VAT and Corporation Tax in outline

This AC is outline-only, so the exam tests whether you can keep two business taxes apart: what each one TAXES, and where its thresholds sit. VAT is a tax on taxable SUPPLIES — turnover, not profit. A business of any legal form must register once taxable turnover exceeds the £90,000 registration threshold (below it, registering is a choice), charges 20% on its taxable supplies once in the regime, and can apply to deregister if turnover falls below the £88,000 deregistration threshold. The two thresholds deliberately differ so a business at the boundary doesn't flip in and out year by year. Corporation Tax is a tax on COMPANY PROFITS — sole traders and partners pay Income Tax and NICs instead, and turnover is irrelevant to the charge. Rates: the 19% small profit rate where taxable profits are below £50,000; the 25% main rate above £250,000; and between the two limits, marginal relief phases the increase in — the working effect is that the slice of profits above £50,000 bears an effective 26.5%, pitched so the average rate lands exactly on the main rate at the £250,000 boundary. The distractors are always the same four swaps: profit vs turnover, company vs sole trader, slice vs whole profit, and gradual phase-in vs cliff edge.