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ATX - Condensed Notes > 1c. Corporstion Tax - Selling a Company > Flashcards

1c. Corporstion Tax - Selling a Company Flashcards

1
Q

Selling a company via Sale of shares :
chargeable gains

A

Ignore if SSE applies
Gain = exempt
Loss = not allowable

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2
Q

Selling a company via Sale of shares :
- stamp duty payable at what %
- by purchased or seller of shares

A

Stamp duty payable at 0.5% by purchaser of shares

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3
Q

Selling a company via Sale of shares:
Number of related 51% companies
1. Related to what period

A

Company leaving group
- related for whole accounting periods when leaves group
- not related with companies in new group until the following accounting period
- this decreases number of related companies in old group for the next accounting period

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4
Q

Selling a company via Sale of shares :
- Does a degrouping charge arise if the company leaves the group
- what type of group
- received an asset through what type of transfer
- transfer happened within how many years before leaving the group
- where do you add the degrouping charge
- what if SSE applies

A
  • degrouping charge arise if the company leaves the group
  • is in a capital gains group
  • receives an asset through a NGNL transfer
  • and the transfer happened within 6 years before leaving the group
  • you add the de grouping change to the sale proceeds giving you a bigger gain
  • if SSE applies then ignore
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5
Q

Selling a company via Sale of shares :
How does it effect the value of assets transferred
- assets transferred with the company at what type of value
- what happens to the capital allowance on TWDV in future
- what happens to the SBA
- does the base cost of assets for chargeable gain purposes change?

A
  • assets are transferred with the company at WDV
  • the capital allowance continues to be claimed by the company in the future
  • the SBA continues to be claimed by the company on original cost
  • the base cost of assets for chargeable gain purposes = unchanged
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6
Q

Selling a company via Sale of shares :
Does the accounting period change

A

Accounting period unchanged

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7
Q

Selling a company via Sale of shares :
Does VAT arise on the sale of shares

A

No VAT arises on the sale of shares

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8
Q

Selling a company via Sale of shares :
How does if effect if company leaving loss making group?
1. Time apportion trading losses for accounting period
- group relief possible to old group upto what date
- no group relief from what date period
- group relief is possible to new group from what date
- what about normal loss relief within the company itself available

  1. Unrelieved trading losses at date of sale
    - where does this go
  2. Trading losses bf that go with the company
    - when can it be used by that company
    - what’s the restriction
  3. How many years after the change in ownership can the trading losses bf cannot be group relieved
A
  1. Time apportion trading losses for accounting period
    - group relief possible to old group up-to date an arrangement is in place to sell the company
    - no group relief is possible from the date of arrangement to date of actual sale normal loss relief within the company itself is available throught
  2. Unrelieved trading losses at date of sale
    - go with the company to the new group
  3. Trading losses bf that go with the company
    - can be used by that company in the future
    - restriction when there major changes in nature or conduct of trade within 5 years starting 3 years before the change in ownership
  4. Trading losses bf cannot be relieved for 5 years after change in ownership
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9
Q

Selling a company via Sale of shares :
Advantages
- when SSE apples
- will BA/BC arise
- loss relief

A
  • no tax on disposal if sse applies
  • no ba/ bc arise
  • loss relief goes with the company to the new group
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10
Q

Selling a company via Sale of shares :
Disadvantage
- transferred

A

All of the company is transferred
- assets and liabilities

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11
Q

Selling a company via Sale of trade and assets
1. Chargeable gain
- chargeable gain/ allowable capital loss arises on disposal of what chargeable asset in the business transferred to the new company
- does this include cars or plant and machinery with value and cost less that 6,000
- what type of relief might be available

  1. Taxable trading profit / allowable trading expense on disposal of intangible assets
    Is loss on sale of good will allowable
    - what type of relief may be available
A
  1. Chargeable gain / allowable capital loss areas on disposal of every single chargeable asset in the business transferred to the new group company
    E.g land and buildings
    - but doesn’t include card, plant and machinery with value and cost less than 6k
    - roll over relieve May by available
  2. Taxable trading profit / allowable trading expenses on disposal of intangible assets
    E.g goodwill, licenses , franchise etc
    - except loss on sale of goodwill = non trading debit
    - intangible roll over relief may be available
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12
Q

Selling a company via Sale of trade and assets:

Stamp duty
- SD or SDLT payable
- by who
- on what assets
- what inclusive price

A

STDLT payable by purchase on land and buildings on VAT inclusive price

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13
Q

Selling a company via Sale of trade and assets:

Number or related 51% companies
- does the company leave the group
- which AP will it be related to
- what if the company sells it’s only trade
- what would happen to the number of related companies in old group next AP

A

-The company does not leave the group
- related to the whole of AP
- if the company sells it’s only trade = will become dormant
- decreases number of related companies in old group next AP

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14
Q

Selling a company via Sale of trade and assets:

Degrouping charge?

A

No degrouping charge
- only arises in sale of shares in a company
NOT on the sale of trade and assets

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15
Q

Selling a company via Sale of trade and assets:
Value of assets transferred
- assets transferred to new group company at what rate
- balance changes and balance allowances arise for which company
- SBA claimed on what cost over remaining life
- base cost of assets for chargeable gain purposes =

A

Value of assets transferred
- assets transferred to new group company at market value
- bc and ba arise for old company
- SBA claimed on original qualifying cost over remaining life
- base cost of assets for chargeable gain purposes = market value

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16
Q

Selling a company via Sale of trade and assets:
How will the accounting period end

A

If the company sells it’s only trade
- it’ll cease to trade and ap will end

17
Q

Selling a company via Sale of trade and assets:
What’s the implication VAT
- for VAT, what rule will probable apply
- will it be a taxable supply
- will Vat arise on sale
- unless it’s what type of asset in which there’s an option to tax

A
  • for VAT, transfer of going concern rule will probably apply
  • won’t be a taxable supply
  • VAT will not arise on sale
  • unless transfer of building and land in which there’s an option to tax
18
Q

Selling a company via Sale of trade and assets:
Losses
If co. Whose trade and assets are sold = loss making
- trading losses stay with which company
- is it transferred to the new group company

trading losses have limited use:
possible claims:
- what period claim agains total period before qcd relief
- group relief go to new or old group
Remaining loss:
- useless as can’t cf if the company does what to trade?

