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haya says

While solving the question of the last section, I faced something that I didn’t understand.

The upper limit is 1,500,000 and after dividing by 2, it becomes 750,000.

So my question, when calculating marginal relief you substitute the upper limit by 400,000 in stead of 750,000.. so why is that?

Hope to find an answer ASAP

Thank you.

styndale says

Hi haya,

My name is Sabrina and I hope my explanation helps you. See below:

In the Lecturer example of A/C Y/E 31.3.2014

TTP was £400,000 and there was no FII therefore the Augmented profit was £400,000

and to work out your answer is as follows:

TTP X main rate

400,000 X 23% = £92,000

Less: Marginal Relief

Fraction X (U-A) X TTP/A

3/400 X (1,500,000 – 400,000) X 400,000/400,000 = £(8,250)

Your answer will therefore be : £83,750

Paul says

When reading about last part associated companies , I thought you would add up all companies profits to see if they are below or above 300K or 1500K so was surprised when found out you divide it by number of companies.

Say you have one company and each year it always makes 250K so you are always under 300K. Then after many years you create another associated company that makes 10K TTP, so now overall profit is 260K so under 300K, however the rule is you divide 300 by 2 so 150K making the company now be well above 150K at 250K. Seems a bit unfair above can you shed some light on this?

Thanks

Paul.

Chris says

Hi Sir,

great lecture. With the relief points during this lecture in mind. Would it therefore be wise to have all of your profits either tax at the lower or upper rates rather than the marginal rates?

And again, any losses or reliefs available that can be offset against profits falling within the upper rates are best left to be carried forward (if this can be done where a profit arises i.e, not utilising it) or carried back?

Hopefully this makes sense.

Thanks, Chris.

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