11: Corp Tax 1

Question 1

What is TTP?

Answer 1

Taxable total profits

Includes total income and gains of a company

Question 2

What makes a company ‘resident’ in the UK?

Answer 2

If it is incorporated in the UK

Or

It is centrally managed and controlled in the UK

Question 3

When does an accounting period start and end?

Answer 3

Starts:
- when a company starts to trade
- when the previous accounting period ends

Ends:
- 12 months after the beginning of the accounting period or sooner
- at the end of the company’s period of account
- company ceases to trade

Preparing a set of accounts does not end a period

Periods CANNOT be longer than 12 months

Question 4

What’s everything in the corp tax computation?

Answer 4

Trading Income (W)
Property Income
Non-trading loan relationships (interest)
Chargeable gains
Misc income
Dividends (always zero)

Less: qualifying charitable donations

TTP

Question 5

Pro forma for trading income?

Answer 5

Net profit
Add: disallowed expenditure
Less: capital allowances
Less: income in accounts not taxable as trading profits
- interest received
- exempt dividends
- profit of disposal

Question 6

What’s different in disallowed expenditure for corporations

Answer 6

It is not necessary to make an adjustment for appropriation of profit

NO private use or salary paid

Question 7

How do capital allowances vary for corporations?

Answer 7

No private use, everything is in the main pool. So somewhat easier!

If more than 12 months, you’ll have to do more than one computation, for the different periods

Question 8

What’s the additional kind of allowance for corporations?

Answer 8

Full expensing

100% FYA for new and unused plant and machinery in the main pool

Basically the same as AIA, and has the same result, but full expense can cover MORE than £1mil.

Not time apportioned

Question 9

What is important to note about property income?

Answer 9

Done on an accrual basis, so when earned. When paid doesnt matter

Question 10

NTLR: interest receivable?

Answer 10

All of this is non-trading.

Need to be added to NTLR and taken away from Trading Profits

Question 11

What does NTLR consist of?

Answer 11

Bank interest receivable
(Non-trading interest payable)

Question 12

How does NTLR impact Trading Profits? (less important)

Answer 12

Trading interest payable gets added
Recievables get taken away

Question 13

NTLR: What is in TRADING interest payable?

Answer 13

Will go into trading profits as 0

An overdraft

Loans to purchase plant and machinery

Loans to purchase buildings to be used in trade

Loans to fund daily operations

Question 14

NTLR: What is in NON-TRADING interest payable?

Answer 14

Will offset NTLR

Loans to buy a property

Loans to buy other companies/investments

Overdue corporation tax

Question 15

How do chargeable gains work for a company?

Answer 15

Corp tax is made on chargeable gains made by a company, instead of CGT

NO ALLOWANCE for companies!

Question 16

What is a QDC?

Answer 16

A qualifying charitable donation

Deducing any charitable donations by the amount paid - simple!

Relieved on a cash basis, not an accruals basis

Question 17

What are the four steps to calculating corporate tax?

Answer 17

1. Calculate TTP
2. Calculate aug profits
3. Decide what rate to tax at
4. Tax TTP at this rate (not aug profits!)

Question 18

How do associated companies/dividends work with corporation tax?

Answer 18

Other companies with 50% or less control
- dividends goes into Exempt ABGH distributions

Associated companies with 51% or more control
- ignore their dividends
- divide the upper and lower limits by the number of associated companies

Question 19

What are augmented profits?

Answer 19

TTP
+
Exempt ABGH distributions

Do not tax these!

Question 20

What are the rates of tax? (Will be in tables)

Answer 20

Under 50,000 - 19%
Between 50,000 and 250,000 - marginal
Over 250,000 - 25%

Question 21

How is marginal relief calculated?

Answer 21

Tax at main rate (25%)

Deduct marginal relief

(U-A) x (TTP/A) x SF

Question 22

How does time work with the augmented profits limits?

Answer 22

The limits themselves must be time apportioned if a shorter account period is being used

Ie. Halved if only 6 months

Question 23

What are associated companies and who is included/excluded?

Answer 23

Companies are associated if:

• one of the companies is under the control of the other
• they are both under common control

Control is having more than 50%

Oversees resident companies are included
Dormant companies are EXCLUDED

Question 24

What are the four things you have to do to the trading profits figure in a scenario-based question?

Answer 24

1. Add back disallowable expenditure - X
2. Leave alone allowable expenditure - 0
3. Deduct capital allowances - minus
4. Deduct income in accounts not taxable as trading income - minus

Question 25

3 things in terms of interest and payables that you could get in a Corp Tax?

Answer 25

Any receivable
- add to NTLR
- (minus) from trading profits

NT interest payable
- (minus) from NTLR
- plus in trading profits as disallowable

Trading interest payable
- leave off NTLR
- allowable in trading profits - 0