If sells it’s only trade and ceases to trade
- what loss carry back
- for how many years
Against total profits before QCD relief

A

If co. Whos trade and assets are sold = loss making
- trading losses stay with old company
- not transferred to new group

Trading losses have limited use:
- current year period claims against total period before QCD relied
- group relief got to old group
Remaining loss:
Useless as can cf if the company cease to trade

If sells it’s only trade and ceases to trade:
Terminal loss carry back for 3 years agains total profits before QCD

19
Q

Selling a company via Sale of trade and assets:
Advantages
1. Transfer to purchaser

A

Can transfer just the assets the purchaser wants

20
Q

Selling a company via Sale of trade and assets:
Disadvantages
- gains
- ba bc
- losses

A
  • taxable gains - can be deferred but not exempt
  • ba and bc arises
  • losses do not go to new group
21
Q

Transfer of a trade / asset within a 75% group , w/o a change in ownership:

Chargeable gains

A
  • Intra group assets = intra group transfers within 75% group at NGNL
  • no chargeable gain / allowable capital losses arises
22
Q

Transfer of a trade / asset within a 75% group , w/o a change in ownership:

Stamp duty land tax

A

Intra group transfers = exempt SDLT
No SDLT payable

23
Q

Transfer of a trade / asset within a 75% group , w/o a change in ownership:

Degrouping charge ?

A

No degrouping charge
- only arises on the sale of the shares in a company
NOT on the sale of trade and assets

24
Q

Transfer of a trade / asset within a 75% group , w/o a change in ownership:
Value of assets transfered

  • assets transferred to new co. At what value
  • bc/ba arise?
  • capital allowances claimed by new co in future but now allowances on the assets transferred?
  • new company continues to claim SBA on what cost?
A

Special rule for asset transfers
- asset transferred to the new company at TWDV
- no BC / BA arise
- capital allowances claimed by the new company on TWDV in future
- but no AIA OR FYA on the assets transferred
- new company continues to claim SBAs on original cost

25
Q

Transfer of a trade / asset within a 75% group , w/o a change in ownership:

Accounting period
If a co. Transfers it’s only trade
- what will happen to the trade- what will happen to the AP

A

If a company transfers it’s only trade
- it will cease to trade
- the AP will end

26
Q

Transfer of a trade / asset within a 75% group , w/o a change in ownership:

VAT
-what rule will probably apply
- is it a taxable supply
- will VAT arise on sale
- unless what type of assets on which there’s an option to tax

  • what if it was in a VAT group
A
  • TOGC rule will probably apply
  • won’t be a taxable supply
  • cat will not arise on sale
  • unless building and asset is transferred on which there’s an option to tax
  • if I’m VAT group = still no VAT
27
Q

Transfer of a trade / asset within a 75% group , w/o a change in ownership:

Losses
- can it be transferred with the trade
- can be used against when profits

A
  • can be transferred with trade
  • can be used agains future profit
28
Q

Transfer of a trade / asset within a 75% group , w/o a change in ownership:

Advantages
- gains
- ba/bc
- loss relief
- choice of asset transfer

A
  • no taxable gains
  • no ba bc arise
  • loss relief goes with the trade to the new company in the old group
  • can just transfer the assets you want
29
Q

What’s a hive down
- create new what % subsidiary
- transfer only what of target company required by the ultimate purchase into the new subsidiary
- sell shares in the sub to who

A
  • creates new 75% sub
  • transfer only trades and assets of target company require by the ultimate purchaser into the new sub
  • sell shares in the sub to purchaser
30
Q

Hive down - on transfer of trade within 75% group
Chargeable gain

A

Transfer of assets = intra group transfers within 75% group at NGNL
No chargeable gain / allowable capital loss arises

31
Q

Hive down - on transfer of trade within 75% group

Stamp duty

A

Intra group transfers = exempt SDLT

32
Q

Hive down - on transfer of trade within 75% group

Value of assets transferred
- assets transferred to new co. At what value
- bc ba arise?

A

Assters transferred to the new co. At TWDV
- no bc or ba arise

33
Q

Hive down - on transfer of trade within 75% group

Losses
Can trading losses be transferred with trade to the new company

A

Yes

34
Q

Hive down - on sale of shares

Chargeable gain

A

Chargeable gain / capital loss on disposal of shares in the company
Ignore if SSE applies

35
Q

Hive down - on sale of shares

Stamp duty
- stamp duty payable at what % by who
- SDLT exemption on intra group transfers is withdrawn if sell shares within what year

A
  • stamp duty payable at 0.5% by the purchaser of the shares
  • SDLT exemption on intra group transfers is withdrawn is sell shares within 3 years
36
Q

Hive down - on sale of shares

Value on assets transferred

  • assets transferred with the new company to new group at what value
  • ba bc arise
  • new company continues to claim SBA on what cost
  • does degrouping charge arise
A

-Assets transferred with the new company to new group at TWDV
- ba bc does not arise
- new company continues to claim SBA on original cost
- degrouping charges arises

ATX - Condensed Notes (14 decks)

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