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ACCA Applied Skills · Taxation (UK) · The effect of a group corporate structure for corporation tax purposes

Ridge Ltd has one 51% subsidiary, Vale Ltd, and no other investments. Both companies are UK resident, trade throughout the year to 31 March 2026, and are not dormant. For the purposes of the corporation tax profit limits, what are the limits applying to Ridge Ltd for that year?

The limits are £25,000 and £125,000. Ridge Ltd and its 51% subsidiary are associated companies, so the standard lower limit of £50,000 and upper limit of £250,000 are divided by the number of associated companies, which is two.

  1. ALower limit £50,000 and upper limit £250,000, with no division
  2. BLower limit £25,000 and upper limit £125,000Correct
  3. CLower limit £16,667 and upper limit £83,333
  4. DLower limit £100,000 and upper limit £500,000

Explanation

Vale Ltd is a 51% subsidiary, so it is an associated company. There are two associated companies including Ridge Ltd, so the limits are divided by 2: £50,000/2 = £25,000 and £250,000/2 = £125,000. Leaving the limits undivided ignores association, and dividing by 3 would wrongly count an extra company.

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