ACCA Advanced Taxation (ATX) Practice Exam

Under what circumstance would a large company not be required to pay tax by instalments?

1. When its tax liability is less than £5,000

2. When its tax liability is less than £10,000

3. When it was not large in the previous accounting period

4. Both B and C

The correct answer is: Both B and C

A large company may not be required to pay tax by instalments primarily when certain thresholds related to its tax liability are not met, as well as based on its size classification in previous accounting periods. One key threshold is the tax liability. If a company's tax liability is below £10,000, it is exempt from the obligation to make payments on account through instalments. This means that the company only needs to make a payment when filing its tax return. Additionally, a company's classification as 'large' can depend on its status in the previous accounting period. If a company is not classified as large in the prior period, it may not be subject to the instalment payments, regardless of its current tax liability. Thus, the circumstances under which a large company would not be required to pay tax by instalments are identified accurately in the correct answer, which includes both the threshold related to the tax liability being below £10,000 and the company not being classified as large in the previous accounting period.