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

Orchard Ltd paid £40,000 of corporation tax for its year to 31 March 2026 on the due date. Following an amended return it owes an extra £10,000 for that year, which it pays exactly 6 months after the due date. Using the assumed underpaid rate, what is the interest charge on the £10,000, working on whole months?

Interest is £425. The extra £10,000 was unpaid for six months at the underpaid rate of 8.50%, so £10,000 × 8.50% × 6/12 gives £425. Using the overpaid rate or a full year would be wrong.

  1. A£425Correct
  2. B£850
  3. C£175
  4. D£212

Explanation

Interest = £10,000 × 8.50% × 6/12 = £425. Using the 3.50% overpaid rate would give £175, a wrong-rate error. Using a full year gives £850, ignoring the time apportionment.

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