Skip to content

ACCA Applied Skills · Taxation (UK) · The use of exemptions and reliefs in deferring and minimising corporation tax liabilities

Kite Ltd and its 100% UK subsidiary Lark Ltd each have a 12-month period to 31 March 2026. Kite Ltd has taxable total profits of £300,000 before group relief. Lark Ltd has a trading loss of £80,000. Kite Ltd claims group relief of £80,000. There are no other associated companies. What is Kite Ltd's corporation tax liability, using the tax tables?

Kite Ltd's liability is £55,000. Group relief reduces taxable total profits to £220,000. With one associated company the upper limit is £125,000, so profits exceed it and the 25% main rate applies to all profits, giving £55,000.

  1. A£55,000Correct
  2. B£41,800
  3. C£60,000
  4. D£50,350

Explanation

Lark Ltd is associated, so the upper limit is £125,000 and the lower limit £25,000. Kite Ltd's profits after group relief are £300,000 - £80,000 = £220,000, which exceeds £125,000, so the main rate applies in full: £220,000 x 25% = £55,000. Using £300,000 gives £75,000, which is wrong because the relief is ignored.

Did you get it right without looking?

One question tells you little. A timed set on 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 The use of exemptions and reliefs in deferring and minimising corporation tax liabilitiesFree diagnostic mock

More The use of exemptions and reliefs in deferring and minimising corporation tax liabilities questions