ACCA Advanced Taxation (ATX) Practice Exam

Under group payment arrangements for corporation tax, must each company prepare a separate tax computation?

1. True, all companies must comply

2. False, only large companies are required

3. True, but only if they have different year-ends

4. False, they can submit a combined report

The correct answer is: True, all companies must comply

Under group payment arrangements for corporation tax, all companies within the group are required to prepare a separate tax computation. This ensures that each company's tax liabilities are accurately calculated based on its individual financial performance and tax obligations. Even though they are part of a group for payment purposes, the tax calculations have to be done separately because tax regulations stipulate that the tax position of each entity must be independently assessed. This requirement upholds the principle of transparency in taxation, allowing the tax authorities to assess and audit each company's statutory obligations accurately. Additionally, having separate computations avoids potential discrepancies that could arise from different accounting periods or financial statuses within the group. As a result, compliance with tax regulations necessitates that all companies in the group adhere to this rule, irrespective of their size or reporting period.