ACCA Advanced Taxation (ATX) Practice Exam

What is the threshold for a company to be considered 'large' in terms of augmented profits during an accounting period?

1. £1,000,000

2. £1,500,000

3. £2,000,000

4. £1,250,000

The correct answer is: £1,500,000

In the context of the UK tax regulations, particularly under the Corporation Tax framework, a company is deemed 'large' based on its augmented profits. The threshold of £1,500,000 pertains to the level of profits that determines whether a company is liable to pay the full rate of corporation tax, rather than the reduced rate available to small companies. This threshold is significant because it affects the tax obligations and compliance requirements of a company. When a company's profits exceed this amount, it must adhere to different tax rules and potentially face a higher rate of tax on the profits. Understanding this threshold helps businesses plan their tax strategies more effectively and ensures they comply with the relevant regulations. Other options do not reflect the current thresholds set by the tax authorities, making them irrelevant in determining a company's classification as 'large.' Thus, the choice of £1,500,000 accurately captures the definition of a large company in terms of augmented profits.