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Corporation Tax LiabilitiesSection BCorporation TaxAdministrationQIPs

ACCA · Question 30 · Corporation Tax Liabilities

Section B: Case 3 - Meridian Logistics Plc

Scenario: Meridian Logistics Plc is the parent company of a cross-border shipping and warehousing group. Meridian Logistics Plc owns 80% of the ordinary share capital of Alpha Ltd. Alpha Ltd owns 90% of the ordinary share capital of Beta Ltd. Meridian Logistics Plc also directly owns 60% of Gamma Ltd. All companies are UK resident and prepare accounts to 31 March.

Question: For the purpose of determining whether Meridian Logistics Plc is a 'large' company required to pay Corporation Tax in quarterly instalments, what is the augmented profits threshold for the year ended 31 March 2024?

Answer options:

A.

£1,500,000

B.

£500,000

C.

£375,000

D.

£300,000

How to approach this question

Identify the standard large company threshold (£1.5m). Count the number of 'related 51% group companies' (companies under common control >50%). Divide the threshold by this number.

Full Answer

C.£375,000✓ Correct
A company is 'large' for Quarterly Instalment Payments (QIPs) if its augmented profits exceed £1,500,000. This threshold is divided by the number of related 51% group companies. A company is a related 51% group company if one is a 51% subsidiary of the other, or both are 51% subsidiaries of the same company. Meridian owns >50% of Alpha (80%), Beta (72% effective), and Gamma (60%). Therefore, there are 4 related 51% group companies in total (Meridian + 3 subsidiaries). The threshold for Meridian is £1,500,000 / 4 = £375,000.

Common mistakes

Excluding Gamma because it's not in the 75% group relief group, forgetting that the QIPs test only requires >50% ownership.
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