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PART III
Special Classes of Companies
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Reduction of corporation tax liability of small companies.
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28.—(1) Where in any accounting period the profits of a company resident in the State do not exceed the lower relevant maximum amount, the company may claim that the corporation tax charged on its income for that period shall be calculated as if the rate of corporation tax for the financial year 1974 and each subsequent financial year were 40 per cent. (instead of being the rate fixed for companies generally).
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(2) Where in any accounting period the profits of any such company exceed the lower relevant maximum amount but do not exceed the upper relevant maximum amount, the company may claim that the corporation tax charged on its income for that period shall be reduced by a sum equal to 10 per cent. of the following amount—
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where M is the upper relevant maximum amount, P is the amount of the profits and I is the amount of the income.
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(3) The lower and upper relevant maximum amounts mentioned in the foregoing subsections shall be determined as follows—
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(a) where the company has no associated company in the accounting period those amounts are £5,000 and £10,000 respectively;
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(b) where the company has one or more associated companies in the accounting period, the lower relevant maximum amount is £5,000 divided by one plus the number of those associated companies and the upper relevant maximum amount is £10,000 divided by one plus the number of those associated companies.
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(4) In applying subsection (3) to any accounting period of a company, an associated company which has not carried on any trade or business at any time in that accounting period (or, if an associated company during part only of that accounting period, at any time in that part of that accounting period) shall be disregarded and for the purposes of this section a company is to be treated as an “associated company” of another at a given time if at that time one of the two has control of the other or both are under the control of the same person or persons.
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In this subsection “control” shall be construed in accordance with section 102 (meaning of “associated company” and “control”).
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(5) In determining how many associated companies a company has in an accounting period or whether a company has an associated company in an accounting period, an associated company shall be counted even if it was an associated company for part only of the accounting period, and two or more associated companies shall be counted even if they were associated companies for different parts of the accounting period.
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(6) For an accounting period of less than twelve months the relevant maximum amounts determined in accordance with subsection (3) shall be proportionately reduced.
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(7) For the purposes of the foregoing subsections the profits of a company for an accounting period shall be taken to be the amount of its profits for that period on which corporation tax falls finally to be borne, with the addition of franked investment income other than franked investment income which the company (if a member of a group) receives from companies within the group.
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(8) For the purposes of this section the income of a company for an accounting period shall be taken to be the amount of its profits for that period on which corporation tax falls finally to be borne exclusive of the part of the profits attributable to chargeable gains; and that part shall be taken to be the amount brought into the company's profits for that period for the purposes of corporation tax in respect of chargeable gains before any deduction for charges on income, expenses of management or other amounts which can be deducted from or set against or treated as reducing profits of more than one description.
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