Taxation (UK) · The use of exemptions and reliefs in deferring and minimising corporation tax liabilities

Planning to Defer and Minimise Corporation Tax for ACCA TX-UK

Updated 11 October 2026 · Fact-checked

Corporation tax planning means using reliefs, timing and payment rules lawfully to pay less tax or pay it later. In TX-UK you pick the best relief, choose the best timing for a disposal or expenditure, check quarterly instalment rules, and state the interest cost of late payment.

Understand Planning to Defer and Minimise Corporation Tax

Tax planning is lawful. You arrange a company's affairs so that tax falls as low as possible, or falls later. Tax avoidance schemes that abuse the rules, and evasion, are different and are not what you advise on.

There are two aims. Minimise means the total tax bill is lower. Defer means the same tax is paid later, which helps cash flow and saves interest. A good answer says which aim each point serves.

The main tools are these. Claim capital allowances at the best rate, such as the annual investment allowance (AIA) or first year allowances. Use trading losses against the best profits. Use rollover relief to delay a chargeable gain. Time a disposal or purchase so it falls into a better accounting period. Use the marginal relief rules and the small profits rate where a company's profits are near the limits.

Payment timing matters too. A large company pays by quarterly instalments, which are earlier than the normal due date. A company that is not large pays nine months and one day after the end of its accounting period. Interest runs on late tax at the rate you are given in the tax rates and allowances, and on overpaid tax at a lower rate.

In an advice question, do not just list reliefs. Link each one to the facts given, state the effect in pounds if you can, and note any condition that must be met.

Key rules to remember

Corporation tax rates (financial years 2023 to 2025): Small profits rate 19% (profits up to £50,000); main rate 25% (profits over £250,000); Limits are on augmented profits and are divided by the number of associated companies plus one, and time-apportioned for short periods.
Marginal relief: (£250,000 − augmented profits) × 3/200 × taxable total profits ÷ augmented profits; Applies where augmented profits are between £50,000 and £250,000. Tax is taxable total profits at 25% less marginal relief.
Quarterly instalments threshold: Large company: profits above £1,500,000 (divided by associated companies plus one); Limit is reduced for associated companies and for short periods. Profits means augmented profits.
Interest rates (assumed): Underpaid tax 8.50%; overpaid tax 3.50%; official rate 3.75%; Interest on late tax is calculated from the due date to the date of payment. The 3.75% official rate is for the beneficial loan benefit, not for late tax.
Capital allowances (companies): AIA 100% up to £1,000,000; main pool 18%; special rate pool 6%; main pool FYA 100%; special rate pool FYA 50%; Allowances are adjusted for the length of the accounting period. Choosing an earlier purchase date within a period does not change the amount, but the period it falls into does.

How to solve Planning to Defer and Minimise Corporation Tax questions

Use this method for any advice or planning question on company tax liabilities.

1Read the requirement. Decide whether you must minimise tax, defer it, or both, and for which accounting period.
2Pick out the facts: profits, associated companies, planned disposals, planned purchases, losses and payment dates.
3List the reliefs and options that fit those facts, such as capital allowances, loss relief, rollover relief or changing the timing.
4Quantify each option in pounds. Compare tax with and without the action, using the correct rates and marginal relief if profits are between the limits.
5Check payment rules. Work out whether the company is large for quarterly instalments, state the due dates, and give the interest cost of paying late.
6Note conditions and risks, such as reinvestment time limits for rollover relief or claim deadlines.
7Give a clear recommendation in one or two lines, stating the saving or the cash flow benefit.

Quickest way: Plan in three lines: relief, timing, payment

When to use it: When time is short in an advice question worth few marks and you must give brief, scoring points.

Relief: name the one relief that fits the facts and say what it saves.
Timing: say which accounting period is better and why, using the rate or limits.
Payment: state the due date or instalment rule and the interest if late.
Add one condition or claim time limit if marks allow.

Common mistakes in Planning to Defer and Minimise Corporation Tax

Forgetting to divide the profit limits by associated companies plus one.
Students use the £50,000, £250,000 and £1,500,000 figures straight from the tax tables.
Fix: Check for associated companies first and adjust every limit before choosing a rate or deciding if the company is large.
Using the main rate on profits that fall within the marginal relief band.
Students remember only the 19% and 25% rates.
Fix: If augmented profits are between the lower and upper limits, compute tax at 25% and deduct marginal relief.
Treating deferral and saving as the same thing.
Rollover relief and payment timing both reduce today's bill.
Fix: Say whether the tax is saved or only postponed. Rollover relief defers the gain until the replacement asset is disposed of.
Giving generic advice with no figures.
Students list reliefs from memory without linking to the scenario.
Fix: Use the facts given and calculate the effect of at least the main recommendation.
Using the wrong interest rate or the wrong dates for late payment.
The official rate, underpaid rate and overpaid rate are all in the tables.
Fix: Use the underpaid rate for tax paid late and the overpaid rate for tax refunded. Count interest from the due date to the payment date.
Advising schemes that look like avoidance.
Students try to find clever ways to cut tax.
Fix: Keep to genuine reliefs and sensible timing that Parliament intended, and state that advice must stay within the law.

