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ACCA Applied Skills · Taxation (UK) · The scope of corporation tax

Marlow Ltd, a UK resident trading company with no associated companies, prepared accounts for the year ended 31 March 2026. Its taxable total profits were £150,000 and it had no franked investment income. Using the rates for the financial year 2025, what is its corporation tax liability?

The corporation tax liability is £36,000. Profits of £150,000 fall between the lower and upper limits, so tax at 25% of £37,500 is reduced by marginal relief of £1,500, calculated as £100,000 multiplied by 3/200.

  1. A£37,500
  2. B£31,750Correct
  3. C£33,000
  4. D£35,250

Explanation

Augmented profits equal taxable total profits of £150,000 (no dividends received), which lies between £50,000 and £250,000, so marginal relief applies. Tax at 25% is £37,500. Marginal relief is (250,000 - 150,000) x 3/200 x 150,000/150,000 = £1,500 (not £1,500 x 4). Hmm: 100,000 x 3/200 = £1,500. Liability is 37,500 - 1,500 = £36,000. Note the option below reflecting this is the key.

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