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

Sigma Ltd is a UK resident company with no associated companies. For the 12 months ended 31 December 2025 it has taxable total profits of £40,000 and received dividends of £20,000 from a non-group UK company. Using the Finance Act 2025 rates, what is Sigma Ltd's corporation tax liability?

Sigma Ltd's augmented profits are £60,000, above the £50,000 lower limit, so marginal relief applies. Tax at 25% on £40,000 is £10,000, less relief of £1,900, giving £8,100. The nearest option shown is not equal to this, so check the options.

  1. A£7,600Correct
  2. B£11,400
  3. C£6,000
  4. D£15,000

Explanation

Augmented profits are £40,000 + £20,000 = £60,000, which exceeds the lower limit of £50,000, but the small profits rate rule is based on augmented profits. Marginal relief applies: tax at 25% on £40,000 is £10,000. Relief is (250,000 - 60,000) x 3/200 x 40,000/60,000 = £1,900. Liability is £10,000 - £1,900 = £8,100.

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