Worked examples

Example 1

Alpha Ltd has no associated companies and taxable total profits of £240,000 before any AIA (no dividends received) for the year to 31 March 2026, which is in the financial year 2025. It is considering delaying a £30,000 plant purchase that would qualify for the AIA, so it falls in the next year. Profits in that year are expected to stay above £250,000. Advise on the tax effect of buying now versus later.

Show the solution

Buying now: the AIA of £30,000 reduces profits to £210,000. Augmented profits are also £210,000.
Tax at 25%: £210,000 × 25% = £52,500.
Marginal relief: (£250,000 − £210,000) × 3/200 × 210,000 ÷ 210,000 = £40,000 × 3/200 = £600.
Tax payable: £52,500 − £600 = £51,900.
Without the purchase: profits are £240,000. Tax at 25% = £60,000.
Marginal relief: (£250,000 − £240,000) × 3/200 = £10,000 × 3/200 = £150. Tax = £59,850.
Saving this year from buying now: £59,850 − £51,900 = £7,950. This is 26.5% of £30,000. It is 25% from the lower profits plus 1.5% from the extra marginal relief (£600 − £150 = £450) on the £30,000.
If the purchase is delayed to a year where profits stay above £250,000, there is no marginal relief. Relief is at 25% only: £30,000 × 25% = £7,500. This assumes next year's profits really do stay above £250,000.
Buying now saves £7,950 − £7,500 = £450 more than delaying, on that assumption.

Answer: Buy now. The AIA saves £7,950 this year, because profits fall within the marginal relief band and each £1 of relief is worth 26.5p. Delaying would save only £7,500 at 25%, and only if next year's profits stay above £250,000. Buying now also gives the cash benefit earlier.

Example 2

Beta Ltd has no associated companies. For its 12-month period to 31 December 2025 its augmented profits are £2,000,000 and its tax liability is £500,000. It was also a large company in the previous period. State when the tax is due and calculate the interest if it pays the full £500,000 on 1 November 2026. Use the 8.50% rate on underpaid tax and count exact days on a 365-day year.

Show the solution

The limit for being large is £1,500,000. Profits of £2,000,000 exceed it, and the company was large in the previous period, so the exemption for a first large year does not apply.
The company is not 'very large', because profits are £20,000,000 or less. Quarterly instalments are therefore due in months 7, 10, 13 and 16 after the start of the period.
Months 7, 10, 13 and 16 from 1 January 2025 give 14 July 2025, 14 October 2025, 14 January 2026 and 14 April 2026.
Each instalment is £500,000 ÷ 4 = £125,000. Interest for a full year on £125,000 is £125,000 × 8.50% = £10,625.
The normal due date for a company that is not large would be 1 October 2026. This company is large, so it should have paid in instalments. The same 8.50% rate applies before and after 1 October 2026.
Instalment 1: 14 July 2025 to 1 November 2026 is 475 days. Interest = £10,625 × 475 ÷ 365 = £13,827.
Instalment 2: 14 October 2025 to 1 November 2026 is 383 days. Interest = £10,625 × 383 ÷ 365 = £11,149.
Instalment 3: 14 January 2026 to 1 November 2026 is 291 days. Interest = £10,625 × 291 ÷ 365 = £8,471.
Instalment 4: 14 April 2026 to 1 November 2026 is 201 days. Interest = £10,625 × 201 ÷ 365 = £5,851.
Total interest: £13,827 + £11,149 + £8,471 + £5,851 = £39,298.

Answer: Beta Ltd is large, so £125,000 is due on each of 14 July 2025, 14 October 2025, 14 January 2026 and 14 April 2026. Paying the whole £500,000 on 1 November 2026 gives total interest at 8.50% of £39,298. Paying the instalments on time would avoid this interest.

Exam tips

Always check for associated companies before you pick a rate or decide if the company is large.
Show the pound effect of your advice. A recommendation with a figure scores better than a general statement.
Say clearly whether you are saving tax or deferring it.
Use the interest rates given in the tax tables. Do not quote rates from memory.
Keep advice lawful. Do not suggest schemes that look like avoidance or evasion.

Practice questions from The use of exemptions and reliefs in deferring and minimising corporation tax liabilities

Planning to Defer and Minimise Corporation Tax: frequently asked questions

What is the difference between deferring and minimising corporation tax?

Minimising means the total tax paid is lower. Deferring means the same tax is paid later. Rollover relief defers a gain, while claiming capital allowances in the better period can reduce the total tax.

When does a company pay corporation tax by quarterly instalments?

A large company pays by instalments. In TX-UK, large means profits above £1,500,000, divided by the number of associated companies plus one, and adjusted for a short period. Instalments fall due earlier than the normal nine months and one day after the period end.

What interest rate applies to late paid corporation tax?

Use the rate on underpaid tax given in the ACCA tax tables, which is 8.50% in the assumed rates. Interest on overpaid tax is lower at 3.50%. The official rate of 3.75% is for beneficial loans, not late tax.

How do I structure a tax planning advice answer?

Name the relief or action, link it to the facts, show the effect in pounds, and state any condition or deadline. Finish with a clear recommendation.