Monday 12 October 2026
Your weekly SQE Prep Quiz has arrived
Dear Subscriber,
Hope you had a great weekend. Please see below for the question, the answer to the previous question and associated resources. You can view a web version of this newsletter by clicking here.
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This Week’s Question: A private company has taxable total profits of £100,000 for a 12-month accounting period ending 31 March 2027. It has one associated company throughout the period and has received no relevant exempt distributions. Assume the corporation tax main rate is 25%, the small profits rate is 19%, the normal lower and upper profit limits are £50,000 and £250,000, and the marginal relief fraction is 3/200. Which of the following is the company’s corporation tax liability?
A. £19,000, because the company’s profits are below the normal £250,000 threshold and therefore qualify for the small profits rate.
B. £22,750, because marginal relief is calculated using the normal £50,000 and £250,000 thresholds without adjustment for associated companies.
C. £24,625, because the profit limits are divided by two and marginal relief of £375 is deducted from tax calculated at the 25% main rate.
D. £25,000, because the company’s profits exceed the adjusted lower limit and the whole of the profits are therefore charged at the main rate without relief.
E. £23,500, because the company pays 19% on profits up to the adjusted lower limit and 25% on the balance above that limit.
Dig Deeper: Want to revise Tax and tax calculations? Watch https://youtu.be/7fxN-n91fCQ
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Last Week’s Question: A company agrees to take a five-year lease of commercial premises. The landlord wants the lease to be excluded from the security of tenure provisions of Part II of the Landlord and Tenant Act 1954. The landlord serves the prescribed warning notice on the company 10 days before the company is due to enter into the lease. The company’s director signs a simple written declaration acknowledging the consequences of contracting out. The lease is then completed on the agreed date and records that sections 24 to 28 of the 1954 Act are excluded. Which of the following best describes the legal position?
A. The exclusion is effective because the warning notice was served before the lease was completed and the tenant signed a declaration acknowledging its effect.
B. The exclusion is ineffective because a commercial tenancy cannot be excluded from the security of tenure provisions for a term longer than three years.
C. The exclusion is effective because the lease itself expressly states that sections 24 to 28 of the 1954 Act do not apply to the tenancy.
D. The exclusion is ineffective because, where the warning notice is served less than 14 days before the tenant becomes bound, the tenant must make a statutory declaration.
E. The exclusion is ineffective because a tenant can contract out of security of tenure only after obtaining independent legal advice about the proposed lease.
Correct answer: D. The exclusion is ineffective because, where the warning notice is served less than 14 days before the tenant becomes bound, the tenant must make a statutory declaration. A business tenancy that would otherwise fall within Part II of the Landlord and Tenant Act 1954 can be contracted out, but only if the statutory procedure is followed correctly. This is expressly within the current SQE1 FLK2 Property Law and Practice specification. The landlord must serve the prescribed warning notice before the tenant enters into the lease or becomes contractually bound to do so. The form of declaration required then depends upon timing. If the warning notice is served at least 14 days before the tenant enters into the lease, or earlier becomes contractually bound, the tenant may make the ordinary declaration. If fewer than 14 days remain, the tenant must instead make a statutory declaration before becoming bound. Here, only 10 days separate service of the notice and completion, and the company merely signs the ordinary declaration. The procedural requirements for valid contracting out have therefore not been satisfied. The exclusion agreement is consequently ineffective. The statutory procedure derives from section 38A of the 1954 Act and the Regulatory Reform (Business Tenancies) (England and Wales) Order 2003.
A is the strongest distractor. Serving the notice before completion is not by itself sufficient. Because fewer than 14 days were given, a statutory declaration was required.
B is incorrect. There is no general rule preventing a five-year business tenancy from being contracted out.
C is incorrect because merely inserting an exclusion clause into the lease cannot bypass the statutory contracting-out procedure.
E is incorrect. Independent legal advice may be sensible, particularly given the consequences of losing security of tenure, but obtaining such advice is not itself a statutory condition of a valid exclusion.
Exam point: watch the 14-day threshold. If the warning notice is served at least 14 days before the tenant becomes bound, an ordinary declaration is sufficient. If it is served later, the candidate should immediately look for a statutory declaration.
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Dr Ioannis (Yannis) Glinavos
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