Section A: Objective Test

DeltaTech Ltd has a 12-month accounting period ending 31 March 2024. It has two associated companies worldwide. What are the lower and upper limits for Corporation Tax marginal relief for DeltaTech Ltd for this accounting period?

Answer options:

Lower limit £50,000; Upper limit £250,000

Lower limit £25,000; Upper limit £125,000

Lower limit £16,667; Upper limit £83,333

Lower limit £12,500; Upper limit £62,500

How to approach this question

Identify the standard lower (£50,000) and upper (£250,000) limits. Determine the total number of related companies (the company itself + its associated companies). Divide the standard limits by this total number.

Full Answer

C.Lower limit £16,667; Upper limit £83,333✓ Correct

For Corporation Tax, the standard lower limit is £50,000 and the upper limit is £250,000. These limits must be divided by the total number of associated companies plus the company itself. DeltaTech Ltd has 2 associated companies, making 3 companies in total. Lower limit = £50,000 / 3 = £16,667. Upper limit = £250,000 / 3 = £83,333.

Common mistakes

Dividing by the number of associated companies (2) instead of the total number of companies (3).

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Practice the full ACCA TX — Taxation Practice Exam 5

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