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ACCA Applied Skills · Taxation (UK) · The scope of corporation tax

Bright Ltd has prepared accounts for the 12 months to 31 December 2025 and has taxable total profits of £400,000. Which of the following correctly states the corporation tax rate treatment for this chargeable accounting period?

The main rate of 25% applies to all of the profits. Taxable total profits of £400,000 exceed the £250,000 upper limit for a 12-month period, so neither the small profits rate nor marginal relief is available, and tax is £100,000.

  1. AMain rate of 25% applies to all profits because profits exceed the upper limit of £250,000Correct
  2. BSmall profits rate of 19% applies to the first £50,000 and 25% to the rest
  3. CMarginal relief applies because profits are between £50,000 and £250,000
  4. DSmall profits rate of 19% applies to all profits because the period is a financial year

Explanation

The company's financial year 2025 rates are 19% small profits rate and 25% main rate, with limits of £50,000 and £250,000 for a 12-month period. Profits of £400,000 exceed the upper limit of £250,000, so the main rate applies to all profits, giving tax of £100,000. Marginal relief is only available when profits fall between the limits.

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