AAT L4 Business Tax

Question 1

For Corporation Tax purposes, a UK limited company's accounting period can be a maximum of:

Accepted Answer

12 months

Answer

A Corporation Tax accounting period cannot exceed 12 months. If a company prepares accounts for a longer period, HMRC splits it into the first 12 months and the remainder.

Question 2

Which of the following is an allowable deduction when calculating tax-adjusted trading profits for Corporation Tax?

Accepted Answer

Staff salary costs and employer's National Insurance contributions

Answer

Staff costs including salaries, wages, and employer's NIC are allowable business expenses. Entertaining UK customers, depreciation (replaced by capital allowances), and political donations are all disallowable.

Question 3

A company purchases a machine for £120,000. It qualifies for the Annual Investment Allowance. If the AIA limit is £1,000,000, what capital allowance can be claimed?

Accepted Answer

£120,000

Answer

The AIA gives a 100% first-year deduction for qualifying plant and machinery expenditure up to the limit. Since £120,000 is within the £1,000,000 limit, the full cost is deductible in the year of purchase.

Question 4

A company has a trading loss of £80,000 in the year ended 31 March 2026. Which loss relief options are available?

Accepted Answer

Set against total profits of the current period, carry back against total profits of the previous 12 months, or carry forward against future trading profits

Answer

UK trading losses can be: (1) set against total profits of the current period, (2) carried back against total profits of the preceding 12 months, or (3) carried forward against future trading profits of the same trade.

Question 5

For capital gains purposes, indexation allowance for companies:

Accepted Answer

Reduces the gain by adjusting the cost for inflation up to December 2017

Answer

Indexation allowance adjusts the base cost of an asset for inflation using the RPI, reducing the chargeable gain. For companies, indexation was frozen at December 2017. Individuals do not receive indexation allowance.

AAT Level 4 Practice Test

AAT Level 4 Practice Test

AAT L4 Business Tax