Monday 19 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 company is defending a civil claim involving the interpretation of a statutory provision. Two earlier decisions of the Court of Appeal (Civil Division) reached conflicting conclusions on the interpretation of the same provision. Neither decision has been overturned by the Supreme Court, and no relevant legislation has changed. The company’s solicitor argues that the later Court of Appeal decision must automatically prevail because it is more recent. The case is now being heard by the Court of Appeal, which must determine which interpretation to follow.
Which of the following best describes the Court of Appeal’s position?
A. The Court of Appeal must follow the later decision because more recent decisions automatically take precedence over earlier authorities of equal status.
B. The Court of Appeal must refer the matter to the Supreme Court because it has no authority to resolve conflicts between its own previous decisions.
C. The Court of Appeal may disregard both decisions and adopt a new interpretation whenever it considers that doing so would produce a fairer outcome.
D. The Court of Appeal must follow the earlier decision because the first authoritative interpretation of a statutory provision is binding on subsequent courts.
E. The Court of Appeal may choose which of its conflicting decisions to follow because an established exception to the doctrine of precedent applies.
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Last 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.
Correct answer: Correct answer: 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. Feedback: For the relevant financial year, the corporation tax framework provides a 19% small profits rate for companies at or below the lower limit and a 25% main rate above the upper limit. Companies whose profits fall between the limits may obtain marginal relief. The standard limits are £50,000 and £250,000 and the marginal relief fraction is 3/200. The important complication is the associated company. Where a company has associated companies, the lower and upper profit limits are proportionately reduced. HMRC gives the example that where a company has three other associated companies, the limits are divided by four. Here there is one other associated company, so the limits are divided by two. The adjusted limits are therefore:
Lower limit: £50,000 ÷ 2 = £25,000
Upper limit: £250,000 ÷ 2 = £125,000
The company’s £100,000 profits fall between those limits, so marginal relief applies. Because there are no relevant exempt distributions, the calculation is straightforward:
Tax at the main rate:
£100,000 × 25% = £25,000
Marginal relief:
(£125,000 − £100,000) × 3/200
= £25,000 × 0.015
= £375
Corporation tax liability:
£25,000 − £375 = £24,625
HMRC confirms that marginal relief operates by calculating tax at the main rate and deducting the relevant relief; it is not simply a separate tax band charged at 19% and then 25%. The SRA’s current assessment specification also clarifies that where candidates need particular tax rates, thresholds or monetary values, those figures will be supplied in the assessment. The candidate is expected to know how to identify and apply the relevant tax rules, rather than memorise changing numerical thresholds.
A incorrectly applies the small profits rate and ignores both the adjusted thresholds and the fact that £100,000 exceeds the adjusted lower limit.
B correctly recognises marginal relief but fails to reduce the thresholds because of the associated company. Using the unadjusted £250,000 upper limit would produce an excessive amount of relief.
D correctly identifies that the company exceeds the lower limit but incorrectly assumes this means marginal relief disappears. Relief remains available until profits reach the adjusted upper limit of £125,000.
E is a particularly important distractor. Corporation tax marginal relief does not operate like income tax bands, with one slice of profits taxed at 19% and another at 25%. The statutory mechanism applies the main rate and then deducts marginal relief.
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Dr Ioannis (Yannis) Glinavos
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