Taxable total profits: formula sheet

Key formulas

Maximum length of a CAP

CAP ≤ 12 months

A period of account longer than 12 months is split: first 12 months, then the remainder.

Taxable total profits

Trading profit + property business profit + interest income + chargeable gains = total profits; total profits − qualifying charitable donations = taxable total profits

Trading losses and other reliefs, where given, are also deducted. Dividends from UK companies are not included.

Corporation tax rates (financial years 2023 to 2025)

Small profits rate 19%; main rate 25%; lower limit £50,000; upper limit £250,000

Limits apply to augmented profits and are time-apportioned for short CAPs. They are divided by the number of associated companies, plus one.

Marginal relief

(Upper limit − augmented profits) × taxable total profits ÷ augmented profits × 3/200

Applies when augmented profits are between the lower and upper limits. Given in the exam.

Straddling financial years

Split the CAP by months across financial years (April to March) and apply that year's rate

Rates are the same for the years in this syllabus, so the split matters mainly for limits in later topics.

Tax-adjusted trading profit

Profit per accounts + disallowable expenses − non-trading or non-taxable income − capital allowances

Do the add-backs and deductions first, then deduct capital allowances. Show a row for each item.

Main pool writing down allowance

WDA = 18% × (tax written down value b/f + additions not covered by AIA or FYA − disposal proceeds)

Reducing balance basis. Disposal proceeds are capped at original cost. Multiply by months ÷ 12 if the accounting period is not 12 months.

Special rate pool writing down allowance

WDA = 6% × (tax written down value b/f + additions not covered by AIA or FYA − disposal proceeds)

Used for cars with CO2 emissions over 50 g/km and other special rate items. Time-apportion for short periods.

Annual investment allowance

AIA = 100% × qualifying spending, up to £1,000,000 per 12-month period

Not available on cars. Reduce the limit pro rata for a short period. In the final period of trade no WDA or FYA is given (a balancing adjustment applies instead), but the AIA can still be claimed.

First year allowance for companies

FYA = 100% on main pool additions; 50% on special rate pool additions

Cars with zero CO2 emissions bought new get 100%. Not available in the final period of trade. Additions that receive FYA do not enter the pool for WDA.

Car allowance rates

New zero emission: 100%; CO2 1 to 50 g/km: 18% (main pool); over 50 g/km: 6% (special rate pool)

Second-hand zero emission cars get 18%.

Structures and buildings allowance

SBA = 3% × qualifying construction cost, straight line

Applies to qualifying non-residential structures and buildings. It is not part of the pools.

Rounding and apportionment rules

Work to the nearest £. Apportion to the nearest month.

These are the supplementary instructions printed in the exam.

Property business profit

Rent accrued for the period − allowable expenses (repairs, insurance, agent fees, irrecoverable rent)

Accruals basis. All UK properties are one business, so a loss on one property is netted against profit on another.

Non-trading loan relationship income

Non-trade interest receivable − non-trade interest payable (accruals basis)

If the result is a deficit, it is relieved against total profits or carried forward. It is not simply ignored.

Taxable total profits

Trading profit + property business profit + non-trading loan relationship income + miscellaneous income + chargeable gains − qualifying charitable donations

Do not include UK dividends received. Deduct donations only after totalling the profits.

Corporation tax rates (FY2025)

Small profits rate 19%; main rate 25%; lower limit £50,000; upper limit £250,000

Limits apply to augmented profits. Marginal relief is covered on its own topic page.

Company chargeable gain layout

Proceeds − disposal costs − cost − enhancement expenditure = unindexed gain; less indexation allowance = chargeable gain

Indexation cannot create or increase a loss.

Indexation factor

(RPI Dec 2017 − RPI at acquisition) ÷ RPI at acquisition

Round to three decimal places. ACCA gives the RPI figures or the factor in the exam.

Indexation allowance

Indexation factor × allowable cost (or enhancement expenditure)

Calculate separately for each item of expenditure, from its own date.

Gain in total profits

Net chargeable gains are added to total profits

Taxed at 19% to 25% depending on profits; see the marginal relief rules (lower limit £50,000, upper limit £250,000).

Capital losses

Set against gains of the same period, then carry forward against later gains

No annual exempt amount for companies and no set-off against income.

Taxable total profits

TTP = Total profits − qualifying charitable donations (QCDs) paid in the period

Total profits exclude UK dividends received. Deduct QCDs after adding up all income and gains.

Treatment of UK dividends received

UK dividends received = exempt; not included in total profits or TTP

Show them below the computation as a memo line.

Augmented profits

Augmented profits = TTP + dividends received from non-group companies

Used for the £50,000 and £250,000 limits and the £1,500,000 quarterly instalment threshold. Limits are reduced for associated companies and short periods.

Corporation tax rates (FY2023 to FY2025)

Small profits rate 19%; main rate 25%; lower limit £50,000; upper limit £250,000

The limits are compared with augmented profits, not TTP.

Marginal relief

(Upper limit − augmented profits) × standard fraction × TTP ÷ augmented profits; standard fraction = 3/200

Applies where augmented profits fall between the lower and upper limits. Deduct it from tax at the main rate.

Rates

Small profits rate 19%; main rate 25%

Given in the tax tables for financial years 2023, 2024 and 2025.

