This is a Working Example of our Forecasts
Registered users can produce their own business forecasts in minutes; exactly as is shown here.

Forecast Corporation Tax

The rules and how they work: This example shows how the corporation tax, taxable profits, capital allowances and marginal relief forecasts are calculated.

forecast for year beginning the 1st.May 2012May 2013May 2014
 Period 1 - Corporation Tax Year starting 1st. April:201220132014
 Period 2 - Corporation Tax Year starting 1st. April:201320142015
 Corporation Tax Period 1 - Days335335335
 Corporation Tax Period 2 - Days303030
    
 Net Profit before Tax95,16399,516252,669
 add: Depreciation10,87617,54320,290
 Adjusted Pre-Tax Profit Cfwd106,040117,059272,959
 less: Tax Losses Bfwd000
 less: Capital Allowances Period 130,84917,65822,729
 less: Capital Allowances Period 22,7631,5812,035
 add: Balancing Charge000
 Taxable Profit Cfwd Period 166,47589,780227,795
 Taxable Profit Cfwd Period 25,9538,04020,400
 Taxable Profit for the Year72,42897,820248,195
    
 Corporation Tax Rate - Period 120%20%20%
 Corporation Tax Rate - Period 220%20%20%
 Corporation Tax Charge - Period 113,29517,95645,559
 Corporation Tax Charge - Period 21,1911,6084,080
 Tax before Marginal Relief14,48619,56449,639
 Marginal Relief Period 1000
 Marginal Relief Period 2000
 Corporation Tax Payable14,48619,56449,639
    
 Tax Loss Cfwd000

The Forecast

Our system automatically calculates this forecast. No intervention is required from a user in order for us to produce this.

Non Deductible Overheads and Expenses

HMRC (Her Majesty's Revenue and Customs) do not recognise entertainment expenses, fines and provisions; including depreciation as being tax deductible. The same goes for overheads that are not regarded as having been incurred "wholly and exclusively" in the pursuance of trade.

Capital allowances are applied in place of depreciation to arrive at the taxable profit. The rate of capital allowance depends on the type or function of the asset. Most fixed assets are categorised by HMRC as belonging to the "main pool." These do not include assets such as property and cars or intangible assets such as patents or trade marks.

Main Pool Capital Allowances

The most common fixed assets to be found working in a business such as plant & machinery, office equipment, fixtures and fittings and delivery vans or trucks are the main pool assets. Certain other fixed assets such as company cars or property qualify for different rates of capital allowance and so are assigned to their own special asset pools.

HMRC calculates capital allowances by the reducing balance method. The rates of main pool capital allowances are as follows.

Capital Allowances for Main Pool Assets 2012 / 13 2013 /14
Annual Investment Allowance limit  £25,000 £250,000
New Assets - Rate for annual investment allowance 100% 100%
New Assets - Rate for value above annual investment limit 18% 18%
Rate for written down assets B/Fwd from previous years 18% 18%

Annual Investment Allowance 2013 / 2014

The applicable dates for the temporary increase to £250,000 for main pool asset annual investment allowances (AIA) are from 1st. January to 31st. December 2014.

Unless a company's financial year starts from 1st April there will be a double overlap for calculating corporation tax during those two years; one for the difference between financial and fiscal years' tax rates and allowances and a second for main pool asset AIA from January 1st. 2013 to the end of 2014. Our system performs these calculations.

Short Life Asset Pools

There is a link below to an article on assigning short life main pool assets to individual pools.

This enables tax losses to be claimed in the year of their disposal instead of simply reducing the value of the main pool by their sales value. It will be of interest to companies where forecast main pool asset purchases are or have been in excess of any year's annual investment allowance.

Capital Allowances for Cars

A car's CO2 emissions (i.e. grammes per kilometre) determines the rates for capital allowances: These are also calculated by the reducing balance method.

Capital Allowances for Company Cars  2012 / 13  2013 / 14
Cars with Emissions below 110g/Km 100% 100%
Cars with Emissions of 110 -160 g/Km 20% 18%
Cars with Emissions above 160g/Km 10% 8%


For the purpose of Figurewizard corporation tax forecasts it is always assumed that your company cars fall within the 110 - 160 g/Km emissions range.

The Balancing Charge

Cost less total capital allowances claimed describes the written down tax value of an asset pool. If one or more assets are sold in the course of a financial year in excess of the written down tax value of the whole of their asset pool, this will produce a capital profit, which HMRC refers to as a "balancing charge". That is added to the taxable profit.

Corporation Tax Rates

There are two different basic rates of corporation tax; i.e. small and standard, depending on the size of the taxable profit.

Corporation Tax Rates 2012 / 2013  2013 / 2014 2014 / 15  2015 / 16
Small - Taxable profit not exceeding £300,000 20% 20% 20% 20%
Standard - Taxable profit greater then £300,000 24% 23% 21% 20%

Marginal Relief Fraction

This is a further allowance against taxable profits between £300,000 and £1500,000.

Rates of Marginal Relief 2012 / 2013 2013 / 2014 2014 / 15 2015 / 16
Marginal Relief Fraction - Divide by 400 400 400 N / A
Marginal Relief Fraction - Multiply by 4 3 1 N / A

How Marginal Relief is Calculated

Further corporation tax relief is provided for taxable profits between 300,000 and 1,500,000 by way of marginal relief. Assuming a financial year starting 1st. April 2012 and a taxable profit of £350,000 the following table shows how marginal relief is calculated:

Description 2012 / 13
Upper limit for marginal relief  £1,500,000
Less: Taxable profit  £350,000
Balance carried forward £1.150,000
Divide Balance carried forward by 400 £2,875
and Multiply by 4 - i.e. Marginal relief £11,500
Corporation Tax - i.e. £350,000 x 24% £84,000
Corporation tax payable after deducting marginal relief £72,500

Phasing out Marginal Relief

The multiplier for marginal relief has always been directly associated with the difference between the standard and small rates of corporation tax. For example that difference in tax year 2012 / 2013 is 4%, making the marginal relief multiplier 4.

As a result of the 2013 budget the small and standard rates of corporation tax will be unified at 20% from 1st. April 2015; bringing marginal relief to an end.

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