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ACCA Strategic Professional · Advanced Taxation (UK) · Mitigation of tax by numerical analysis and reasoned argument

Pinewood Ltd, a UK resident company with no associated companies, has a 12-month accounting period to 31 March 2026 with taxable total profits of £40,000 and no exempt distributions received. Using the rates in the Finance Act 2025 tax tables, what is its corporation tax liability?

The liability is £7,600. Profits of £40,000 fall below the £50,000 lower limit for a company with no associates and a 12-month period, so the 19% small profits rate applies to all of it, and neither the main rate nor marginal relief is relevant.

  1. A£7,600Correct
  2. B£10,000
  3. C£6,000
  4. D£8,500

Explanation

Augmented profits are £40,000, below the £50,000 lower limit, so the small profits rate of 19% applies to the whole amount: £40,000 x 19% = £7,600. The main rate of 25% would give £10,000, but it applies only where profits exceed the upper limit of £250,000.

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