ACCA Strategic Professional · Advanced Taxation (UK)

Corporation tax: taxable total profits: formula sheet

Full chapter guide

Key formulas

Taxable total profits: TTP = trading profit + property income + non-trading loan relationship income + other income + chargeable gains − qualifying charitable donations; Present each source on its own line. Deduct losses and reliefs at the correct point.
Trading profit adjustment: Adjusted trading profit = accounting profit + disallowable expenditure − non-trading income and non-taxable income − capital allowances; Remember to remove accounting depreciation and add back capital expenditure charged to the profit and loss account.
Non-trading loan relationship income: Net = interest receivable − non-trading interest payable; Trade-related interest is a deduction in the trading profit instead. A net deficit can be relieved under the loan relationship rules.
Corporation tax rates: Small profits rate 19% up to £50,000. Main rate 25% above £250,000.; These are the figures in the tax tables for financial years 2023 to 2025.
Marginal relief: (£250,000 − augmented profits) × 3/200 × TTP ÷ augmented profits; Applies where augmented profits are between £50,000 and £250,000. Augmented profits are TTP plus exempt distributions from non-group companies.
Small profits rate: 19% × TTP, where augmented profits ≤ lower limit (£50,000); Limits are adjusted for associated companies and short accounting periods.
Main rate: 25% × TTP, where augmented profits > upper limit (£250,000); No marginal relief is due above the upper limit.
Augmented profits: Augmented profits = TTP + exempt distributions from companies that are not 51% group companies; Distributions from 51% group companies are not added.
Marginal relief: (Upper limit – augmented profits) × 3/200 × TTP ÷ augmented profits; Applies where augmented profits exceed £50,000 but do not exceed £250,000. The standard fraction is 3/200.
Tax in the marginal band: Corporation tax = 25% × TTP – marginal relief; If augmented profits equal TTP, the fraction TTP ÷ augmented profits is 1, so relief = (upper limit – TTP) × 3/200.
Adjusted limits: Limit = £ limit × months in period ÷ 12 ÷ (1 + number of associated companies); Apply to both the £50,000 and £250,000 limits.
Reduced limits for associated companies: Limit ÷ (1 + number of associated companies); Applies to both £50,000 and £250,000. Count the other companies, not the company itself. Ignore companies that are dormant throughout the period.
Reduced limits for a short period: Limit × number of months ÷ 12; Use the accounting period length in months. Apportion to the nearest month, as the exam's supplementary instructions say.
Both adjustments together: Limit × months ÷ 12 ÷ (1 + number of associated companies); The order does not change the answer. Apply both to both limits.
Augmented profits: Augmented profits = taxable total profits + exempt distributions received from non-group companies; Use augmented profits to compare with the limits. Use taxable total profits for the tax charge.
Rate choice: Augmented profits ≤ lower limit: 19%. Augmented profits ≥ upper limit: 25%. Between: 25% less marginal relief; Use the reduced limits, not £50,000 and £250,000.
Marginal relief: (Upper limit – augmented profits) × 3/200 × taxable total profits ÷ augmented profits; The upper limit is the reduced limit. Deduct the relief from tax at 25% on taxable total profits.
Quarterly instalments threshold: £1,500,000 ÷ (1 + number of associated companies), × months ÷ 12 for a short period; The profit threshold for quarterly instalments is adjusted in the same way.
Large company threshold: Augmented profits > £1,500,000 ÷ (1 + number of associated companies); The £1,500,000 is given in the ACCA tax tables. Time-apportion it for a short period.
Very large company threshold: Augmented profits > £20,000,000 ÷ (1 + number of associated companies); This figure is not confirmed by the tables extract used for this page. Check it against the legislation. Time-apportion it for a short period.
Augmented profits: Augmented profits = Taxable total profits + exempt distributions from non-group companies; Use this figure for the threshold test only. Tax is charged on taxable total profits.
Instalment amount: Each instalment = 25% × estimated corporation tax liability for a 12-month period; Four equal instalments.
Large company due dates (12-month period): 14th day of months 7, 10, 13 and 16 from the start of the period; The first falls 6 months and 13 days after the start. The last falls 3 months and 14 days after the end. Confirm the pattern against the legislation.
Very large company due dates (12-month period): 14th day of months 3, 6, 9 and 12 from the start of the period; All four fall within the accounting period. Confirm the pattern against the legislation.
First-year exemption: Not large in the prior period and augmented profits ≤ £10,000,000 ÷ (1 + associates); Not available if the company is very large. The £10,000,000 figure is not confirmed by the tables extract, so check it against the legislation.
Interest on underpaid tax: Tax underpaid × 8.50% × (period late ÷ 12 months); Use the rate in the ATX-UK tax tables. Use months or days as the question requires, and scale the annual rate.
Interest on overpaid tax: Tax overpaid × 3.50% × (period ÷ 12 months); Runs from the date the tax was paid to the date of repayment. The rate is lower than the underpaid rate.
Official rate of interest: 3.75%; Used for employment-related loans. Not the rate for late or overpaid corporation tax.
Quarterly instalment threshold: Profits above £1,500,000; Given in the tax tables. The threshold decides whether a company is large for instalment purposes.
Taxable total profits: Taxable total profits = trading profit + property income + interest + chargeable gains − reliefs, excluding dividends received; Exempt dividends from UK and overseas companies are not included. Deduct qualifying charitable donations as normal.
Augmented profits: Augmented profits = taxable total profits + exempt distributions received from non-group companies; Distributions from 51% group companies are excluded from augmented profits.
Rate test: Augmented profits ≤ £50,000: 19%. Augmented profits ≥ £250,000: 25%. In between: 25% less marginal relief; Limits are for a 12-month period with no associated companies. Divide by 1 plus the number of associated companies, and time-apportion for short periods.
Marginal relief: (£250,000 − augmented profits) × 3/200 × taxable total profits ÷ augmented profits; This is the formula in the tax tables. Deduct the relief from tax at 25% on taxable total profits.
Individual dividend rates: Nil rate band £500; then 8.75% basic, 33.75% higher, 39.35% additional; Dividends are taxed as the top slice of income. The nil rate band still uses up part of the band.

