Skip to content

ACCA Strategic Professional · Advanced Taxation (UK) · Corporation tax: the scope of corporation tax, including close companies and investment companies

Zeta Ltd has taxable total profits and augmented profits of £1,600,000 for the year, with no associated companies. Which statement is correct about the payment of its corporation tax liability and the interest position if it pays late?

Zeta Ltd is a large company because its profits of £1,600,000 exceed the £1,500,000 threshold, so it must pay by quarterly instalments. Any instalment paid late carries interest at the 8.50% rate on underpaid tax, not the official rate or the overpaid rate.

  1. AProfits exceed £1,500,000, so Zeta Ltd is large and must pay by quarterly instalments, and interest at 8.50% runs on any instalment paid lateCorrect
  2. BZeta Ltd pays nine months and one day after the year end, with interest at 3.75% if late
  3. CZeta Ltd pays by instalments only if profits exceed £250,000, with interest at 3.50%
  4. DZeta Ltd is not large, as the limit applies only to profits above £1,600,000

Explanation

The quarterly instalment profit threshold is £1,500,000, and profits of £1,600,000 exceed it, so Zeta Ltd pays by instalments. Late instalments bear interest at the 8.50% rate on underpaid tax. The 3.75% official rate and the 3.50% overpaid rate do not apply to late payments, and £250,000 is the upper limit for marginal relief, not the instalment threshold.

Did you get it right without looking?

One question tells you little. A timed set on Corporation tax: the scope of corporation tax, including close companies and investment companies shows your real accuracy, how long you take and where you lose marks.

Practise Corporation tax: the scope of corporation tax, including close companies and investment companiesFree diagnostic mock

More Corporation tax: the scope of corporation tax, including close companies and investment companies questions