AAT L4 Business Tax (UK Corporation Tax) 1 — Questions and Answers
Question 1: The UK corporation tax rate for companies with augmented profits over £250,000 for the financial year 2023 is:
- 19%
- 20%
- 25% (Correct answer)
- 30%
Correct answer: 25%
From 1 April 2023, the main rate of UK corporation tax is 25% for companies with augmented profits exceeding the upper limit of £250,000. The small profits rate is 19% below £50,000, with marginal relief in between.
Question 2: Augmented profits for corporation tax purposes are calculated as:
- Trading profits only
- Profits chargeable to corporation tax plus exempt dividends received from non-associated companies (Correct answer)
- Total taxable income minus capital allowances
- Profits per the accounts before any tax adjustments
Correct answer: Profits chargeable to corporation tax plus exempt dividends received from non-associated companies
Augmented profits = profits chargeable to CT + dividends received from non-associated companies. They are used to determine whether a company falls within the small profits rate, marginal relief, or main rate.
Question 3: For UK corporation tax, the small profits rate applies to companies with augmented profits below:
- £100,000
- £50,000 (Correct answer)
- £250,000
- £500,000
Correct answer: £50,000
The small profits rate of 19% applies to companies with augmented profits at or below £50,000. Between £50,001 and £250,000, marginal relief reduces the effective CT rate from 25% toward 19%.
Question 4: Marginal relief for corporation tax is available to companies with augmented profits:
- Below £50,000
- Between £50,001 and £250,000 (Correct answer)
- Above £250,000
- Above £500,000
Correct answer: Between £50,001 and £250,000
Marginal relief applies to companies with augmented profits between £50,001 and £250,000, providing a graduated reduction in effective CT rate between the small profits rate (19%) and the main rate (25%).
Question 5: For corporation tax purposes, dividends received from UK companies are generally:
- Taxable as trading income
- Exempt from corporation tax (Correct answer)
- Taxable at 19%
- Taxable but only at the small profits rate
Correct answer: Exempt from corporation tax
Dividends received from UK companies are generally exempt from corporation tax under the dividend exemption rules, preventing economic double taxation of company profits distributed to shareholders.
Question 6: The accounting period for UK corporation tax purposes cannot exceed:
- 6 months
- 9 months
- 12 months (Correct answer)
- 18 months
Correct answer: 12 months
A corporation tax accounting period cannot exceed 12 months. If a company's accounts span more than 12 months (e.g., on incorporation), the period is split into two CT accounting periods.
AAT L4 Business Tax (UK Corporation Tax) 1
The UK corporation tax rate for companies with augmented profits over £250,000 for the financial year 2023 is: