Section A: Objective Test

Orion Ltd prepared accounts for the 15-month period from 1 January 2023 to 31 March 2024.

How will this period of account be split into Corporation Tax Accounting Periods (CAPs)?

Answer options:

One 15-month CAP to 31 March 2024.

One 12-month CAP to 31 December 2023, and one 3-month CAP to 31 March 2024.

One 3-month CAP to 31 March 2023, and one 12-month CAP to 31 March 2024.

Two 7.5-month CAPs.

How to approach this question

Remember the rule for long periods of account: a CAP cannot exceed 12 months. The period is split into a 12-month period first, followed by the remaining balance.

Full Answer

B.One 12-month CAP to 31 December 2023, and one 3-month CAP to 31 March 2024.✓ Correct

For Corporation Tax purposes, an accounting period cannot exceed 12 months. When a company prepares accounts for a period longer than 12 months, it is split into two Corporation Tax Accounting Periods (CAPs). The first CAP is for the first 12 months of the period of account, and the second CAP is for the remainder of the period. Therefore, Orion Ltd will have a 12-month CAP ending 31 December 2023, and a 3-month CAP ending 31 March 2024.

Common mistakes

Splitting the period to align with the tax year (31 March) first, rather than taking the first 12 months.

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Practice the full ACCA TX — Taxation Practice Exam 1

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