HMRC Targets Errors in Marginal Relief Claims
HMRC has launched a new letter campaign targeting companies that may have miscalculated corporation tax marginal relief on their recent returns.
Businesses receiving one of these letters must respond within 30 days, even if they believe their calculations are correct. Failure to do so could result in a formal compliance check and potential penalties.
What is Marginal Relief?
Since April 2023, corporation tax rates have been tiered:
19% for companies with taxable profits up to £50,000
25% for those with profits over £250,000
Marginal relief applies to profits between these thresholds, easing the transition between the two rates.
However, where a company has associated companies — for example, where control or ownership links exist — the £50,000 and £250,000 thresholds must be divided proportionately between them.
This means that businesses with associated companies may qualify for less marginal relief than they have claimed, resulting in underpaid corporation tax.
Why HMRC is Contacting Businesses
HMRC’s letter states:
“We have information that shows your company has associated companies, but hasn’t declared them when claiming marginal relief. Having associated companies reduces the taxable profit limits for claiming marginal relief. This means your company may owe more corporation tax.”
In short, HMRC is checking that companies have correctly declared their associated businesses and accurately calculated their relief based on adjusted thresholds.
What You Should Do
If you receive one of these letters, you should:
Respond within 30 days – even if you believe your return is correct.
Review your corporation tax returns for accounting periods including and after 1 April 2023.
Check whether you have any associated companies that should have been factored into your marginal relief calculation.
If an error is identified and it’s within 12 months of the filing date, submit an amended return online.
If it’s outside the amendment window, make a voluntary disclosure to HMRC to avoid further penalties.
Don’t Ignore the Letter
HMRC will continue sending these letters until October 2025, and ignoring them can lead to a compliance check — something that can be time-consuming and costly for any business.
How Exchange Can Help
At Exchange Accountants, our tax specialists can:
Review your corporation tax filings to ensure your marginal relief has been correctly calculated.
Identify and correct any potential errors before HMRC takes further action.
Liaise directly with HMRC on your behalf if a letter has been received.
With complex rules around associated companies and marginal relief thresholds, expert advice is essential to stay compliant — and to protect your business from unnecessary tax exposure.
If you’ve received a letter from HMRC or want peace of mind that your filings are accurate, our team is here to help.
Let’s Grow Together.
