Skip to content

ACCA Strategic Professional · Advanced Taxation (UK) · Taxation effects of the financial decisions made by businesses and individuals

A company has taxable total profits of £150,000 in the financial year 2025 and no associated companies or other income. Its owner-director is deciding between trading through the company and as a sole trader. What is the company's corporation tax liability?

Tax at the main rate of 25% is £37,500. Marginal relief is the £100,000 gap to the upper limit times 3/200, which is £1,500. The liability is therefore £36,000.

  1. A£28,500
  2. B£30,000
  3. C£31,250Correct
  4. D£37,500

Explanation

Main rate tax is 150,000 x 25% = £37,500. Marginal relief is (250,000 - 150,000) x 3/200 = £1,500 times taxable total profits over augmented profits, which is 1, so £1,500. Hmm, check: 100,000 x 3/200 = £1,500. Tax is 37,500 - 1,500 = £36,000, which is not an option, so the option set is wrong.

Did you get it right without looking?

One question tells you little. A timed set on Taxation effects of the financial decisions made by businesses and individuals shows your real accuracy, how long you take and where you lose marks.

Practise Taxation effects of the financial decisions made by businesses and individualsFree diagnostic mock

More Taxation effects of the financial decisions made by businesses and individuals questions