13. Corporation tax

Question 1

Corporation tax is paid on what?

Answer 1

Taxable total profits: worldwide income and one-off gains

Question 2

An accounting period ends at the earliest of? (3)

Answer 2

• 12 months after beginning of AP
• begins / ceases trade
• statement of financial position (SOFP) date

Question 3

Proforma for taxable total profits

Answer 3

Tax adjusted trading profit X
Interest income X
Property income X
Chargeable gains/capital gains X
Miscellaneous income X
= Total profits X
Less: QCDs (X)
= Taxable total profits X

Question 4

What’s the general rule in regards to charitable donations?

Answer 4

small donations are deducted as a QCD on accrued basis - large donations deducted from trading profits on a paid basis

Question 5

Are companies taxed separately on chargeable gains?

Answer 5

No

Question 6

What are the main differences in tax rules when considering trading income of a company rather than an individual? (4)

Answer 6

• No private use adjustment on expenses: company separate entity so workers charged on benefit
• No private use adjustment on capital allowances: see above.
• Dividends not allowable deduction
• Staff wages only allowable on an accrued basis where they have been paid within 9 months of the y/e, otherwise remove.

Question 7

Interest income is taxed on what basis?

When is interest income allowable?

Answer 7

Accruals

When business is money lender.

Question 8

Is interest on overdue CT allowable?

Answer 8

No

Question 9

Property income is taxed on what basis?

Answer 9

Accruals

Question 10

What is the proforma for property income?

Answer 10

Rent accrued X
Allowable deductions (X)
Premium X
= Property income

Question 11

Is interest payable on a loan to acquire or improve a rental property interest or property income? Why?

Answer 11

Depends: rental: interest income, residential = property income.

Question 12

Are QCDs on a cash or accruals basis?

Answer 12

Cash

Question 13

Corporation tax - long periods of account: How is income divided?

Answer 13

• Trading income: time apportioned
• Capital allowances: two seperate computations, 2nd time apportioned
• Interest/property income: accruals and time apportion
• Chargeable gains: date of disposal
• QCDs: cash basis

Question 14

Where a company has a long period of account, how does this effect filing and payment dates?

Answer 14

Two comps prepared with seperate due dates of pay (9 months and 1 day after p/e) and 1 file date 12 months after end of long period.