AAT L4 Business Tax 2

Question 1

A company has taxable total profits of £300,000 for the year ended 31 March 2026. The main Corporation Tax rate is 25%. What is the Corporation Tax liability?

Accepted Answer

£75,000

Answer

Companies with taxable total profits above £250,000 pay at the main rate of 25%. Corporation Tax = £300,000 x 25% = £75,000. Marginal relief applies between £50,000 and £250,000 only.

Question 2

For 2025/26, a UK business must register for VAT when taxable turnover exceeds:

Accepted Answer

£90,000

Answer

The VAT registration threshold increased to £90,000 from 1 April 2024. A business must register if taxable turnover exceeds £90,000 in any rolling 12-month period.

Question 3

Which expenditure item would be added back when calculating tax-adjusted trading profits?

Accepted Answer

Depreciation charged in the accounts

Answer

Depreciation is an accounting charge, not a tax-deductible expense. HMRC replaces depreciation with capital allowances when calculating taxable trading profits. The other items are allowable business expenses.

Question 4

A company sells a factory for £500,000. It cost £200,000 in June 2010. The indexation factor from June 2010 to December 2017 is 0.234. What is the indexed cost?

Accepted Answer

£246,800

Answer

Indexed cost = Original cost + (Original cost x Indexation factor) = £200,000 + (£200,000 x 0.234) = £200,000 + £46,800 = £246,800.

Question 5

How are qualifying charitable donations treated for Corporation Tax purposes?

Accepted Answer

Deducted from total profits as a qualifying charitable donation

Answer

Qualifying charitable donations are deducted from total profits (after calculating trading profits) in arriving at taxable total profits. They are not an allowable trading expense but reduce the overall Corporation Tax liability.

AAT Level 4 Practice Test

AAT Level 4 Practice Test

AAT L4 Business Tax 2