R03 Corporation tax: free practice questions

1. Question 1 of 5

   What are the corporation tax rates for the financial year 2026?

   Option A: 20% up to £50,000 of profit, and 30% at £250,000 or moreOption B: 25% on all profits whatever their levelOption C: 19% up to £250,000 and 25% above thatOption D: 19% up to £50,000 of profit, and 25% at £250,000 or more

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   The answer is D: 19% up to £50,000 of profit, and 25% at £250,000 or more

   For the financial year 2026 (1 April 2026 to 31 March 2027), profits up to £50,000 are taxed at 19% and profits of £250,000 or more at 25%, with marginal relief in between.

   Why the other options are wrong

   A

   The rates are 19% and 25%.

   B

   Small profits are taxed at 19%.

   C

   The 19% rate applies only up to £50,000.

2. Question 2 of 5

   A company has one associated company. What is its lower profits limit for corporation tax?

   Option A: £125,000Option B: £50,000Option C: £25,000Option D: £12,500

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   The answer is C: £25,000

   The £50,000 and £250,000 limits are divided by the number of associated companies plus one. With one associate: £50,000 ÷ 2 = £25,000 and £250,000 ÷ 2 = £125,000.

   Why the other options are wrong

   A

   £125,000 is the upper limit when there are two companies.

   B

   The limits are shared between associated companies.

   D

   That would apply with three associated companies.

3. Question 3 of 5

   How can a company relieve a trading loss?

   Option A: Against the shareholders' personal income for the year in which the loss aroseOption B: Against total profits of the same period, then those of the previous 12 monthsOption C: Carried back up to three years in all casesOption D: Only by carrying it forward against future trading profits of the same trade

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   The answer is B: Against total profits of the same period, then those of the previous 12 months

   A trading loss can be set against total profits of the same period and then carried back 12 months; any balance is carried forward against total profits, with a restriction above £5m. Claims are generally due within two years.

   Why the other options are wrong

   A

   Company losses stay with the company.

   C

   The normal carry-back is 12 months.

   D

   Same-period and carry-back relief are also available.

4. Question 4 of 5

   How do a company's chargeable gains differ from an individual's?

   Option A: Companies get indexation to December 2017 but no BADROption B: Companies pay CGT at 24% rather than corporation taxOption C: Companies get a £3,000 annual exempt amountOption D: Companies can set capital losses against trading profits

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   The answer is A: Companies get indexation to December 2017 but no BADR

   Company gains are taxed as part of profits. Indexation allowance applies, frozen at December 2017; business asset disposal relief doesn't. Capital losses only reduce chargeable gains.

   Why the other options are wrong

   B

   Companies pay corporation tax on gains.

   C

   Companies have no annual exempt amount.

   D

   Capital losses only reduce chargeable gains.

5. Question 5 of 5

   Which company is a close company?

   Option A: A listed company whose shares are widely heldOption B: One with ten shareholders, none of them relatedOption C: One where no group of five or fewer controls itOption D: One controlled by four unrelated shareholders

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   The answer is D: One controlled by four unrelated shareholders

   A close company is controlled by five or fewer participators, or by its directors. Associates such as relatives are grouped together, so family companies are often close. Loans to participators can trigger a tax charge.

   Why the other options are wrong

   A

   Widely held listed companies aren't close.

   B

   Control by five or fewer (or by directors) is required.

   C

   That's the opposite of a close company.

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