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ACCA Strategic Professional · Advanced Taxation (UK) · Mitigation of tax by numerical analysis and reasoned argument

Birch Ltd has no associated companies and a 12-month accounting period. Its taxable total profits are £150,000, including no exempt distributions. Using the marginal relief formula in the Finance Act 2025 tax tables, what is its corporation tax liability?

The liability is £36,000, being main rate tax of £37,500 less marginal relief of £1,500. Relief is the £100,000 gap to the £250,000 upper limit multiplied by 3/200, with no adjustment needed since taxable total profits equal augmented profits.

  1. A£35,250Correct
  2. B£37,500
  3. C£36,000
  4. D£34,500

Explanation

Tax at 25% is £150,000 x 25% = £37,500. Marginal relief is (£250,000 – £150,000) x 3/200 x 1 = £100,000 x 0.015 = £1,500. The liability is £37,500 – £1,500 = £36,000. Option £35,250 wrongly uses a different relief figure.

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