Corporation tax is charged on which of the following?

• A. Gross revenue
• B. Adjusted profits
• C. Dividends paid
• D. Capital gains only

Answer: (B)

Corporation tax is charged on a company’s profits, after adjustments for tax purposes. The amount taxed is not simply accounting profit or revenue, but the adjusted profits the tax system uses, which incorporate allowable deductions, non-deductible costs, timing differences, and capital allowances. Dividends are distributions of profit and don’t determine the tax base, and capital gains aren’t taxed only as gains separate from profits—the gains are included in the overall profit calculation as chargeable gains. So the tax base is the adjusted profits.