ACCA AS Taxation (UK) 2 — Questions and Answers
Question 1: Corporation tax is charged on a company's:
- Turnover
- Taxable total profits (including trading profits, investment income and chargeable gains) (Correct answer)
- Dividends paid to shareholders
- Gross assets
Correct answer: Taxable total profits (including trading profits, investment income and chargeable gains)
Corporation tax is charged on a company's taxable total profits, comprising trading profits, non-trading income (e.g., interest) and chargeable gains, less qualifying deductions.
Question 2: The main rate of UK corporation tax (from April 2023) for companies with profits over £250,000 is:
- 19%
- 20%
- 25% (Correct answer)
- 30%
Correct answer: 25%
From 1 April 2023, the main corporation tax rate is 25% for companies with profits over £250,000. The small profits rate is 19% for profits up to £50,000, with marginal relief between.
Question 3: Which of the following is an allowable deduction for corporation tax purposes?
- Dividends paid to shareholders
- Depreciation charged in the accounts
- Capital allowances on qualifying assets (Correct answer)
- Entertaining UK customers
Correct answer: Capital allowances on qualifying assets
Capital allowances replace accounting depreciation for tax purposes. Dividends are appropriations of profit, accounting depreciation is added back, and customer entertaining is generally disallowed.
Question 4: For VAT purposes, the standard rate in the UK is:
- 5%
- 10%
- 20% (Correct answer)
- 25%
Correct answer: 20%
The standard rate of UK VAT is 20%. A reduced rate of 5% applies to certain supplies (e.g., domestic fuel, children's car seats) and zero-rating to others.
Question 5: A VAT-registered business must submit VAT returns and pay VAT:
- Annually
- Monthly
- Quarterly (usually) (Correct answer)
- Weekly
Correct answer: Quarterly (usually)
Most VAT-registered businesses submit quarterly VAT returns and pay any VAT due within one month and seven days of the quarter end, under Making Tax Digital.
Question 6: Which of the following correctly describes 'input VAT'?
- VAT charged by the business on its sales
- VAT suffered by the business on its purchases (Correct answer)
- The net VAT payable to HMRC
- VAT on imports from outside the UK
Correct answer: VAT suffered by the business on its purchases
Input VAT is the VAT a business pays on its purchases and expenses. It is reclaimable from HMRC (for VAT-registered businesses), reducing the net VAT payable.
ACCA AS Taxation (UK) 2
Corporation tax is charged on a company's: