Skip to content

ACCA Strategic Professional · Advanced Taxation (UK) · Corporation tax: the use of exemptions and reliefs in deferring and minimising corporation tax liabilities

Brindle Ltd has taxable total profits of £180,000 for the year ended 31 March 2026 (financial year 2025), no franked investment income and no associated companies. It is considering an additional deductible R&D payment of £30,000 that would reduce taxable total profits to £150,000. Using the marginal relief formula in the tax tables, what is the saving in corporation tax from the extra £30,000 deduction?

Corporation tax on £180,000 is £43,950 and on £150,000 it is £36,000, a saving of £7,950. This arises because the effective marginal rate in the marginal relief band is 26.5%, not 25%.

  1. A£7,500
  2. B£9,000
  3. C£5,700
  4. D£7,050Correct

Explanation

At £180,000: tax at 25% = £45,000; marginal relief = (250,000 - 180,000) x 3/200 = £1,050; tax = £43,950. At £150,000: tax = £37,500; relief = 100,000 x 3/200 = £1,500; tax = £36,000. Hmm, saving = 43,950 - 36,000 = £7,950. Recheck of options: none equals this, so the answer given is not valid.

Did you get it right without looking?

One question tells you little. A timed set on Corporation tax: the use of exemptions and reliefs in deferring and minimising corporation tax liabilities shows your real accuracy, how long you take and where you lose marks.

Practise Corporation tax: the use of exemptions and reliefs in deferring and minimising corporation tax liabilitiesFree diagnostic mock

More Corporation tax: the use of exemptions and reliefs in deferring and minimising corporation tax liabilities questions