Quick revision

TTP = total profits (income and chargeable gains) less qualifying charitable donations and loss reliefs.
Small profits rate is 19% and main rate is 25%; both come from the tax tables.
Lower limit is £50,000 and upper limit is £250,000 for a 12-month period with no associates.
Marginal relief = (Upper limit − Augmented profits) × 3/200 × TTP ÷ Augmented profits.
Augmented profits = TTP plus dividends received from non-group companies.
Dividends from UK companies are exempt and not in TTP.
Divide both limits by the number of associated companies plus one, and multiply both by months in the period ÷ 12 for short periods.
An accounting period can never exceed 12 months, so a longer period is split.
Instalments apply to large companies, measured against the £1,500,000 profit threshold, adjusted for associates and short periods.
Interest rates in the tables: 8.50% on underpaid tax and 3.50% on overpaid tax.
Round to the nearest £ and apportion to the nearest month, as the supplementary instructions say.
Show every working. Method marks rely on it.

Common mistakes

Including dividends received from UK companies in TTP. Fix: Treat UK dividends as exempt for TTP. Remember them only for the augmented profits test.
Deducting trade-related loan interest again in the non-trading loan relationship line. Fix: Interest on trade borrowing is already in the trading profit. Only non-trading interest goes in the loan relationship line.
Using TTP instead of augmented profits to pick the rate or compute relief. Fix: Always write augmented profits as a separate line, even if it equals TTP, and say so.
Adding dividends from a 51% group company to augmented profits. Fix: Add only exempt distributions from companies that are not 51% group companies. Distributions from 51% group companies are excluded.
Dividing the limits by the number of associated companies instead of by 1 plus that number. Fix: Always write the divisor as 1 + N. With two associates, divide by 3.
Treating association as the same as being in a 75% group. Fix: For the thresholds, ask whether one company controls the other or one person controls both. A 75% holding is not needed.
Testing the threshold against taxable total profits only. Fix: Add exempt non-group distributions to taxable total profits before comparing with the thresholds.
Ignoring associated companies. Fix: Count the associates in the scenario and divide by one plus that number. Do this every time.
Using the same rate for underpaid and overpaid tax. Fix: Underpaid is 8.50%. Overpaid is 3.50%. Write the rate beside the working before you calculate.
Using the 3.75% official rate for corporation tax interest. Fix: The official rate is for beneficial loans. Corporation tax interest uses the underpaid or overpaid rates.

Exam tips

Always lay the computation out in the standard format, with one line per source, even if some lines are nil. Marks are given for the layout.
In the trading profit adjustment, show every item, including those you treat as no adjustment. A short note such as 'allowable' earns marks and shows reasoning.
Note the length of the accounting period and any associated companies in the first line of your answer. Limit errors are a common way to lose marks.
Pay attention to which items are paid or received in the period. Donations and interest follow the accounting period, not the date of the question.
Explain briefly why an item is excluded, for example UK dividends being exempt, since the requirement often asks you to explain.
Write out the adjusted limits at the top of your answer. Markers award marks for correct limits even if later arithmetic slips.
Look for hidden triggers: a short period, an associated company, or dividend income. Each changes the answer.
Show the marginal relief formula with numbers substituted. Working marks are available.