Advanced Taxation (UK) · Corporation tax: the comprehensive calculation of the corporation tax liability, including overseas aspects

Computing Taxable Total Profits for ACCA ATX-UK

Updated 11 October 2026 · Fact-checked

Taxable total profits (TTP) are a company's profits chargeable to corporation tax. You adjust trading profit, then add property income, loan relationship income and chargeable gains, and deduct trading losses and qualifying charitable donations. Corporation tax is charged on the result at the rates in the tax tables.

Understand Computing Taxable Total Profits

A company pays corporation tax on its taxable total profits. These are all its income and chargeable gains for a chargeable accounting period, less certain reliefs. Unlike an individual, a company has no income tax bands and no personal allowance. All profits are added together and taxed at one set of rates.

The starting point is the accounts. Accounting profit is not taxable profit. You adjust it by adding back expenses the tax rules do not allow, such as entertaining, depreciation and most legal costs of a capital nature. You also deduct income that is not taxable as trading income, such as interest received and rent. You then deduct capital allowances. The result is adjusted trading profit.

Other income is taxed under its own heading. Rental income is property income. Interest on bank deposits and loans is non-trading loan relationship income, taxed on an accruals basis. Capital gains are included as chargeable gains after the company's own computation. Do not mix these up with trading profit. They are taken out of the trading adjustment so they are not taxed twice.

Finally, deduct qualifying charitable donations paid in the period. These are not an expense of the trade, so they are added back in the trading adjustment and then deducted once, from total profits. The figure after donations is TTP. TTP is the figure you use to find the tax rate and the corporation tax due.

Key rules to remember

Taxable total profits: TTP = trading profit + property income + non-trading loan relationship income + chargeable gains − current-period and brought-forward loss reliefs − qualifying charitable donations; Show each source on its own line. Losses and donations are deducted from total profits, in the order the question requires.
Adjusted trading profit: Accounting profit + disallowable expenditure − non-trading income and gains credited − capital allowances (or + balancing charges); Capital allowances are a deduction. Add back depreciation and any capital items charged in the accounts.
Augmented profits: Augmented profits = TTP + exempt dividends from non-associated companies; Used to test the corporation tax limits. Exempt dividends from 51% subsidiaries are not included.
Marginal relief: (£250,000 − augmented profits) × 3/200 × TTP ÷ augmented profits; Applies where augmented profits are between £50,000 and £250,000. Small profits rate is 19% and main rate is 25%. Limits are divided by associated companies plus one and time-apportioned for short periods.

How to solve Computing Taxable Total Profits questions

Use the same layout for every corporation tax computation question. A clear layout earns marks even when a number is wrong.

1Read the requirement and identify the accounting period, its length, and whether the company has associated companies.
2Adjust the accounts profit to trading profit. List add-backs and deductions in a working, then deduct capital allowances.
3Compute each other source separately: property income, non-trading loan relationship income (interest received less interest paid on non-trading loans) and chargeable gains.
4Set out the computation with columns for each source and a total. Include dividends received only as a memo item for augmented profits.
5Deduct any trading losses claimed against total profits, then qualifying charitable donations paid in the period.
6State TTP, then compute the corporation tax using the correct rates and limits for the period.
7Show a brief note for any judgement item, such as why an expense is disallowed. State assumptions.

Quickest way: Add-back and tick-off method

When to use it: Use it when a long list of accounts items is given and you have limited time.

Go down the list once. Next to each item write one of: A (add back), D (deduct, not trading income), or N (no adjustment).
Move every non-trading credit, such as rent, interest and gains, out of the trading working and onto its own line in the main computation.
Add back donations and depreciation automatically. Then do capital allowances separately.
Total the sources, deduct donations last, and write TTP before touching the rates.

