Q: How it works, step by step

The section of law behind each step is shown beside it. 1 Take accounting profit s.113C(8) Profit before tax from the audited accounts, adjusted for income the section excludes. 2 Apply 17% s.113C(2) ACT = 17% of accounting income. 3 Compare s.113C(2) Pay the higher of ACT and corporate tax (normal or minimum). 4 Carry forward s.113C(3) ACT paid above corporate tax is carried forward and adjusted against corporate tax for up to 10 tax years.

Question 1

Where it applies

Accepted Answer

Every company, with exclusions for certain income (for example income under FTR and some exempt income)

Question 2

How it works, step by step

Accepted Answer

The section of law behind each step is shown beside it.

1
Take accounting profits.113C(8)
Profit before tax from the audited accounts, adjusted for income the section excludes.
2
Apply 17%s.113C(2)
ACT = 17% of accounting income.
3
Compares.113C(2)
Pay the higher of ACT and corporate tax (normal or minimum).
4
Carry forwards.113C(3)
ACT paid above corporate tax is carried forward and adjusted against corporate tax for up to 10 tax years.

Question 3

Rates and rules

Accepted Answer

Case Rate / rule Law ACT rate 17% of accounting income s.113C

Question 4

Worked example

Accepted Answer

Accounting profit of Rs 55 million and taxable income of Rs 20 million (because of tax depreciation): corporate tax is Rs 5.8 million and ACT is Rs 9.35 million. ACT is payable.

Question 5

Points to watch

Accepted Answer

Large timing differences, such as accelerated depreciation, are what usually trigger ACT.