Augmented profits

Augmented profits = TTP + exempt dividends from non-group companies

Group dividends are excluded. Use augmented profits only to test the limits and compute marginal relief.

Limits (12 months, no associates)

Lower limit £50,000; upper limit £250,000

Both are given in the exam tables.

Adjusting limits

Adjusted limit = limit × (months in period ÷ 12) ÷ (1 + number of associated companies)

Apply to both limits. Count associated companies, not the company itself, then add 1 in the divisor.

Marginal relief

(Upper limit – augmented profits) × 3/200 × TTP ÷ augmented profits

Use the adjusted upper limit. Deduct the relief from tax at 25% on TTP.

Liability between the limits

Tax = 25% × TTP – marginal relief

Applies only when augmented profits are above the lower limit and below the upper limit.

Adjusted limits

Limit × (months in period ÷ 12) ÷ (1 + number of associated companies)

Apply to the £50,000 lower limit, £250,000 upper limit and £1,500,000 instalment threshold. The £20 million very large threshold is adjusted in the same way.

Marginal relief

(Upper limit – augmented profits) × standard fraction 3/200 × taxable total profits ÷ augmented profits

Use the adjusted upper limit. It applies only when augmented profits fall between the adjusted lower and upper limits.

Corporation tax rates

Small profits rate 19%; main rate 25%

Both rates are given in the tax tables. Above the adjusted upper limit, the main rate applies to all profits.

Large company instalment dates

14th day of months 7, 10, 13 and 16 after the start of the period

For a 12-month period starting 1 January: 14 July, 14 October, 14 January and 14 April.

Very large company instalment dates

14th day of months 3, 6, 9 and 12 after the start of the period

For a 12-month period starting 1 January: 14 March, 14 June, 14 September and 14 December.

Instalment amount

Estimated corporation tax liability ÷ 4

Four equal instalments. Short periods still use four instalments, and the dates are worked back from the last one.

Short period: last instalment

3 months and 14 days after the end of the period

Earlier instalments fall at three-month intervals before that. Check the date against the start of the period.

First-year exemption

Not required to pay by instalments if not large in the previous year and profits do not exceed £10 million (adjusted)

The exemption does not apply to a very large company (£20 million threshold).

Quick revision

• TTP is the profit charged to corporation tax for a chargeable accounting period.
• A chargeable accounting period cannot be longer than 12 months.
• TTP layout: trading profit, property income, interest, chargeable gains, less qualifying charitable donations.
• Dividends received from other companies, UK or overseas, are not in TTP. Augmented profits = TTP plus dividends from non-51%-group companies. Dividends from 51% group companies are not added.
• Companies have no annual exempt amount for chargeable gains.
• The small profits rate is 19% and the main rate is 25% in the rates provided.
• The lower limit is £50,000 and the upper limit is £250,000 for a 12-month period.
• Marginal relief = (upper limit – augmented profits) × 3/200 × TTP ÷ augmented profits.
• Limits are time-apportioned for periods shorter than 12 months and divided by (1 + the number of associated companies).
• The quarterly instalment profit threshold is £1,500,000.
• Qualifying charitable donations are deducted from total profits, not from trading profit.
• Capital allowances: main pool 18%, special rate pool 6%, annual investment allowance 100% up to £1,000,000.

Common mistakes

• Treating a period of account of 18 months as one CAP Fix: A CAP cannot exceed 12 months. Split into 12 months and 6 months, and compute separately.
• Including dividends from UK companies in taxable total profits Fix: Exclude UK dividends from taxable total profits. Add them only when finding augmented profits.
• Adding back all entertaining. Fix: Only customer and supplier entertaining is disallowable. Staff entertaining is allowable, and so are gifts to staff.
• Claiming AIA on a car. Fix: Cars never qualify for AIA. Put them in the main pool or special rate pool, or give a new zero emission car a 100% FYA.
• Using rent received instead of rent accrued Fix: For companies, use the amount due for the accounting period. State the basis in your answer.
• Putting non-trade interest in the trading profit Fix: Remove it from the adjusted trading profit and include it as non-trading loan relationship income.
• Applying an annual exempt amount to a company gain Fix: Companies have no annual exempt amount. Gains go straight into profits.
• Using indexation to create or increase a loss Fix: Calculate the unindexed gain first. If it is nil or a loss, indexation is nil. Otherwise cap indexation at the gain.
• Including UK dividends received in taxable total profits. Fix: Remember that UK dividends are exempt. Keep them out of TTP and use them only for augmented profits.
• Ignoring dividends when testing the profit limits. Fix: Always compute augmented profits before choosing the rate. Add dividends from non-group companies to TTP.

Exam tips

• Always check the legal form and residence first. A one-line statement earns an easy mark.
• In Section C, show a date line or a table of CAPs with their months. Marks are given for the split.
• Time-apportion by months, to the nearest month, as the exam instructions require.
• Set out the computation in a column per CAP with sources in rows. It is clear and quick to mark.
• In objective questions, watch for the trap that dividends from UK companies are not in taxable total profits.
• Lay out the capital allowance computation in columns for AIA, FYA, main pool, special rate pool and total. Markers award marks for each pool and each allowance separately.
• Always show an item you treat as no adjustment, with a zero or a tick. This earns marks and shows the marker that you have considered it.
• Check the CO2 figure on every car. It decides which pool the car goes in, and whether a new car gets a 100% FYA.