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ACCA Strategic Professional · Advanced Taxation (UK) · Corporation tax: taxable total profits

Hartley Ltd has no overseas operations and controls two other UK companies, Ivy Ltd and Jove Ltd, each of which is a 100% subsidiary and was trading throughout the year. All three companies prepare 12-month accounts. What are the lower and upper profit limits that apply to Hartley Ltd for corporation tax rate purposes?

The limits are £16,667 and £83,333. With two associated companies, three companies share the limits, so the £50,000 lower limit and £250,000 upper limit are each divided by three. Ignoring Hartley itself gives the wrong divisor of two.

  1. A£25,000 and £125,000
  2. B£16,667 and £83,333Correct
  3. C£12,500 and £62,500
  4. D£50,000 and £250,000

Explanation

Hartley Ltd has two associated companies, so the limits are divided by 3 (the company plus two associates). £50,000 / 3 = £16,667 and £250,000 / 3 = £83,333. Dividing by 2 would ignore the company itself, and dividing by 4 would count one company too many.

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