Common mistakes in Computing Taxable Total Profits

Leaving charitable donations in the trading expenses and deducting them again from total profits.
The donation appears as an expense in the accounts, so it looks allowable.
Fix: Add it back in the trading adjustment. Then deduct it once as a qualifying charitable donation from total profits.
Including interest received or rent in trading profit.
These credits are in the profit and loss account, so students leave them in.
Fix: Deduct them from the accounts profit and tax them under property income or loan relationship income.
Forgetting to add back depreciation and deducting capital allowances twice.
Depreciation is an accounting charge, and students confuse it with capital allowances.
Fix: Always add back depreciation and amortisation first. Then deduct capital allowances once, from the separate computation.
Adding exempt dividends to TTP.
Dividends received appear in income, and students include them in the total.
Fix: UK dividends received are generally exempt. Exclude them from TTP and use them only in augmented profits where relevant.
Using the full £50,000 and £250,000 limits without adjusting for associated companies or a short period.
Students rush to the rates and forget the adjustments.
Fix: Divide the limits by the number of associated companies plus one and time-apportion for periods under 12 months.

Worked examples

Example 1

Delta Ltd prepares accounts for the year to 31 March 2026. Accounts profit is £180,000 after: depreciation £12,000; entertaining customers £3,000; donation to a registered charity £2,000; interest received £4,000; rental income £9,000. Capital allowances are £15,000. Delta has no associated companies and no other income. Compute TTP and corporation tax.

Show the solution

Trading profit: £180,000 + depreciation £12,000 + entertaining £3,000 + donation £2,000 = £197,000.
Deduct interest £4,000 and rent £9,000 credited in the accounts: £197,000 − £13,000 = £184,000.
Deduct capital allowances £15,000: adjusted trading profit £169,000.
Add non-trading loan relationship income £4,000 and property income £9,000: total profits £182,000.
Deduct qualifying charitable donation £2,000: TTP £180,000.
There are no exempt dividends, so augmented profits = £180,000. This is between £50,000 and £250,000, so marginal relief applies.
Tax at 25% = £45,000.
Marginal relief = (£250,000 − £180,000) × 3/200 × 180,000 ÷ 180,000 = £70,000 × 3/200 = £1,050.
Corporation tax = £45,000 − £1,050 = £43,950.

Answer: TTP is £180,000 and corporation tax payable is £43,950.

Example 2

Echo Ltd has a 12-month period to 31 March 2026. Adjusted trading profit is £320,000. It sold a building giving a chargeable gain of £40,000. It paid a qualifying charitable donation of £10,000. It received UK dividends of £20,000 from an unconnected company. Compute TTP, augmented profits and the corporation tax.

Show the solution

Add trading profit £320,000 and chargeable gain £40,000 = total profits £360,000.
Deduct qualifying charitable donation £10,000: TTP £350,000.
UK dividends of £20,000 are not in TTP. Augmented profits = £350,000 + £20,000 = £370,000.
Augmented profits exceed £250,000, so the main rate applies with no marginal relief.
Corporation tax = £350,000 × 25% = £87,500.

Answer: TTP is £350,000, augmented profits are £370,000 and corporation tax is £87,500.

Exam tips

Always lay out the computation in columns by source of income. Marks are given for each correct heading and for correct treatment of each item.
Add back donations and depreciation in the trading working. Examiners often include both and look for them.
Where an item does not alter profit, say so briefly. A short note shows you considered it.
Check the length of the period and the number of associated companies before choosing the rate or the limits.
Round to the nearest £ as the supplementary instructions require, and show all workings.

Practice questions from Corporation tax: the comprehensive calculation of the corporation tax liability, including overseas aspects

Computing Taxable Total Profits in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Computing Taxable Total Profits: frequently asked questions

What is the format of a corporation tax computation in ATX-UK?

List trading profit, property income, non-trading loan relationship income and chargeable gains with a total. Deduct losses and qualifying charitable donations to reach taxable total profits. Then compute the tax using the rates and limits.

How are qualifying charitable donations treated for corporation tax?

They are not deducted in the trading profit adjustment. You add them back there and then deduct them once from total profits. The deduction is for amounts paid in the accounting period.

Are dividends received included in taxable total profits?

Dividends received from UK companies are generally exempt, so they are not in TTP. They are added to TTP only to compute augmented profits for the rate limits.

Do I need to adjust the profit for interest received?

Yes. Deduct interest received from the accounts profit when finding trading profit. Then tax it as non-trading loan relationship income on an accruals basis.