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ACCA Strategic Professional · Advanced Taxation (UK) · Corporation tax: the scope of corporation tax, including close companies and investment companies

Dunmore Ltd has a short 6-month accounting period, with no associated companies. How are the lower and upper limits for the small profits rate and marginal relief treated?

For an accounting period of fewer than 12 months, the lower and upper limits are time-apportioned. A 6-month period therefore has limits of £25,000 and £125,000, rather than the full annual £50,000 and £250,000, which affects both the small profits rate and marginal relief.

  1. AThey are time-apportioned to £25,000 and £125,000Correct
  2. BThey remain at £50,000 and £250,000
  3. CThey are doubled to £100,000 and £500,000
  4. DThey are replaced by the £1,500,000 instalment threshold

Explanation

Where an accounting period is shorter than 12 months the limits are reduced in proportion to its length. Six months out of twelve gives £25,000 and £125,000. They do not stay at annual amounts.

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