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

Gamma Ltd has taxable total profits of £100,000 and no augmented profits beyond that, a 12-month period, and one 51% subsidiary that is active. Under the ATX-UK tax tables, what are the effective lower and upper limits for Gamma Ltd?

With one associated company the limits are halved, giving a lower limit of £25,000 and an upper limit of £125,000. Group companies share the thresholds, so a group structure can push profits into marginal relief or the main rate.

  1. A£25,000 and £125,000Correct
  2. B£50,000 and £250,000
  3. C£100,000 and £500,000
  4. D£16,667 and £83,333

Explanation

The limits are divided by one plus the number of associated companies. With one associated company, divide by 2: £50,000/2 = £25,000 and £250,000/2 = £125,000. Distractor £50,000/£250,000 ignores the associated company.

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