applies to companies with profits between £300,000 and £1,500,000. The fraction used in the calculation of this marginal relief will be 11/400.

The profits limits may be reduced for a company which is part of a group or has associated companies. The lower rates and marginal reliefs do not apply to close investment holding companies.