Question 1

SCENARIO: EcoGrid PLC is a public utility company specializing in green energy. For the year ended 31 March 2024, its draft net profit before tax is £2,500,000. This includes: £40,000 client entertainment, £15,000 political donations, £120,000 dividend received from a UK subsidiary, and £50,000 interest received on a non-trade bank deposit. EcoGrid PLC purchased a new zero-emission goods vehicle for £60,000 and constructed a new commercial factory building for £1,000,000 (completed and brought into use on 1 October 2023). The main pool tax written down value brought forward was £200,000.

REQUIREMENT: Calculate EcoGrid PLC's Corporation Tax Liability for the year ended 31 March 2024. Show all adjustments to trading profit, capital allowances (including Structures and Buildings Allowance), and the final tax calculation.

Accepted Answer

Step 1: Adjust the accounting profit (add back entertainment and political donations, deduct exempt dividends and non-trade interest). Step 2: Calculate Capital Allowances (18% on main pool, 100% FYA on zero-emission vehicle, 3% pro-rated SBA on the building). Step 3: Deduct CAs to find Trading Profit. Step 4: Add back the non-trade interest to find Taxable Total Profits. Step 5: Apply the 25% CT rate.

Question 2

What mistakes do candidates make on this ACCA question?

Accepted Answer

Forgetting to pro-rate the SBA. Treating the zero-emission vehicle as a main pool asset (18%) instead of 100% FYA. Leaving the interest in trading profits.

How to approach this question

Full Answer

Common mistakes

Practice the full ACCA TX — Taxation Practice Exam 6

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